Archive: 2017

  1. FTSE 100 Review

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    The FTSE 100 has undergone its latest quarterly review.

    FTSE Russell, the providers of the FTSE 100 and related UK indices, has announced the results of its quarterly review.  This was based on market values on 28th November and will take effect from Monday 18th December.

    As far as the FTSE 100 is concerned, there are three exits and three entries:

    Going out…
    ConvaTec Group, is a healthcare group focused on wound care, continence and critical care and infusion devices. In mid-October it issued a profit warning which prompted a near 25% drop in the share price. That was enough to put ConvaTec’s position in the Footsie at risk. The share price did not recover from the warning, leaving the inevitable to happen.

    Merlin Entertainments runs Madame Tussauds, Legoland Parks and a variety of other theme parks. Its share suffered a downward rollercoaster experience in October when it revealed “difficult” summer trading because of terror attacks and unfavourable weather.  After falling nearly 20%, the shares have drifted down further, following a similar pattern to ConvaTec. At current levels, the market punishes bad news.

    Babcock International Group is a support services company with an emphasis on defence industries.  Support services have been out of favour (think Capita, Carillion). Its half year results in November were in line with forecasts, but highlighted issues that were holding back revenue growth, giving the share price a Footsie-fatal second leg down.

    Coming in…
    Just Eat will be a familiar name to many. Floated only 3 years ago, Just Eat dominates mass market takeaway internet ordering, although unlike its rivals, such as Deliveroo, it makes no deliveries itself. Just Eat has grown dominant by buying out much of the competition. Its growth comes at a rich share price – the price/earnings ratio is over 50 and so far, there is no dividend.

    Ironically, at the same time as Just Eat moved into the Footsie, Restaurant Group (whose brands include Frankie & Benny’s, Garfunkel’s, Joe’s Kitchen, etc) was ejected from the FTSE 250.

    Smith (DS), is a packaging specialist, with an innovative line in corrugated paper. It has grown as its competitors have fallen by the wayside, making acquisitions en route. Ultimately its business is about cardboard boxes, but there remains plenty of demand for them – just think of all those Amazon deliveries…

    Halma is the sort of business that generates a “Who?” response. It produces safety, health and environmental equipment and has been on a roll since announcing “widespread growth” in a September trading update, followed by good half year results in November.

    The arrival of Just Eat is a reminder that technology can produce rapidly growing companies outside the USA.


  2. Children in Need! Thank you!

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    Thank you to everyone who came along for our Walk for Children in Need this morning.  It was a fresh and sunny morning walking from Cricklade to South Cerney and back again.

    We managed to raise a whopping £311!! Lexington have decided to match this so we have a grand total of £622 raised for Children In Need, so a very big Thank You from us.



  3. Warren wins the CISI Professional of the Year award 2017

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    As many of you will know, Warren made it through as a finalist for the “CISI Professional of the Year” award earlier this year.  We have some great news to share, At the recent event that took place in Celtic Manor, Warren was named the CISI Professional of the Year award for 2017. Thank you to all of our clients for your continued support.


  4. National Savings & Investments closes the Children’s Bond

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    When National Savings & Investments (NS&I) announced the launch of their new Junior ISA, they said that the Children’s Bond would be closed to new sales from September 2017, this is disapointiung, but with the JISA and the abilty to fund Pensions for children I can only asusme the demand was not there.

    NS&I have now confirmed that the latest issue (36), paying 2.00% (tax-fee), fixed for 5 years, was withdrawn from 24 September. NS&I regard the JISA as an effective alternative, even though it is a variable rate product (currently also paying 2%), rather than fixed rate. 

    When existing Children’s Bonds reach maturity, there will be no roll over to a new Bond available. Instead NS&I says it “will contact customers about a month before each Bond matures to let them know what the options are at that time”.

    With the cost of university education increasing, the need to put money aside for your childrens future is even more important. There are a number of options which include deposit savings, a JISA and a General Investment Account so you need to do your research to understand which is best for you because all accounts have their pros and cons.

    I have a guide which compares the different options, so please send me a message if you’d like a copy.

  5. LISA savers face losing their £1,000 bonus

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    The Lifetime ISA (LISA) which launched in April 2017 enables savers to subscribe up to £4,000 a year and receive a government bonus of 25% of the money saved every year until age 50.

    Anyone from 18 to 39 is able to open a LISA and the funds are accessible, penalty-free and tax-free, either at retirement from age 60, when you buy your first home valued at £450,000 or less or if diagnosed with a terminal illness.

    For the first year only the government bonus will be paid annually (i.e. at the end of the first year) but will be paid monthly thereafter.

    However, for those who invest the maximum of £4,000 in the first year and then buy a house before that 12-month bonus arrives, they will lose the £1,000 bonus – you must keep the LISA for 12 months to attract the bonus.

    An interesting point is that existing savers with a help-to-buy ISA can transfer this to a LISA and get a full 25% bonus on the transfer!

    While the introduction of these new savings products had initially been welcomed, the detailed rules are in fact quite complicated and could result in costly consequences for savers. With this in mind, for the LISA it may still be worth opening the account but just being aware that a bonus may not be earned in the first year if an early house purchase takes place. And, for the help-to-buy ISA, it may be advisable for individuals to wait until near the end of the tax year before they transfer it to a LISA.

  6. The effect of raising the female state pension age

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    The Institute for Fiscal Studies (IFS) has issued a working paper examining “the effect of raising the female state pension age on income, poverty and deprivation”. It offers a variety of interesting and sometimes counter-intuitive insights to the reform, which was originally set in train by the Pensions Act 1995. For example:

    • Between 2010/11 and 2015/2016, the SPA for women rose from age 60 to 63, resulting in 1.1m fewer women receiving a state pension and government providing £4.2bn a year less through state pensions and other benefits. Affected households receive about £74 a week less in state pensions and other state benefits because of this change.
    • The change has also increased women’s employment rates substantially in the 60-62 age range, boosting the gross earnings of these women by £2½bn in total. Across all 60-62 year old women (including those not in paid work) this is equivalent to an average of £44 per week. This – and the fact that employee national insurance contributions are paid up to the (now higher) state pension age – boosted government revenues by £0.9 billion in 2015/16. Thus, the total gain for the Exchequer from the rise in SPA was £5.1bn a year.
    • Income poverty among 60-62 year old women is up sharply (by 6.4% compared to a pre-reform poverty rate among women of this age of 14.8%). However, the IFS found no evidence of any change in measures of material deprivation (ie people saying that they cannot afford a range of important items).
    • The reform to women’s SPA has correspondingly increased the age that single men can claim Pension Credit. 25% of men at these affected ages are single, and are, on average, poorer than those men who are in couples. The reform reduced benefit incomes of single men aged 60 to 62 by an average of £21 per week (from a pre-reform average of £89).

    The £5.1bn annual savings are a reminder of why increases in SPA can be expected to continue.

  7. The Government should keep its hands off our pensions!

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    The Government should remove the £1m lifetime allowance and keep it’s hands off our Pensions!

    Changes in pensions legislation have had more impact than anything else I have experienced as a financial planner. The most significant development was the sweeping changes to pensions announced in the Labour government’s 2004 budget, which came into effect on 6 April 2006 and became known as “pensions simplification”. 

    The aim was to encourage retirement planning by simplifying the previous eight tax regimes into one single regime for all individual and occupational pensions.

    ‘A foolish piece of legislation’

    One of the most important changes (and one which many people thought would not affect them) was the introduction for the first time of a £1.5m “lifetime allowance”. It meant that all personal and occupational pension benefits that exceeded this limit would be hit with a 55 per cent tax charge.

    Since 2010, successive governments, in their attempts to tighten the Treasury’s coffers, have reduced the lifetime allowance to its current cap of £1m.

    Protections have been put into place for investors with funds that transition these limits but, 11 years since its introduction, an allowance which originally affected only a small proportion of retirees is now affecting many.

    Since the introduction of the lifetime allowance in 2006, the FTSE All-Share index is up 91 per cent, so anyone with a little more than £500,000 in a pension then may now be experiencing its impact.

    The lifetime allowance is, in my opinion, a foolish piece of legislation which only penalises those who are sensible and have made good provision for their retirement. It is a penalty on the prudent.

    There seems little benefit to anyone – other than the Treasury – of the lifetime allowance, particularly since the introduction of the annual allowance (a £40,000 cap on annual pension contributions).

    One hopes that in the fullness of time it will be removed, but let’s not hold our breath.

    Double standards depending on the type of pension

    A 65-year-old retiring with a £1m personal pension fund can purchase an annuity in today’s market of £32,000 per year indexing with inflation, or £28,000 a year when you include a 50 per cent spouse’s pension for someone the same age.

    Their defined-benefits counterparts, on the other hand, would need a pension of £50,000 per year to hit the £1m mark, with the 20-times multiplier to calculate their equivalent lifetime allowance value.

    This is particularly unfair when cash-equivalent transfer values are obtained from defined benefits schemes and the cash value is far higher than the 20-times multiple. The cash values being offered can often be as high as 40 times, effectively doubling the lifetime allowance.

    It is a clear two-tier system.

    Tax-deferred, not tax-free

    When planning for your retirement, you need to consider government intervention as a risk. New policies have affected pensions numerous times over the years, most notably through the equalisation of male and female state retirement ages, the increasing of the state retirement age, and the increase of the minimum retirement age for personal pensions.

    With the UK running a £69bn annual deficit and the country’s debt at about £1.6trn and rising, ask yourself this: if the Government wanted to slow down this debt growth, how might it do it?

    One answer is to increase taxation. So, while today, you might receive 20 per cent or 40 per cent or 45 per cent tax relief, you may find the taxation of your pension is higher during your long retirement in the future.

    Pensions are tax-deferred retirement schemes, not tax-free. A healthy balance between ISAs and pensions tends to be the only safe conclusion.

    If you have any questions please do not hesitate to contact us at the office on 01793 771093

  8. June CPI inflation figures – maybe interest rates will remain

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    The CPI for June showed prices flat over the month, whereas prices rose by 0.2% between May 2016 and June 2016. The consensus had been for a 2.9% annual rate, so the 0.3% drop to 2.6% surprised the markets. The CPI/RPI gap widened to 0.9%, with the RPI annual rate now standing at 3.5% (down 0.2% on May’s annual figure). Over the month alone, the RPI was up 0.2%.

    The Office for National Statistics (ONS) newly favoured CPIH index was down 0.1% to 2.6% for the year, its first decline since April 2016. The ONS put the fall down to a variety of factors:


    Transport: The largest downward effect came from transport, in particular motor fuels. Fuel prices fell by 1.1% between May and June 2017, the fourth successive month of price decreases. Over the same period last year, fuel prices rose by 2.2%.

    Recreational and culture: This category also made a substantial downward contribution to annual inflation with overall prices dropping by 0.1% between May and June 2017, compared with a rise of 0.6% a year ago. The move downward partially reverses the upward pressure seen between April and May 2017 and comes from a variety of areas, principally data processing equipment, cultural services, and games, toys and hobbies.


    Furniture and household goods: This category gave largest upward contribution with overall prices up by 0.5% compared with a 0.3% fall between May and June 2016. The upward effect came from prices for a variety of bedroom, kitchen and lounge furniture.

    Core CPI inflation (CPI excluding energy, food, alcohol and tobacco) was down 0.2% at an annual 2.4%. All twelve index components remain in positive annual territory, with the lowest pair (recreation and culture and communication) now +1.5%. Food and non-alcoholic beverage inflation is now running at +2.3%, against -1.1% at the end of 2016.  Goods inflation fell 0.3% to 2.6%, while services inflation decreased by 0.1% to 2.9%.

    Producer price inflation (PPI) eased again. The input PPI figure fell back from 12.2% in the year to May 2017 to 9.9% in the year to June 2017. Since the start of 2017 the input PPI annual rate has dropped by 10.0%, a reminder of its volatility. Output price (aka factory gate price) inflation fell 0.3% to 3.3%.

    The surprise drop annual CPI figure eases the pressure for an interest rate rise when the Bank of England’s Money Policy Committee meets in just over a fortnight’s time, Its announcement is due on 3 August, alongside publication of the latest Quarterly Inflation Report.

  9. The Cost of Education

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    A quarter of UK parents regret not saving earlier for their child’s education and one is five say they wish they had saved more, according to new data. Funding the cost of education is a big and important issue.

    It seems that more than 70% of parents contribute towards the cost of their child’s education, at a “rich mix” of fee-paying schools, colleges or university.  Despite this, less than half of those questioned in research by HSBC said they had started thinking about these costs before their child had started primary school.  This compares to 60% of parents in the rest of the world. Blimey, we’re way behind!

    20% of those British parents interviewed said they would be willing to cut back on holidays to fund their child’s education (not what the owners of Peppa Pig world and CeeBeebies land want to hear) and 14% said they would work longer hours to keep up with education costs.  Nearly three-quarters of parents said they relied on day-to-day income to fund their child’s education.

    HSBC, who were behind the research say almost half of UK parents admitted to not knowing how much they were spending on their child’s education.  This was the highest proportion of any country in the survey; the global average was 22%.  Given the “every day” grind/joy of bringing kids up, these stats are pretty worrying.

    Many parents, it seems, just don’t know how much they are spending on education – even when the core fees are met by the local authorities.  Ignorance is bliss – but the opposite has the strong capacity to create so called “justifiable anxiety” – you (may) have heard it first here.

    HSBC say that for parents in the UK with a child in paid-for education can spend about £128,600 over the course of primary, secondary and tertiary education.

    It seems from the HSBC report that parents in Asia lead the way in terms of planning ahead.  More than half of parents in China said they funded their child’s education through general savings, investments or insurance and more than two-fifths through a specific education savings plan.  In contrast, fewer than one in 10 parents in the UK (5%), Australia (8%) and Mexico (8%) choose to fund their child’s education through a specific education plan.

    HSBC said that in nine of the fifteen countries surveyed, paying for their child’s education is most likely to be parents’ biggest financial commitment, above others such as mortgage or rent payments and household bills.

    Whatever may happen politically in relation to government support of higher education costs there is a real and, I believe important need for informed advice to seriously and concertedly attack this wide-open door of opportunity. Done well this will benefit parents, grandparents, children and the advisers putting in the time and expertise to deliver excellent outcomes

    University Money Guide

    It may be too late to consider saving or investing for your child who is off to University in September, would you be interested in a guide that I am compiling – Managing your student finances?  Let me know and I will ensure you are sent a copy.
    If you hope your children are off to university in the future, you have a choice, you are 100% certain to retire and maybe a 60% chance your child will go to university – once you’re retirement planning is sorted, then consider the university fees.



  10. More Over 50’s Setting up Businesses

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    ONS (Office of National Statistics) data shows that as at the end of 2015 there were 4.6m self-employed people in the UK – up from 3.8m in 2008 – and the over 50’s account for 43% of those that start their own business.  In addition, the number of self-employed people aged 65 and over has more than doubled in the past five years.

    This is quite compelling – the rise of the “nevertiree”.  It seems that many of these new older self-employed/business start-up initiators are using their pension funds to fund their ventures. 

    This “rise of the older entrepreneur” is another example of how demographics and social change are affecting and (predominantly) extending the need to access financial advice.