Posted August 28th, 2012
Just a reminder, if you weren’t aware already, If you were one that would reach the ceiling of £50,000 a year contributions in your
personal pension, you may have found, or been advised to look at MIPs. A MIP is a Maximum Investment Plan. They were often used by those that hit the afore mentioned cap of £50,000 as a way of investing further without hitting any tax free cap.
You could invest as much as you liked in a MIP and you would never pay tax on any returns assuming the policy
remains qualifying. However, a change included in the budget means that there is now a limit of £3,600 that can be invested in one of these schemes as tax free. Anything beyond that and you will have to pay tax on the returns.
The changes are explained in much more depth here:
So you could take a policy out for £10,000 pa but there would only be tax relief on the first £3,600.
You may find you are unaffected by the changes. However, if you have a MIP and would like to know more, or even consider other ways to invest beyond your pension the why not get in touch?
Whitewell Financial Planning Ltd and The Whitechurch Network Ltd are not responsible for the content of external websites.
Image Credit: flickr.com/***~^ ^~***
Posted August 23rd, 2012
A Bank lending scheme! Whatever next? A butchers selling fresh meat? Or a greengrocers selling fresh veg? A brand new bank lending scheme is very progressive and cutting edge. It’s not as if banks were ever set up in the first place to make loans at interest or connect capital deficit customers with capital surpl………Hang on a mo. Why all the hoo ha?!? How is it that we’re now at a stage where a bank lending money to businesses and customers seems so far-fetched? To the extent that we need “new” schemes to get the initiative going!
For the second time this year we have seen schemes introduced that were intended to see cash find its way, via the banking system, to households and non-financial firms. And it seems that by and large, that didn’t happen. Claims of banks hoarding money and that nearly half of the small firms that asked for bank credit were refused is hardly going to breed confidence in these sorts of schemes.
Why not just give the money directly to the households and businesses in question and let them invest it themselves? Sounds crazy I know, but let’s not get in to a discussion about where money actually goes when it finds itself entering the banking system. Here’s a picture of a cat:
There may be another way:
A friend of mine has been (bleating on endlessly) talking about this for the past couple of weeks. I’ve yet to watch it but it’s definitely on my to do list. Without giving the game away, the upshot is that poor old Dave Fishwick, despite having a brilliant idea of what a bank should actually be i.e. one that lends to customers and business and offers a decent rate of interest on savings – actually finds himself being turned down upon trying to procure the necessary licences. I won’t say why he gets turned down. But when I was told why he was turned down it wasn’t for the reasons you might think. And then you realise that in actual fact it makes total sense when you think about the sort of people that make those decisions.
It’s not as if they’d let any old Tom, Dick or Harry look after your money.
cat – flickr.com/danperry.com
banker – flickr.com/WorldEconomicForum
Posted August 16th, 2012
Any profession carries with it a lexicon of terms that to the expert are as much second nature as the skill set itself. To hear skilled musicians talking about tri-tone substitutions or compound time signatures may appear baffling to the lay-person, but to the pros involved is as plain as plain English. However, a musician would never try to sell you a tri-tone substitution and therefore perhaps the need for a “plain English” explanation is somewhat moot.
Just incase you were wondering, the above piece of music is in Common Time (4 crotchet beats to a bar) and is also in the key of B Major (5 sharps). Although it appears to have briefly modulated to E Major in the bar of music we see here. I know. I’m a man of many talents!
In professions where the selling of a product is key then the use plain English must go hand in hand. The technical jargon used in financial circles is ridiculously confusing. I still remember as a child watching economists make forecasts about stock market movements and the national economic out-look. I recall listening to them, but they may as well have been talking Swahili for all it meant to me.
The problem is, even though it was on the news and being made available for public consumption, there was little done to make things clear.
As a professional in any walk of life, it’s easy to forget that at one time you didn’t know what you were talking about either. Using plain English to convey technicalities is not really dumbing down. It is paying the client due respect by accepting that they may not be privy or fluent in a particular language. If somebody whose first language is Greek gave me advice, I may ask them to explain it to me again in English. This isn’t because I am ignorant or lack intelligence. It’s simply because I don’t speak Greek and therefore have no other way of understanding what they are saying.
The same is true in financial circles. The over use of technical terms and phrases will baffle clients. This is no reflection on their intelligence. They just have no frame of reference for the foreign terms you may be using.
Key Investor Information Documents keep things clear and as straight forward as possible. Investors need to know, in a plain, easy to digest language exactly what their choices are and what they are buying in to. Perhaps if we trimmed back some of the jargon we may find that existing and potential investors alike may be more forthcoming.
A KIID will make things a lot clearer when it comes to where and how you want to invest your money. Have a look at the following example. It’s very straight foward and easy to understand.
Image credit: flickr.com/MaxiuB
Posted August 13th, 2012
At the time of writing, it’s currently day 11 of the Olympic Games. I am a sports fan. Has to be said though that I didn’t really picture myself being too interested in the Games in London. It just felt a bit…….far away. Being the fan of the beautiful game that I am, I can point out how international tournaments are given country (rather than city) designation when it comes to selecting (I use the term very loosely!) hosts. Not only that, but us Brits are eternal self-deprecating pessimists when it comes to sport these days. Well having found myself slowly but surely drawn to all that is team GB I think it’s high time we left that cynicism on the football pitch.
GB football, drawing mainly on English talent, managed to do what England mainly do. Quarter final exit on penalties. YAWN! But what bothered me most is that I missed Jess Ennis striding to Gold in the 800m, the last event of the heptathlon to watch the football! More fool me right? It’s really starting to register that in actual fact, when it comes to sport, as a nation we do ok. Whether it’s as England/Scotland/Wales/Northern Ireland or Great Britain, we do have much to be proud of. We do well in the Rugby, the cricket team is neatly brushing aside all comers (let’s face it, as long as we beat the Aussies that’s all that really matters right…….if only Germany had a cricket team of worth), and our young Athletes, and not so young Sailors, Cyclists, Horse Riders etc…..well they really are doing us proud.
At the moment we are only one Gold medal behind what we achieved in Beijing. And there are still 6 days to go! It isn’t just about the competition though. The whole event has been a marked success so far. Right from the opening ceremony – wonderfully directed by Danny Boyle whose commentary on the covert dismantling of the NHS by the current administration raised many eyebrows – full of humour and artistic endeavour, to last night’s victory at the Velodrome, it has been fantastic. There was much scepticism and criticism before the games began but it’s always been this way in Blighty. The negative talk almost seems to part of the ceremonial build up to events of this sort held on our shores. Ultimately, barring major disasters, it just serves to make the ensuing festivities all the more magnificent. It’s a far cry from the almost shy, awkward and “don’t expect too much from us” handover in Beijing four years ago.
We should start believing in our nation again. The bids and organisation for these events can sometimes leave one feeling a bit detached. It almost initially seems little more than a jumped up PR exercise. However, once talented, creative, committed and gifted people get hold of these things and truly start to pull it together it’s hard to imagine how it can be surpassed. That’ll be the task for the organisers in Rio. And I say good luck to them….on current evidence they are really going to have to pull out all the stops to top what is shaping up to be the best Olympic Games of modern times. It’s a shame there isn’t something that Britain can do more regularly that would enable us to invite the world over for the summer. Maybe not annually, but these events come around so seldom. Perhaps that’s what makes them so special, but it’s a shame that we won’t get to see such an event on this Isle again for many years. Perhaps not even in mine or your life time.
The organisation has been tremendous from what I can see. The stadium looks to be constantly at capacity and the Olympic park looks very modern and also very jovial at the same time. All that was left was the question of whether our Athletes could step up and to be frank, even if not another medal was won between now and the end of the tournament they have done the nation proud.
Sitting very nicely in 3rd on the medal table with the USA and China ahead. And although an obvious point, it is always worth underlining that both the a fore mentioned super powers have populations that dwarf our own considerably. It isn’t as if we are flooking the triumphs either. There has been many assured and dominant performances in quite a few disciplines. Particularly in the cycling and sailing.
There is no shame in jumping on the Olympic Bandwagon. It’s our tournament for the world and it is there for us all to enjoy. Why pretend to be disenchanted when it’s all so much fun?
Hundreds of years ago there was a breed of chemists that believed you could forge Gold by mixing elements and by weaving magic in to chemical compounds. Perhaps if they were alive today they may realise that determination, belief, talent and dedication are the main ingredients in forging precious metals where there were none before.
Image Credit : flickr.com/ianpatterson
Posted August 2nd, 2012
Investing in index funds is a hotly debated topic amongst investors. I am biased I suppose, but I do have to wonder why?
Index funds are generally managed by computer systems. You can self-direct, but if you’re not a worldly-wise investor (the term “index fund” may even mean nothing to you), then working with a financial advisor is key to helping you research and develop an all-weather portfolio.
Be careful though. There are advisors, trading in index funds, who will want to sell you a particular product as they are paid handsomely to do so. This being the case, these particular commissioned – JP Morgan funds for example – have a higher brokerage fee which therefore often means a higher implementation fee and higher annual commission.
An Independent Financial Advisor is, or at least should be, just that. Brokers selling his or her companies own commissioned funds will have a vested interest in selling you a particular company’s fund. Kind of like a Ford dealership selling you a Ford car and you pay more for the privilege. However, the independent chap across the road could sell you a Honda, Ford, Toyota…….without having any particular loyalty to any manufacturer. He’d be more likely interested in selling you a car that suits you. The analogy breaks down when we realise that ultimately both car salesmen are looking to sell you the car that suits their company’s bank balance. That is business after all.
But then, the business that is at least as interested in their customers wishes as they are in their own profits do tend to have a habit of sticking around. The fact is, for an IFA, this is absolutely paramount.
One of the underlying principles of making investment strategies work is making sure they are tailored and bespoke to each individual client. My experience tells me that this really does work.
No two clients are ever the same. Let’s say Mr A and Mr B came to me looking for advice on investing similar amounts of money. Once I have talked with the clients about their hopes and plans for the future we see that the strategy that would work for Mr A may not suit Mr B at all. Because an Independent Financial Advisor isn’t getting paid commission by a company to sell products, then I’m not going to sell Mr B something that won’t work for him, simply to help turn a profit. And that profit may be something Mr B never sees anyway because of the exorbitant fees involved.
Beyond that, there is little human interaction in passively managed index funds. Because we can leave computers to track an index, it means there is less managing to do which means lower costs for clients.
image credit: flickr.com/Hugo90