Review meetings with clients are always interesting and a recent one raised the issue of mixed marriages or rather mixed domicile marriages which give Financial Planners, Solicitors and other professionals an interesting area of research. Where both spouses are British or both are non-British the rules are relatively simple. The so-called inter-spouse exemption in the UK whereby spouses can pass assets to each other with little concern, being a very useful tax planning tool. But where one is foreign, the situation is far less generous and more complicated. Here the upper limit on gifts between spouses is £55,000 which does not cover very much where property is concerned, and the rate for Inheritance Tax is 40 per cent.

Domicile is a question of fact. It can mean where you consider your permanent home or maybe where you intend to return when you retire – as the above heading says, where the heart is. Domicile for Inheritance Tax purposes is usually acquired when a foreigner has been resident in the UK for 17 out of 20 years.

British clients with overseas property e.g. a holiday home in Spain, will need to have their will notarised for it to be valid under Spanish Law or else do two wills, a UK one and a Spanish one. And trusts for example which orginate from the time of the Crusades, can be a very useful means of keeping wealth in the family for the benefit of future generations, have not been recognised in continental Europe since the time of Napoleon.

Thinking of the long term but in a different context, one lady farmer has managed to banish plastic bags from her town and has a vision of a world without oil  http://www.dailymail.co.uk/news/article-1145431/Now-farm-help-teach-world-live-oil-says-woman-banished-plastic-bags-town.html giving the fascinating thought of the oil-producing states being reduced to penury as no wants their stuff. In another twist, her father actually encourages foxes which like grey squirrels are technically vermin, as part of his conservation work. While I have never seen one in the countryside, foxes are now a regular sight at night in town. Still keeping with nature, the final winter talk at my gliding club at Lasham www.lasham.org.uk on Saturday 28th March 2009 is on the subject of Owls with a demonstration.

An indication if one were needed, of how the mortgage market has changed comes in an e-mail from Scottish Widows Bank announcing its new lending criteria in their top of the range Flexible/Professional mortgage where the maximum loan-to-value is now 60 per cent compared with 110 per cent a couple of years ago. For those who can perhaps no longer afford their mortgage, there is now The Little Book of Redundancy http://www.cm-murray.com/Pages/LittleBookOfRedundancy.pdf

Another client meeting is helping a lady take her small pension in the best way to suit her circumstances. Her fund is far too small to provide her with any sort of decent income but the tax-free cash (Pension Commencement Lump-sum) will come in useful as her husband is about to have a major operation. The fund is just over the £16,500 Triviality Limit where you can take the whole fund in cash but get stung for Emergency Rate Income Tax. Fortunately, she has assets overeas which will provide enough income and she will have the support of her family there too. But looking at the annuity offered, the 3 per cent escalating one will take 17 years to catch with the level annuity, so in spite of my warnings about inflation she takes the level option.

Research for the above reminds of another client who got all his pension funds in cash and tax-free but the price was very heavy – he was terminally ill. A local solicitor had introduced him as a divorce case where he needed advice on how to pay off his ex. He could either sell his home and give his ex an agreed portion of the proceeds, or keep his property and take out a mortgage, giving her the mortgage amount. After deciding on the latter option, there was no response to phone calls or letters until about a year later. Trying one more phone call for luck, we finally spoke and about 20 seconds into our conversation he blurted out that he had terminal brain cancer. We better meet, I suggested and he came to my office the next day. Looking visibly paler and with a large horseshoe-shaped scar on the side of his head, he brought me up to date.

At our previous meetings, we had discussed critical illness cover. As my best quote was 3 times the cost of the same benefit obtainable through his employer, I suggested that he get the maximum cover via that scheme. This turned out to be £250,000, and it must have paid out shortly after the cover started.

His divorce was now settled but he had nearly £200,000 in two private pensions. He seemed quite relaxed, was obviously compos mentis but there was one question I needed to ask. Telling him that he did not have to answer if he did not want to….my question was, How long have you got? Without pausing, he replied that there was only a 50 per cent chance of his surviving the next 12 -18 months explaining that the problem with brain cancer is that if surgery is the treatment, it is very difficult to remove all the cancerous tissue and the doctors expected his brain tumour to grow back.

Taking benefits from a pension usually involves taking the tax-free cash and an annuity. Ordinary annuities are based largely on standard life expectancy so smokers for example, can get higher rates and people with serious illness enhanced rates. In this case, taking any annuity would have been grossly unfair to the client and HMRC allow the payment of the whole fund in cash without any tax penalty in exceptional circumstances, such as terminal illness or where life expectancy is around say, 12 months. Agreeing a fee for my time, and after weeks of unnecessary delay with me eventually having to take the file back from my colleague, his two pension funds were finally paid out. He died in a hospice a few months later.

Arranging life insurance for smokers can be interesting and raises the occasional question like, I only have the occasional puff, can I get non-smoker rates? The answer is of course No! and depending on the amount of cover required, can be easily detected with a swab placed in the mouth, which can even pick up passive smoking. Rates can be double that of non-smokers but as an insurance contract is essentially one of the utmost good faith, no point in putting down a false answer. While the rules have changed here slightly, the underlying principle has not, see http://www.georgeemsden.co.uk/2008/06/uberrimae-fidei-bo-diddley/ However, in response to market forces, Norwich Union (soon to be Aviva!) has recently changed its smoker definitions: Current Smoker 10 cigarettes + a day for the last 10 years, Light Smoker and the unchanged Non-Smoker definition. The other side of the coin here, is that smokers will probably get higher rates for an annuity….

Budget Day was traditionally the day for whacking smokers except when things were good or maybe an election was near, when excise duties might be reduced. The Chancellor would save the news about the taxes on tobacco and alcohol to the end of his speech, which this year will be the latest one I can remember - 22nd April - well after the end of the financial year on 5th April. Budgets have usually been early or mid-March, which gave people a few often frantic days or weeks to do things before the the new rules came into effect, usually 6th April. But recent Autumn Public Spending statements have made the Spring Budget much less relevant and since 1997 we have the situation where the the Government says it forbids something like say, some evil tax loophole, but does not publish the details for weeks or even months resulting in a horrible sort of limbo where no one knows what to expect. Last Spring for example, a tax partner in a firm of accountants told me there were three areas where he was waiting for detail to be published so he could advise his worried clients on trusts and other areas. A shabby trick here was pulled a couple of years ago.

When the Chancellor sits down after his speech the papers with the full detail are available in the Voting Office. But some serious changes to trusts were only announced on the HMRC website at 6 pm that evening to come into effect at midnight. Not the sort of behaviour one expects from a country that prides itself on having given the world the Mother of Parliaments.

Moving from the world of politics to cyberspace, Twitter is the subject of latest blog by Mike Southon serial entrepreneur & now guru/public speaker on this topical area http://www.ft.com/cms/s/0/9ce3a368-f82d-11dd-aae8-000077b07658.html?nclick_check=1 You can probably guess who is No.1 on Twitter worldwide, but the No. 2 is a surprise….

Meeting George Kinder again a couple of weeks ago prompts me to reread his The Seven Stages of Money Maturity where the start of his working life offers an interesting solution to newly-weds who want to balance their individual wishes with their joint ones. They made a deal – first two years his wife supported him while he worked on his goals and projects. Then it was her turn. Problem as you might guess is that his were not finished even after two years, so he had to get real job which in his case was doing people’s tax returns eventually leading him to where he is now.

For most people, there are three main money facts: biggest asset – home, biggest liability – mortgage and biggest pool of money with their name on it – pension. The latter comes in two main types: money purchase – employee carries the investment risk, and defined benefit or final salary where the employer carries it. Employers willing to do this are diminishing steadily and members of existing defined benefit schemes usually count themselves lucky. Penalties for not keeping a scheme properly funded are severe and unsurprisingly some feel this type of scheme is over-regulated and the strain of keeping this sort of pension topped up, can threaten the viability of the business itself.

There is the Pension Protection Fund http://www.pensionprotectionfund.org.uk/ for this type of scheme for which the levies are expected to increase signficantly this year. In a well-timed initiative, HSBC has launched Pensions Watch to help worried defined benefit scheme trustees.

Somehow all the foregoing reminds me of the dictum from Charles Darwin “Survival of the Fittest” and by chance when researching something completely different, leads me to a catalyst in the form of a failed social experiment which may have prompted him to make the journey which led to his famous theory, in a 2005 BBC article  http://news.bbc.co.uk/2/hi/uk_news/magazine/4429006.stm And if IT problems are hampering the survival of your business, you might like to see Saving Money on IT in a Recession, Russell Henley’s blog   http://www.ecademy.com/node.php?id=120514

The uncanny feeling from the research for writing here is that the clock is running backwards. A couple’s dream of retiring in Spain has come to an end with the falling £Stg http://www.guardian.co.uk/money/2009/feb/07/expat-pensioners-income Working in a Stock & Share department in 1973 where the FT 30 share index lost three quarters of its value over 18 months and the posted oil price went up 4 times, was some handy preparation for facing subsequent ones. But the Bank of England inflation report in November pushed this perhaps comforting assumption aside saying it was the worst situation since 1914. There is no one around who can remember conditions then and even if there were, our world is so different one wonders how much use their wisdom would be.

But to leave you with something that will make you laugh, allow me to point you to Richard Lederer’s History of the World according to student howlers or bloopers http://www.classbrain.com/artread/publish/terrible_world_history.shtml Maybe the old ones are the best.

Friday morning 7.15 am and it’s time for a double take. A long team of horses two-abreast from the Household Cavalry are making their way down Piccadilly and the shouts of the officer in charge can be heard some distance away. Health & Safety is well-observed and they stand out in the morning twilight in their bright yellow safety vests.  Their trot is quite brisk so they are soon past but the inevitable “deposit” animals make are a reminder of their passing. In the pre-car era, 3 or 4 tons of this would have been deposited on London’s streets every day and with everyone’s coal fires burning non-smokeless fuel, life must have been awful.

My www.brxbondstreet.co.uk meeting at the RAF Club provides the perfect uplift in this period of gloom and well worth the crawl out of bed at 5.40 am. Kirsty www.perfectlytempered.co.uk our chocolatier has had a very busy week getting out a large corporate order entailing working from 7am to 10 pm. These hours were not unusual when she was in the City herself, but as this is now for her own business, it is much more fun and she can take a few days off. Accountancy recruitment specialist Roy www.rgduncan.com has a huge pool of quality candidates and offers a few tips for people applying for jobs in this area:

* Target the post advertised specifically. A general catch-all approach won’t get very far. How do you meet the job spec?

* Keep contact details simple. Three e-mail addresses for example, does not help.

* Keep the c.v. up date and in reverse chronological order. What are your USPs?? What makes you stand out?

* A polite covering letter with the c. v. will probably help as only 1 in 10 people bother here.

The 10 minute slot is taken by Alexis, proprietrix of  www.the happinesscentre.com whose bread &  butter work is dealing with corporate wellness or rather the increasingly stressed population in and around Shepherds Bush, an area with the highest concentration of businesses in the UK. Stress per se is not bad and can vary from too little (drone zone) to the You Stress and into the optimum area of Creative Calm. Beyond this, productivity falls off seriously with the most obvious result of lower sales. Stressed male executives form a large part of her 5,000 annual clients as The Happiness Centre can deal with issues that an executive could not deal with via his employer. Common causes of poor health are dehydration and bad nutrition.

A different type of holiday is mentioned by master-coach George Metcalfe via www.vaughantown.com where you spend your week or whatever talking English to people in Spain who want to improve theirs. The cost to you is the airfare but looks worth looking into, as on your holiday you have a companion and guide, making the stay more interesting than just being herded around as a tourist.

In an end to a very enjoyable meeting, in-house jeweller Lewis www.joseph-sterling.com reports a wonderful money saving idea heard on the radio from a lady who obviously does a lot of entertaining.  Her after dinner mints are in fact frozen toothpaste! Couple of hours in the freezer, remove the wrapping, slice it up and voila! after-dinner mints.

In an interesting example of serendipity, a meeting with a friend who is a franchisee reveals he is not happy with the way the franchise is being run. The number of franchisees has halved and with other buinsess interests, the franchisor seems to have taken his eye off the ball. One hour later over lunch with two solictors in Clerkenwell, one asks do I know anyone in a franchise? I mention my friend’s predicament and while it may not lead to anything, is worth a chat over a cup of coffee in Muswell maybe as we all live nearby.

A lesser-known casualty of the current credit crunch is the divorce rate which started dropping many months ago as the kitty to be shared out on the split started getting smaller, mainly as a result of falling property prices and lower (money-purchase) pension funds. In a related spin-off from the Madoff hedge fund fraud, one “clean” divorce case has been made dirty by the disappearance of a US$ 2.7 million investment a husband paid his ex- as part of their amicable split – and the husband wants a refund.

Facing up to another reality, there is now a Society of Later Life Advisers with Lord Lipsey as its Honorary President who pointed out at the launch last month, “We simply have to accept we are never going to get to a position where the state pays for everything.” A Solicitors for the Elderly http://www.solicitorsfortheelderly.com/public/index.php already exists to provide legal advice in an increasingly relevant and difficult area. And just to provide a final cheer, George Magnus, Senior Economist at UBS points out:

• For the first time, Britain’s over-65s outnumber people aged under 16.
• By 2035, these two age groups will have grown by 4 million (or nearly 50%), and 500,000, respectively. The working age group in between will be a little smaller. These developments capture the economic essence of ageing populations, namely the sharp rise in economic dependency of older citizens on those of working age.
• For the UK, this means that while there are now four people of working age supporting each pensioner, by 2035 it will be just two and a half, and by 2050 only two.
• 17 million baby boomers in the UK, (78 million in the US).

The Bank Rate reduction to 1 per cent provides an unlikely bit of nostalgia taking me back to the start of my banking career at Coutts & Co. 1973 found me at Cavendish Square branch on the corner of Harley Street in Management & Loan department as it was then called. Within my in-tray, was a piece of accountants ruled column paper with a stern heading BANK RATE. Starting from 1928 when the branch opened, the first figure showed the again familiar of 1% in a firm neat copperplate hand in blue-black ink. Some while later, the next neatly written rate is 2% and later on 3%. Changes after this, became more frequent with the standard of handwriting deteriorating and ending with the inevitable ballpoint pen scrawl in the sixties and seventies. Researching this on the Bank of England website has me worried with interest rate statistics going back to 1694 and a first (Bank of England) Bank Rate of 6%. But interest rates around 1928 and later are much more than the 1% on my sheet, so perhaps this was Coutts & Co’s own rate for something else.

Interesting how some things stick in one’s mind, but my induction course back in 1972 in the days of the 3 day week and power cuts, reminds me that Coutts & Co was originally founded before the Bank of England in 1692 by one James Campbell. The copperplate reversed and intertwined initials in Coutts & Co’s logo are actually J C rather than T C of the more famous Thomas Coutts.

One question that can be relied on to make clients squirm is the subject of wills and dying. Solicitors will confirm for example, that many people seem to have a fear that making a last will & testament will tempt fate and accelerate their own or maybe their spouse’s demise. Draft wills have been known to linger on the coffee table for weeks and longer.

It is doubtful then that many people took notice of a recent announcement from the Ministry of Justice increasing the payments to partners and children for intestacy – dying without making a valid will. From 1st February 2009, a spouse or civil partner with children will automatically receive £250,000 compared with £125,000 previously, from the estate of someone who dies without a will. Where there are no children but there are parents or siblings, the amount will increase from £200,000 to £450,000.

In the biggest reorganisation of the Coroner Court system for 100 years, there will be a Charter for the Bereaved and a new post of Chief Coroner for England and Wales with more details at www.justice.gov.uk

Note that the above refers to married people not people who live together as a so-called common-law wife/husband, and for a nightmare example of what can happen here without a valid will see http://www.georgeemsden.co.uk/2006/05/will-you-wont-you/

The theme of asking big or maybe tough questions is continued at a packed Institute of Financial Planning meeting in the City to hear father of the financial planning movement George Kinder. His book The Seven Stages of Money Maturity is considered a classic and illustrates the evolution of financial advice from commission-based product selling to fee-based advice where products are secondary. His own career started doing tax returns for people and evolved into putting a human side to what can be a very dry subject. Very few people get excited about how much they need to invest in a pension or how much life insurance they or their family might need. But talk to them about what they really want to achieve and you have a very interesting conversation, not to mention it making the adviser feel pretty good when the clients says they feel inspired after a meeting with you. The Hawaiian concept of Aloha is also introduced in his first book and means to inspire or make someone feel better, rather than the more prosaic Hallo or Goodbye meaning. You can see George Kinder here http://www.youtube.com/watch?v=rwJxKbgz9ss

A predictable result of the credit crunch is that people are claiming more on unemployment insurance resulting in premiums going up by 20 per cent in some cases. This so-called Payment Protection Insurance (PPI) is often a “point-of-sale” product sold by lenders at the time of mortgage application. This is cheaper than Permanent Health Insurance (PHI) which pays during a period of illness, but is poor value compared the with latter. The former PPI is an annual contract which the insurer can choose not to renew if there are too many claims whereas PHI cannot be revoked by the insurer, hence its name Permanent Health Insurance. A PHI policy which will cost around a third more, will pay up to retirement or other age if necessary, whereas a cheaper PPI contract will typically only pay for a maximum period of 12 months. A classic case of cheap price but poor value.

First Thursday of the month and it is time for me to get out my financial stethoscope be pensions doctor for a day at one of the group schemes I look after. First is a new employee asking about fund alternatives to the default fund chosen when the scheme was set up. There are > 100 other funds to choose from but only about 4 per cent of employees bother to select a different fund from the default one, so her enquiry is unusual. Fortunately, her query is easily answered with a link from the provider showing the alternatives available, enabling her to select her own fund mix. Second is a long serving employee whose husband is having a major operation next month and she needs to take tax-free cash or Pension Commencement Lump Sum as it has been called since A Day. Her long service entitles to good employer contributions so she will be able to take a little more end 2010 when she finally stops work.

But of more concern to her is the loan her husband took out last year where the payments are a problem. He cannot afford the £280 original monthly payment but can afford £100 a month. However, the lender who is also her banker, has not been very helpful causing her much worry. To save £32 bank charges for each unpaid item they have cancelled the direct debit and to help her, I write down 4 bullet points to be included in her letter to the lender which ought to solve the problem.

Finally in a classic case of unintended effect perhaps, groans from my mortgage colleague remind me of the latest data protection regulations. These mean that once a mortgage has completed, the lender will no longer talk to the broker that introduced the borrower to them in the first place, much to the frustration of the client concerned  – YCMIU.