Spring is in the air so here are a few items to think about with the new fiscal year which starts 6th April. The Annual Allowance and Lifetime Allowance for pension contributions increase to £245,000 and £1,750,000 respectively; a pension contribution of £2,880 net (£3,600 gross) can be made to a pension scheme for a child, civil partner or spouse without the donor having to prove any earnings. With enough time or for a child perhaps, this could prove to be investment of a lifetime although they will not be able to access it till they are 55. If you do not wish to wait that long and want the benefit for yourself, then consider investing in a stock & share ISA (limit £7,200) and forget about it for a while. Try and avoid the ISAs from the Big Banks as their charges tend to be higher than average and performance similarly lower.
The current Capital Gains Tax allowance of £9,600 (£4,800 for trusts) needs to be used before 6th April as it cannot be carried forward while the £3,000 Annual Gift Allowance under Inheritance Tax needs to be used too, although the previous year’s allowance can be carried forward here.
Non-domiciled individuals who have lived in the UK for 7 years need to contact their tax advisor about whether they wish to continue to be taxed on a remittance basis.
Leaving the most obvious till last, where one partner pays Higher Rate Income Tax at 40 per cent and the other pays Basic Rate Income Tax at 20 per cent, changing investments to the partner with unused allowances can be quite effective. And just to cheer everyone up, it’s Mothering Sunday on 22nd March so better book that restaurant table or those tickets, order those handmade chocolates or whatever you have in mind for that day.
My seminar at SmartWisdom mentioned in http://www.georgeemsden.co.uk/2009/01/a-bolt-from-the-blue-barack-obama/ turns out to be about non-linear notetaking which will save me time when I have done the follow up exercises. At the same seminar, I meet Mark Forster whose time management autofocus system
http://www.youtube.com/watch?v=qF1ngJAyD_s
looks like the right thing at the right time.
Returning to the title, the current financial malaise we are in turns out to have come from something perfectly laudable – a search for yield. Going back a few years, one could say that there were highly-rated (safe) bonds with a low yield and lower-rated (less safe) bonds which provided a higher yield. Bond is one of those emotive words which make almost any investment sound safe. Tell a client or maybe a trustee that you intend to invest in equities and watch the usual nervous reaction – mention the word bond in the same context and it all sounds much safer. But back to the original point – imagine a meeting a few years ago, at an investment bank (merchant bank in the UK) and some bright spark asks the perfectly reasonable question, how can we get a better yield without taking a higher risk? Answer: a repackaging job where you put some of the higher-yielding (riskier) stuff with the lower-yielding (safer) stuff and put a safe AAA label on it.
This would have been fine if elementary lending practice had been followed and the investment banks had actually looked at some of the orginal mortgage files. The skeletons were easily visible, but this basic request was angrily rebuffed. 80 per cent of the mortgage files which contained the assets used to justify the high rating, appear to be have been fraudulent or suspect. Full version here http://www.huffingtonpost.com/william-k-black/the-two-documents-everyonb169813.html
A recent meeting with a company doctor Roy Holland to discuss various funding deals produces an interesting bonus. Among the parties in the hotel lobby chatting over laptops and notebooks is a party of three, where a Japanese gentleman takes out and unfolds a neat pocket computer about the size of a cigarette case. Unlike some PDAs or small computers, the keyboard actually looks usable for my clumsy fingers so being my usual shy & retiring self, I politely ask him if he could e-mail me details of this machine. It is called a Pomera http://www.kingjim.co.jp/pomera/ but being a word processor rather than a PDA means I probably will not get one, but thank you Mr Kurose.
Occasionally I am asked how long this recession will last and for once I will stick my neck out. With hindsight, the feel good bubble seems to have burst after the 2008 Olympics. There was plenty of bad news then but since the Olympics, hardly any good news. My own feeling is that nothing much will change until the London 2012 Olympics when people might start feeling a bit better again. Let me be the first to say that my guess is no better than anyone else’s, and the wonderful things about markets etc (that’s really us folks) is that they have the wonderful habit of proving the pundits spectacularly wrong occasionally. At the Bank of England Inflation Report meeting in November 2008 for example, their sophisticated economic models had suggested that there was only a 1 per cent probability of interest rates reaching the levels at that time!
While we can blame the Government for much of the economic mess, having government-funded healthcare is a blessing, although it has resulted in the NHS being the largest employer in Europe with 3 million employees. Having got off relatively lightly with throat cancer in 2007 – previous blogs here http://www.georgeemsden.co.uk/category/cancer/ my nasendoscopies which look right into my voicebox, are now every two months. But now it is my turn to help my wife through her journey through the cancer jungle. The chemotherapy administered every 3 weeks is working well and the support excellent, but after one of many doctors meetings, I ask about the cost of the drugs concerned. Several thousand pounds for each cycle I am told and there will be 6 – 8 of them depending on how things go and of course, this does not take into account the cost of doctors time etc.
But to leave you on a positive note, a taxi journey to a colleague’s leaving do at The Waldorf (we do like to do things in style at in2) shows the hidden talents of one of our black cab drivers – Boxing Tuition? A former amateur boxer, Alex Wilkey 07956 907 380 now offers Personal Training – with a difference. See you in the gym?