Not sure if it is getting wiser or just plain getting older, but my list of things to avoid is getting longer. Last week it was a wheeze for avoiding Stamp Duty which has all the attraction of  grenade where someone has lost the pin while a popular fad I hate viz.  Structured Products, has become a “bad thing”. Structured products (SPs) in general and the firm of Keydata in particular are a hot topic as the latter firm was a big producer of these. SPs typically feature “Guaranteed” somewhere in the flyer or brochure strapline and the return is related to the performance of one or more indices over a certain period which may be calculated as an average or on specific days and the products have a typical life of between 5 & 6 years. They are often sold directly to the public with cleverly designed literature and by high street banks where customers think, well if a big bank is selling them, they must be OK. Gut tells me < 5 per cent of people read or understand these as the sight of the G-word Guarantee (no matter how qualified) switches off people’s brain cells. Keydata’s problem was that they thought their structured  product was ISAable but HMRC differed and demanded £5 million in back tax for the many clients who had invested in them via ISAs. Keydata didn’t have it meaning they were working on very slim profit margins and filed for administration/winding up proceedings. This is not the first time these things have been in the news. Precipice bonds were a previous scandal where again the G-word featured prominently in the flyers I used to get. Pleased to say my instinct was to bin them, and a firm which used to have an office in Clerkenwell near in2 Consulting’s previous office sold buckets of them, closed down years ago leaving many pensioners with practically nothing to show for their guaranteed investment. A meeting there with the MD was very pleasant where he let slip that the margin on these SPs he was flogging was 8 per cent then told me with a chuckle that his own money was with Equitable Life.

My recent visit to www.passionfortheplanet.com and an article on the credit crunch take me back to the start of my international banking career in the City. First HO job is processing inter-bank dealing limits. With a worldwide network of branches and plenty of competition, Lloyds Bank International (long since subsumed into Lloyds TSB) held its own quite well. Deals like discounting a letter of credit underwritten by a local bank which were outside the business limits meant a telex to HO which had to be answered within 24 hours or business would be lost to a competitor. Banks have  hierarcies and bigger the deal, the higher up to the chain you go to get the deal authorised or occasionally rejected. Managers concerned had typically worked around the globe and depending on pressure of work and mood had a good fund of stories. One particular manager we shall call William, last of the non-graduate overseas trainees, had an interesting time in Latin America. At short notice, a trainee might be called on to help out a branch three hours flight-time away – Brazil is a very big place – and stay for days or weeks. Some of his flights over the Amazon jungle showed clouds of morpho butterflies with their blue wings flashing in the sunlight. Their beautiful bright blue colour is structural rather than pigmented as each wingscale is a little prism. Today instead of blue butterfly wings, it is stories and satellite images of the forest being burned to make way for cash crops or biofuels. Never mind the displaced indigenous people in the jungle – they hardly seem to count in our quest for reducing CO2 emissions.

Occasionally people in the hierarchy were absent, so a relatively small deal might end up with a director who had a huge signing limit or even the Chairman’s office whose limit was of course, unlimited. The telex in question was invariably presented with the bank file concerned just in case the manager needed to check but if  the guaranteeing bank was Barclays for example, the decision and signing took seconds. In another case the branch requested a dealing limit (so they wouldn’t have to ask every time a bit of business came in) for a fringe bank (remember those?) answered with something like they’ve got to be joking – the reply to the branch in Argentina was more polite.

Promotion led to Loans Administration Department and later my friend William decided that he had had enough of limits and office politics preferring instead to help run the ranch of his father-in-law, which was about half the size of Wales. Sad to have missed out on the overseas trainee stuff as their’s was something of a charmed life. Trainees were sometimes met at the airport by local staff some of whom were young, single and female. Lots of dinner invites to meet more eligible young ladies often followed but for the guys, biggest problem was not language, culture or climate but rather staying single!

Staying with radio, there is now a Pensions Radio http://beehive.podcastproduction.eu/beehive_pension_podcast.xml being the various podcasts of pensions guru Steve Bee available on 020 8099 3190 if you are not on-line. For non-pension professionals where the P-word (pensions) is concerned, one might be tempted to add the usual warning: May Cause Drowiness, Do not Drive or operate Heavy machinery etc, but they are well written and in plain English, although the content can be worrying with little to cheer about.

Recent finals for The Apprentice lead to involvement of BRX Bond Street’s www.brxbondstreet.co.uk chocolatier Kirsty Joly www.perfectlytempered.co.uk as an industry expert along with some of her contemporaries. Both presentations lasted 30 minutes and were very polished but alas the edit cut out much intriguing detail. Yasmina’s question to the “blonde at the back” was in fact to Kirsty but another blonde appeared in the final programme! In Kirsty’s view the Cocoa Electric was pitched at a very narrow target market while the Choc D’Amour chocolates were more the sort of artisan chocolate her clients prefer. The Cocoa Electric ones had lots of potential, but didn’t quite hit the spot and the Strawberry and Basil one got particularly a bad press for some reason. Unusual flavours sometimes work and sometimes don’t e.g. a rosemary chocolate which people automatically think they won’t like as it’s an unusual flavour for a chocolate are a firm favourite, while some sample orange and chilli chocolates she brought to a BRX meeting the next week had a sort of Marmite reaction – love it or hate it.

A self imposed goal of one blog per week, creates a continuous demand for interesting content meaning one meets some very interesting people, complementing the more mainstream stories from several news feeds like www.mycompanypension.co.uk First is a catch up meeting with Michael Harrison, one of the founders of www.3Cscommunity.org where we meet at the Royal Institution http://www.rigb.org/registrationControl?action=home in Albemarle Street off Piccadilly. The museum in the basement is one of London’s hidden gems and features much of the equipment used by Faraday in his electricity, magnetism and chemistry discoveries. All done in the nineteenth century on the same premises, but you will probably remember him best from his image on the Twenty Pound note. Mental note – Good place to take my grandson when he’s bigger.

After training as a lawyer, Michael set up a desk top publishing company before starting the current digitisation company scanning priceless public and private documents – some of which can be seen in the museum. The business has changed in the two years since we met and there are two main solutions to taking things forward. But helped perhaps by a superb 3 course set lunch, the simplest solution turns out to be with people he worked with many years before and knows well – much less risky than signing up with people you don’t know.

My blog on financial Planning for People with Cancer http://www.georgeemsden.co.uk/2009/05/financial-planning-for-people-with-cancer/ leads to a trip to South Wimbledon to see Chantal Cooke’s digital and on-line radio station www.passionfortheplanet.com Covering Essex, London, Peterborough, Bristol and Devon it has a firm niche in environmental issues not to mention a mission to introduce non-mainstream music which works well too – no celebrity gossip either. Having always wanted her own radio station, first step was the BBC then setting up another commercial station in Canterbury. Catalyst, or perhaps the I don’t want to do this any more moment came after 4 years when rumours of band Oasis splitting up saw a newsroom of 60 journalists running round like the proverbial headless chickens – they really do this see  http://www.georgeemsden.co.uk/2009/01/a-bolt-from-the-blue-barack-obama/

But what is the point of creating another radio station just like the others? Answer: do the opposite and if it is something you are passionate about, you have a chance. With Chantal doing the journalism bit and Kenny whom she met in Canterbury doing the music, their own plus backers money got the station on the air 7 years ago. Listeners are now 120,000 on digital radio – plus a few on-line listeners, accounting for < 2 per cent of radio listeners nationally. My own item on financial advice for people with cancer is scheduled for transmission 29th June 2009.

Walking back finds me in Merton Abbey Mills with its Alternative Market and London’s only working water wheel – another place to take the family perhaps http://www.mertonabbeymills.org.uk/index.php Can also recommend the creamy penne alla gregoriana at the Mama Rosa Ristorante.

Pension surgeries lead to signing up an employee who has been with the company for 10 years entitling him to a nice employer contribution. Now full-time, he can afford to join but has sadly missed out on 10 years of his own, his employer’s contributions, tax relief and growth. Another member wants her pension paid to a different bank account which the pension provider can do over the phone but after getting lost in a call centre, she tells me she will bring the papers and new bank details next month, so I can make the call for her while she is with me. Some people just find the whole subject of pensions intimidating.

Snippets appear on my newsfeeds: AEGON Scottish Equitable reduces some of its rates by 44 per cent for joint-life second death policies – useful for people who want to have a policy in place that will enable their beneficaries to pay Inheritance Tax (IHT) due. IHT is essentially the children’s problem where their parents are married as it only becomes payable on second death but IHT has to be paid before Grant of Probate. Until the executors or administrators get this, they cannot do much. While the parents are the insured here, these policies can be taken out and paid for by the children/beneficiaries so it will not affect the parent’s standard of living.

At the ABI conference, Shadow Chancellor George Oborne announces that the Tories will abolish the rule which forces people to buy an annuity before age 75 if they can prove that they have enough to live on and will not need to claim State Benefits – small glimmer of hope but will believe it when I see it. Interesting situation as the well off can get a reasonable rate of return on their money and keep their capital – which can of course, be passed on to the next generation although may be subject to IHT. The less well off will get a slightly better rate of return at current rates but lose their capital and pass nothing of their pension funds on to their children. Bill Gates probably never thought any of his quotes would be applied to British pensions, but his quote “Life isn’t fair, get used to it” may apply here. Annuities are Theft from another IFA might be another.

In the mortgage market which shows some signs of recovery, the Council of Mortgage Lenders announce that 69% of borrowers opted for Fixed Rates in April at an average rate of 4.83%. Meanwhile in the market for funding for entrepreneurs the http://www.meetup.com/opencoffee/ networking group has a lively e-mail community dealing with issues like: patents, NDAs (non-disclosure ageements) business plans & due diligence. Off-line (face-to-face) meetings are every Thursday 10 – 12 in the UCH Roberts Building in Malet Street. And if the words of a serial entrepreneur are of interest, see  http://www.ft.com/comment/columnists/mikesouthon

But to finish on an amusing note, coffee break chuckles from a colleague lead me to Hitler and the Expenses Scandal on YouTube  http://www.youtube.com/watch?v=gHbNPlDAUwE where there is now a whole family of Adolf Hitler videos subtitled onto a chunk of the film Downfall N.B. Strong language but very funny.

Client texts me and asks what tax rate applies to trusts? Tax partner of West End accounting firm is at same meeting so we talk in coffee break. Answer: 40 per cent now but going up to 50 per cent in April 2010. Trusts still work for Inheritance Tax planning where the assets concerned are out of one’s estate after 7 years but as far as holding assets is concerned in your own lifetime (their orginal purpose) the new 50 per cent Income Tax rate is a killer. If you pay 40 per cent Income Tax, why pay 50 per cent if those assets are held inside a trust? Only seems to make sense where income is given away which will carry a 50 per cent tax credit – so if money is paid to a child for example, they can claim the tax back. A few MPs might be unhappy here: http://www.telegraph.co.uk/news/newstopics/politics/labour/4981114/Lord-Mandelson-facing-questions-over-blind-trust-investments.html

Property investment is also on the agenda and yields of commercial property coming up for auction are 5 – 8 per cent p.a. However, the banks are greedy wanting 3 per cent Arrangement Fees and margins of 3 per cent or more over Bank Rate which is not going to stay in the trough at one half per cent for ever. Borrowing looks silly on these terms and the only people who can afford to risk this sort of purchase are those with their own money – quite an achievement for a Labour government. These deals are only going to work when property prices fall further &/or the banks relax a bit.

Simpler way of raising money and without involving the banks, might be to have a bullion party where fellow www.brxbondstreet.co.uk member Lewis Malka of http://www.joseph-sterling.com is looking for new hosts. Previous party had people walking away with between £200 & £8,500 where the latter case was lady who must have been popular but decided to get rid of the cr** jewellery she had been given over the years, and get something she wanted. Best hosts tend to be ladies with big houses who like entertaining – and don’t forget old dental crowns either – it’s all gold even if it doesn’t glitter anymore. All driven of course by the high gold price (US$ 965.70 an ounce as I write) reminding me of one of our Prime Minister’s less prudent decisions (as Chancellor) when gold was US$ 275 an ounce http://www.georgeemsden.co.uk/2008/03/one-for-sorrow-two-for-joy/

It’s that time of year again and Richard Houldsworth http://splattprint.com/ another BRX member, has been talking to a large hotel group about their Christmas brochure.

As there plainly will not be any official 70th D-Day Anniversary celebrations, a BBC 4 programme commemorating the 65th Anniversary seems worth watching. Besides the pictures of amphibious tanks, landing craft and concrete bunkers, an old film shows troop-carrying gliders landing next to King George V & Queen Elizabeth while the credits include the Museum of Army Flying http://www.flying-museum.org.uk/the_collection.htm a place that has been on my must visit list for some time. Admission is £7 for Adults but it is impressive to be asked to fill in a Gift Aid form on entry so that the museum a registered charity, can claim the Basic Rate Income Tax on the entry cost resulting in an income of £8.75 per ticket. The two main parts of the museum are devoted to the above-mentioned gliders used by the Allies initially in 1942, and the Air Observation/Liaison part which goes back to the nineteenth century with balloons and man-carrying kites. Plenty there to keep little boys (and of course their Dads) amused for many hours including three simulators – a multi-function helicopter/training plane one, a bi-plane one and an anti-tank one – all £1 a go.

But a story springs to mind from my early glider training. Having seen troop-carrying gliders used effectively by the Germans, Sir Winston Churchill decides we should have them too and a demonstration is organised for him along the lines of the one when the King & Queen visited. Gliders are launched in advance and they release from the planes towing them at the agreed height, but thermals are popping and the pilots decide to do a little local soaring. Meanwhile the Great Man has arrived and sits down waiting for the planned demo. Conditions are really good and the soaring goes on. Eventually, the gliders spot-land as intended in front of Sir Winston, but by now he is furious. Apart from the disciplinary action that followed, rumour has it that later military gliders had two feet lopped each wing, rendering them still glideable – but no longer capable of soaring. (Usual bottle of plonk for the reader who can clarify this). Empty, these troop-carrying gliders could be looped as well, as a picture at the museum shows. And if you like this sort of flying story see: http://www.amazon.co.uk/Think-Like-Bird-Pilots-Story/dp/1904744052

Staying with WW2, a contact at a recent networking meeting mentioned that his home in Balham was near Du Cane Court which would have been Adolf Hitler’s private residence had Operation Sealion (invasion of the UK) succeeded.  Then on Saturday BBC Radio 4 broadcasts Punt P I with a special on this intriguing story http://www.bbc.co.uk/iplayer/episode/b00krgd4/Punt_PI_Series_2_Episode_1/ Scheduled invasion date had been 21st September 1940 but the Battle of Britain stopped it. Sadly this story appears to be urban myth with no documentary evidence, but with lost musical pieces turning up after 200 years, who knows???

To conclude and perhaps show that pensions are not always boring, Pensions Minister Rosie Winterton claimed for soundproofing her bedroom in a new twist to the on-going MPs expenses saga http://www.professionalpensions.com/859637 YCMIU. Thanks again to Mike Jones at http://www.mycompanypension.co.uk/ for highlighting this item – a rare amusing one among other pension stories which tend to be much more serious. The lady concerned is still in the Cabinet but now with the portfolio of Minister of State (Regional Economic Development and Co-ordination) Department for Business, Innovation and Skills.

Retiring soon, the client’s portfolio looks good. New property bought in the country and selling London home will provide a useful cash lump which could generate income from deposit rates only slighty higher than now. Better rates available with a half step up in risk but still staying in the low-risk category and miles away from the volatility of equities. Bond prices are weakening, hard for people who considered them a safe alternative to equities, and likely to get weaker if (surely when?) interest rates rise in a year or two, in response to inflation.

Children will need to be supported for a while yet and will need some help with a deposit. Family Gifted Deposits are strange beasts with lenders as some seem to hate them rather than see it as an opportunity to get another customer. A deposit of  25/30 per cent is quite a large cushion against further property price falls from a lender’s point of view, and no one just starting out on a career is going save anywhere near that portion of the purchase price. The portion of first-time buyers (FTBs) has been declining for years pointing to lower long-term house prices. When the FTBs move, who will buy their property if not everyone’s parents can provide a huge deposit?

All looks fine apart from the gremlin of health. Less of it and care/treatment has to be paid for. Some basic care can be done by a partner or someone can come in for a few hours a week from local agency and wage rates here are not exactly high. Common reaction at this stage in a client meeting is “But I have BUPA!” Yes, but private medical insurance is for acute conditions i.e. ones which are curable. Chronic or incurable conditions are not covered. Many employees have  BUPA via their employer which is cheaper than buying it individually and allows people in < perfect health to get cover they could not get otherwise. Most (but some like Pruhealth do not) have a continuation option whereby cover can be maintained as an individual policy after leaving employment. This will cost more but at least cover will be maintained.

Back in the office, the promised quotes for pre-funded long-term care insurance (LTCI) are interesting. This cover is taken out while you are healthy and benefit is paid on mental or physical disability – maybe 3 or 6 months after diagnosis. Having a longer deferred period is cheaper than a shorter deferred period, and gives the person covered a chance to receover. But the cost is high: 12 per cent of the benefit for the male and 18 per cent of the benefit for the female. In money terms, monthly premium is £120 for £1,000 monthly benefit for my client and £180 per month premium for his spouse. Huge disparity in cost is actuarial – women live longer than men (about 4 years on average) and a visit to a care/nursing home will probably show 80 per cent of the residents female.

Compare the cost of whole of life insurance for same client (not yet 60) where the (annual rather than monthy) cost range is:

• for husband: <1% – 2.8% p.a. of the sum-assured for death cover i.e. £995  to £2,800 total annual premiums for £100,000 death cover
• and 2.7% – 3.1% p.a. of the sum-assured for critical illness cover i.e. £2,700  to £3,100 total annual premiums for £100,000 critical illness cover.
• for spouse: 1.15% – 2.9% p.a. of the sum-assured for death cover i.e. £1,150 – £2,900 total annual premiums for £100,000 cover
• and 3.7% – 4.8% p.a. for critical illness cover i.e. £3,750 – £4,880 total annual premiums for £100,000 cover

The LTCI rates will probably stay high until someone else sees a profit opportunity but the one insurer still offering this cover has had the field to itself for sometime and I am not holding my breath for any new entrants into this market – would really love to be proved wrong here! Commercial Union (now part of NU or AVIVA) were the first to offer this cover back in 1992 but they and their competitors bailed out when reinsurance rates went up 200 per cent in one year. People who wanted cover left it soooo late before applying that it was a question of when there would be a claim, rather than if. The cover can only be bought by IFAs with the requisite CF8 qualification nor you cannot buy this cover directly from the insurer. Harking back to my previous rant about annual general insurance contracts, http://www.georgeemsden.co.uk/2009/05/smarter-than-the-average/ the LTCI contracts bought years ago are still in effect provided the premiums have continued to be paid.

Why bother with LTCI? Simple, it will protect your capital as a quick look at care home fees in the West Country showed rates of £700 – £750 a week (excluding nursing care) – something that will clear up a lot of Inheritance Tax bills. Once you are eating into capital to pay care bills, it has a tendency to evaporate rather quickly and the new notional capital rules were announced only days ago. If you are in hospital, care is paid for by the Local Heath Authority. Pass through the hospital doors and any follow up care is in the hands of the Local Authority something they never really wanted. The increasing cost of all of us living longer was off loaded from the Health Service to the Local Authorities back in the nineties but in response to their squeals, they were and are are allowed to apply a means test – the aforementioned notional capital rules – seem to sounding a bit like Mr Micawber* here.

Starting at £24,000 in England and getting less  should entitle you to having part of the cost of care covered by the Local Authority, down to all the cost if assets are < £14,000, but interpretation of the rules varies widely. But after a rewarding professional life, would you want to risk ending up in a council-funded nursing home??

* a character from Charles Dickens’ (CD) slightly autobiographical novel David Copperfield (initials reversed – DC).    Most famous quote in the book is:

Annual Income Twenty pounds, Expenditure 19 pounds 19 shillings & 6d, result happiness. Annual Income Twenty pounds, Expenditure 20 pounds & 6d, result misery.