The newly formed Pension Income Choice Association for people with pension pots of under £50,000 could be quite busy as this includes the majority of UK pension customers. Many IFAs are reluctant to deal with people with such small pensions as it is unlikely to be profitable or even loss-making business. Commission for arranging an annuity is typically one per cent, so for a £50,000 annuity earnings will be £500. But in most cases, earnings would be £375 as most people (sensibly) want to take their tax-free cash of 25 per cent of the fund. Looks a similar situation to solicitors where the £125 cost some charge for drafting a will is probaly loss-making too or if you prefer, the “sprat to catch a mackerel”. Just to enlighten you here, Tax-free Cash being a simple term which most people understand, is now officially called a Pension Commencement Lump-sum – under the Government’s Pension Simplification rules!

The initials at heading seem to be popular covering a host of different organisations all over the world as well as the eating disorder where people eat non-food stuff like clay, chalk or dirt.

Our regulators seem to be busy with a £2.8 million fine for sub-prime lender GMAC http://www.moneymarketing.co.uk/1001131.article?cmpid=MME01&cmptype=newsletter while high-street insurance broker Swinton is fined £770,000 for selling unnecessary PPI (Payment Protection Insurance) and is offering refunds on 480,000 policies http://www.myintroducer.com/view.asp?ID=1273 Difficult to buy any new gadget these days without being pressured into buying insurance, providing nice bonuses for the sales staff. If you have a credit card, you may have PPI included too and the card companies will only remove this rubbish when you tell them to. You will get much better value sickness protection insurance talking to an IFA who will take into account your whole financial situation, not just one bit of it. Recent review meetings with clients I haven’t met for a long time or new referrals where we do  holistic review, more often than not involve fairly basic financial housekeeping which clients can often do themselves.

Debt management companies are busy and two stories from www.eastangliandebtmanagement.co.uk are fairly typical. In one, a 26 year old lady working for a high-street bank took out a personal loan for a car when she started work, but with steady job found it easy to get one credit card, and another and another till she was £70,000 in debt. In another case, a business couple found themselves over £100,000 in debt with repayments of £2,500 per month. Solution in the first case was an IVA (Individual Voluntary Arrangement) while a debt management plan was set up with the second one.

Ethical Lender Triodos Bank are trying to practise what they preach with a transparency tool where you can see where their loans are going  http://www.triodos.co.uk/knowwhereyourmoneygoes Staying with green/ethical issues, Christopher Booker’s new book The Real Climate Change Catastrophe looks a good read  http://www.telegraph.co.uk/news/6425269/The-real-climate-change-catastrophe.html perhaps for the Christmas stocking - if I can wait that long.

Least surprising item in the last few days is from the National Audit Office pointing out that elderly people pay more tax than they need to because the rules are complicated   http://www.nao.org.uk/publications/0809/dealing_with_the_tax_obligatio.aspx Reassuring to find my instincts correct in my bête noire Structured Products where again the regulators are doing something by putting these beasts under review. With investment strategies having names like: Napoleon, Cliquet, Wedding Cake and Annapurna, these often complicated products have been sold to risk averse investors rather like with-profits policies and funds a few years ago. http://www.telegraph.co.uk/finance/personalfinance/investing/6464922/FSA-puts-structured-products-in-the-spotlight.html

Proving the old saying that “good news is no news” a client attending a trade fair in Germany is impressed by the technology. All meaning that the finance required for the next business phase, is much more than the figure of last week and mortgage colleague Peter peter@in2consulting.co.uk is already on the case. The data needed for the lender was ready and e-mailed across quickly. Commercial mortgages require a fairly standard information set and requests for further information are usually positive. Most surprising here was the lack of interest in lending from his High Street Bank who as he pointed out, have had £billions (it’s actually £trillions) of our money.

Long-term Care creeps slowly up the agenda after a spectacular lack of interest in the late 1990s when the Royal Commission came to the unsurprising conclusion that it should be free, which helped no one. Couple of enquiries from solicitors show elderly clients in care homes, having large amounts of money but no idea how much future care will cost or how much needs to be set aside. All making the Inheritance Tax planning that may be driving the enquiry rather difficult.

Immortal words from Lance Corporal Jones of Dad’s Army are a surprise in something as serious as the LaterLifeSymposium09 hosted by www.partnership.co.uk  which addressed the structural and financial challenges facing us with our living on and on and on.

With the benefit of 100% hindsight, many have wondered how effective the Home Guard would have been in stopping the Germans if they had invaded the UK when they had the chance. Estimates for the likely delay that might have been achieved vary from days to 10 minutes. But our current age structure - largely the result of the maturity of that post war or baby boomer generation, is worrying. While interest is rising in this issue, we are still in the “Bore War” phase. This was the label given to the first few months of WW2 after UK declared war on Germany when nothing much happened. At the time, there were many who knew people from the earlier Boer War in South Africa, but few get the pun now.

A few figures from the first two speakers, Colette Dunn of Watson Wyatt and Steve Groves of Partnership:

* by 2031 the number of people over 65 will exceed those under 16. This has never happened before.

* by 2020, the working population will not be able to afford the cost of supporting the retired/non-working population

* the so-called Dependency Ratio will change from 12 working people in 1950  for each retired person to 4 people by 2050

* the over 85 population group has the highest rate of increase of any age sector

* average life expectancy increased by about 1 year in the 23 years to 1978. But in the 30 years since then has increased by about 10 years – presumably reflecting the benefits of better health care via the NHS which started in 1948.

*  by 2031 80 per cent of the wealth in the UK will be owned by the over 60s and they don’t seem to want to spend it…Most relevant to this group is HOW they decumulate assets or use them up. Accumulating further assets using Asset Allocation, the Holy Grail of investment planning these days is irrelevant. If you hear a dull thud at this point, it is your financial adviser falling off his chair.

* interest rates seem likely to remain low for a year – maybe two. Use this opportunity to reduce debt.

Final Guest speaker is Robert Peston BBC Business Editor  http://www.bbc.co.uk/blogs/thereporters/robertpeston/ who will be remembered for breaking the story of Northern Rock couple of years ago. Again with hindsight, we had a golden age of living standards from 1992 – 2007 when there was not a single quarter of negative growth. But as the economist Keynes put it, our Animal Spirit will mess it up eventually. The global banking standards which had the unforgettable names of  Basle I and Basle II were fundamentally flawed and allowed for example, £380 million of capital to bear the risk of £133 billion of debts. If these assets dropped by one third of a per cent, the capital cover was effectively wiped out.

Recent proposals to separate proper banking from the exotic stuff  are either sensible or do not go far enough – depending on who you talk to. The super bonuses resulting from gambling with everyone else’s money have produced no social benefit at all and have been ultimately pointless. Will bankers reform themselves? Not very likely as Corporal Jones said…see heading. 

Wall Street has always struck me as the Hollywood of the East Coast where you have young handsome investment bankers some of whom are very smart but then with their resources they have, can buy or hire the brains without having to work up a sweat themselves. Not so long ago we all admired these people!! and is Wall Street a good film or not? We may not see them for a while but like The Terminator, “I”ll be back.” Talking of which, Arnie is now trying to sort out the State of California’s financial mess, or let me be polite…deficit.

Expect some political concensus on raising the State Pension Age. Last week, it was confirmed that the Netherlands will increase their State Pension Age to 67 in 2020 after originally wanting to increase it in 2011.

Since we are talking of banks and big numbers, it seems very apt to have finished the week with a tour of the Museum   http://www.bankofengland.co.uk/education/museum/ and a few normally closed parts of the Bank of England. With 1,700 staff and ten floors – 3 below ground and 7 above, this is another Hidden Gem like my previous blog   http://www.georgeemsden.co.uk/2009/06/hidden-gems/

Known as The Old Lady of Threadneedle Street since a famous cartoon Political Ravishment by James Gillray http://www.londonrevolution.net/blog/london-virtual-tours/the-birth-of-the-old-lady-of-threadneedle-street.html  the Bank was founded in 1694. The £1.2 million original capital was raised in days to enable our King William III to finance his war against the French. It was owned privately until 1946 when it was nationalised. Before then, Dividend Day was a day out as you had to go to the Bank in person to collect your dividends.

If you enjoy being envious, there is a 20 kg bar of gold in the museum worth at time of writing about £255,000. Bank Note printing was outsourced years ago and a new £50 note is due soon – some shopkeepers will not accept the current ones as they are the obvious ones to try and forge, and the battle to stay ahead of forgers is never ending.

Admission is free and visits are popular with schools whose names are announced on the Welcome Board you see  as you enter. Security is similar to airports so allow time for this if you come as a group. Most curious? the beautiful mosaic floors done over a 10 year period by a Russian artist and the river Walbrook which has been piped and diverted down Princes Street, so its flow doesn’t wash away the foundations.

Finally, the Bank has its own ghost of which there appears to be more than one version so if you like this morbid stuff, go to Google…The man with two shadows???

A break from pensions this week? BBC Radio 4 is usually a source of good material when TV offers little or increasingly when driving. Last Sunday am engrossed in a radio play which turns out to be Beau Geste – something every schoolboy is supposed to have read. Remember the William stories by Richmal Crompton and later the James Bond ones but never got round to the P C Wren classic. Google reveals a site officiel for the Foreign Legion  http://www.legion-etrangere.com/ with information available in 15 languages to reflect the 136 nations from which its members are drawn. Legionnaire stories available on Amazon include Legionnaire by Simon Murray & The Naked Soldier by Tony Sloane but remembering the postal troubles, decide to order them on-line from Haringey Council Libraries and are available for collection three days later. Simon Murray’s book has a forward by Frederick Forsyth whose Day of the Jackal drew on his experiences in France in the early 1960s when Simon was in the Legion not to mention a glowing review from former Secretary of State Henry Kissinger and it lives up to its plaudits.

22 February 1960 and over 30 ne’er-do-wells are reduced to 7 on the first day after the initial interviewing sergeant tells him it might be much tougher and less glamorous than he thought. Borne out next morning and the first week when duties are peeling potatoes and sweeping up. Further training near Marseilles leads to Algeria after initial training but only after one of the worst sea voyages I have ever read about. Couple of months after that brings a first suicide when a young Spaniard shoots himself.

Book is in diary form with the boring bits taken out and there are plenty of gaps. At times this was worse than the brutality which is as bad and sometimes worse than you imagined and dished out when tasks are not done to standard. Interesting mixture of camaraderie but not getting too close to other people either – you don’t really know them do you? Operations tracking down the fellagha who want a fully independent Algeria vividly show one of the Legion’s slogans: March or Die! and on an early patrol, 3 are killed but only after they have killed 5 and injured 15 soldiers in one company. Who were these guys? The Deuxieme Bureau (French MI5) wants to know which means showing the faces of the victims so they can be checked. No point in carrying a whole body back to camp where the Deuxieme Bureau guys are, just the heads will do. Three including the author are sent back for this grisly task and as the only cutting implement available is a penknife (wouldn’t a bayonet have been better?) this job takes 30 minutes. Carrying two decapitated heads on top of your kit is quite tiring and the heads are handed over. No point in bringing the third one as it is unrecognisable. Photos of the heads are taken and having served their purpose, are chucked away in the bushes. The returning soldiers put their kit back in their tents but end up the victim of probably the most grotesque practical joke ever. The soup cauldron appears unusually full although everyone else has eaten, so they are invited to help themselves. Just as they are about to take their first mouthful, one soldier puts his hand into the pot and pulls out one of the severed heads by its long black hair to the amusement of everyone….else (Use the Comments box if you can go one better here)

At the time of writing, there were over 30,000 Legionnaires but the current figures is 7,699 and the days when the Legion was the refuge of murderers and rapists appear to be gone. Checks are quite thorough these days involving Interpol for example, and everyone gets a nomme de guerre which can be dispensed with after one year when they can revert to their real name. There is no leave outside France for the first 5 years and the pay is not great  http://www.legion-recrute.com/en/salaires.php but then no one joins the Legion to become a millionaire. Desertion surprisingly is not despised but deserting with your weapon is and especially getting caught. Traditionally British and Germans have made up significant parts of the Legion to the extent that in the 1980s:

“the Legion saw a large intake of trained soldiers from the UK. These men had left the British Army following its restructuring and the Legion’s parachute unit was a popular destination. At one point, the famous 2eme REP had such a large number of British citizens amongst the ranks that it was a standing joke that the unit was really called 2eme PARA, a reference to the 2nd Battalion, the Parachute Regiment of the British Army” (quoted from Wikipedia)

Recruitment of British legionnaires has not been helped recently by the physical unfitness of British youth being an obvious consequence of “dumbing down” in the school curriculum and sale of school sports fields. Mentioned this previously in:  http://www.georgeemsden.co.uk/2008/03/tango-and-bohemian-rhapsody/ where the blocks of flats in question near Old Street just near www.in2consulting.co.uk offices are nearing completion   http://www.bezierlondon.com/#/Contact/

Two final points. With government spending cuts coming at local as well as national level, don’t be surprised if local libraries close – use them or lose them, as libraries have always been a soft target in local government spending cuts. And, if you want to catch up on the first episode of Beau Geste  http://www.bbc.co.uk/iplayer/search/?q=beau%20geste

Suddenly the P word is all over the media. Dispatches on Channel 4 shows “Who stole my Pension?”  http://www.channel4.com/programmes/dispatches/episode-guide/series-3/episode-6 While the programme has some distinguished contributors, the omission of the much-quoted £1.2 Trillion (1,200,000,000,000) public sector pensions cost is bizarre. Then Shadow Chancellor George Osborne mentions a proposed increase in the State Retirement Age to 66. The related issue of long-term care becomes a bidding war with Labour’s £20,000 one-off premium   http://www.georgeemsden.co.uk/2009/07/rita-hayworth-and-the-shawshank-redemption/ being seriously undercut by the Tories £8,000 scheme.

Paying £8,000 or £20,000 as a one-off premium seems to be a number plucked out of the air although its proposers say it can be self-funding? But until the calculations are out in the public domain, this seems cloud cuckoo land – a phrase used about public sector pensions in the Channel 4 programme.  The related issue of the cost of care in old age came up last week at a friend’s Ruby wedding (40 years) anniversary party when a cost of £1,000 a week for a residential care was mentioned – not including nursing care of course. 

The scheme will only work if it is compulsory as few will want to pay either figure until they are on the point of needing care and the problem with elderly people is that life (health really) can change overnight – in my own experience, often as a result of a fall. Commercially available long-term care was withdrawn years ago as people were leaving applying for it until the last minute so it was a case of when people were going to claim rather than if. Only one company offers pre-funded care policies now and they are much more expensive than previous rates http://www.partnership.co.uk/ They will not deal direct with the public and if your own adviser has not passed the requisite CF8 paper, they are not permitted to give advice here.

Regarding a higher retirement age, let me mention again a grisly statistic. Raising the retirement age to 70 means that 27% men and 17% women will die before receiving their pension. A huge disadvantage of the State Pension is that you cannot pass it on (if you haven’t taken it, you lose it) unlike a private one where your fund will be passed onto your beneficiaries if you die before taking your benefits.

Raising the retirement age is going to mean a huge extra cost for employers. Currently, the highest age employee benefit insurers will provide for is 65 so people working beyond that age or their scheme retirement age, lose these benefits from the employer e.g. Death-in-Service benefit, pension contributions, group sickness insurance, group private medical insurance. At a retirement planning meeting recently with an employed client, I suggested that he get an illustration for continuing his private medical insurance beyond his planned retirement age of 62. He was quoted a cost of £500 per month.

People who work beyond their employer’s standard retirement age are clearly disadvantaged raising some interesting questions with new anti age discrimination legislation. Having employee benefits finish at say, age 60 when the Employer’s Retirement Age is say, 65 can also be dangerous for employers. Last week, found a case of this where an employee who had been ill for 7 years had reached the age of 60 and the insurance benefit stopped. Question was, Can he be dismissed? The lower age for the employee benefits was presumably done to save costs, but will now be expensive to sort out – classic case of not having insurance being more expensive than having it.

BRX Bond Street www.brxbondstreet.co.uk brings some interesting different angles including one from the accountant www.sayersb.co.uk We are in a pre-election period and over the last few years, many government services have been outsourced to the private sector. With some serious spending cuts on the way, firms which have built their business model on this (government bodies will generally pay their bills and don’t go bust) could be in for a tough time. Other members are busy too including a (high end) property finder where the market varies street by street with some distressed sales but no one dares mention this – never was keeping up appearances more important. Great story too from Des Sutton of www.manbytesdog.com who was able to replace a client’s laptop with all the previous settings, the same afternoon when the hard disc fried in the morning.

Staying with laptops, the Antiques Roadshow http://www.bbc.co.uk/showsandtours/beonashow/antiques.shtml where I have yet to see an uninteresting edition, reminds me that lap desks or scriptoires/escritoires have a been around and a status symbol for a long time. These led to the invention of the brief case and if you thought a desk for example was just a desk, have a look here  http://www.achome.co.uk/antiques/vintage_office.htm N.B. you will have to scroll down a bit.

Finally, an eye test reminder draws up some interesting trivia and history here  http://www.glassesdirect.co.uk/guide-to-vision/history-of-glasses/ including: spectacles have probably prevented the world being run by people under 40 and while babies cry, they don’t produce tears until they are 1 to 3 months sold.

A parent is getting on and you live 100 miles away. But he is getting care from council employees so you can sleep peacefully. On a visit, Dad shows you his will where he has appointed a carer as his executor? This is the bones of an item picked up on the new MacMillan Care website  http://community.macmillan.org.uk/whatsnew/default.aspx where people put their cancer/care issues out in various forums. Some of them make uncomfortable reading and if you wish to join in any threads, you will need to register. The headline asked: Can a carer be an Executor of their charge? which set alarm bells ringing.

As long as we are compos mentis, we can appoint whoever we like to deal with our estate when we have passed on. But where you have a surviving child who cares about you and visits, why not involve them in this? Why appoint a carer that borrows £1,500 from you and is not doing a great job? Care agency staff for example, are not allowed to be an executor or be a beneficiary of their charges. The Criminal Records Bureau  http://www.brookson.co.uk/news-and-press/139/8/changes-to-criminal-record-bureau-crb-checks.aspx includes a separate Protection of Vulnerable Adults (POVA) register but occasionally checks are not done by employers. The two employees concerned have apparently been dismissed, but their appearance on the POVA register will depend on whether or not they get a criminal conviction.

There is nothing to stop anyone taking someone off the street and employing them directly. No checks have to be done and where people do this to try and save money perhaps, they tend to be blissfully unaware of the risks they run as an employer. Supposing the carer has an accident, for example? Fortunately, new rules coming in 2010 put the onus on the employee to ensure that a carer’s own records are up to date.

Families who feel that their parent has been exploited can always go to court but proving this can be difficult where payments are made directly. Much better at the outset to establish a contract with carers setting out the restrictions on accepting gifts, signing legal documents or being included as beneficiaries in the care recipient’s (service user’s) will or acting as their trustee.

Alternative might be a nursing home but let’s face it, no one ever really wants to move into a home not to mention the risk of MRSA for example, which may be higher than staying in their own home.

In the above case, moving Dad to the same town largely solved the issue, so he could be seen more often. But care in your own home is an often overlooked alternative and a niche of http://www.caringandsharing.info/ The cost can be less than that of a nursing home, not to mention avoiding the trauma of selling up and moving. Much of their work is with dementia patients. Where a person has a physical illness for example, their life expectancy will often be shorter but for mental illnesses life expectancy can be normal so will need caring for longer. Equity Release can be one way of funding this as properties may need to be adapted to provide in-house accommodation for the carer or allow for the installation of specialist equipment.

From an adviser’s point of view, one has to be absolutely clear who is the client? If the parent is compos mentis, then they are usually the client and all discussions are with them. If not, then a Lasting Power of Attorney is needed and dealings will be with the Attorney rather than the person receiving care. While parents will usually discuss this with their offspring, the advice is for what benefits the parent. All meaning of course, that the children could end up inheriting nothing apart maybe from a few personal effects.

Other research around cancer websites reveals an huge database on different types of cancer at http://www.cancerresearchuk.org/ some imaginative fund raising at the Marie Curie Cancer charity http://www.mariecurie.org.uk/supportus/fundraising/chance-to-dance/chance-to-dance.htm What is most surprising here is that it is a Marie Curie project. Whereas Cancer Research UK and MacMillan are for helping people with years perhaps to live or maybe normal life expectancy – mid life if you like, Marie Curie only deals with end life patients, 5 months to live or less – as their website says, we don’t do research…

Another nightmare unfolds in a younger generation in the unregulated sale & leaseback sector. Families that cannot keep up their debt or mortgage payments have been tempted into sale & leaseback deals with many home owners not bothering to read the small print. What can happen is that the home is sold for well under the market value, credit card and other debt is rolled in as well so families think they have a clean sheet. But they may only have limited rights to stay and can find themselves out on the street when the new landlord gives them notice. Nastiest of all, this situation is only likely to occur where there is reasonable equity in the property. If debts are equal to the property value, no incentive for the sale and leaseback people. Where there is equity, a family’s biggest asset has been sold cheaply for a few months extra in their home.

The regulators have a consultative document for this, but there does not appear to be any provision for independent legal advice or independent financial advice, which would be the case with equity release for example. Could be a worthwhile area for solicitors and IFAs to work together.