Will Apple learn lessons from Google Maps?

Will Apple learn lessons from Google Maps?

Apple users (iphone, ipod, ipad, imac) were given some relief this week as google maps was made available once again. Prior to the latest operating system, google maps had been the default map tool. However the new Apple maps was made the default tool on their latest upgraded software. It was not a good experience, with many places not being “on the map” and as a result users found the experience somewhat unsatisfactory. So there has been some relief at last following a new app which can be installed easily onto the latest Apple operating system. So despite being one of the worlds favourite companies (who voted?) Apple, make mistakes – by attempting something that they are not good at. I wonder if Apple will learn this lesson.

Finding a reliable guide

Why bother you with this? well it occurred to me that a financial plan is rather like having a map. However when you don’t have the full picture or bits are missing, it really does become rather pointless. RDR is now a couple of weeks away and I remain concerned that the majority of the country will not be able to afford advice and will attempt to do it themselves. This is of course possible, if its your gift. The problem with maths and money, is that because we all handle it, there is a tendency to undervalue or appreciate the skills to advise on it. The skills can be learned of course, but as with many things, are you really going to bother? after all you have your own job and skills to master and the “outside of work” part of life is meant to be spent doing things you enjoy – or it ought to be? I am concerned that many will attempt to navigate the minefield of financial service, thinking that they will achieve the same result for “free” (their time) whereas I believe that this is much more likely to result in a very serious financial blunder, which I see rather too frequently. Much like the man that blindly followed the sat nav in his car much to his cost. Sat Nav can be great, but it still requires interpretation and wisdom and many are built on unreliable data. Your financial planning, which means – your lifestyle are not worth risking. Remember invariably, we get what we pay for. Of course some people will always blame their tools… oh and click here for a list of the top ten sat nav blunders.

Will Apple learn lessons from Google Maps?2023-12-01T12:23:19+00:00

Life Expectancy Assumptions

Born Before 1962? under-estimating life expectancy may be…. fatal?

If you were born before 1962 there is mixed news, according to a report by the National Association of Pension Funds (NAPF). This is a rather concerning but important report. In essence most people over 50 years old today are under-estimating how long they will live whilst being over-optimistic about how well off they will be in retirement. This of course on the face of it is a fairly disastrous mix. That said, I have to say that I’m rather wary when contemplating reports that suggest forecasts are accurate (which is the fundamental flaw within the report). Whilst clients will testify to my rather unusual approach of discussing life expectancy at a fairly early stage of the financial planning process, it is important that you understand the implications. However, to pretend or suggest that the future is predictable in this way is really rather silly. We use life expectancy as a guide, nothing more. In reality our assumptions ought to be reviewed annually, because of a very strange quirk of life called “mortality drag” which is the statistical notion that the longer you live, the longer you will live. Strange but true. Great financial planning when all is said and done, means making your money last a bit longer than you.

Start with the end in mind

The report suggests that people in their 50’s underestimate life expectancy, though to my mind the data is somewhat open to interpretation. The most important finding was that 59% of people surveyed (aged 50-64) had not given thought to how long they might live. The ONS 2010 figures should be applied carefully and based on current age. They are also based upon statistics of people that have already died having lived a long life. So it would be reasonable to assume that thanks to those wonderful people at the NHS that we are all kept going a little longer and if we live a healthy lifestyle, perhaps longer still. However the principle is quite right in planning life, but this needs to be done with the knowledge that any such forecast will be wrong. It is a guide and nothing more. All life expectancy data is historical and can be used for is to identify national historical averages.

Born in 1961 or earlier

So for those born in 1961 such as Lloyd Cole, Peter Beardsley, George Clooney, Tim Roth, Enya, Heather Locklear, Michael J Fox, Meera Syal and Meg Ryan (who all became 51 in 2012) the UK ONS statisticians would cite historical data that for those born in the UK and living there the men have an average of 29.73 years left and the women have another 32.96 years.  However, as we all know, this is no way to plan a life, indeed one might suggest that it is utterly silly. Well, I would largely agree, but for good financial planning it is helpful to at least put some sensible parameters in place that we review each year.

Life Expectancy Assumptions2023-12-01T12:23:19+00:00

Inflation, Forecasts and Fudge

Inflation, Forecasts and Fudge

Inflation is a significant problem for people living on a fixed income. Its also a problem for everyone else. Perhaps you, like me, are often “surprised” by Government statistics showing inflation at 2.7% (CPI) and 3.2% (RPI). Indeed you are also perhaps a little suspicious of attempting to report a “figure” using two different approaches (at least). These figures make forecasts something of a fudge.

Energy prices continue to rise

As we are now in the grips of winter and I grow increasingly aware that my boiler is likely to need renewal, I am mindful of the cost of energy to heat the house. Why the providers select the coldest time of the year to announce their price increases is beyond me, but to have increases so far above the rate of inflation is presumably alarming for many people, or at least for those not yet living with either solar power, heat pumps or some other form of renewable energy. Clearly those that illuminate their homes with festive lights from the start of December as though competing with Disney are plugged into lunar power (I doubt).

Financial Planning is not a law of averages

So it is a relief that when it comes to financial planning, we can make allowances for what I might politely describe as Government backed institutional “fiction” and assign rates of inflation to any cost you care to mention. So for even the most dubious of national statistics, our clients can select a more realistic and relevant rate of increase (or decrease). More importantly still, this is reviewed. As our clients are anything but average, it is only sensible to use assumptions and statistics that reflect their experience – of petrol prices, property prices, stock markets, energy costs and so on. A great financial plan is not about precision, (after all its an educated best guess) but it is about relevance and should be unique to you. This is important because if your income rises by 3% a year, but costs rise at 9%, it really does not take long before you realise that the maths doesn’t add up. Most suppliers put up their prices by between 7% and nearly 11% this winter (EDF increasing by 10.8%).

Inflation, Forecasts and Fudge2023-12-01T12:23:18+00:00

Financial Advice from Banks

Few will get financial advice from Banks due to RDR

As I had posted earlier today that Nationwide, the largest Building Society in Britain (by miles) has suspended its pension advice (as the one pension that they sell, er I mean advise (Legal & General) is not compliant with the new adviser charging rules) it is only fair to outline what the other banks are planning. Very few people will be able to get financial advice from banks, if anything more people will find the restricted offering is likely to lead to increased focus on product pushing by Banks. We shall have to see.

Barclays withdrew their “financial planning”  services in January last year. They do offer advice to their more wealthy customers under the Barclays Wealth label.

Lloyds has ceased providing advice to anyone with less than £100,000.

RBS will be offering restricted advice, having cut its number of advisers in half.

Santander has had to suspend its 800 or so advisers from further investment advice as they are concerned that  their advisers are not adequately trained. Santander have previously stated that they will offer restricted advice (their own products) to anyone with £25,000 or more.

Why? because compliantly providing financial advice is very expensive. Providing proper financial planning advice is even more expensive as it involves two limited resources – time and expertise. This was outlined several years ago (and repeatedly ever since) by Ernst & Young who warned Banks to change their business model and that the hourly rate would need to be at least £200, which clearly for a standard bank customer is unlikely to be workable.

Financial Advice from Banks2023-12-01T12:23:17+00:00

Autumn Statement Summary

Autumn Statement Summary

From 2014/15, the lifetime allowance for pension contributions will reduce from £1.5 million to £1.25 million and the annual allowance from £50,000 to £40,000;
The maximum income limit on capped drawdown arrangements is to be reinstated at 120%
(from 100%);
The higher rate threshold for income tax will be increased by 1% rather than inflation in 2014/15 and 2015/16;
The personal allowance will be increased by a further £235 in April 2013, taking it to £9440;
ISA allowance will increase to £11,520 for 2013/14 (maximum £5,760 into cash);
Child Trust Fund and Junior ISA subscription limits will both increase to £3,720 for 2013/14;
The basic State Pension will increase by 2.5% in April 2013;
Most working age benefits and tax credits will be up-rated by 1% for three years from April 2013 – excluding disability and carers’ benefits;
There will be a further 1% cut in the main rate of corporation tax from April 2014, to 21%;
The Inheritance Tax Nil Rate Band will increase by 1% (rounded up) to £329,000 in 2015/16.
Autumn Statement Summary2023-12-01T12:23:17+00:00

Retail Distribution Review (RDR) Chaos before Christmas

Just A Few Days Left… until Retail Distribution Review

Most of us now buy a large proportion of our Christmas gifts on-line. Those that have not planned ahead, may have an anxious wait for the parcels arriving during the busiest period of the year with only a couple of weeks left. In a similar way, advisers have been awaiting RDR, the Retail Distribution Review which is also only a few working days away now. It officially starts on Monday 31st December 2012 (that’s in 24 days time). Sadly, whilst full of noble intentions (clearly priced advice, better quality advisers, clearly defined types of adviser) I regret to say that its a complete shambles across the majority of the financial services industry.

What The Dickens?

You need proof of course, but take Nationwide. One of the few mass-market banks/building societies that has intentions to provide advice going forward. Most Banks elected not to do so as they priced their hourly costs at over £250 an hour, which of course is not likely to be afforded by most of their customers, who are likely to scream “more? you want some more?” in that Oliver Twist way as yet another way of extracting cash from unsuspecting customers is served up like a warm bowl of gruel. So in practice most people will no longer be able to go to their bank for advice; (I want to say that this is probably a good thing as bank advice generates the most complaints and most advisers would probably say isn’t as good). That’s a half-truth though, they have more complaints because they have a lot of customers, as for being as good – well some are, some aren’t as with all other advisers. The reality is that it should be the case that getting advice is better than not getting any, so even the Banks have a role to play.

Get Your Goose? Walks, Talks, Sounds, Smells and looks like…

Sadly, due to the way that the FSA have approached “adviser charging” this has created a raft of problem with pretty much all financial products requiring an upgrade and re-think. It is concerning that Nationwide have today announced that they are suspending their pension advice because even at this stage they don’t have the ability to offer an RDR compliant pension. They know that they want to get 3% for the “advice” and 0.5% for ongoing “advice” but bluntly to anyone in my industry this looks very much like a product selling approach. To those in the know, this is akin to “if it walks like a duck, speaks like a duck, looks like a duck… it is a duck”. To enlightened advisers, this would raise the question of Nationwide’s leadership, culture and governance to have allowed matters to get to this point with this “approach” and that is putting it very politely. Natiowide are reported to have about 460 “advisers” and are looking to get the number over 500. in the meantime Nationwide have said that customers wanting a pension should go to speak to an independent financial adviser… which of course Nationwide is not and from the end of the month, will be offering “restricted” adviser solution. As of this moment, their website has not been amended to reflect this fact.

Who hasn’t delivered… Santa or Sants?

Santa will not be bringing you a pension from Nationwide this Christmas, largely thanks to the way Mr Sants (who is seeking new employment) has decided to interpret and apply RDR. Mind you, its not as though there’s a queue of people asking if they can have one. Pensions aren’t really in that naughty or nice  discussion are they? So credit to Nationwide for being nice by suspending pension advice, although of course if they hadn’t they would have probably been found out as rather naughty and on an entirely different list. Mind you, Nationwide are “on your side” this Christmas.

Retail Distribution Review (RDR) Chaos before Christmas2023-12-01T12:23:16+00:00

Autumn Statement

Autumn Statement

George Osborne stuck his head above the pulpit today to deliver the Autumn statement. Perhaps the most predictable lynching of the year, with a general acknowledgement that things aren’t going as well as planned or expected. Many will say how they would have done things differently – but of course this is a rather academic debate and consigned to ancient history. As a consequence there is going to be more pain and more goalpost moving.

Lifetime Allowance cut by £250,000

A significant goalpost move which will have a direct impact on our clients regards pension allowances. The last Government devised “pension simplification” which as I have said before was a complete mess, resulting in ever more complication not less. They established a total lifetime allowance for the value of pension funds of all descriptions. Back in 2006 this was set at a pot worth £1.5m – with excess tax charges for those over this unless they had applied for HMRC protection (on the condition that no further payments to pensions were made – broadly speaking). The allowance crept up to £1.8m and was cut back to £1.5m at the start of this tax year as part of “austerity measures”. Today this has been trimmed even more by £250,000 to £1.25m for the 2014/15 tax year. This makes larger pension pots more likely to be taxed and creates a serious concern for those approaching this figure.

Annual Allowance reduced by 20%

In addition the annual allowance which was £255,000 a year was shrunk to £50,000 is going to be reduced further to £40,000 for the 2014/15 tax year. Ok this is a lot of money to many people, but is doesn’t look like a a system designed to encourage saving for a pension. In fact it looks like exactly the opposite. This sort of Government meddling is very unhelpful to anyone attempting to become financially independent. Restrict one or the other, but not both. I am sorry to say that I find our tax system rather daft.  There are so many rules and rates of tax that this promotes an approach of tax minimisation wherever possible. This could be so easily resolved, should any politician have courage (which they don’t) by introducing a single rate of tax on all forms of income and ensuring that UK earnings were taxed in the UK. The solution is worryingly simple – remove the incentive to find the lowest rate of tax by making the tax rate the same for everyone.

Warning for high earners and NHS Consultants

Unfortunately, this latest round of goalpost moving will hit many high earners (such as Consultant Doctors) that are members of a final salary scheme (such as the NHS Pension) who have their annual allowance assessed a little differently (based on the notional rise in the value of their pension). Tax charges may apply and retiring before 2014/15 may now be a way of avoiding a penalty on £250,000 of 55% (£137,500) if you don’t have Fixed or Enhanced Protection. So more need for expert advice…

Autumn Statement2023-12-01T12:23:16+00:00

Lifestyle Financial Planning – for creatives

Lifestyle financial planning for creatives

Today has been another day helping clients to figure out what they want from the future. It is really important to me to understand what it is that a client is aiming for and in my experience this is really all to do with “lifestyle”. As I have said before, the main objective of great financial planning is to “ensure that your money doesn’t run out before you do”. In other words – to last for the duration of your life. When viewed this way, the financial services industry largely appears to be upside down – normally emphasis is placed upon achieving high returns or “guaranteed” ones (no such thing). However a financial planning approach starts with the end in mind – addressing our mortality and then prompting the discussion about what we want from life with the time we have left – however long this is we simply don’t know, but for most of us it is probably less than we hope for.

Great composition

Great financial planning involves engaging with values – what is it that people really want to achieve and why it is important to them. This is not wishful thinking, but a plan of action – although sometimes (rarely) I need to suggest that for some plans to be achieved, significant alterations would need to be made. Today I was working with a composer who will hopefully have more of his work performed and published. Composers and indeed many people in the arts don’t really have a “retirement date” of course they want the option of choosing whether to work or not, but in practice, health permitting, there is no reason why individuals cannot work well beyond State Pension age. This can (and should) be taken into consideration when planning the future – what sources of income are available from royalties and box office receipts etc. Naturally one needs to make assumptions carefully and they should be reviewed – getting this “right” is not really the objective (initially) but appreciating and realising the various options enables further creativity when thinking about the future. I am a committed advocate of lifelong financial planning, when done well it reduces financial anxiety and stress, releasing greater creativity.

Lifestyle Financial Planning – for creatives2023-12-01T12:23:15+00:00

Cash ISA Rates

Here is a list of some of the better Cash ISA rates that are widely available to most people within the retail banking and building society sphere. Remember this is a list, is not advice and merely for information so that you have a guide to the general level of better rates of interest widely available.

Instant Access Accounts

  1. Building Society: Leeds 2.00%
  2. Bank: Virgin Money 2.00%
  3. On-line: National Counties 2.25%

Cash ISAs – Fixed Rates of interest

  1. Building Society: Leek United 2.75% (3 years)
  2. Bank: Bank of Scotland 2.80% (4 years)
  3. On-line: Bank of Scotland 2.80% (4 years)

Cash ISAs – Variable Rates of interest

  1. Building Society: Earl Shilton 2.70% (90 day notice)
  2. Bank: Virgin Money 2.00%
  3. On-line: Monmouthshire Building Society 2.50% (30 day notice)

 Of course rates change regularly, though this tends to be in response to announcements from the Bank of England. I would remind you that the Bank of England base rate is currently 0.50%. Once again your attention is drawn to compensation limits of £85,000 per person per banking license. So given the instability of the global economy and the potential for claims, diversifying your cash holdings is arguably as important (if not more so) than diversifying your investment portfolio. See the FSCS website for more information. Remember that you have until 5th April to use your ISA allowance for 2012/13.

Cash ISA Rates2023-12-01T12:23:14+00:00

Tax Avoidance – HMRC turns on the spotlight

Crossing the Tax Avoidance to Tax Evasion Border

HMRC has a spotlight page which is aimed at drawing attention to tax avoidance schemes that may turn out to be tax evasion schemes. This is effectively the equivalent of a border patrol between the two. One would be forgiven for thinking that this has been like many physical borders in Europe – a line on a map that you can cross without even noticing. Let me disavow you of that notion. Despite the efforts of some very clever Accountancy and Legal folk, this is at best a “high risk crossing point” and more likely to be something approaching one of those films you may have seen in the past that involves check-point Charlie in days of East and West Berlin (some of us do remember them).

HMRC on target

However, in these days of better technology, I might suggest that check-point Charlie has gone one further by sending an advance text or email advising you to change course. Or to use another military film scenario – you are flying into restricted airspace and missiles are locked onto you as a target. Actually, I think that this perhaps best describes what is currently happening.

Christmas Post

HMRC have written over 1,500 letters to people who signed up for a particular tax avoidance scheme suggesting that they pull out of the scheme or face HMRC investigation. This is the sort of post that you really should open rather promptly and respond to. This is not a “file it to do later”.

Definitions – Detail is everything

However, it seems that the language about this topic is changing. Tax avoidance always has been legal and would involve using personal allowances and reliefs – such as pensions, ISAs and so on. It is interesting to note that HMRC is now referring to this as tax planning rather than tax avoidance. HMRC now define tax avoidance as bending the rules of the tax system to gain a tax advantage that Parliament never intended. It often involves contrived, artificial transactions that serve little or no purpose other than to produce a tax advantage. It involves operating within the letter – but not the spirit – of the law“. This is an approach that seems to be heading in the direction of “guilty until proven innocent”. So please be warned – but this is precisely where expert advice is required. There are genuinely good forms of proper investment that carry tax relief or allowances. These need to be considered carefully and can be excellent ways to diversify a portfolio.

Tax Avoidance – HMRC turns on the spotlight2023-12-01T12:23:14+00:00
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