Auto Enrolment Fines – Workplace Pensions

As expected, the pensions regulator is taking auto enrolment (workplace pensions) rather more seriously than it took stakeholder pensions. Employers were warned about the prospect of fines and as the number of firms that should have started their pensions has multiplied, so have the fines. This is unlikely to alter as the momentum increases. This year medium sized and some small firms will be expected to comply with the rules. 166 penalty notices were issued in the last quarter of 2014 and over 1,100 compliance warning notices sent to firms.

Avoid the Fines

Employers need to get on with their auto enrolment compliance. In practice this is a project management exercise rather than about finding a good pension. As a result I advise employers and Accountants to use the very low cost software from AE in a Box. It enables you to fully comply in time and avoid fines. Importantly it is an ongoing project – much like PAYE is an ongoing project, so data and processes need to be adhered to strictly.

AE in a Box

AE in a Box is very inexpensive, £79+VAT to set up and then £29+VAT a month thereafter. The monthly subscription will only begin 6 months prior to your staging date. I would urge you to consider this bit of kit. It isn’t a financial product, its a tool to help you do the job yourself, cost-effectively rather than getting a more expensive planner like myself involved.

Dominic Thomas

Auto Enrolment Fines – Workplace PensionsDominic2023-12-01T12:39:55+00:00

How Was Your Last Quarter?

You may have seen the news that the Apple corporation have just posted the largest profits for Q4 in history. Apple is an enormous company, worth around $640 billion. At the end of 2013 Apple had a market capitalisation value (the value of the company based on the price of issued shares) of £302 billion…which at the time was about 2.2% of the total US market (£13,304 billion)… or to put it another way 14.6% of the UK market (then worth £2,057 billion)…. to give this some context the market capitalisation of Greece was £20 billion…. so back in 2013 Apple was worth 15 times more than Greece.

The results of Apple for the last quarter of 2014 saw profit of £11.8 billion. That’s profit. So one has to ask, what does Apple do that others don’t either as corporations or nations?…. and hence the obsession that many have with Steve Jobs. Much of the profit was due to the sales of the iphone – all 74.5million of them sold in the last quarter!… good to feel unique eh?

Many businesses will look at Apple with considerable envy, the more thoughtful will reflect on what they do to create such loyal customers…. perhaps a few lessons for the politicians too.

Dominic Thomas

How Was Your Last Quarter?Dominic2023-12-01T12:39:55+00:00

Retail Therapy

Most of us have probably at some point dabbled in a bit of retail therapy, bought something nice to make us feel a bit better. Invariably the feeling is all too fleeting, which most of us observe and move on, however some, much like addicts, seek out another high or buzz, returning to the shops. Unfortunately most western economies are based upon this reality to a greater or lessor extent.

However, whatever your economy is based on, the cold reality of life will eventually be something that cannot be avoided. You may have seen the rather sad tale of Louise Gray, a widow of the 7/7 London bombings. Mrs Gray received a substantial sum from the Criminal Injuries Compensation Authority and awards were also made to her son and daughter, which were placed into Trust (presumably a Bare Trust) as the son gained access to the funds at 18. However, he simply took funds out and entrusted them to his mother, who it seems had spent her funds and then spent his. Sadly this resulted in her son Adam taking his mother to court to return the money to him, which she couldn’t so was recently sentenced to imprisonment for 2 years and 8 months.

Of course, I know nothing of the detail of this case, but I imagine that Mrs Gray has found it very hard to adjust to life following the loss of her husband and rather than seeking professional help and support sought comfort in things. Of course, she may have sought and even found some counselling, but even if she did, her behaviour suggests that she was avoiding confronting some very harsh realities, which I imagine would be a difficult process for most people.

It would be easy to dismiss her actions as foolish, yet it is plain that it is far easier to avoid reality than face it. The Greek election vote is something of a vote for denial of reality, but then, aren’t our own politicians in a rush to make promises that in reality delay the unyielding inevitability of collective need to get our finances in order? Whether its tax cuts, tax breaks, spending increases, decreases… it all boils down to some basic sums… you cannot continue to spend what you don’t have, without a day of reckoning. Talk of finally paying off the FIRST World War debt (some £1.9billion is still owed) is somewhat flawed… the debt hasn’t been repaid, its been repackaged… much like switching a credit card balance to a cheaper one isn’t clearing debt. Perhaps you thought that the country would have paid for WW1 by now, some 100 years later…war is expensive in every possible sense! How much better off our Nation would be if we had found the courage to repay debt rather than simply maintain it. The truth can be pretty painful can’t it…..

Dominic Thomas

Retail TherapyDominic2023-12-01T12:39:55+00:00

Speaking up for Annuities

OK, let me be clear. I have long wished that the compulsion for people to buy annuities would be abolished. It seems that sometimes wishes do come true…as the Chancellor did precisely this in his Budget last year and on 6th April 2015 the new rules begin. However the general level of financial knowledge is very poor in this country… little wonder as its a dull subject for most people and full of very unhelpful jargon… and some maths… the perfect ingredients for neglect.

Annuities aren’t “bad”

Annuities aren’t good or bad. They are simply a financial product, designed to provide a guaranteed income for life. It is very true that annuity rates have fallen heavily over the last 20 years. This has nothing to do with “greedy insurance companies” but is due to low interest rates, low inflation, low gilt yields and increased life expectancy.

So when I came across an item from the Telegraph “I spent £100,000 on an annuity” I was drawn to it…. well.. thought I should read it anyhow. This is the sad story about Mr Archer, who following his purchase of an annuity decided to see his doctor, who suggested he has a scan and, as it turns out, had a large tumor growing and therefore posed some serious questions about life expectancy.

Now, we have probably all made decisions that we would like to reverse with the advantage of hindsight, but in truth the only real “mistake” made by Mr Archer was to fail to see his doctor and get a full medical prior to buying his annuity. Armed with such information his adviser would probably have provided him with different options.

A clean bill of health…

Normally in the world of financial services, you want a nice clean medical history… relevant when applying for any sort of financial protection (life assurance, critical illness cover, income protection and even private medical insurance). However when it comes to annuities you are more likely to have better options if your health looks… well not so good. In both instances you must be entirely honest, but quite obviously it would make sense to have a medical before an annuity application is made. This could lead to being offered an “enhanced” annuity (sometimes called an “impaired life” annuity). In short, meaning that your life expectancy is below average, so you are offered a higher income… perhaps 30%-40% more. Many retiree’s will qualify for an enhanced annuity.

You cannot change history… but can alter the future

This is not the fault of the annuity provider, or indeed the product. It is sadly a case of “if only I’d known”. Whilst some clamour for annuities to be unpicked, I think this very unwise. The new rules result in greater flexibility, but there are serious concerns that some will simply blow their pension. Indeed just because a doctor or insurer says you have a reduced life expectancy, does not mean that its a certainty… its all about likelihood and probability. The only certainty you can give yourself at retirement, is to book a medical with your GP first, then get a decent financial planner to outline your options. Please learn from the very understandable mistake that Mr Archer made and don’t make the same one. None of us are immortal, with age comes greater health problems… death is not a question of if, but when.. so please add some advantage to your hand.

Dominic Thomas

Speaking up for AnnuitiesDominic2023-12-01T12:39:54+00:00

Commission – I Don’t Understand it either!

Commission – I don’t understand it either!

If you know anything about me and the firm, you will know that from inception (1999) we removed commission from all financial products that we arranged. This was due to wanting to remove bias between financial products and provide better arrangements for our clients. Admittedly ahead of our time and it wasn’t until January 2013 that commission had to be removed from investments as a result of the regulator’s review of the market.

Yet only this month (January 2015) I am wrestling to understand commission on a tiny life assurance policy that I have arranged for a client. Long story short we asked to remove the commission as usual (reducing the monthly premiums by about 30%). However it appears that in this instance, the insurer only removed “initial commission” and when the terms came through, the renewal commission of £1.06 per month would be paid to us from month 49… until the policy matures in 10 years time. In short we would potentially receive commission of £1.06 a month for 95 months…. not exactly a lot of money, but not what we promised! So I request that this commission be removed, only to find that the monthly premium is reduced by just one pennny a month… rather than passed directly onto the client as I had assumed. In this scenario, the insurer merely keeps £1.05 a month extra as pure profit. Bonkers! OK I know its not a massive sum, but then that’s just because this was a small policy, the cheapest from the market, but multiply it by millions of customers…

So, it would seem to me that I should take this extra commission (not payable for 4 years) and either pass it all to the client or offset it against his fees, but to my mind this merely demonstrates how behind the times some product providers are and why I believe that so few of them have the remotest chance of surviving another thirty years. As for the regulator, in their infinite wisdom, the commission ban only applies to retail investment products… not insurance… no, I dont understand it either!

Dominic Thomas

Commission – I Don’t Understand it either!Dominic2023-12-01T12:39:53+00:00

Oldest Woman – secrets to longevity

Scotland’s oldest woman, Jessie Gallan recently turned 109 according to reports. She suggested that her longevity had been achieved by regular walking, eating porridge and avoiding men. Whilst I imagine this is is probably a little too reductionist, it does bring the issue of longevity back into the news again.

In April pension changes mean that it will be possible to encash an entire pension fund all at once. This would be very unwise for most people and there is concern that people will underestimate their longevity and thereby run out of money.

Living to a very old age is a mixed blessing and I imagine that you will have your own thoughts on this. As for anyone that is 109 now, if they began drawing a State pension at age 60, it has been in payment for 49 years… about the same as working life (16-65).

For those that wish to live a very long time, I guess its time to avoid the men and have a regular breakfast of porridge.

Dominic Thomas

Oldest Woman – secrets to longevityDominic2023-12-01T12:39:53+00:00

Pensioners Broke the Website

Today is the launch of the NS&I Pensioner Bonds and the demand has been so great for them, that pensioners broke the website for NS&I… or more accurately, the site has had a significant amount of technical problems today coping with the rush to buy pensioner bonds.

As mentioned before the rates are very good by comparison, whether you want to tie up cash in a Bond for these periods is another matter, but if you do and you are seeking very low risk (not no risk) then this can be suitable (note I did not say that it is suitable – as ever context and your circumstances are everything).

The one year bond is 2.8% and the 3 year bond is 4%. Details can be found here at NS&I.

Dominic Thomas

Pensioners Broke the WebsiteDominic2023-12-01T12:39:52+00:00

Dispatches: How to Blow Your Pension

Last night Channel 4 showed a 30 minute programme called “How to Blow Your Pension”. The premise being that the new pension rules might result in thousands of “pensioners” cashing in their pension pots, blowing the lot only to run out of money. You can see the show on the 4OD website should you wish to. The intention was good, but the execution rather miserable and once again missing the opportunity to educate people and whilst Michael Buerk had a good reputation as a BBC newsreader, clearly he doesn’t appreciate that a document from a pension provider is not actually advice – but information about options. Frankly it isn’t that much of a jungle out there, but you will need proper advice, this is not the time to become a DIY internet “expert” it has to work and last. Just because someone has teeth that they care for, doesn’t mean that they should do their own dentistry. Just because you earn, handle and spend money does not make you best placed to do a proper job of planning and generating income for the rest of your life… So I thought I’d have a go at explaining the issues.

New Pension Rules – Simple

Pension rules are changing, from April 6th 2015 anyone aged 55 will be able to access their entire investment based pension pot should they wish to. There will be no compulsion to buy an annuity (an income for life). The principles have not changed – in that 25% of the pot is treated as tax free and the remainder is treated as income when you take it, however you take it – and so subject to income tax at your relevant rate of tax. You can still buy annuities should you want to. That’s it.

Running out of Money

The difficulty is that for most people their pension needs to last as long as they do…. ideally a bit longer if they have a spouse that outlives them too. So in practice you need to be careful about how much you take, its got to last and once its gone, its gone. So you have to guess how long you and your spouse might live (clue – actuaries do this for a living and designed annuities).

Make a Plan

So you will also need to reflect on how much income you need, what plans you have and it would be sensible to allow for some unexpected costs. You may need to pay for your own care or medical treatment – if you wish to choose how this is provided to you. You will also need to reflect on the impact of inflation, which at the moment is at record lows – but do the things you pay for really have such a low rate of inflation? and making a guess now for the next 20, 30 or perhpas 40 years of retirement needs some proper thought. If you don’t buy an annuity (which for many will be a very sensible option) the fund will need to grow (just to stand still and keep pace with inflation at the very least) – so how much investment risk is appropriate? what returns do you really need? what happens if these aren’t achieved? how will the portfolio be looked after? … and so on.

Review the Plan

As a result of these new “freedoms” (which some already enjoy anyway) you have a plethora of choices and the truth is that these need to be reviewed – in fact thats the beauty of it all, you get to alter your decisions (unlike simply buying an annuity and having to live with the consequences for the remainder of your life). The ability to access the money means that the crooks are on the scent… be it “pension liberation” or rubbishy investments that aren’t regulated and promise more than they could ever deliver. An independent financial adviser can sort the wheat from the chaff, but a financial planner, will do that and also help you plan your income requirements to suit your unique requirements.

Was that really so hard?

Dominic Thomas

Dispatches: How to Blow Your PensionDominic2023-12-01T12:39:51+00:00

Faking It – Big Eyes

Solomons-financial-advisor-wimbledon-blogger

Faking It – Big Eyes

As you may have gathered, I enjoy stories, particularly those that seem to have something to say. As a financial planner, naturally I’m interested in money and how investors behave. However money is just a tool, what people really want are the choices that money offers. We all relate to money differently and history is littered with examples of good and not so good financial decisions.

The new Tim Burton film Big Eyes explores the true story of artist Margaret Ulbrich (Amy Adams). Primarily this is an intriguing story about how a struggling single mother, plying her skills as a street artist meets a fellow artist Walter Keane. He is charming and encouraging, enabling her to regain some sense of confidence in her own ability. Following their marriage Walter exhibits his work and includes some of his Margaret’s which she has effectively now signed as Mrs Keane. It is mistaken for his and unwilling to correct the error for fear of losing the sale, so begins a sequence of events in which he passes off Margaret’s work as his.

Oversized

The deception does not come naturally to Margaret, and the severity of her “crime” is exaggerated by husband so as to ensure her silence. Largely due to his skills the work becomes commoditized, world-famous and naturally very lucrative. As the money flows in her fear about the magnitude of the crime multiplies, leading her to feel trapped, friendless in her studio, unable to take any credit for her work. One wonders whether this would have been a very different story had Walter Keane not been such a brilliant salesman and marketer. The sadness of the story is that Walter is unable to recognise the value of his own skills, preferring to deceive and take full credit for the work and is unable to acknowledge the deception.

Ultimately, Margaret finds the self-confidence to leave her increasingly belligerent husband and gains the confidence to reveal her “crime”, though in practice this is more of an unmasking of the truth. What is surprising is how it took so long and why his deception was not uncovered sooner. Therein lies an uncomfortable truth – much like the emperors new clothes, sometimes the obvious observation isn’t spoken for fear of appearing foolish, even the art critics (the experts) misinterpret the source of the work. It is only a judge who assesses the claims with the obvious solution…much like King Solomon’s wisdom when two women argue over a baby…. so when it comes to assessing a fraudster, you need eyes to see.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Faking It – Big EyesDominic2023-12-01T12:39:51+00:00

Charlie Hebdo & Uncomfortable Freedoms

As I listened to the news of the murders at Charlie Hebdo I cried. Battling with writers block at the time I was forced to confront the very free and ephemeral nature of my struggle and that my fear was solely for my own lack of productivity rather than persecution for the outcome of my labour. Anyone who puts their creativity ‘out there’ from blogging to fine art runs the risk of ridicule or dislike alongside the possibility of appreciation. Tracey Emins 1998 ‘My bed’ seems to evoke particular vitriol. Perhaps the gamut of responses is to be more expected in the world of social media where anonymity can afford for speedy and unconstricted ideas to find a mass audience in seconds, but to once again know that people had in the 21st century lost their lives for expressing themselves, their politics, art and ideas was a confronting reality. As a therapist who writes it was particularly poignant to hear that one of those who lost their life was the psychoanalyst and columnist Elsa Cayat.

As someone with strong connections to North Africa I am aware of the polarisation that is often underlined in moments like this, and the inevitable backlash against Islam from those who fail to see the actions of extremists as distinct and non-representative. We can only hope that the long-term legacy of this tragedy can be a reassertion of freedom not reductionist constraint.

In extremis and trauma the casualty is always the capacity to think, to play and explore. The brittle and defensive often compels us to more primitive ways of being; survival, fight, flight, or freeze. In the words of Malala Yousafzai to the UN General Assembly in 2013 “We realise the importance of light when we see darkness. We realise the importance of our voice when we are silenced”. Her response to a regime that sought to exterminate her both as individual and symbol tells us that it is precisely in these moments of oppression and terror that we need freedom of speech, art and creativity, something of ambiguity that leaves us with questions and a sense of not knowing. This is the opposite of traumatic shock. In our transaction with art and literature we are free to choose to look and engage or look away. Around the world there are those losing their lives for that which many of us take for granted. I hope that we can honour their courage by fighting to maintain the place for equality of expression and difference in the written, spoken and visual, even if it makes us uncomfortable.

Sarah Benamer

Charlie Hebdo & Uncomfortable FreedomsDominic2023-12-01T12:39:50+00:00

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