Work in Progress – Development of the Spotless Mind

2004: Eternal Sunshine – Gondry

Another day, another training session. Financial Planners have to complete a minimum of 30 hours of CPD (Continuous Professional Development) each year and from January will have to obtain a certificate of professional standing which evidences qualification and CPD. Fortunately this is not an arduous task for me as I am regularly improving my knowledge and attend numerous seminars and events that ideally help me to do an even better job. I think it best left that I simply overachieve the CPD requirements by a significant factor. Anyway, today I’m at events which explore the pension rules that are impacting many of our clients in Final Salary Pension Schemes and returning to the office via tucking into a little heavy economics at the IOD. This is of course all part of most professions these days, but when I do count my time spent going to what I consider to be helpful training events (often they are very good) this makes the 30 hour target look rather a dim and distant target. This is all valuable time that admittedly helps me do a better job (well most of the time) but is also rather costly in terms of not being available to clients, anyway my purpose in sharing is that a day in the life of.. is often about ongoing development, which is rather necessary in a world where economics, stockmarkets, law and taxation issues change on a frequent basis and another reason why conducting a review of your financial planning, is vital, even though it may feel rather familiar. However another reason for reviewing your planning is because things change, sometimes unexpectedly and sometimes because mistakes happen and need correction. Despite the continuous development and thorough training, I have yet to meet the perfect adviser or for that matter, the perfect client.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Work in Progress – Development of the Spotless MindDominic2017-01-06T14:40:08+00:00

MPs pushing for More Pension Smoke and Mirrors

2011: The Sunset Limited – Lee Jones

Financial Planners remain unimpressed with moves to further restrict pensions. As I blogged on Monday, the Chancellor is being petitioned by various MPs to reduce the annual allowance from £50,000 to a lower sum both £30,000 and £45,000 have been mentioned. Don’t forget that the annual allowance was £255,000 and was reduced to £50,000 from April 6th 2011. So dramatic actions are now a precedent. The amount of tax saved in not providing tax relief, can be used to justify raising the personal allowance to £10,000. This is decidedly bad news for pensions as I outlined in my piece on Monday “Pensions and the Muppet Show“. This is more of the same. However examined, this is not about saving tax, it is about appearing to do so. It is all to do with appearing to help lower income earners. The personal allowance has been raised, true – for everyone, true, but higher rate taxpayers have not benefited as the amount of earnings required before a 40% tax rate applies has been reduced. Anyone earning £100,000 or more can see their personal allowance completely removed and those with incomes over £150,000 pay 50% tax as it is.

What the politicians have not thought about is that Occupational Pension Schemes – in particular final salary schemes do not apply the actual amount contributed towards the pension as part of the annual allowance. Indeed the rather daft calculation involves working out how much the pension has increased, making an adjustment for inflation and then multiplying by a factor of 16 to calculate the element of the annual allowance used. This makes planning very difficult as most Final Salary Schemes are not geared up to provide the information in time for tax year end deadlines. Further messing around just makes things harder and ends up making additional work accounting for things rather than doing anything productive. I hope that George Osbourne will see sense and not introduce further restrictions on pensions. If he wants to make changes, my suggestion would be to scrap the lifetime allowance and restrict tax relief to 20% of all contributions, irrespective of earnings. This would at least make funding a pension a worthwhile exercise.

In the meantime, expect the media to be full of articles this weekend about ending higher rate relief or the annual allowance being reduced. Pension companies will be quick to point out that if you have money for investment, now is the time to act, use the allowance now before it gets removed (before 5th April 2012 presumably). Nothing quite like a fire sale and I’ve known this industry to create a few and invariably nothing changes. However, this time the current general antagonism towards those with large incomes despite the economic recession, is holding court with politicians who seem to be very concerned about appearances.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

MPs pushing for More Pension Smoke and MirrorsDominic2017-01-06T14:40:08+00:00

Auto Enrolment – Defining the Worker

Auto enrolment – defining the worker

Financial Planning has not yet seen the day when pension schemes are compulsory, but that day is surely closer as auto-enrolment outlines some of the hurdles that employers must jump. As an IFA, my role is to help both employers and employees to make best use of pension arrangements.

The new auto-enrolment pension rules come into effect at the end of October. There are three categories of employee that must be automatically enrolled into a pension scheme by their employer. I draw your attention to use of the word “must” – which means must. The first and easiest group to identify are those that are eligible, this means aged between 22 and State retirement age, working in the UK and earning more than £7,475 a tax year. Note though that this sum will probably be revised (upwards) by the Government and is likely to be linked to national insurance levels or the personal allowance. The second category is what might be described as “keen savers” – employees that fall outside of the automatic criteria, earn between £5,035 and £7,475 but want to join the scheme and have a right to do so. Employers must make it easy for these people to opt in and must also contribute along the same lines. Finally a group that the Pensions Regulator call “Entitled Workers” who earn below £5,035 and don’t qualify for auto-enrolment. The employer doesn’t have to make payments and can offer a different pension scheme. Confused? well here’s a diagram from the regulators website.

Thoughts – the limits will be revised annually, so in reality employers have to keep an eye of eligibility rules. The easiest solution is to simply make the scheme available to all under the same terms, this should prevent breaching any rules.

Dominic Thomas: Solomons IFA

Auto Enrolment – Defining the WorkerDominic2017-01-06T14:40:08+00:00

Inflation Falling Down to Two Percent

1993: Falling Down – Schumacher

Yesterday data about inflation, that is rather key to any forward-thinking financial planner, was published. This recorded the UK’s rate of inflation in January 2012 at 3.60% (CPI) and 3.90% (RPI). These figures suggest that inflation is back under control, although frankly the maths behind the numbers would imply that inflationary figures were bound to reduce. Previously you may have read that a figure of 3% was mentioned for March 2012, well now the Governor of the Bank of England (Mervin King) is suggesting that by the end of 2012 the figure will drop below 2%. This will come as a relief to consumers who have seen the prices that they pay for many items rise considerably, although I suspect that most of us never experience inflation quite in the same way the Government statistics suggest. Now I’m not sure what hacking rules apply to the Bank of England, but you can legitimately read the letter from Mr King to the Chancellor Mr Osbourne dated 13 February 2012. I think the Governor got a little carried away signing the letter. You can also see the Chancellor’s response, in which he is a little more friendly and doesn’t suffer from bigsignaturitis.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Inflation Falling Down to Two PercentDominic2017-01-06T14:40:09+00:00

Honesty is the Only Policy Worth Having

1939: Panama Lady – Jack Hively

Financial Planning may involve providing sufficient financial protection for your family and perhaps your business, but it is a rare event when someone returns from the dead. You may remember the case of Mr and Mrs Darwin, who faked the death (lost at sea in his canoe) of Mr Darwin resulting in life assurance and pension policies providing his “widow” with funds of just over £500,000. The extent of the deception was such that it even included pretending that the death was genuine to their own children, which of course raises lots of questions.

The couple, who had begun to make a new life for themselves in Panama (nothing quite like the cliche is there!) were eventually tracked down and their deception exposed. They were both convicted of fraud in 2008 and are currently forming part of the numbers residing at her Majesty’s pleasure. The CPS have now announced that they have fully recovered all of the proceeds of the fraud and are due to return this to the pension and life assurance companies concerned. The numbers are of course one part of this story, the other is the costs – both to the legal system and the family and friends of those connected to the Darwins. A sad tale of very poor decisions. Of course, should either of them now want life assurance any application would be declined due to their track record. This reminds me to remind clients, that when you complete an application form, you need to answer honestly. If you smoke, make sure you state this – even if you consider it a rare occurrence, this could be interpreted as a false statement and will make any future application somewhat difficult to secure. Amnesia is not a very compelling excuse.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Honesty is the Only Policy Worth HavingDominic2017-01-06T14:40:09+00:00

Funds: Henderson Cleaning Up

2007: Code Name: The Cleaner – Mayfield

As an IFA or Financial Planner, one of my tasks is to assess funds and select them. Clients will appreciate that I have particular views on this subject. These can be found within the resources section of the main Solomon’s IFA website in a document called “Our Approach to Investing“. Anyway, today Henderson have informed advisers that following their takeover of Gartmore and New Star, they plan to merge a considerable number of their funds. Anyone with holdings will be written to in the not too distant future, starting at the end of this month. The funds under the spotlight of consideration are as follows. All funds would begin with the Henderson brand name, so please take that as a given.

Diversified Absolute Return Fund

Higher Income Fund

European Value Fund

US Opportunities Fund

UK Strategic Capital Unit Trust

Extra Monthly Income Bond Fund

High Yield Monthly Income Fund

Managed Distribution Fund

International Fund

Industries of the Future Fund

Global Care UK Income Fund

UK Strategic Income Unit Trust

European Smaller Companies Fund

Global Dividend Income Fund

The plan, assuming approved by investors and the regulator will be executed between May and the end of July this year. Like many Fund Management Groups, there has been a serious danger of having too many funds to look after well and investment, we all know that focus is everything. This, whilst probably not great news for some of the Henderson staff, is probably the right thing for investors and Henderson. Obviously for any client with holdings in any these funds, I will keep you posted.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Funds: Henderson Cleaning UpDominic2017-01-06T14:40:09+00:00

Thanks for visiting the Blog

1961: 20,000 Eyes – Jack Leewood

Today the Solomons IFA blog has reached 20,000 page views, which is very encouraging. The information within the blog is meant to be helpful and also to provide a voice and opinion about aspects of financial planning life. I’m delighted with the progress being made. Whilst 20,000 is very small beer for many mainstream websites, for a small boutique firm of financial planners it is a pretty big deal, particularly as the views have doubled from 10,000 since 21st September – a little under 5 months ago. The blog began rather half-heartedly in June 2009 and in the first year I only managed 48 posts.It wasn’t until August 2010 that I took up the challenge more seriously and now report that this is post 523. Thank you if you have been one of those that have checked out the blog. Let me know if there are topics you would like to be covered. I am always happy to put something on the blog that will hopefully be of benefit and interest to others. The more suggestions the better.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Thanks for visiting the BlogDominic2017-01-06T14:40:09+00:00

Final Straw for Final Salary Schemes?

2003: Lost in Translation – Coppola

OK, so my last post was about how pensions are being made increasingly less attractive as options for building financial security and independence. As a financial planner that seeks to utlise what is available, I have to admit to having something of a “moment” when I come across things that seem to be contrary to the best interests of anyone. No sooner had I published “Pensions and the Muppet Show” when a Gonzo the Great cannonball-like email arrived in my inbox. This time suggesting that Defined Benefit (Final Salary) schemes are likely to become extinct due to Solvency II. This initiative, was (is) meant to primarily ensure that Banks don’t lend too much money and that they keep bigger reserves. Most of us would probably think this is a sensible measure. However, it has been taken a step further reports William Robins of Citywire. The National Association of Pension Funds (NAPF), the CBI and the TUC have written to Jose Manuel Barosso, President of the European Commission. Their letter signed by Joanne Segars (NAPF), Brendan Barber (TUC) and Katja Hall (CBI) makes it clear that new proposals (from Europe) will force final salary pension schemes to make even bigger contributions. This, all three organisations agree, will lead employers to divert money that was otherwise for investment in growth, job creation and R&D. In addition the way investments are made would alter to hold an even greater proportion of low risk, low return asset classes. In addition the need to switch investment (some €3trillion) would have an immediate catastrophic impact on the stability of European financial markets. The proposals as they stand will lead to the death of Final Salary schemes and perhaps the death of a few businesses as well, many of which on paper are effectively a pension scheme with a smaller business bolted on.

Final Salary schemes are without doubt the best type of pensions available. Leaving one or not joining one is invariably not a good idea (unless you are retiring). It seems rather daft that in essence Solvency II might end up just being a raising of the bar rather than any change in behaviour by Banks. One of the main problems with European legislation about pensions is that the UK is so much further ahead (developmentally) than most European nations and as a consequence, they simply do not appreciate the implications.

This stems from the 500 page EIOPA (European Insurance and Occupational Pensions Authority) report stating that employers need to hold pension qualifications and should also hold greater reserves for operational risk. At the moment European law is actually what counts here in Britain, we have to comply.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Final Straw for Final Salary Schemes?Dominic2017-01-06T14:40:09+00:00

Pensions and The Muppet Show

2012: The Muppets – James Bobin

Financial planning done well means that a client will be financially independent and not reliant upon the State. This means setting aside income in a thoughtful way so that when earnings cease or reduce, there are sufficient funds to provide an ongoing sustainable resource.This often involves taking full advantage of inducements to save where appropriate.

Pensions have been a political football for many years. Rules about them have never been terribly well thought through, indeed some of them can only be described as idiotic. As pensions receive tax relief they are an attractive way to invest. However, the tax relief is the only attraction about them. The previous Government introduced us to pensions simplification, which frankly was anything but simple. The way pensions operate (largely) is becoming increasingly daft – investors are restricted on the amount that they can contribute, the amount of tax relief, the size of the fund and the amount they take out and the amount that can be passed on. The auto-enrolment regime will also provide another raft of rules. This is a mess.

From April 6th 2012 the lifetime allowance (the amount that can be held in pension funds without being subject to extra tax charges) will reduce from £1.8m to £1.5m. The amount that one can contribute has already been restricted to £50,000 and how contributions are calculated for final salary scheme members (those few that remain) are also made more awkward.

Enter Danny Alexander MP, interviewed in The Telegraph is attempting to propose restricting higher rate tax relief further still and seems keen to make it very difficult for anyone earning over £100,000 to receive tax relief. Many words come to mind, but wisdom is not one of them. This is the time when backbenchers will be making their petitions to the Chancellor ahead of his Budget in March. Whilst many (the majority of the population) do not earn £100,000 and few invest £50,000 a year towards pensions, many do pay higher rate tax. The sad reality is that for anyone earning over £80,000 a year, to maintain their standard of living in retirement considerable sums need to be saved. Suppose they require an income of £40,000 – a pension fund of £1m will be required in all probability – which clearly needs a lot of money put into the pot plus growth to get there. Yes, I know that for some people a £40,000 a year pension is very nice thank you very much, but remember that this is about creating people that are not dependant upon the State so that State taxes can be used to fund our welfare system, economic structure and so on. The Welfare State should not be shaped by those green with envy (and no I’m not referring to Kermit). Hopefully a modicum of common sense will prevail and pensions will not lose higher rate relief unless other restrictions are lifted (contribution levels, lifetime allowance), otherwise there will be little incentive to save or use pensions, which is hardly the message to be sending out prior to introducing auto-enrolment. I know the Muppet movie was released here on Friday, but one begins to wonder if they might be running a different show, though if the real Muppets were running things, I’m sure it would be an awful lot more amusing and at least we would be smiling.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Pensions and The Muppet ShowDominic2017-01-06T14:40:09+00:00

Cash ISA Rates – Critical Choice

1963: Critics Choice – Don Weis

Sometimes choice can be overwhelming. My success at selecting the BAFTA winners was considerably easier given a short-list of 5 in most categories. If only selecting investments and financial planning was quite so straight-forward – today I was even telling one client that there wasn’t even a wrong answer for his situation, which I concede seems rather an odd thing to say. Selecting the better deposit account is also somewhat overwhelming, but hopefully this list will be of assistance in the initial filtering.

Instant Access

Online: Nationwide 3.12%

Bank: Virgin Money 2.85%

Building Society: Nottingham 3.25%

One Year Deposit

Online: Firstsave 3.60%

Bank: Santander 4.20%

Building Society: Barnsley 5.00%

Two Year Deposit

Online: Firstsave 4.00%

Bank: Clydesdale 3.82%

Building Society: Melton Mowbray 3.51%

Cash ISA – Variable Rate

Online: AA Savings 3.05%

Bank: Santander 4.00%

Building Society: Newcastle 3.05%

Cash ISA – Fixed Rate

Online: RBS 4.20%

Bank: Clydesdale 4.40%

Building Society: Barnsley 5.00%

Please note that I am not endorsing any of the above. You should do your own search at Moneyfacts. I am particularly concerned about the marketing of the Barnsley account, which is really an investment. You should check protection levels with the FSCS and remember the banking licenses apply to several banks so even spreading money with different banks will be of no assistance if they share the same banking license. I have written about this before in previous blogs, so have a look.

We are a boutique firm of financial planners. We create financial plans designed to achieve a desired lifestyle. We will craft and implement your plan that will provide you with the greatest chance of accomplishing your unique goals based upon the values that you hold. Financial products are little more than the tools to achieve your required results
Call us today or visit our website for more information and to arrange a meeting

Cash ISA Rates – Critical ChoiceDominic2017-01-06T14:40:09+00:00