For me, many of life’s milestone’s are based upon the sporting calendar. Its Wimbledon 2014 and its not so much that I watch every shot but that it signifies that the English summer is really here (despite the weather). It acts as a reminder of years gone by, stretching all the way back to childhood and watching coverage on the BBC or even listening to games on the radio. It isn’t even as though I’m particularly recalling all the great tennis players of the past, merely that it, like so many other events is another way of marking time and moments in my life.
As we are based in Wimbledon, well… next door. It seemed like a good idea to create a small campaign. So I have put together a free report that you can download for free. This explores the 5 most common mistakes that investor make. I have probably got a lot to learn in terms of making the report punchy or marketing friendly. Its a genuine attempt to provide something of use to anyone that has any intention of investing.
Do have a look at the report, I’d welcome any feedback, more importantly though, pass on the link to your friends that you believe could benefit. Here is the link
The Lifetime Allowance (LTA… nothing to do with tennis here in Wimbledon) is the amount that you are permitted to hold in all of your various pension pots unless you have Enhanced, Primary or Fixed Protection. The limit is currently £1.5m which sounds like quite a lot, but with annuities at rock bottom rates, a 4% annuity would generate a taxable income of £60,000 a year, if you take the tax free cash, then it would be £45,000 a year. Before you challenge my figures, yes this is a guide, I could almost certainly find you a better rate than 4% but just play along..
Standard Life, the rather large Scottish pension company, have suggested that the reduction in the LTA to £1.25m at the start of the next tax year (6 months time) would mean that something like 300,000 people are likely to be punished with a penalty. The penalty for exceeding the LTA is currently a 55% tax charge. Yikes! Now you can protect your existing £1.5m allowance, but with strings attached and you need to begin this process soon.
Final Salary – Final Farce
If you think that you are one of the lucky ones in a final salary pension scheme (or Defined Benefit scheme) and avoid this problem think again. Your pension is given a cash value, based upon the income and lump sum that you will get. There is a magic formula to work this out, which I shall not bother you with here, but suffice to say those with long-term service in a final salary pension scheme… say NHS, Teacher, Civil Service, BBC and who have a high final salary or expect to have promotions that trigger increased pension rights, then you are likely to be caught by this.
The Real Impact of Taxes
This was one of the previous Government’s knee-jerk reactions to the credit crunch and has made simplified pension planning about as much a reality as Utopia. However, we live with the reality of many poor political decisions and the current administration seem equally as unprepared to alter things. To do a quick bit of maths for you 55% of £250,000 is an extra tax charge of £137,500 on money that you have saved or a reduction on your pension pot of 9.1%…. yet politicians seem to fuss over 1% pension charges. Standard Life suggest that this will impact rather more people over the longer term – perhaps 10 times as many unless the rules are altered or abolished entirely. This is not a good way to encourage people to save for their retirement.
Dominic Thomas: Solomons IFA
Success is contagious, but sadly less contagious than pessimism. As we digest the weekend that has happened, with a new British Wimbledon men’s singles champion the media is flooded with soothsayers. It has been a good 12 months for British sporting interests. Congratulations to Andy Murray for a spectacular victory at Centre Court, very well deserved and reminds me of a post on my old blog site from 2 years ago. Also Mr Froome collected the Tour de France yellow jersey and is leading after 9/21 stages, the Lions also thrashed Australia. There are of course many more sporting events to come this summer and British interests are very much alive.
It has been suggested that Andy Murray’s life will now change considerably. Well, he probably will now be regarded with legendary status in British sport, but winners tend to win a lot and hopefully Andy will continue to have success in Grand Slams, with two to his name now. However being number 1 is not an easy feat. Success longevity requires a huge a mount of perseverance and frankly quite a bit of luck. Luck – for keeping fit and not having significant injuries. There are very few that reach the pinnacle of their sport, by becoming a champion. Take tennis as an obvious example, dominated by just a few players.
Thankfully investing is not about being number 1, it is not about “winning” and beating everyone else. However, most people do not have a “successful” experience of investing. This need not be the case. Most investors behave as though they have to win the game, constantly adjusting positions trying to eek out advantages. The truth is that a successful investment experience does not rely primarily on skill, it relies upon discipline. Even the great tennis players make mistakes as we saw throughout the Wimbledon championship, often players beat themselves rather than get beaten. Investors can learn a lot from tennis and sport. It takes dedication, persistence, a long-term mindset, a thought through strategy and above all discipline to keep at it, keep believing and playing the long game.
Dominic Thomas – Solomons IFA