The Lifetime Allowance Cut

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

The Lifetime Allowance CutDominic2023-12-01T12:38:23+00:00

What Tennis Can Teach Investors

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

What Tennis Can Teach InvestorsDominic2023-12-01T12:23:45+00:00

Service resumes in Wimbledon

So the 2013 Wimbledon tournament is under way again. Yet again, it would take a brave soul to bet against the usual suspects from reaching the semi-finals. Mr Federer has already begun his challenge, where the grass in SW19 is perhaps his best opportunity to win another grand slam. Many will be hoping that Andy Murray will be able to draw on his success at Queen’s and the 2012 Olympics. The Bryan brothers will take some stopping in the men’s doubles, who are amongst the most successful tennis players in the last 40 years when it comes to titles (doubles specialists).

The thing about being “a great” is consistently delivering results. History is recorded by the winners and you may be surprised to learn that when it comes to greats, the greatest, by a country mile is Martina Navratilova with a combined 344 titles in singles, doubles and mixed doubles, surpassing the nearest male by nearly 200 titles (John McEnroe the most successful man with 148 titles). Martina dominated her field with Chris Evert providing a worthy opponent (186 titles).

Investing is a little like tennis, but for all but the investment greats (and there are really very few of them) the similarity is not as you might expect. By saying investing is like tennis, I mean the sort of tennis that most people play. Invariably the winner made fewer mistakes. Tennis is one of those games that to win, largely means not being beaten by yourself (rather than your opponent). Of course if you play tennis, you may be forgiven for thinking you are quite brilliant (if you win) however the truth is that you made fewer double-faults, hit the ball out fewer times and probably made fewer worse second and first serves. Like investing, taking credit for your skill may be somewhat premature, actually what counted was the number of mistakes that you made. Tennis is a very skilled game. Investing is too. However most of my job is to act more like the coach than the player. Helping clients to remain calm, to keep to disciplines, to persist, to see the bigger picture (the whole ball) and to reduce the number of errors made that are self-defeating. Errors like trying to time the market, trying to beat the market, using expensive investment strategies, not diversifying risk, failing to understand risk and being distracted by the noise. Successful investing is possible for anyone. Having clear targets, seeking investment efficiency, minimising costs and playing a game where a successful outcome is realistic. So as you watch some of this years Wimbledon and watch the professionals, think if this is winning or not being beaten. Reflect on who is likely to win the tournament titles and when you are ready to discuss a winning investment and financial planning service only a couple of miles from Centre Court, give me a call.

Dominic Thomas – Solomons IFA

Service resumes in WimbledonDominic2023-12-01T12:23:43+00:00

Assumptions and Black Swans

Assumption is the mother of chaos

I was reminded last night that sometimes what you get depends entirely upon your perspective. I was at a “gig” (I loathe the word) for one of my favoured bands – Athlete. A nice bunch of guys from London who had a few big hits and keep at their music. I was treated to tickets to hear them in Wimbledon, which was a bit confusing because Wimbledon is not known for its music venues in London, so assumptions were made, that suggested a small intimate event.. perhaps for up to 100 people. Not beyond the realm of reason as this happens quite regularly. However this assumption was somewhat off the mark. One presumably made by the venue manger and tour manager as well.

Wrong time and place

Sadly expectations were not met, though I dare say that the first 50 people to arrive had a great time. Unfortunately, as nice as the venue was, it was not suitable for the event and the 500+ people that showed up. It would have been pretty good for 50. This wasn’t Athlete’s fault and I have to admit that I felt rather sorry for them as many people got fed up and left or expressed their frustration at them rather than the venue. The venue was/is tiny, there wasn’t enough room for everyone. The shape of the venue made it impossible even for someone of my height (6’2″) to see them or hear anything other than the bass – no I couldn’t even hear the apologies for the recognised mis-selected venue. Disappointment all round, hopefully something good may still come from this.

We all make mistakes, but do we learn from them?

I’m reminded though that there is a time and place for everything. How many people in a venue, how many clients can be served, cared for and looked after. Sometimes we bite off more than we can chew and sometimes the environment means we should pack up and reschedule. Knowing when to quit is as important as knowing when you aren’t up to the task. This is an experience that the BBC are facing today as well. Enormous organisations are hard to manage, but then – so are smaller ones. Similarly with our own money, we make choices, people tend to spend what they have rather than managing it properly or planning spending. We are all faced with management tasks, some we get right, others we get wrong. Sometimes we need to take note and change behaviours. This means learning from mistakes and forming new (better) habits. This is not a luxury, we all make mistakes and all need to be afforded the opportunity to learn from them and correct them where we can. Someone that is a fan – or on your side, will give you a second chance, perhaps a third and fourth (maybe more) but barring all but the most patient of people there is a limit to our “forgiveness” if actions to remedy and resolution are not taken. The Banks still seem unable to learn this basic lesson. It seems certain politicians have the same problem. As for small firms like mine or a great band like Athlete, well we simply have to learn, try harder and make sure that we don’t over promise and under-deliver… much like my new i-phone that is still unusable. The question is, is the mistake an out of character rare event (a black swan) or it is merely representative of a wider problem?

Assumptions and Black SwansDominic2023-12-01T12:23:07+00:00

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