Market Update – The FTSE 100 – Booming or Heading For A Fall

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Brexit continues to claim the headlines. Yet, as mentioned in our previous quarterly update, it is not a doomsday. For every perceived negative, a positive arises.

The past few months have seen politicians re-iterate that they will abide by the Brexit vote, expecting to trigger the required Article 50 by April next year.

As an economy, the overriding desire is for a clear direction and stability above everything else. The announced deadline for triggering Article 50 has to be welcomed, along with the most recent announcement to adopt the current EU rules into UK legislation until such time as they can be reviewed; Both announcements clearly demonstrate momentum is building and, as such, give confidence to businesses and investors over the UK’s future outside the EU.

The fly in the ointment is exchange rates. The step towards Brexit has coincided with a dent in the value of Sterling on the world stage. The Pound has fallen in value against both the Euro and the US Dollar.

Whilst poor exchange rates aren’t the best thing for someone planning a holiday overseas, nor for overseas companies selling goods to the UK such as Apple, the lower exchange rates can prove very fruitful for UK companies exporting goods or UK companies whose businesses profits are earned overseas.

It is the drop in exchange rates which has caused the FTSE 100 to surge above 7000 recently which is welcome news for any existing investor.

Even more encouraging than the FTSE 100 surge has been that index’s ability to maintain the highs and not immediately fall back. This has allowed the other UK indices, such as the FTSE 250, to catch up.

Some of the best performing funds over the past few months have been smaller company equity based investments.

Equally property funds have started to lift their temporary suspensions as the concerns about panic selling of commercial properties has failed to materialize.

Looking ahead, there are reasons to feel reasonably optimistic yet not to be overconfident. There will, no doubt, be many opportunities for reasonable investment returns but it is also a time not to get over-enthusiastic.

The largest changes to portfolios we envisage making is a move away from overseas income producing assets such as overseas corporate bonds, and a move towards UK income producing assets like property and equities focused on taking advantage of the more favorable export markets.

For our clients, we are gradually looking to tweak investment portfolios over time, if appropriate for that individual client, as will be apparent when we carry out our regular reviews.

Equally we await the first Autumn statement from the new Chancellor of the Exchequer, Phillip Hammond. We will obviously keep you updated if this has an impact on our outlook.

In the meantime, as always, please get in touch with Platinum if you would like to discuss your investment strategy or if you have any concerns.

Office renovation

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If you have visited us recently or passed by our office on Marsland Road in Sale you have probably noticed that we are currently renovating the front of our office. We moved into the premises nearly 10 years ago and now feel it is time to refresh our image.

The signage has been taken down for the moment but we are still open and here to welcome you. We apologise for any inconvenience caused but can reassure you that it will look fantastic!

Thank you for your patience.

 

 

 

 

 

 

Property vs Pensions for retirement?

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Andy Haldane, Chief Economist for Bank of England, recently mentioned that property is a better investment for retirement than a pension. For the typical saver there are key points to consider before taking these views into consideration –

Pensions

  • Tax Relief on Pensions means that your contribution has grown 25% even before the money has been invested.
  • Taking money out of your pension after 55 is easier to do so than selling a property.
  • Saving into a pension means that you have ring-fenced that money for your retirement.
  • You can start pension savings for as little as £50 a month.

 

Property

  • Buying a property using a mortgage lets you gain more if the property grows, but can also cause you to lose more if the property reduces in value.
  • “Bricks and Mortar” have shown to grow 23% in the UK over the last 10 years a 2.3% return per year and this doesn’t include the rent received.
  • If you haven’t lived in a property for some or all of the time you’ve owned it (a buy-to-let property, for example) then you may be liable to pay Capital Gains Tax of up to 28% when it’s sold.

 

The points above are a summary and each form of investment has its own benefits and detriments. Both these options can be used effectively as part of a diversified portfolio.

As always we welcome the opportunity to discuss the options available. Contact Platinum and our specialist advisers will be glad to help.

Britain’s “Best Account” no longer worth it?

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The Santander 123 account, one of the “best accounts” in the UK offering a 3% interest rate has decided to slash their interest rates to 1.5%, this change has sent several million UK savers into despair. This is not all as NatWest and Royal Bank of Scotland (RBS) have warned businesses they may have to charge them to accept deposits due to low interest rates.

The changes in interest rates affect all individuals and businesses, not only because of bank charges but also inflation. With Inflation expected to rise, a saver in the average account is actually losing money in real terms and experiencing negative interest rates.

Cash deposits are not the only method for savings, there are various alternatives that can be used to safeguard your money against the effects of inflation and it is important you consider these alternatives as part of a robust financial plan.

But this is where Platinum can help. We are happy to speak to anyone who is concerned about how these changes will impact their savings. Our specialist Advisers can help you understand how these changes will affect you and look at alternative strategies to current accounts.

Growth Comes From Time Or Timing?

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On occasion we are asked whether it is worthwhile coming out of the stock market and encashing investments whilst the stock market is at a high, to then re- invest once markets have fallen. This can be a ‘dangerous’ game.

Market timers often try to predict big wins in the investment markets, only to be disappointed by the reality of unexpected turns in performance. For those who do not wish to subject their money to such a potentially risky strategy, time- not timing -could be the best alternative.

Market timing is a strategy in which the investor tries to identify the best times to be in the market and when to get out.

Advocates of market timing say that successful forecasting can result in higher returns than other strategies. The difficulty is reliably predicting the unpredictable.

Although some professionals may be able to use market timings to reap rewards, one of the biggest risks of this ‘strategy’ is potentially missing the market’s best-performing cycles. That is why perhaps the best move for most individual investors- especially those striving toward long-term goals- might be to invest and hold on to these investments throughout market cycles. This is commonly known as a ‘buy-and-hold’ strategy.

Buy and hold, however, doesn’t mean ignoring your investments. Remember to give your portfolio regular checkups, as your investment needs will change over time. Annual reviews may be enough to help ensure that the investments you select will keep you on track toward meeting your goals.

Most experts agree that generally, a portfolio made up primarily of the ‘riskier’ funds may be best for those saving for goals more than five years away. On the other side those saving for shorter-term goals, might consider a portfolio weighted toward money market instruments.

Remember, though, even those enjoying retirement should consider the potential inflation-beating benefits as well as the risks of stock market related involvements.

As always please contact the team here at Platinum if you would like to discuss your portfolio, and review whether it is best structured to achieve growth in line with your timescales.

Market Update – Change Is Afoot

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The impact of the referendum and Brexit is starting to take effect, yet it is still not a doomsday scenario.

Having seen a clear result in the referendum, it is virtually impossible that the UK remain within the EU, despite various media headlines about challenges.

As a direct result many financial institutions and investors have started to align themselves to make money out of the upcoming changes, despite the actual leaving date not being for at least a couple of years.

The most immediate effect of the vote on markets was our currency exchange rates. Sterling swiftly lost between 10% and 15% of its value against the likes of the US Dollar and the Euro. This may seem bad news and many people are surprised how such a fall in currency triggered a leap in the FTSE 100 stock market index.

The drop in exchange rates isn’t good news for holiday makers travelling overseas. Equally the change in exchange rates could mean imported items like gadgets such as iPads suddenly increase in cost.

However, the inverse is that for tourists coming into the UK, we are now a cheaper destination. Also our exported goods are suddenly cheaper. It also means that for UK companies which earn their profits overseas, have suddenly seen their profits leap between 10% and 15% upwards.

As a result, whilst some of our smaller UK firms have been impacted by the change in currency, many of the larger FTSE 100 firms have risen significantly in value.

At the same time large investors have been uncertain about what the demand will be for commercial property in the UK. In order to prevent a panic sell of investments, the larger property funds have suspended trading.

This suspension was almost inevitable once a few large investors start expressing interest in reducing the investment holdings and will ultimately filter through to most property funds.

It is not a situation for panic. The suspended property funds remain invested and continue to receive regular income in terms of rent. Equally most pundits would agree that, long term, property is not in the same situation as 2007 and 2008.   Over time this sector will stabilize and return to a steady and reasonably predictable asset class.

For investors, the situation is fairly simple. Existing holdings in property will remain as they are and hopefully receiving steady yield (income). Any new investments or rebalancing will simply exclude property temporarily until the suspensions are lifted.

Most importantly, we do not share the pessimistic views about the UK’s outlook as Brexit takes form. Change is afoot, yet at the same time change brings opportunity.

As always the key to successful investing has to be diversity. A balanced portfolio avoiding being overweight in any asset will allow people to ride out any blips and or temporary fund suspensions.

We will continue to monitor the situation closely and if appropriate will let our clients know about any immediate actions required.

In the meantime, as always, please get in touch with Platinum if you would like to discuss your investment strategy or if you have any concerns.

Brexit Is Not Doomsday

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For those waking up this morning, the media is full of the referendum result. Alongside this news is a constant stream of negative headlines about dramatic drops in various stock market indices and the plummeting pound.

I thought it important to send out a quick note, to say to our clients “Don’t Panic!”.

For the past four months’ financial markets around the world have been waiting for today. Over that time investors and investment funds have positioned themselves to, both, ride out any dramatic turbulence and take advantage of that same volatility.

A good example of this is the shares in banks. For the past year they have fallen in value in anticipation of a vote, and although their share price will suffer another fall today Banks will continue to make money. As such their share price will recover in time.

Equally, as a country our need for utilities and food will continue unchanged. Therefore, these defensive stocks should continue to also pay steady dividends and their share price should ride out any volatility.

It’s worth taking a breather and remembering that today’s vote will take at least two years to enact. Over that time the markets and economy will operate fairly unchanged. This means that investments which made sense over the past year will largely continue to make sense going forward.

As Fidelity’s Head of European Equities announced “…we certainly do not expect a Doomsday scenario and sharp declines should increase investment opportunities.”

In the short term, especially the next few days, there will be plenty of ups and downs in both exchange rates and stock market announcements but a large proportion of this is driven by investors looking to ‘play’ the markets and take advantage of these fluctuations.

For most of our clients we have helped create very balanced and diversified portfolios, focused on achieving growth over the medium to longer term. Currently we see no reason to change our strategy.

In the short term we would simply offer reassurance that our clients’ portfolios are structured to cover a vast range of asset classes, sectors, geography and fund managers. This means a medium term focus should allow our clients to ride out any turbulence.

As always, we are here to help. Should you have any queries or concerns regarding your plans and investments please do not hesitate to get in touch.

What are the death benefits on your pension and who will receive them?

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If you have pension plans from previous employment, do you know who you will receive your pension if you die?

Completing a nomination form specifies what you would like to happen to your death benefits or to place your death benefits under trust. Without a nomination form, your wishes may not be fulfilled as the pension trustees or administrators have discretion over who they pay death benefits.

New pension flexibilities have made death benefits on pensions a good savings vehicle for inheritance planning. The changes in rules now allow an individual to:

  • pass funds down through the generations via flexi-access drawdown.

  • pay death benefits to a far wider range of beneficiaries than previously available

It is important to bear in mind that it may be impossible to make use of these options if your pension plan or scheme doesn’t offer them.

If you have pensions that can’t facilitate the new freedoms your beneficiaries could find that the only option available to them is annuity purchase or to take a lump sum (which may not be the most tax efficient option).

It is really important that you:

  • check with your pension provider that your death nomination form is up to date

  • check with you pension provider that new pension flexibilities apply to your plan

Alternatively contact us at Platinum and we can guide you through the process and co-ordinate this on your behalf.

We look forward to working with you.

Taking control of your pension is so important

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In days gone by, the only retirement option for most people was to buy an annuity – a guaranteed income for life – so most pension funds were designed with that in mind.

All this changed in April 2015 when pension freedom arrived. You can now access your pension pot from the age of 55, choosing how you want to take the money in a variety of ways. It is likely that your pension fund is set up with an annuity in mind. You are therefore unlikely to achieve the best value if you wish to use it for drawdown.

Arriving at retirement in a few years’ time means taking the right action now – preferably five, ten or even fifteen years before you start to do so.

By failing to plan far enough in advance, you run the risk of letting your pension fund steer your decision, rather than the other way around.

Planning five or ten years in advance gives you a destination to aim for. You can then see if your pension is currently on course for that destination – in the vast majority of cases, it will need at least altering to ensure it is heading in the right direction.

Here are the steps you should be taking to keep your pension on track.

  • Get a sense of where you are now
  • Think carefully about your retirement goals
  • Discuss pension choices with your adviser
  • Is there any action you need to take now
  • Regularly review your goals and pension arrangements

Do you have the time and knowledge to deal with this?

Seeking independent financial advice from us can really help. As advisers we can assess your circumstances and search the whole of the market to find the solution that fits your needs best.

Our assessment also takes into account all your other financial circumstances too, and other factors such as your attitude to investment risk.

So, go on, dig out your pension paperwork and give us a call to start the ball rolling.

We look forward to working with you.

Auto-enrolment – Comply or be fined!

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We are 5 months into 2016 and it’s been nearly 5 years since the first company auto-enrolled their employees into a pension scheme.

The Regulator has increasingly demonstrated its willingness to clamp down and fine those companies not complying with their staging date and the new workplace pension rules.

One notable recent fine was levied against Swindon Town Football Club, with the club having to pay £20,000 in penalties. From an initial penalty notice of £400, the fine rose quickly due to the company’s inaction towards the warnings notices. The fine was calculated at a rate of £2500 a day.

The Pensions Regulator has continued to issue guidance, but even so it is not surprising that we are seeing the number of whistleblowing and enforcement actions increase as the number of employers subject to auto-enrolment grow substantially. The increase in the number of companies having to auto-enrol beckons the increase in the Pensions regulators effort to deal with non-compliance.

This serves as a wake-up call for employers. The regulator has the legislative power to impose fines and is doing so. Simply ignoring auto-enrolment is not an option.

If you are an employer and all this sounds a little confusing – call Platinum and we’ll guide you through the process.