Market Update – A Possible Brexit Looms?

eu and britain

Speculation about UK’s future within The European Union (EU) has gained momentum as we start the official campaigns for the referendum.

One demonstration of how the uncertainty has impacted the financial world is the Sterlings slide in value compared to the US Dollar and the Euro.

Since the new year there has been a significant reduction in exchange rates, as many holiday makers would have noticed. Obviously this has a knock on effect to financial markets, yet the effect hasn’t been as dramatic as many feared.

In general equity markets, particularly the UK, have demonstrated their resilience and started to recover a little since the start of 2016.

Despite the continual stream of headlines declaring it is bad for the UK economy whether we are in or out of Europe, investors have shown they are looking longer term.

It is likely that the UK will see some continued volatility as we approach June, but there is now a very strong case for investing and looking beyond the next few months.

Investments which are based upon sound foundations and use sensible strategies, in what is often described as value investing, will continue to gereate steady returns.

2016 as a whole is unlikely to be a ‘Boom’ year for financial markets as there is still too many unknown and unpredictable global issues. But it does look as though it could be a year of steady growth for those willing to take on a balanced portfolio of investments, using all the common assets classes ranging from corporate bonds and property, through to equities and absolute return strategy funds.

As always please get in touch with Platinum if you would like to discuss your investment strategy or if you have any concerns.

NS&I Guaranteed Returns Cut?

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National Savings and Investments (NS&I) have yet again announced that they will be cutting interest rates on savings from June 2016 and also reducing the number of prizes available in Premium Bonds.

Some 23.5 million customers will be affected.

In November we posted a blog as NS&I cut their rates from 1.5% to 1.25% for savers. Now a further cut has been announced on their ISA bringing returns down to 1% (a new 7 year low).

Once again, the cut is following a trend in the market as banks and building societies are doing the same which means that although returns are lower, NS&I still remains competitive.

June 2016 also marks a reduction in the chances of winning a premium bond prize to 30,000 to one – a 15% reduction.

Looking ahead, savers need to look at alternatives to make sure that their money is safeguarded from the effects of inflation.

If you would like to speak about alternative strategies for safer returns please do not hesitate to get in touch with Platinum.

Budget 2016 – Sunny Outlook For Savers!

savers

The recent budget continued the trend of supporting savers and first time house-buyers with the Chancellor of the Exchequer focusing a large part of the budget towards taxes and savings.

The changes announced were varied and will take effect over the coming years. Some are positive and others less generous, however some headlines include –

  • Personal tax allowances are due to increase year on year.
 
  • The £1000 personal savings allowance has started to take effect for most savers.
 
  • Allowances of £1000 were announced for property income and internet sales.
 
  • Increased ISA allowances are available for savers from next year.
 
  • Capital Gains Tax was cut for most transactions, although property was excluded.

 

The chancellor also announced the introduction of Lifetime ISA’s for the under 40’s, whilst not a replacement for pensions, these could be an attractive savings option for many.

We always welcome the opportunity to discuss the overall market situation with our clients. We would urge any clients to get in touch with the team at Platinum if they have any questions.

 

 

A new addition to the ISA family!

LISA Graphic

The recent budget laid out quite a few changes for the regular saver. ISAs were handed another variation to the current range available; this new one is known as the LISA (Lifetime ISA) and is created for people to save for the future.

Designed to encourage those under the age of 40, the LISA can be used to help buy your first home or save for your retirement.

The LISA acts as a bonus scheme – the government will add an extra 25% to what you have saved. So if you contribute the maximum amount of £4000 a year the government will contribute an additional £1000 as a savings incentive.

A key benefit of the LISA is you won’t pay tax when you come to take your money out, either in retirement or when you buy that first home.

Be cautious though because as appealing as the above sounds, there are restrictions to the LISA. If you decide to withdraw the money before the age of 60 and decide not to put it towards your first home you will lose the government bonus (and any interest or growth on this). You will also have to pay a 5% charge.

If you have a Help to Buy ISA already in place you can transfer those savings into the Lifetime ISA from 2017.

Getting one pound for every four is a straightforward incentive to save, but there are restrictions.

Contact the team at Platinum to see how we can make the LISA work for you.

Tax Year – Use It Or Lose It

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Both Individual Savings Accounts (ISAs) and pensions provide an opportunity for UK investors to shelter their money from the taxman.  It is something everyone should consider.

Within an ISA you pay no tax on any capital gains or income earned and you do not have to declare your ISA’s existence on your tax return.

With pension savings you immediately receive income tax relief on any personal contributions, and the monies grow free of income tax or capital gains tax.  On encashment you could be liable to some income tax on the proceeds but at least 25% is tax free before you reach 75 years of age.  The new legislation has made pensions an irresistible way of saving and planning with no restrictions on access past the age of 55 and 58.

As an added bonus, pension savings can be seen as an exceptionally efficient tool to avoid inheritance tax.

At present, you can invest up to £15,240 in this tax year and you can choose to invest this in cash, stocks and shares, or a combination of the two.

For the majority of savers pensions contributions are limited only by your earnings or a cap of £40,000. For some people it is up to £190,000, depending upon previous contributions.

From the next tax year, for high earners contributions will be capped at £10,000 per year which means that it is important to take advantage of this tax years limits.

You might already have ideas about the assets in which you want to invest. Perhaps you are considering equities, fixed income, cash or a mix of asset classes. It may be worth considering a collective investment scheme that will provide exposure to a more diverse range of investments.

Since time flies by, you should consider taking action as early as possible. The end of the current tax year is fast approaching and you don’t want to lose this year’s allowances for good. Whatever you choose to do, you should plan ahead in order to make the most of the long-term benefits offered by an ISA or pension.

Of course, you do not have to use the whole allowance but if you can take advantage of it, or if you have investments elsewhere that could be transferred, ISAs and pensions provide a more tax-efficient way to invest.

Contact us at Platinum if you would like to review how you can maximise your allowances and plan to grow more tax efficiently.

 

Time Bomb For Buy-To-Let Investors

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This year brings about changes for purchasers of buy-to-let properties and second homes. Property investment will become unfavourable, as anyone looking to purchase these types of assets will be subject to new Stamp Duty Land Tax (SDLT) rates.

This means that from 1st April 2016, SDLT rates for residential property will be 3% higher than the current rates and will be on a progressive/tiered basis.

Up until then, anyone purchasing a buy-to-let property at a value of £125,000 would not have paid any SDLT but after April 2016 they would be liable for £3,750 in SDLT.

For the average buy-to-let property, which costs around £184,000, the changes mean a fivefold increase in stamp duty from £1,180 to £6,700. A £250,000 buy-to-let bought today has a £2,500 stamp duty bill; it will carry a £10,000 tax burden in three months – a hike of £7,500.

This restriction only applies to investors with less than 15 properties. While that may seem unfair to individuals wanting to purchase a second property, buy-to-let landlords will also be hit by a change to Capital Gains Tax (CGT) rules as well as tax relief rules.

The changes being implemented have their own advantages and disadvantages:

  • New homeowners will have a larger range of properties to buy from as they will not have been taken up by investors

  • However property investors will be restricted on the benefit from spending in buy-to-let property; this combined with low annuity rates in the markets means that savers will have to invest in other asset classes in order get some growth.

This is a big blow to investors, who saw buy-to-let property investment as an alternative to pensions and especially when coupled with the rules being implemented in 2017 which restrict tax relief.

But this is where Platinum can help.

We are happy to speak to anyone who is concerned about how these changes will impact on their investments overall. Our specialist Advisers can help you understand how these changes will affect you and maybe look at alternative strategies to buy-to-let properties.

 

A possible change in tax relief

tax change

The government has hinted they are introducing changes to the tax relief on pensions, with the full details likely to be announced on 16th March – Budget Day, this year.

Currently when someone pays into a personal pension they receive tax relief based on the income tax they pay.

This means:

  • If you are a basic rate taxpayer (with a top rate of 20% income tax) then paying £80 into a pension means the government will add an extra £20 to make the contribution up to £100.

 

  • If you are a higher rate taxpayer (with a top rate of 40% income tax) then paying £80 into your pension means the government will still add an extra £20 from the government, However you will also receive an extra £20 via a tax refund rather than into your pension fund, which gives you an effective rate of 40% income tax relief.

 

The potential change is likely to introduce a ‘flat rate’ of pension tax relief which may be between 25% or 33%.

Let’s take a look at what this will mean if we assume a flat rate tax relief of 33%.

  • If you are a basic rate taxpayer, then paying £80 into a pension means the extra £20 to make the contribution up to £100 but you may also get an extra £13, which could be paid via a tax refund. The basic rate taxpayer could be better off.

 

  • If you are a higher rate taxpayer, then paying £80 into your pension you will also get an extra £20 from the government and also receive an extra £13 via a tax refund (rather than into your pension fund). This gives you an effective rate of 33% income tax relief, so clearly you would be worse off than the current system.

 

Of course we do not know if the changes will be introduced this year or what the new rules could be. However if the current system of pension tax relief is more beneficial to you than the proposed new system Platinum would encourage you to make a pension contribution before 16th March this year.

If you have any questions please let us know.

 

Raising Money For The Christie

me martin and Barry

On Friday 22nd January we opened our door to hold a coffee morning to raise money for The Christie.

We were joined by our client Barry Thompson who is a proud Ambassador of The Christie and has raised a phenomenal amount over the years. As Barry’s 60th birthday approaches he has decided to celebrate by arranging “60 Do’s With Barry”  through which he will  attend different fundraising events over 60 days.

The money raised will be funding 60 young children going through cancer treatment at the moment. To help with their treatment the Christie have a mould made of their body to protect them through treatment and they paint this as the Superhero of their choice to try and relax them when having radiotherapy.

We were delighted to raise £835 from the sale of coffee and cake to clients, family and friends. If you would like to hold a fundraising event please contact Barry Thompson on 0161 480 6444

Thank you to all those who attended and gave so generously.

 

Our Predictions For 2016

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Looking into 2016 we continue to see positives for investors, especially for those willing to ride out short-term bumps and focus on the medium to long term gains.

Reflecting on the past 12 months, the cumulative effect on markets of the year’s various dramas – Chinese slowdown, uncertainty over US monetary policy, the commodities slump and so on – was surprisingly mundane. Overall, most investors saw their portfolio’s grow steadily in excess of inflation and/or bank deposits.

Although this year feels as though it has started with a whimper there are some encouraging factors;

 

  • US monetary policy has started to take a smoother path as the Federal Reserve announced a very modest increase to interest rates. This is a big sign of confidence in the overall US and global economic recovery.

 

  • In terms of geographic sectors, Emerging and Chinese financial markets have been ravaged in the past year, arguably giving an opportunity for investors as they look ahead

 

  • Within the UK, the FTSE 100 has been hit by fluctuations in commodity prices affecting the valuations of mining companies such as Glencore, as well as oil companies such as BP and Shell.       As with the Emerging markets, this has given a great ‘buying’ opportunity for investors.

 

It would be great if we were just positive about the future but that would be naive. For example, the upcoming referendum on EU membership will certainly create some uncertainty and volatility in the UK for the short term.

However we are confident that this unsettled period will be fairly short-lived and during these times opportunities will abound for fund managers focusing on good research and selective stock picking.

2016 will no doubt bring some ups and downs in terms of portfolio valuations but the overall trend should remain positive for clients who are diversified in terms of fund choice and asset allocation.

As always investors will benefit most where they hold a diverse range of investments and asset classes ranging from corporate bonds and property through to UK and global equities.

For our existing clients we continue to review their holdings and help position their plans to hopefully reduce instability without jeopardising investment returns.

Please get in touch with Platinum if you would like to discuss your investment strategy or if you have any concerns.

Interest Rates Falling For Savers

falling rates

National Savings and Investments (NS&I) have announced that with effect from Monday they will be cutting the interest they pay on their Direct ISA from 1.5% to 1.25%. This will have an immediate impact on more than 400,000 savers.

However we think the bigger news is that the major high street banks are to follow NS&I’s lead. Early December sees TSB cutting their interest rates and HSBC having been contacting customers about their rate reductions from January.

There are a number of reasons for this cut, including the interest rate outlook from the Bank of England and current inflation levels, both of which have conspired to keep the bank base rate at its low level of just 0.5%pa.

Looking at a long term view, rates should bounce back but the trend is worrying for clients relying upon savings income. If you are concerned and would like to look at alternative strategies for guaranteed and secure investments please do not hesitate to get in touch with Platinum.