When The Bank Goes Bust

From January next year there are some significant changes to the Financial Services Compensation Scheme (FSCS).   British savers will receive a lower guarantee on their deposits.

In the unlikely event that a UK bank or building society collapses, the FSCS will pay currently pay compensation of up to £85,000 per person or small business, for each authorised bank or building society. However from the beginning of 2016, the maximum amount of compensation will be reduced to £75,000.

Furthermore the regulator is now required to review the limit every five years, meaning protection could change again in line with EU legislation and exchange rates.

Whilst 95% of UK savers are expected to be unaffected by these protection changes, those who are affected by the new rule need to take action and consider dividing their money between several banks and building societies in order to ensure their savings are fully covered.

It is important to remember that if you have several accounts with the same institution (or different banks or building societies that are subsidiaries of it) you will only receive the maximum amount once – per person, per institution.

There are some positive changes as FSCS protection has been expanded to include larger companies and small local authorities such as parish councils, with their cash deposits covered up to £75,000. The regulator has also altered the insurance limits for compensation under the FSCS to increase cover for some policyholders in the event that their insurer collapses, although the limits for all other kinds of insurance remain unchanged.

We have always encouraged our customers to ensure their holdings remain diversified and are protected as much as possible. If you or someone you know is unsure whether they are likely to fall foul of the new £75,000 limit then please do not hesitate to contact Platinum.

Taxing Times For Buy to Let Investors

House for Rent

Do you know about the tax changes introduced in the summer budget on Buy to Let investments?

Whilst they won’t have an impact until 2017/18, they are significant enough to make many investors reconsider the viability of Buy to Let as an income strategy.

Currently an investor is allowed to offset several expenses incurred against income received, as a result of owning the property. The obvious expense is the interest on any associated mortgage borrowing, although there are many other financial costs and allowances which investors are allowed to claim to reduce the tax owed on their investment.

Whilst HMRC are likely to issue further guidance as the deadline approaches, the main goal over the next three years is to introduce changes that limit the tax relief offered to a level in line with the basic rate tax, i.e. just 20%.

This loss in valuable tax relief could render many Buy to Let properties no longer a viable investment, and with the potential of capital gains tax liabilities when disposing of the property it is important to plan ahead before the tax rules start to take effect.

It is worth taking the opportunity to consider your position carefully and assess the current returns you are receiving in conjunction with robust tax advice.

As always Platinum are happy to help any clients and encourage those concerned to get in touch.

Market Update – Riding Out The ‘Animal Spirits’

August proved a torrid month for investors around the world and the UK was no exception.   Unusually September has continued with this theme.

Previous worries over the outlook for Greece and the Eurozone were sidelined by a huge surge in concern over China’s slowing economy, followed by the knock on effect on commodity prices and mining companies.

Whilst the FTSE 100 dropped almost 17% from its all time high in April, most of our clients have seen much more modest falls.   We have always encouraged a diversified portfolio of funds and this has stood many investors in good stead.

That said, investors must ask themselves if there is genuinely something to worry about or if it is just markets’ so-called ‘animal spirits’. The answer to that question affects whether a client sells out with the aim of avoiding further losses or holds on in the hope of recovery.

In the case of China, we may simply be seeing an unwinding of a stock market bubble. Historically vulnerable to the influence of speculators, the Chinese market had risen dramatically over the past 18 months and some measure of readjustment was always likely.

Their economy is certainly slowing but plenty of market-watchers had suggested the Chinese economy needed this to happen.

A few general lessons from previous market shifts are worth remembering – not least that there can be significant bounces in the days and weeks that follow. Looking to sell up and then buy back in again is likely to see investors miss such upturns. It can also add trading costs.

August also tends to be a bad time to make big investment decisions as thin trading often produces significant market swings. When traders return to duty after their summer break, market order is usually restored.

This year the usual September recovery has been delayed by the drop in value of commodities such as copper. This is more exaggerated in the FTSE due to the high number of mining stocks such as Glencore. However remain confident that markets will soon resume ‘normal service’.

It bears repeating – in most circumstances, it will make sense to stay invested or even to buy a little bit more. Valuations have been relatively unattractive of late and investors may now just be able to pick up a bargain.

Don’t forget, Platinum are only an email or phone call away. So please get in touch if you have any concerns or wish to discuss your options for pensions or investments.

Another pension change?

tax

After spending the last year getting to grips with the new pension rules, the latest news that another ‘pension revolution’ may be around the corner may not be welcome. However this looks a distinct possibility following Chancellor of the Exchequer George Osborne’s summer announcement of a new consultation on the UK’s pension regime.

There are no firm details as yet, but he expressed a wish to simplify the pension system further by stating “Pensions could be taxed like ISAs – you pay in from taxed income and it is tax-free when you take it out. In between it receives a top-up from the Government.” The reaction from the financial sector has been mixed. Although many welcome his desire to simplify the regime, they believe ISAs have retained a ‘halo’ effect precisely because they have been relatively immune from government tinkering. As one industry commentator observed:

“What the current regime could really do with is some stability and relief from further meddling. The only way to encourage more people to save is to keep the rules as simple as possible. ISAs are a truly trusted product within the financial services industry – they are simple, easy to understand and accessible. It would be disastrous if people were to save for retirement only to find in later life that a cash-strapped government changes the rules again to tax income for a second time.”

The Chancellor’s move to taper tax relief on pensions for high-earners had been well-flagged. From April 2016, for every £2 of adjusted income over £150,000, an individual’s annual allowance will be reduced by £1, down to a minimum of £10,000.

As advisers we have urged higher-earners to take advantage of the reliefs where possible up to the end of this tax year. However, George Osborne did not – as some had expected – make changes to the salary-sacrifice regime, meaning higher-earners on the margin can still use this to bring them below the threshold.

Given the potential for further changes on contribution levels, we would now urge all Platinum clients to assess their situation and maximise any tax savings whilst the legislation still provides for such generous tax breaks for all levels of tax payers.

As always, we are only a phone call or e-mail away with advice.

Our Latest Addition To Our Team

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We are pleased to introduce the latest recruit to our financial planning and advice team; Eeshan Gupta.

Eeshan has worked in the Financial Services Sector for nearly all of his working life.

He has a wealth of knowledge in pensions and savings, including valuable experience in the realm of Workplace Pensions and Auto Enrolment.

Having achieved numerous qualifications, Eeshan’s continuing goal is to help clients with their Financial Planning to ensure a secure future.

When not in the office, Eeshan is nearly always playing squash or going for a swim.

 

 

No need to panic!

dont-panic

In view of the recent volatility within investment markets we want to reassure you not to panic.

The current volatility is a by-product of the falls in the Chinese stock exchange. There are two major factors to remember regarding China;

 Firstly, their economy has slowed. Compared to Western economies, the Chinese are still showing definite growth year on year, however it is no longer the double digit growth as seen previously. This has been enough to cause worries for investors.

Secondly, the Chinese stock market investors are mainly private investors rather than major institutions. As such private investors do not always see the ‘long game’ and can often react emotionally and quickly to news rather than looking at fundamentals.

 It is important to remember that the Chinese economy is still growing and the Chinese government still have a lot of scope to stimulate a market recovery.

The recent falls in stock markets in the UK, US and Europe are directly influenced by the falls in Shanghai, but it is essential that everyone looks beyond the headline grabbing news of the FTSE’s fluctuations;

It is holiday season and huge numbers of institutional fund managers and traders are on holiday. These are the investors who invest over the longer timescale and will see this volatility as an opportunity.

Linked to this the volume of trades being conducted is very small compared to normal. This means that when shares are bought or sold undervalue it has an exaggerated effect on indices.

The knock on effect of the above is that we fully anticipate the markets recovering significantly as we enter September and there will be a return to normality.

For existing clients, it is not the time for rash decisions rather hold firm to a balanced investment approach. Arguably it is an opportunity to invest new monies whilst markets look to be in a short term dip.

 

 As always we are happy to discuss the situation and potential impact or opportunities with any clients, so please do not hesitate to get in touch.

Smart Investors Find Dividends In The Future

Dividend

For investors, the most notable change in the post-election ‘Summer Budget’ was arguably the scrapping of the existing dividend tax credit regime. Under the current system, dividends are paid with a notional 10% tax credit, meaning non- and basic-rate taxpayers have no further liability.

From April 2016 the tax credit will be replaced by a £5,000 tax-free dividend allowance for all taxpayers. Above that, investors will pay tax at 7.5%, 32.5% or 38.1%, depending on their marginal rate of tax.

For clients who receive dividends of less than £5,000 per annum there is no change. In fact, for those higher rate tax payers with dividends below this level, there is a significant tax saving.

However for anyone receiving more than £5,000 dividends each year, including dividends from both investments and privately owned companies, there is an increased tax liability.

The end result of these changes is that everyone needs to review their financial situation.

 

  • Company owners need to maximize dividends before April and consider whether swapping dividends for salary afterwards would reduce any tax bill.

  • Investors need to consider how to ring-fence investments in tax wrappers such as ISAs or Pensions, and explore whether to create dividends to utilise the £5,000 annual allowance.

 

As always Platinum are happy to discuss things further and answer any of your questions. Please do not hesitate to contact us.

Growing Investments

courgette2

One of our clients was kind enough to bring some fresh produce in the other day from his allotment.

After a few ribald jokes around the size of his courgettes, we took a couple of photos and it struck us that cultivating an allotment can have several similarities to managing an investment portfolio.

When starting with an investment plan or an allotment you only have a finite amount of space or funds to start with. So it’s not good practice to commit all your space or funds to one single produce.

A single investment or crop may give good returns for one year but over time it will stumble as most things are cyclical and benefit from rotation and diversity.

Once you have set up and planted your allotment you need to maintain it so that it continues to flourish, ensuring that any tweaks are made as the seasons evolve.

Equally, an investment portfolio is no different as you look to rebalance or move from one asset class to another.

Overall, there is one truism that can be applied to both activities and that is that growth comes from time, care and attention.

Platinum are always happy to review clients plans so if you, or anyone you know, would like to chat things through then please get in touch.

Market Update – Does It All Seem Greek To You?

grexit

The news throughout June seemed to stumble from one bad story to another. Financial markets were no different, with headlines focusing on Greece and their negotiations to repay national debt.

The crux of the argument between Greece and its creditors is how quickly – if at all possible – the country can repay the growing debts whilst trying to reduce the impact on its people.

From an outside point of view, it is this uncertainty that is causing the volatility. Until Greece comes to either a permanent arrangement or decides to reinstate the Drachma as currency, this uncertainty will cause markets to drop quickly yet bounce back equally fast.

Even now, the FTSE is demonstrating that uncertainty and is currently at a low point for the year.

The fundamentals for investments (ignoring the situation in Greece) remain sound and a diverse portfolio of different asset classes and investment funds will no doubt demonstrate steady growth over time.

So once a decision is finally reached in Greece, whatever the outcome, I believe clients will see their investments take a leap forward.

Clients investments will ride out the turmoil and for many they will benefit from the bounce back when it occurs.

The focus needs to remain long term and the potential for growth remains. We also suggest that the majority of clients’ funds be invested in a diverse spread within the UK and globally (including the Eurozone to some extent) and including non-correlating asset classes such as property and the ‘absolute return’ sector.

 

If you are concerned with your investments and pensions or would like to chat about your options, you know Platinum are only a phone call away.

Whoops! The Top 3 Investment Mistakes We Make

market

“To err is human” said Alexander Pope – but in investment, to err can also be expensive. You need to look at the mistakes of others then try to avoid the most obvious pitfalls.

 

  1. Investors can make many mistakes but one of the most common is to follow the herd. When markets are high, they can scramble to invest, thinking they might miss out. When markets are falling, they often sell out. One of the more well known examples of this sentiment driven investing was the ‘dot.com’ boom. Millions of investors parted with their savings, thinking they were missing out on a chance to make ‘easy’ money. Unsurprisingly, the bubble then burst and many scrambled to get out without a thought about what might happen next.

 

  1. Don’t get carried away in the moment – either to invest or to sell. Stories of large falls in markets can make investors nervous – but this is the nature of equity investment and selling on a short-term dip simply crystallises a loss. It can also mean missing out on both the eventual return to normality and the longer-term benefits. Markets will always go down as well as up, so if you are scared by such volatility, take advice. Perhaps equities are not for you.

 

  1. Don’t believe you can time markets – experts agree this is a near-impossibility. Investment should never be gone into lightly. Be clear about your objectives, your timelines and the risks – and make sure your portfolio is run accordingly.

 

Numerous studies have proven how people who have attempted to avoid stock market losses have in fact missed out on some of the largest stock market gains. You cannot predict the future, especially in the short term, so it is important to have a clear strategy over a reasonable timescale accepting that volatility is part of the ride.

 

By focusing on ‘value’ when investing and having clear objectives over the medium to long term, clients continue to see their investment returns grow and have ridden out much of the recent stock market instability created by the global debt crisis.

 

Contact us if you want to ensure your investments are positioned appropriately for the future.