Category: Economic

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What’s all the fuss about?

Haters gotta hate

By now you probably all understand I am not a fan of the economic and social policies of this UK Government. To be fair I didn’t like most of the last shower’s either. Two sides of the same global agenda coin, putting global ideology before the people. I am unapologetically a Capitalist. I believe that capitalism works. It may be flawed, more rewards tend to end up going up the ladder than down, but it has proven to be the system that has lifted over 2 billion people around the world and counting, out of poverty. Socialism, Marxism, Command Capitalism all impoverish the masses, if not, then the price an individual pays is the loss of freedom.

So from a political point of view I do hate any ideology which impoverishes and removes personal freedoms. Which brings me to the position UK citizens currently find themselves in with this iteration of democratic government.

The UK economy is in a bit of a pickle.

As someone who is deeply interested in the future prospects of governments, economies and companies (we have the wealth of 200 families sat on our shoulders) I do read extensively and try to keep that reading balanced. I’m a capitalist and yet I will read articles in The Guardian to maintain that balance. Ultimately I source material from individuals with “skin in the game”, money on the line, rather than graduate journalists or editors with chips on their shoulders.

To cut to the chase, UK governments have already borrowed too much, and investors who hold that debt are worried. There was a time when investors in UK Government debt were domestic in nature. Large UK investment funds and UK pension funds especially. But over time that domestic loyalty has waned. A typical UK pension fund only holds the minimum mandatory level of UK gilts to remain within the law. Those funds have also reduced their holding of UK listed shares from around 40% to, wait for it, now just 4%! The Chancellor is currently trying to force UK pension funds to invest more. Watch this space.

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Slack News Fortnight

Obviously It’s been anything but a slack fortnight at the office. With 5 major events occurring, which have repercussions for investors, I thought it would be best to wait until all 5 unknowns were in before I commented. Individually, each of these domestic and international geo-political events will shape how we manage our investment portfolios and how we help clients plan their finances, both now and into the future.

Plan | Save | Grow | Spend | Gift | Pass

But firstly I would like to extend our condolences to the families of the two clients we suddenly lost this week. After almost 38 years building long-term client relationships it’s inevitable that some must come to an end. Currently we are helping the families of 8 of our clients who have passed away in recent months.

Hopefully our previous financial planning and long-term client relationships will help at this difficult time.

The 5 known unknowns

“There are known knowns, things we know that we know; and there are known unknowns, things that we know we don’t know. But there are also unknown unknowns, things we do not know we don’t know.”

Donald Rumsfeld – United States Secretary of Defense.

Two weeks ago we knew there was a UK budget to come, a new Conservative leader to be chosen, a new President of the US, a further interest rate decision to be made in the US and also an interest rate decision due from the Bank of England. All those changes would move both domestic and global shares in some way. Some outcomes were expected, some were binary decisions which were too close to call and some were just plain unexpected.

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Investors in the Cross Hairs

We ended our previous blog with:

 If tax concessions are taken from one area they will seek others. Expect to see changes brought in concurrently to limit ISA contributions and increase the rates of Capital Gains Tax to investments outside of ISAs. The subject for next time.

So as promised here is my take on the increase in Capital Gains Tax and the decrease/capping of an individuals ISA allowance.

Currently there is no CGT on ISA or Pension investments, we expect that to remain the same. This blog is really only of interest if you hold excess investments in a General Account outside of your ISAs & Pensions. If you do not have a General Account there is no need to read on, unless you are interested. The rest of you can get back to what you were doing before this blog interrupted you.

Increase in Capital Gains Tax

We have left this blog quite late, with the Autumn Budget just 48 hours away now, but we have been waiting to see if any clearer information surrounding tax rates would be “leaked”.

Investment capital gains have always been taxed at a lower rate than earned and unearned income. That differential is about to become closer, or indeed fully closed, with maybe even a doubling of the rate of tax. Basic rate tax-payers currently are charged 10% on the gain achieved from holding investments (higher for property gains) Our worst expectations are that this could be increased to 20%. For higher rate tax-payers, their current 20% rate could be raised to 40%.

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