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  • You may have seen news stories about property fund suspensions. Should we be worried that this is a sign of impending financial Armageddon?


    It might just be worth explaining how property funds work. Obviously the key investment is property, but usually these funds also have ready cash available to pay a steady stream of investors who may want to cash in their investment. This cashflow is also supported by new investors to the fund. Property is not a liquid investment, it cannot be easily or quickly bought and sold. In normal circumstances it doesn’t have to be. However, if investment confidence drops and suddenly more investors want their cash out than can be borne by the cash balances and inflows to the fund, then this creates a problem. The worst thing for investors would be a quick “firesale” of properties which is why the decision to temporarily suspend the fund is taken.
    Investing in property funds carry some risks, we have seen suspensions before after 9/11 and the 2008 crash so nobody should be convinced otherwise. They can however provide a high yield and as long as rents keep coming in then that will continue. Again this is not without risk.
    However, it’s important to put thing in perspective. For many clients, this is not an issue as there are ways to gain exposure to property while avoiding these liquidity risks.
    Where clients do have exposure to open-ended physical property funds, this tends to form only a small part of our clients’ portfolios, typically less than 10%. Accordingly, this means that they are still able to access income and capital from their portfolios if they need to. This is why diversification is such a powerful investment principle and one that we abide by as a firm.
    We are long term investors, not short term speculators and our clients’ portfolios are designed to withstand tough market conditions. We continue to keep our eyes on events in these challenging times for investors.

  • With the news currently being dominated by economic and political events I thought I would write a somewhat more light-hearted blog for this week about something completely different.

    One of the benefits of living and working in the South Lakes is that we have the Lake District national park right on our doorstep. For those who like to enjoy a good fell walk we have access to numerous fells from countless paths from Ambleside right through to Keswick. Those inclined to set off with the objective of reaching another summit can be spoilt for choice. However for those who are less adventurous or if you're like me and have children who "do not want to go for another walk this week", occasionally we like to do something a little different.

    This year anyone with at least a moderate sense of exploration can enjoy the lakes and support the Calvert Trust by trying to complete the Herdwick Trail. This is a really entertaining public art trail which stretches from Bowness to Keswick with the objective of finding 60 individually decorated life size Herdwick sheep and 48 lambs. These have been painted and positioned throughout the lakes but within easy reach of anyone as they are predominantly located within the town centres of Keswick, Grasmere, Ambleside, Windermere and Bowness. A donation of £4 for maps and an activity book pointed us in the right direction and its fair to say that my boys have had hours of fun trying to find them. Yesterday we spent a full day in Keswick trying to track them all down and the sense of achievement my boys had made for a very enjoyable day. We are already looking forward to making a trip to Grasmere and Ambleside next week to find some more.

    The sheep and their lambs will be there throughout the summer until the 4th September before they are auctioned off to raise further money for the charity. So if you fancy a day out in the Lakes, doing something a little different whilst supporting a very good charity why not have a go?

    Further details can be found at www.goherdwick.co.uk

  • Lisa Bennett
    Caption: Lisa Bennett

    The Government have had concerns over the substantial penalties associated with some old pension contracts. These penalties are preventing a significant number of people from accessing their pensions using the highly publicised ‘Pensions Freedoms’.

    In a bid to resolve this, the Financial Conduct Authority (FCA) has recently proposed plans to place a 1% cap on these penalties when people want to take the benefits from their pensions before their selected retirement date. For existing contract-based personal pensions, including workplace personal pensions, this means that exit charges will be capped at 1% of the value of the pension pot. Also, firms will not be able to apply any exit charge for personal pension contracts that are entered into after the proposed new rules come into force.

    On another note, the Department for Work and Pensions (DWP) is to consult on plans to cap exit fees for those with occupational pensions.

    Christopher Woolard, director of strategy and competition at the FCA, said, “Together with the ban on exit fees in future contracts, we are proposing a 1% cap on exit charges in existing contracts to ensure people can access their pension pots without being deterred by charges. This is an important step so people feel able to access their pension savings should they wish to.”

    The proposed changes are expected to cost the industry over £100 million, and the regulator predicts that this will allow a further 37,400 people to access their pension pots before their selected retirement date. It might sound like a win for consumers; however, it will still mean that a person with a pot of say £30,000 will face a penalty of £300 if they retire their pension early.

    My other concern is that for existing savers, the penalty cap will only apply to those who retire their pensions before their selected retirement date; it will not apply to those who would like to transfer their pension to another provider while they are still saving. Although it will be great news for many existing savers, there will be many who will continue to be penalised for saving for their retirement.

    Please note: As set out in the consultation, market value adjustments and a loss of terminal bonuses are not considered exit charges for these purposes.

  • Roger Jackson
    Caption: Roger Jackson

    It’s very common for people to go through their working life acquiring various pension pots from different employers. It’s also very common for people to forget to notify a pension provider when they change address - making the pot very easy to forget about as years go by when no longer receiving correspondence or statements from them.

    I recently saw an alarming statistic on this - would you believe that there is an estimated £400million of pension funds unclaimed!?*

    If you think you may have a lost pension, it should be very simple to locate using the new and improved service from The Department of Work and Pensions (DWP). It’s a free service which searches a database of more than 320,000 pension scheme administrators, and it provides you with results instantly. All you have to do is enter your previous employers’ details into the online database, and you should be provided with the contact details for pension schemes you may have paid into.

    Over the past ten years, there has been a 436% increase in tracing requests which is likely to continue to increase in light of the recent pension freedoms.

    To see if you have an unclaimed pension, just follow the link - www.gov.uk/find-pension-contact-details

    *source: FT.com (13/05/16)

  • Andrew Laisby
    Caption: Andrew Laisby

    March's Budget has seen more than a fair share of comments regarding the fairness of the various tax raising measures, which I will not go into today, one being the so called ‘Sugar Tax’.

    This got me thinking about other obscure and perhaps bizarre forms of taxation over the years since tax had its origins in what is believed to be the first tax, which was a tax on cooking oil, imposed by the Egyptian Pharaohs.

    • There was a taxation on playing cards since as early as the 16th century, however, in 1710, the English government significantly raised taxes on playing cards and dice which led to widespread forgeries of playing cards in order to avoid paying taxes. This tax wasn't removed until as recently as 1960.
    • In 1660, England imposed a tax on fireplaces which led to people covering their fireplaces with bricks to conceal them to avoid paying the tax. This tax was repealed in 1689.
    • Throughout the 16th century, producing speckled soap was banned in Britain as it depleted the country’s supply of tallow trees. As speckled soap was significantly easier and cheaper to produce than coarse and sweet soaps, the government introduced a tax to try and halt production. However, all this did was ensure that soap became a preserve of the rich and wealthy and it wasn’t until the Industrial Revolution in 1853 that the tax was finally revoked.
    • In 1712, England imposed a tax on printed wallpaper. Decorators avoided the tax by hanging plain wallpaper and then painting patterns on the walls.
    • In the 1700’s, England imposed a tax on bricks. However, resourceful builders soon realised that they could use larger bricks (and therefore fewer bricks) so that they could pay less tax. Shortly after, the government realised their error and placed a higher tax on larger bricks. Brick taxes were finally repealed in 1850.
    • Towards the end of the 17th century, Russian Emperor Peter the Great introduced a tax on men’s facial hair in an attempt to force men to adopt the clean shaven look that was common in Western Europe, therefore ‘he hoped’, modernising society. All bearded men were forced to the pay the charge and carry around a copper or bronze token to show they had paid the tax.

    So, perhaps a ‘Sugar Tax’ is not as off the wall as first thought.

    In closing, I came across a suggested motto for HMRC, "We have what it takes, to take what you have" - (anonymous).

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