Wealth Management Update – October 2015
Investment markets…what now?
As I write the FTSE100 is now 15% down on its high’s for the year. The FTSE all share is down 14%, and most stock markets around the world are in a similar position, if not worse.
At the same time interest rates are so low that they generate practically nothing.
So what should you do?
Should you cash everything in and put it under the bed? Should you cash everything in and buy a house and hope that you can lock away your money and that house prices will continue to escalate, ignore the stamp duty, the capital gains tax and income tax on rent generated?
No.
No is of course the answer. We have been through tough times before, and we will go through them again. There will always be boom and busts, but when we think of the last three or five years we can see reasonable growth, even taking into account the recent falls.
The only advice that everyone should really take is invest, and invest quickly if you have it. When the markets are down, that is the time to invest. Of course, rarely is that what people do. Most people are scared off when markets fall, and wait until they rise again before investing. But that is why most people are unsuccessful when it comes to investing. Everyone knows you should invest when the markets are low, but rarely does anyone do that.
So go against the crowd and make sure you invest what you can while the time is right. In two years’ time you will probably be glad you did.
Changes to European Inheritance Rules
If you own a holiday home in France, changes last month now mean you can leave the home to your chosen beneficiaries rather than having to comply with the heirship rules in France. Previously, local laws dictated who could inherit and in what proportions. This has affected many people including the turkey mogul Bernard Matthews – he died in 2010 with a £12million villa near St Tropez. His wishes were to leave the property to his long-term partner but his three children used French law to claim a 75% share of the property for themselves. French law had dictated that up to 75% was to be left to children regardless of whether the deceased had left a will or not.
Under the new EU succession regulation known as Brussels IV, the law of the deceased’s home country will apply if a Will has been drawn up. However if there is no Will, French law will continue to dictate who inherits. So it is even more imperative that a Will is drawn up than it was before.
In Spain, Britons have been able to use the inheritance laws of the UK when leaving property to beneficiaries for some time however under Brussels IV, if there is no Will in place the local laws will now apply and as a result, two-thirds of any asset must go to children and a third to a spouse. This is also the case for other European countries such as Greece, Portugal and Italy. In Greece, 25% of property is usually inherited by a spouse and the rest to children.
In Europe the local laws focus heavily on protecting and supporting children but what most people wish to do is leave any property to their spouses initially. Now, if you have no Will in place your wishes are unlikely to be met as they will be at the hands of the local laws in the country of your property and differ from the Rules of Intestacy that apply in the UK. Most of you reading this Update have Wills in place, so your wishes have already been addressed: but think about the friends and family you know who have foreign assets – do they have their Wills and affairs in order too so can benefit from UK law on their foreign assets? Or will their property still fall under the local succession rules?
Do your executors know your documents from your data?
We are all living in a world that is now dominated by technology, and with our ever-increasing dependence upon our computers, smartphones and the internet in general we need to make sure firstly that we are secure in what we are doing but secondly that our information can be found if needed – namely by our executors when applying for probate.
There are many investment and bank accounts that exist now purely online and with pressure to be green, paper statements for many of these are a thing of the past. Therefore how on earth are your executors going to know what you hold and where? For any savings accounts that you receive paper statements for this will be relatively straightforward but for your online accounts, these can be tricky to identify.
Therefore when creating a summary of your assets or thinking about making your executor’s job easier, plan for your digital information too – will they need your computer password to access accounting information that you store on your computer or information that you keep on spreadsheets? What about online banking account numbers? It is obviously not a sensible idea to write down your login and password details together as these can be lost or misused, but make sure your online information is accessible to your executors – even if it’s keeping a list of the institutions you have online accounts with. Simple but effective administration in this area will make sure your executor can complete their role quickly and efficiently, but also pass your entire estate to your loved ones ensuring no account goes missing.
If you need help with this please let us know!
The time to retire
When should you retire?
For some strange reason most people have a set retirement date. Why is that? It’s probably because that’s what their employer sets as a retirement date. But why then? Why retire when someone else says so? More importantly why retire at all?
A great man once said, we only retire from what we don’t like doing which is sensible. But unfortunately many people don’t have the option to do what they like and so work is a requirement not a choice and sometimes it’s not what you really want to do.
The new pension rules now give you more options around retirement. We’re not talking about drawing your money out to buy a car, we’re talking about accessing your pension to retire when you want to retire. With sensible planning more people can retire sooner than they think. Unfortunately, those that have not put sufficient away may have the opposite situation.
Start to think of your pension as ‘financial independence’ rather than a pot of money that you access when you get old. If you don’t have a plan of how to use it, and when, now’s the time to put such a plan in place.
You can now access the pension pot from age 55, which give a great deal of flexibility because you can decide how much you want to take from it.
So start thinking differently, and start planning. Freedom may be closer than you think!
US Interest Rate Decisions – what next?
You can’t have missed the coverage of the Fed’s decision not to rise interest rates in the US. If they had decided on 17th September to increase rates, it would have been the first time in 11 years that they would have risen, versus 6 years here in the UK.
When speaking of America, we all know the adage ‘American sneezes and the world catches a cold’ and if the Fed had increased interest rates, the rest of the world would certainly be more than under the weather now. But why is that and what does it mean for us?
Well it seems the environment in the US would be ripe for interest rate rises – unemployment is low at just 5.1%, which usually means wage inflation occurs, consumers then spend more which increases demand and contributes to inflation. Interest rates are then raised to curb inflation. However, in the US the labour workforce is only 62% of the overall population which means there are plenty of workers available for gainful employment, so employers are not incentivised to increase wages to retain staff.
This contributed to the Fed’s decision to retain rates at their historically low level but in addition, many struggling emerging economies such as China and Brazil have debt lodged with the US Treasury so an increase in interest rates would mean their debt servicing costs would increase, rocking their own and recovery and growth boats: and therefore have a knock-on effect to global growth.
What does this mean for investors? Well when the Fed does decide to increase interest rates (which could be in October or December), US investments will be affected – the last 3 interest rate rises saw US investments fall initially, but they recovered just a few months later. We should expect investment volatility going forward for the US and other parts of the world in the coming months. If you haven’t done so already, you should consider reducing your US investment holdings to account for the upcoming rate hike and as always ensure you hold a diverse portfolio.
Big Companies top the ‘Pops’…………. Of complaints
If you have ever been frustrated when trying to deal with an insurance company then you are not alone.
Between January and July this year the big insurance companies topped the list of complaints made to the FSCS. Of course, being big companies they are bound to have more complaints than smaller companies because of their size. That said, when you think of the impersonal service that they must often give, almost by definition makes it hard for them to be really understanding of a clients needs.
| Firm | Number of new complaints |
| Prudential Assurance |
8,827 |
| Friends Life |
7,013 |
| Royal London Mutual Insurance Society |
5,688 |
| Aviva Life Services UK |
4,342 |
| Scottish Widows |
4,110 |
| Zurich Assurance |
4,004 |
| Scottish Equitable |
3,826 |
| Phoenix Life |
3,554 |
| Legal & General Assurance Society |
2,609 |
| Abbey Life Assurance |
2,543 |
ISA rates at lowest since records began
Cash ISA savers are now receiving the lowest interest rates since records began said the Bank of England last week.
Average interest rates fell to 1.43% in August. Two years ago the rate was 2.35%.
Last month 400,000 savers with NS&I were told that their rate of return would be cut from 1.5% to 1.25%, suggesting that interest rates will stay low for quite a bit longer.
Book of the Month
October is a rare month. Rare because we have never recommended two novels two months in a row. This month’s book ‘The Humans’ by Matt Haig, is an interesting thing. It’s a novel that is really a commentary on the state of human life. When you read it you enjoy the novel, but that is not the author’s intent. Haig is more interested in getting you to look at life from an outsiders point of view.
The book’s is easy to read and will make you laugh out loud in places, but at the same time has important points to make. This book is well worth your time.
Best Savings Selections
Top Three No Notice Accounts without Bonus
| Name | Contact | £1 Gross % | £500 Gross % | £1k Gross % |
| ICICI Bank UK | Via branch | 1.64 | 1.64 | 1.64 |
| Virgin Money | 0845 600 4466 | 1.51 | 1.51 | 1.51 |
| RCI Bank UK
|
www.rcibank.co. uk |
1.65 (min £100) | 1.65 | 1.65 |
Top Three Monthly Interest Accounts
| Name | Contact | £1k Gross % | £5k Gross % | £25K Gross % |
| Charter Savings Bank | www.chartersavingsbank.co.uk | 1.83 | 1.83 | 1.83 |
| ICICI Bank UK | www.icicibank.co.uk | 1.64 | 1.64 | 1.64 |
| Paragon Bank | www.paragonbank.co.uk | 1.94 | 1.94 | 1.94 |
Top Three Cash ISA’s
| Name | Contact | £1 Gross % | £10 Gross % | £100 Gross %
|
| Mansfield BS
|
01246 202055 | 1.55 | 1.55 | 1.55 |
| Earl Shilton BS | 01455 844422 | n/a | 1.55 | 1.55 |
| Al Rayan Bank | 0845 6060 786 | n/a | n/a | 2.00 (min £250) |
Please check with the terms and conditions before opening any account. If in doubt consult with your financial adviser directly as the above are for information only.
Source: Moneyfacts Magazine October 2015 Edition
