Wealth Management Update – July 2016

08 Jul 2016 | Wealth Management Update |

Brexit becomes a reality

Well we can’t say that the outcome of the recent referendum was quite what anybody expected; even those in the ‘leave’ camp seem to be shocked at the result.

As you know, we were convinced (as were the majority of professionals in the financial sector) that the country would vote to remain and had arranged our investment portfolio to take advantage of this. Luckily, we also employed a very cautious strategy and included investments that would protect us from a vote to leave, meaning that at the time of writing most investments are down by 3%, whilst our average portfolio has risen by 0.5%, a clear indication that our strategy was a wise one.

Unsurprisingly, there was a sharp fall in the markets on the Friday immediately following the referendum, due to the shock and unexpected outcome of the vote, as well as David Cameron’s immediate resignation! However, the markets did start to recover the same day, once the news had filtered through to all avenues. Whilst we can be sure that the next few months, and possibly even the next two years, will be increasingly volatile as decisions are made and actions are proposed in preparation to leave the EU, we will obviously be doing everything we can to ensure you are affected by this as little as possible.

Nobody really knows how this result will affect the country and the economy in the long term, but we must now embrace this change and adopt a typically British outlook of “Keep Calm and Carry On”.

If you are not currently a Penguin Client but would like to see our 4-minute Post Brexit video, please contact Rhianydd Summerhayes on rhianydd@penguinwealth.com.


Pension tracing service launched

Ever wonder what happened to that pension you paid into thirty years ago?

Well, the Department for Work and Pensions has decided it’s time to find out, and have been working with the Pension Tracing Service to launch a website to help people track down their old pension policies.

Taking into consideration the demands of working life and the fact that people, on average, have eleven jobs during their lifetime, it is no great shock that such things are lost in transit. It has been suggested that there are currently £400 million in unclaimed pension savings that people have either lost track of or forgotten about, and which are left untouched in pension schemes across the country.

The new website is designed to track down those policies directly linked to your employment. The service will search a database of more than 320,000 pension administrators and will provide trace results immediately, so there is no waiting around for months on end. You can trace your scheme using your old employer’s details and are then provided with their contact details. Simply get in touch to see if you have a pension pot you had forgotten about.

If you know you paid £100 into a pension scheme thirty years ago then the hassle of tracking down your old scheme to demand it back may not be worth the admin. However, if you think you may have squirrelled away a substantial sum in your previous employment and you aren’t sure either where it is, what you need to do, or how to get in touch with them when the time comes, then this is definitely something we would recommend. Just follow the link below to get started:



Take That … giving it back for good?

It’s always the people you least expect isn’t it? Who would have thought that the ‘whiter than white’ favourite of the 90s pop bands would ever be caught up in a tax avoidance scandal? Well, perhaps Robbie Williams, as he was always the rogue … but, shockingly, he was one of just two of the original members of the band that were not involved!

This tax avoidance was originally exposed by the media in 2012 and has taken four years to be resolved. The three members of the band involved avoided tax payable of up to £20 million after placing £66 million into an artificial tax shelter – quite a substantial amount (although probably not in their eyes). They decided to pay the £20 million they owed, rather than appeal HMRC’s decision.

Whilst their investments were in tax avoidance, which is legal, HMRC appear to have deemed the ‘Icebreaker’ scheme they used as too aggressive to be permitted. They have taken that stance with all individuals who invested in this scheme.

This just shows how careful we all need to be to ensure we are not too aggressive in our tax planning – a balance we believe we achieve excellently on your behalf.

When is a bowl of porridge a chicken curry?

You will have read in many newspapers over the last year or so about the rise of “Robo-Advice”. “Robo-Advice” is the term given by the media to a new way of selling financial products to people.

Many of the large financial providers are concerned that their costs have increased. This increase in costs is a result of two things: first, charges have fallen with increased regulation (the cap on stakeholder pensions, for example); and second, it is increasingly difficult to incentivise the people who sell (the removal of commission for IFAs). In an effort to sell their products, they are introducing online systems that “guide” people to buy a specific product.

This type of online selling has become known as Robo-Advice. What is strange is that there is no robot involved, and there is no advice given. In this way you can describe a bowl of porridge as a bowl of chicken curry!

Robo-advice is simply a means of selling more to people who generally are not taking advice and don’t know what they don’t know.


Where to invest?

With us obviously!

But if you had some money set aside for some alternative investments then the best way of earning some high percentage returns at the moment is to use the exchange rates.

By investing abroad in foreign currencies such as the US dollar, there is money to be made when sterling falls against it. For example, if the exchange rate is $1.50 for every £1, then your £2,000 can buy you $3,000 worth of US stocks. Providing your US stocks do not lose value in the mean time, when the exchange rate drops to $1 for every £1, then you can convert back into pounds and receive £3,000. Not too shabby for what is probably going to be a short-term investment!

With the current situation as it is, using exchange rates is the only method with the potential to reap large gains, as it is likely that the markets will remain volatile, unpredictable and unstable for the short term.

Getting the timing right is obviously crucial in this scenario and there is a risk it could go wrong, be mistimed and you could end up worse off than before. But is it a risk worth taking? Well, that is up to you.

What we will say is that your money must be free and clear of America by September when the country gears up for the election, as no matter the outcome we think the markets will be heavily affected.


The personal savings allowance & investment bonds     

We have written a few articles on the most recent budget, and specifically on your new savings allowances. Whilst we like to think we know everything, we are often surprised by snippets of information we find hidden from view.

One such snippet we came across recently relates to your new savings allowance and bonds. It would seem that chargeable event gains made on investment bonds can also be attributed to the new savings allowance. A chargeable event falls into a number of categories including death, partial withdrawal, maturity and surrender.

We have researched this with HMRC and can confirm there are no details of this anywhere to be found, so very sneaky indeed.

If you are considering taking action that will result in a chargeable event occurring on your investment bond, we suggest that you speak to your accountant to find out if and how you can mitigate some of this tax by attributing it to your new savings allowance. Whilst it may not be possible in every eventuality, it is definitely something to keep in mind and utilise if possible.

Property: Forever blowing bubbles … but has the bubble burst?

In our assessment of the potential impacts of a vote to leave the EU, we identified many possibilities across the short, medium and long term. These included a change in the Conservative leadership, with both Boris Johnson and Teresa May standing as candidates for the role of Prime Minister, a fall in sterling, and a run on Gold. We also identified a risk to the Commercial Property sector, as foreign investors would be put off by the ongoing political upheaval, and domestic companies would be unwilling to sign new contracts when their long-term future in the city might be in jeopardy.

Over the last 8 or 9 months, we have seen the cost of commercial renting in London come down from highs of around £150 per sq. ft. in the middle of last year. As a result of this we, along with many others, have felt that the long-term potential of property investments was already starting to reduce in this area; in fact estimations were to expect negative returns come 2019. With this already on the table, and with the added pressure that Brexit has exerted on the sector, it comes as little surprise that some of the major UK Property Funds, including Aberdeen, Henderson and Standard Life Investors, have announced that their underlying assets are worth less now than they were a month ago. This has reduced the value of the funds by somewhere between 3% and 6%.

While we are still in this time of uncertainty, all of these funds, and the majority of the others, are reviewing their assets weekly to ensure that the funds reflect fair value. Further downgrades will indicate how badly the sector will be affected by the ongoing turmoil, as well as indicating if, or when, the London bubble bursts.

Combined with the effects of switching pricing to a mid-price basis in May – this is where the full cost of property transactions are passed to new and existing investors to help protect ongoing investors against excessive price fluctuations – nearly all of the major UK Property funds have experienced big falls in value this quarter; some of up to 10% and that’s in just 60 days! Our second property fund, F&C, have just experienced a big and unexpected withdrawal as a result of Brexit, which caused them to swing the price on 1 July.

Our own property exposure is well diversified away from the city and the southeast in general, so we are not experiencing the full impact of these falls, but we are keeping a close eye on the situation to be alert to any contagion outside the city.


Book of the month

This month’s book is a follow up to the well-known, The Happiness Project. The Happiness Projectwas not a book that we really got on with, but Gretchin Rubin’s new book, Better Than Before, is much more accessible and practical.

The book does exactly what it says on the tin, and is an excellent way to examine how you run your life. Practical and easy to read, it’s just the book to leave around the house for your spouse or partner to find!


Best Savings Selections


Top Three No Notice Accounts without Bonus

Name Contact £1 Gross % £500 Gross % £1k Gross %
RCI Bank UK www.rcibank.co
1.45 (min £100) 1.45 1.45
Virgin Money Via branch 1.26 1.26 1.26
 Coventry BS 0800 121 8899 1.15 1.15 1.15


Top Three Monthly Interest Accounts

Name Contact £1k Gross % £5k Gross % £25K Gross %
Charter Savings Bank www.chartersavingsbank.co.uk 1.44 1.44 1.44
RCI Bank UK  www.rcibank.co.uk


1.44 1.44 1.44
Charter Savings Bank www.chartersavingsbank.co.uk 1.54 1.54 1.54


Top Three Cash ISA’s

Name Contact £1 Gross % £10 Gross % £100 Gross %
Skipton BS www.skipton.co.uk n/a n/a 1.50 (min £500) Fixed Rate
Bank & Clients 01935 609600 n/a n/a) 1.50 (min £1,000)
Al Rayan Bank 0845 6060 786 n/a n/a 1.55 (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 July 2016 Edition


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