Wealth Management Update – February 2018

Notes on Brexit

As the next round of negotiations resumed only at the end of January, there is no progress to report this month. However, as the current negotiations are due to address the post-Brexit transition we are sure there will be some key outcomes that will indicate the likelihood of either a Hard or Soft Brexit. So watch this space!

Carillion demise raises pension concerns

Following on the heels of the problems at Toys R Us discussed in last month’s Wealth Management Update, Carillion is the latest firm to fold with a large pension deficit. So, it begs the question, who will be next?

Defined Benefit pensions, such as Carillion’s, have always been considered to be reliable and usually have more favourable benefits than newer policies or Defined Contribution schemes. A combination of these reasons, as well as many others, means that those with Defined Benefit schemes are reluctant to transfer away from this pension security. But is staying put the right thing to do?

Yes, Defined Benefit pensions can be very reliable, very substantial and give you a clear idea of exactly how much you will receive each year in your retirement. But, this will only be the case if the backing of the pension is strong. Many companies are struggling with their Defined Benefit schemes and are working with a pension deficit – which means there is not enough money in the scheme to meet the projected withdrawals when their members begin to retire.

Many schemes working with such a deficit have a plan in place to ensure the deficit is reduced and that funds will be available for those retiring in the future, but it relies on that plan panning out. So maybe Defined Benefit pensions are not as reliable as everyone thinks. Well, in Carillion’s case, KPMG’s audit of Carillion’s financial results between 2014 and 2016 is being investigated by the UK’s accountancy watchdog. It will certainly be interesting to see what that investigation unearths.

If you have a Defined Benefit pension and you aren’t sure of the details, get in touch with us and we can arrange to do a full audit of your pensions to make sure they are what you think they are.

For more information on compensation if a Defined Benefit pension scheme goes bust, please see the link below:


House prices set to be static

House prices remained positive last year with average growth of 2.6%. While this was 1.9% down on 2016/17, you can’t argue with a positive. It was bad news for those in London, however, where prices fell for the first time in eight years!

Projections suggest the figures this year probably won’t be positive, with Brexit and rising interest rates putting the brakes on the property market. It is not clear whether these effects will cause prices to fall, or just slow, but either way it is set to be an underwhelming year for property prices in comparison with previous surges.

Those likely to be most affected by stagnant property prices are buy-to-let landlords, as many are now relying on capital gain to boost their returns because the recently introduced new laws and charges are eroding rental yields.

This really is a case of watch this space; there are so many influences to consider that current projections are not reliable.


Cash ISA slump

Historically cash ISAs have been the “go to” account for savers but, as we keep saying in our monthly updates, they are just not producing the returns savers need.

Since the Bank of England cut interest rates to 0.5% in March 2009 cash ISA rates, and savings rates generally, have dwindled. They experienced their worst year on record in 2017, with average returns much lower than stocks and shares ISAs which, for our clients, saw an average return of 9.6% for the year.

Unless there is a massive shake up with increased competition between banks and building societies, little will change with cash ISAs. So, if you are after potential returns, the only way to go with ISAs at the moment is stocks and shares.

If you don’t have a stocks and shares ISA but do have a cash ISA that is seeing little or no growth, speak to us about how to get your money working for you.

If you are an existing client, don’t forget that you have only a few months to benefit from the annual ISA allowance (currently £20,000). It is use it or lose it, so make sure you use it, otherwise you could be missing out on another 9.6% on that cash!


Trump in Davos …

The World Economic Forum took place from 23rd to 26th January. Held annually in Switzerland, its mission is to be “committed to improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas”.

The main talking point was centred around Donald Trump (of course) and his decision to increase trade tariffs by up to 50% on items such as washing machines and solar panels, affecting particularly China and South Korea.

His stated reason for such a steep increase is “inappropriate behaviours” relating to “unfair foreign competition”, although no one is sure exactly what that means. This kind of behaviour from Trump is almost certain to start a trade war amongst nations – not fantastic news for the world or the economy, which is sure to be negatively affected in the long run.

Trump arrived at the forum with the largest group in history, so it would seem they were determined to make an impact. We can only hope that Trump’s “America First” ideology does not mean isolating the rest of the world in the process.


What is open banking?

New rules brought in on 13th January this year mean that banks must allow you to share your financial information with other authorised providers. There are some key words underlined there –banks will only do this if you allow it, and will only share information with other banks, building societies or other authorised organisations.

The reason for the new rules is to encourage more competition and innovation in financial services, which will hopefully result in better products to help the consumer – a.k.a. you! For example, it will allow you to link your bank account, transactions, regular payments, etc. to an App that could analyse this and suggest the best product in the marketplace for you. Quite nifty if you like that kind of thing!

Let us be clear – you do not have to share your information. Banks cannot give out information without your express permission. Each account you want to link will contact you to ask your permission to release the information, it will then contact your bank to get that information. Be aware, you can only use this if you have online banking.

Now here’s the serious bit! Be careful who you share your information with. It must be an authorised company if you are to have any protection (if something goes wrong) from your bank. So proceed with caution.



Book of the month

There is probably no alternative for this month’s book. Fire and Fury, Inside the Trump White House by Michael Wolff is a book you must read. Assuming what Wolff says is true, you will not believe what happened in the first nine months of the Trump Presidency. You will gain an understanding of why there have been three Chiefs of Staff (the Chief of Staff effectively runs everything) and two Heads of Communication in nine months, and why Trump expects his daughter to be the first woman President.

It is, of course, inevitable that there will be inaccuracies in the book, and there is a fair bit of “tittle tattle”, but it certainly gives you a flavour of things.



Best Savings Selections



Top Three Cash ISA’s

Name Contact £1 Gross % £10 Gross % £100 Gross %
United Bank UK 08002182266 n/a n/a 2.15 (fixed rate)
Marsden BS Via Branch n/a n/a 1.30 (min £5,000)
Al Rayan Bank 0845 6060 786 n/a n/a 1.20 (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 February 2018 Edition

Signup to our mailing list

Receive the latest monthly news, tips, events and financial commentary from the Penguin Team, straight to your inbox.

Book your
Discovery Meeting

Contact Us

T: 02920 450143


Penguin House, Raleigh Walk, Brigantine Place,
Cardiff, CF10 4LN

Cowbridge Office
5 Willow Walk , Cowbridge
Vale of Glamorgan, CF71 7EE

Penguin © 2024. Penguin is a trading name of Penguin Wealth Planners Ltd. who are authorised and regulated by the Financial Conduct Authority (FCA no. 830057). For further information please View More

Privacy Policy