Tag Archives: budget

Any Change?

Any changeIn my last article, I promised a more detailed comment on the Budget changes to the tax treatment of pensions, but it seems that these changes are not yet ‘cast in stone’. There have been some alterations since the Budget, as I last wrote, and we may not have seen the end of these. Briefly, the changes only affect those earning in excess of £150,000 and are applicable until 5th April 2011 when further restrictions on pension contribution tax relief will be put in place. If you are fortunate enough to be in this position, then the important parts are: all regular contributions (monthly or quarterly) in existence before the 6th of April 2009 will continue to receive full tax relief, as will those pension investors that have made irregular contributions – who will benefit from full tax relief on the lesser of the average of three years ‘infrequent’ contributions or £30,000. The changes do not apply to those members of occupational ‘defined benefit’ (final salary) pension schemes, only ‘money purchase’ arrangements. Confused? You should see the unabridged version! It is not inconceivable that there may be other alterations to pension tax relief – which still remains a valuable benefit for many – so watch this space.

Meanwhile, economic indicators continue to be conflicting: signs of increased mortgage lending, another small increase in a major house price index, Bank of England Base Rate held at 0.5% tempered with increasing unemployment and house repossessions. It appears that the recent rally in the UK stock market has reached somewhat of a plateau; a situation that I feel may well be the case for the remainder of the year. Volatility will probably be a feature of world markets for some while to come, a good thing for some people, and doubtless a great deal of money can be made by relatively few ‘day traders’ brokers and ‘market makers’. Most of us, however, will not benefit to any great degree from this situation for many months. Markets do seem to be reasonable value, not as was available a few months ago, but I feel that in a few year’s time, 2009 will be looked upon as a ‘bargain basement’ year for the share markets.

A quick few lines about the mortgage market: little by little, it seems that the Government actions of the last few months are starting to have some effect. There are signs of lenders increasing the number of schemes that are available and the percentage of purchase price that they will lend, and decreasing their profit margins. (Not that they are historically cheap though, some margins are more than five times what they were a few years ago, however, volumes are very low). But whilst there are no ‘green shoots’ wherever you look, there seem to be buds here and there, on the ‘brown sticks’. The mini heat-wave probably helped a bit, but roll-on the financial summer!

David Foot

Trying to Look on the Bright Side

Portfolio“Here we are again, happy as can be. . . ”, as my dear old Dad used to sing, when we were setting off on our summer holidays. Well, you could be excused for thinking that happy days are here again, if you read the right papers, or listen to the right radio stations: the ‘Footsie’ is up by something approaching a thousand points since my last column, mortgage approvals up by 19% in February and 16% in March and the Nationwide’s house price index actually rose in March! Years of experience have taught me to not to get too carried away, when things are starting to go well. In fact, I am less optimistic about the short-term future of the UK stock market, than I was when writing my piece for the February/March issue, when I said “when things are looking bleak, it is usually a good time to invest”. Not that I am pessimistic about markets, I still feel that many stocks and bonds are undervalued, but just not as cheap as they were. Many other economic factors are still negative, and there is a lot of bad news that needs to work its way through the system. Unemployment will go up, and house repossessions with it, and they will not be the only ‘bitter pills’ that will have to be swallowed. But ever the long-term optimist, I continue to believe that – barring earth shattering events, this year will be a positive one for stock markets.

The much predicted rally in bond markets doesn’t seem to have manifested itself yet, but more industry luminaries seem to be ‘putting their money where their mouths are’ and investing in quality bonds and bond funds. With some funds offering running yields of 10 – 15% the potential for some capital appreciation (with income reinvested) seems to far outweigh the potential risks. While I am on the subject of risk, yesterday, I met up with the manager of one of my favourite ‘protected growth’ funds. He was updating me on the roll-out of a higher risk, multi-asset fund (also designed and run by him) but I had to congratulate him on the success of his low-risk fund. It was designed to provide 100% capital protection; yet the units in the fund are up by over 6% since the launch in December 2008, a very creditable performance indeed.

Now just a brief few words on the recent Budget. The major impact is on the taxation, and pension tax-relief of those who earn in excess of £100,000 a year. A lucky few, most will think, who have probably already assessed the impact of the new rules. In the absence of any more notable events in the meantime, I shall give a summary of the most important budget proposals in the next issue. Until then, make the best of these ‘interesting times’.

David Foot