Saturday
The Financial Times reports that the much-vaunted “Innovative Finance Individual Savings Accounts” – a new kind of peer-to-peer ISAs – are finally getting ready to launch after a very long gestation period, and that they should be in place by February/March.
The IF plans were originally announced by ex-chancellor George Osborne in the 2014 Budget, and in theory they came into existence in April 2016; but it has taken longer than expected for the lenders to get regulatory approval, which is why we’re still waiting.
Essentially, the funds do the same thing as existing P2P set-ups, which is to say that they provide unsecured loans to businesses which bypass the banks but still produce highly profitable results for investors who are willing to shoulder the risk. The difference is that, by setting up the funds as ISAs, they also qualify for tax exemption on the resulting revenues for investors.
The two key providers, Ratesetter and Funding Circle, say that they expect keen interest for the new products – indeed, so much so that initial access is being rationed to those who are already investors in the existing P2P vehicles. Funding Circle says that demand will raise “hundreds of millions of pounds” initially and eventually “in the billions” once the ISA project kicks off properly.
The only existing IFISA, from Zopa, was opened in June but has already been closed due to investor demand. Like the other providers, Zopa says it is expecting a surge in demand from this month, when investors will be able to transfer cash from other ISAs into the new IFISA accounts.
The new schemes allow for investment returns ranging from 4.1% to as much as 7.5%, depending on the ISA clients’ preferred risk levels. Which is why the tax-exempt status of the new ISA vehicles is of such interest. But the FT warns that all providers are tightening their lending criteria as uncertainty spreads – partly due to Brexit, and partly not…..
Money Mail’s Jeff Prestridge leads the charge on the “unfinished business” of pensions auto-enrolment with a battering -ram of a piece in which he says that the government needs to gets serious about tightening the rules and procedures.
The government, he says, is due to publish its recommendations for reform of the policy initiative this week. And Prestridge sets out a case for including the self-employed in the auto-enrolment universe; for removing the limits that exempt low-hours employees from becoming liable; and for including the under-22s and those above statutory retirement age within the range unless they opt in. Oh, and removing the £45,000 upper limit on the income that counts toward an auto-enrolled contribution to a works pension fund.
The onslaught continues. In fairness, Prestridge aims to shock us with the revelation that 52% of adults still have no retirement plans in place whatsoever; and that, of those that do, only 48% have checked on their progress in the past year. He quotes a comparable survey to show that the evidence for employee concern about pension commitments has if anything got worse over the last seven years. You’ll need to read the article for the full details.
Fancy an easy-access savings account that pays 1,100% more interest than the average account? The Telegraph could hardly fail to hook our interest with a headline like that. But don’t order the yacht just yet.
Birmingham Midshires’ new Internet Saver account pays 1.45% on balances of £1 or more, the Telegraph says. And the catch is that the attractive rate pays only for twelve months, after which it reverts to a Standard Saver Internet account, which pays only 0.2%. Sic transit Gloria mundi. And, the Telegraph says, if you can manage with a notice period of 180 or even 120 days, you can beat the BM’s return by 0.1% or more. Don’t all rush at once.
Sunday
Most of the money sections carry some reference or another to the bitcoin or cryptocurrency craze. It’s a topic under the spotlight in the Financial Mail on Sunday as Sally Hamilton reports on the rising popularity of bitcoin and other cryptocurrencies as people jump on the bandwagon as a result of astronomical gains already seen this year. But will people be considering this as a Christmas gift? Really? What about concerns that it is the latest investment bubble which is about to burst? Only time will tell of course, but caution is advised.
The MoS fund focus looks at JP Morgan US Equity Income, a £3.7 billion fund that has been managed by Clare Hart from New York since launch almost nine years ago. As Jeff Prestridge reports, an increasing number of investors are now viewing the US market as an alternative source of dividend income. The JPM fund is diversified, comprising more than 90 holdings spread across most – not all – of the market’s key sectors. Hart’s investment style is such that she tends to hold stocks rather than trade them in order to deliver returns. ‘I am looking for quality companies which have the ability to pay a stream of growing dividends. I do not fly in and out of companies,’she comments. Is the US market overvalued? Hart comments ‘Yes, the US equity market is not cheap, but it is not the most expensive I have seen it either. Earnings growth can support the market at its current level,’ she says. Let’s hope she is right!
Christmas shopping investment-style is on the agenda for The Sunday Times Money section too, as Ruth Emery’s lead article highlights the attractions of shareholder perks. Of course, with most shares now held in nominee accounts it isn’t quite as easy as it was in the olden days of share certificates to actually claim these perks. However, Emery does explain how shareholders can claim their entitlement, and indeed, what level of holding is needed to claim them! She lists seven shares which might prove attractive if you’re interested in buying their products. They include Mulberry, Marks and Spencer, Brewdog and Moss Bros. Want to know more? You’d better read the article!
Also in the Sunday Times, the digital revolution is on Ian Cowie’s mind as he explains why he’s taken the unusual step (for him) of subscribing for shares in a brand new investment trust being launched this month. He’s typically avoided this as many trusts then slip to a discount to NAV once trading begins. The Aberdeen Standard European Logistics Income (Aseli) Trust aims to gain indirectly from the growth in ecommerce. Cowie reports that the trust will run “big boxes” – warehouses and other “final mile” distribution hubs to deliver all the stuff that we buy online. Another fund in this sector, the Tritax big box real estate trust is trading at a 14% premium. Unlike Tritax, Aseli will focus on continental Europe and the Nordic states and will launch on December 15th if you’re interested!
Still on the Christmas theme, Harvey Jones in the Sunday Express examines the anomaly which is known as the “Santa rally” and whether this year might see a repeat performance. As Jones reports, the Santa rally is more than just a myth, with the FTSE 100 delivering a positive return in 26 out of the last 30 Decembers, a “staggering” 87 per cent success rate, according to wealth manager Tilney. Even when the index did drop, in 1994, 2002, 2014 and 2015, the slippage was minor. In contrast, it has risen by more than 5 per cent on seven separate occasions, including a leap of 8.24 per cent in December 1993.
Here at IFA Magazine, we have always been strong supporters of the principle that investment should be for the long term and not just for Christmas. However, it is interesting to note how the Christmas spirit and a range of other factors such as repositioning of portfolios ahead of the year end, seems to affect share prices in such a consistent fashion. Will we be joining in? Probably not. Bah humbug.
