The Financial Times draws attention to the imminent tripling of employee contributions to auto-enrolment pensions with effect from 6th April. Not a lot of people will be aware that the new tax year brings an increase in minimum contributions from 1% of salary to 3% (for employees), and from 1% to 2% (for employers).
The FT quotes Hargreaves Lansdown as saying that the change means that a worker on a £20,000 salary will now be paying £27.94 a month into his pension instead of £9.42, while his employer’s contribution will rise from jump from £11.77 to £23.28. That would mean that the total amount going into this worker’s pension pot will go up from £21 a month to £50. And that an employee on £30,000 will find his fund boosted from £36 to £86 per month – of which he himself will be paying £47.94 instead of £16.08.
The increase is bound to come as a shock to hard-pressed working staff, says the FT, but it still falls well below the recommended savings levels of 12% to 15% that most advisers suggest. The main immediate comfort is that the auto-enrolment system means an employer contribution which can make a significant difference to the eventual outcome -plus the taxman’s rebate, obviously; however, there are also fears that the increase may prompt more workers to opt out. At present, auto-enrolment covers all employees between 22 and the state retirement age who are earning more than £10,000 a year.
The Telegraph reports that UK consumers lost over £230 million to through direct debit bank fraudsters during 2017, but that only £60.8 million of it was ever successfully reclaimed from the banks.
New figures from UK Finance show that, of the 43,875 cases of authorised push payment scams reported in 2017, the majority were against individuals who lost an average of £2,784 each. However, businesses fared much worse, with an average loss of £24,355. The majority of the cases in question happen when scammers pretending to be banks, police, solicitors or utility providers persuade the victims to arrange immediate payments by bank transfer.
In most cases, it seems, UK banks and building societies are able to reject the claims for compensation on the grounds that the transfers were willingly authorised by customers who ought to have known what they were doing; however, it adds, a new industry code is due to be introduced in September which will offer some recompense.
The actual implementation date has yet to be set. The Telegraph says, however, that the September provisions will not apply to pre-existing and retrospective scams, and neither will they apply to people who are tricked into making transfers abroad.
In a week that has brought news of a slight annual fall in house prices, Money Mail focuses on a report from the Bank of England that warns of what looks like reckless borrowing by house-buyers. More than around 28% of all buyers are borrowing four times their annual incomes , it says – double the proportion of eight years ago.
The possibility seems to be there that many of them are over-reaching at a time when rates seem likely to rise, and when property values themselves may be stalling.
There are rules, the Mail says, that stop lenders from authorising more than 15% of their total loan books for borrowers wanting 4.5 times their income – which, it says, effectively discourages them from advancing more than £135,000 to a borrower on £30,000 – but this doesn’t seem to be slowing the pace of lending. The third quarter of last year saw lending between 4 and 4.5 times income to 17.7% of all borrowers, with another 10.6% going to borrowers who wanted even more.
There is praise indeed for the Investment Trust sector from Jeff Prestridge, writing in the Financial Mail on Sunday. He highlights the number of trusts which have consistently increased dividends and reports that “many of these long-established trusts continue to do a fantastic job of creating long-term wealth for shareholders”. A feature which makes them particular attractive he suggests, is their low charges. This, Prestridge reminds us, stems in large part from the way trusts are set up, with the investment managers required to report to an independent board. These boards can fire the managers if they fail to deliver the investment returns expected of them.
They also determine the charges that managers can levy for running the trust’s assets.
As an example, he highlights Monks IT (managed by Baillie Gifford) where charges are currently being revamped, in order to reduce the charge to investors still further.
The MoS fund in focus is Mid Wynd International – an investment trust managed by Simon Edelsten, who along with colleagues Alex Illingworth and Rosanna Burcheri, runs £700million of assets for fund management house Artemis (Artemis took over the running of Mid Wynd from Baillie Gifford in 2014). The team also manage the Artemis Global Select fund.
The strong performance record of the IT is highlighted. It is currently invested in 65 stocks with only two being UK listed – insurer Prudential and National Grid – for reason of their attractive dividends and, in Pru’s case, its business interests in the Far East – according to the article. While the trust’s portfolio is skewed towards the United States, it is what a number of Japanese companies are doing in the automation space that excites Edelsten the most. It is this theme and that of tourism – especially in the expanding economies of the Far East – that underpin a big chunk of the trust’s stakes.
Moving on, the end of the tax year is firmly in the sights of the Sunday Times, with their 8 page supplement – the ISA special – setting out to guide those people still to use their allowance for this tax year and also to form a strategy for building longer term portfolio within an ISA shelter. It is aimed at DIY investors, giving broad coverage to different aspects of ISA investing. There’s lots of the technical stuff – what are they? How much can you invest and in what types? Can I transfer? You know the drill. It then proceeds to examine some underlying investment choices such as active v passive and cash, extending to the different versions such as Innovative Finance ISAs, Junior ISAs and LISAs. There’s unlikely to be much in here that will raise questions amongst those who take professional advice though – it is aimed squarely at the DIY investor.
The main Sunday Times Money section leads with a consumer finance article about landline charges – so nothing to bother advisers with there. In his Personal Account column, Ian Cowie gets all stock specific on us – highlighting some of his recent purchases of brewers, namely Greene King and Fuller, Smith &Turner, as he feels they may prove more defensive during any uncertain period brought about by Brexit. Hic!
Ruth Emery debates whether “Tigger” Hammond is on the trail of those who use internet platforms to generate some extra income – and who might not be aware of the tax considerations of doing so. Think Airbnb, ebay etc. She reminds readers of the two £1000 allowances introduced in the current tax year – one for property related income and one for trading activities – as well as the rent-a-room relief scheme under which the first £7,500 earned each year from letting a furnished room to a lodger or through a site like Airbnb, is tax free. Go with care is the message.
Finally, in their “how to invest £10,000” column, Times Money invite Kelly Kirby of Chase de Vere to give here tips for those starting to build a portfolio. Her recommendations are to allocate £4,000 to Liontrust Special Situations fund, £3,000 to each of Old Mutual North American Equity and JPM Europe Dynamic funds.
It’s the prospect of rising mortgage rates which the Sunday Telegraph Money is considering this week. In particular, it’s the analysis for those who would potentially face an exit penalty if they switched to a different mortgage in order to reduce their monthly outgoings – and it appears that depending on the deal you go for, it could be worth taking the hit and switching to a lower deal, although in many cases the penalty will be prohibitive enough to make it not worthwhile. Nothing new there then, but if you’d like to see all the number cruching we’d suggest you read the article.