The Sunday Times Money section leads with an article on estate wrangles and the potential for disputes amongst beneficiaries. The messages within it will be very familiar to advisers so we won’t get too carried away with the detail here. Suffice to say that there are reminders about the value of having a valid will and power of attorney in place as well as the need to take particular care in planning where there are instances of declining mental capacity.
Ian Cowie is on his soapbox this week, writing his personal account column, as he looks ahead to what Chancellor Hammond might have in store for savers a week today in what seems sure to be a tax raising budget. He clearly has strong feelings that any temptation that the Chancellor might have to raid tax relief for savers would be a retrograde step – especially for the young. According to Cowie, Hammond told lobby correspondents that he regards incentives to save for retirement as “eye-wateringly expensive” and high on his list of potential cuts to fund extra government spending. In terms of the detail, whether it’s a cut in the maximum annual allowance for pensions from £40,000, reducing the lifetime allowance or restricting tax relief on contributions to the basic rate of income tax is anyone’s guess. Cowie then goes on to give three suggestions as to what readers might do ahead of the budget. Firstly, he suggests using pension and ISA allowances for the current tax year this week just in case. Secondly, he suggests that the 20% top rate of CGT might be ripe for review – and therefore investors with gains might consider realising profits in excess of the CGT allowance. Finally, and this is a biggie, he suggests that for those who are eligible and who know what they want to do with the money, that they consider taking the 25% TFC from pensions. As he says, most pundits reckon that this perk is safe as it would be so unpopular. However, Cowie’s warning is that Hammond “looks like a desperate man who might make a desperate mistake”.
Fund management fees are also under the spotlight in the Money section. In analysis provided to the Sunday Times by Justin Modray at Candid Financial Advice, they review the cost of around a dozen different funds to highlight the difference in fees and charges. There are plenty in the firing line but those which come in for favourable comment are Fundsmith Equity and Lindsell Train UK Equity.
In a separate article, investment fund fees take the spotlight again. This time it’s about research from Morningstar which shows that passive funds have been cutting their costs by up to a half over the past five years, whilst fees on active funds on average have fallen by just 18%.
Telegraph Money is highlighting the risks of investing in schemes which are not regulated by the FCA. They remind readers that investing in such firms can void your right to complain to the Financial Ombudsman Service (Fos) or FSCS, making it hard for investors to get their money back if the worst happens. They have a harrowing case study of a couple of retired teachers who had unwittingly been drawn into a scheme and lost a significant amount of their assets as a result. This will not be news to advisers who will be all too aware of the risks and the value that proper due diligence of investments brings.
Writing in the Financial Mail on Sunday, Jeff Prestridge is taking a good hard look at what Chancellor Hammond might do when it comes to pensions in his budget next week. Given the need to raise some money, Prestridge talks through a range of options – from the most radical of getting rid of tax relief all together – through limiting it to basic rate tax relief and then to more of a, as he calls it “tinkering” approach, where changes are made to the annual contribution allowance and/or the lifetime allowance, then through to doing nothing – for fear of upsetting swathes of middle England!
The MoS fund in focus this week is the Personal Assets Trust. As they explain, it’s a “rare breed” amongst funds, with its overriding objective being to preserve the wealth of shareholders, even if it means compromising returns when stock markets are advancing. The trust’s exposure to equities at present– 36 per cent – is at a nine-year low because manager Sebastian Lyon believes stock markets are heading for some difficult months. Unlike most other fund managers, Lyon has no compunction when it comes to selling equities within the trust and holding large cash balances. Over the coming months, he envisages the trust’s equity exposure reducing maybe a fraction more, but not down to the zero level it was at in the run-up to the financial crisis in 2007 and 2008. Personal Assets has more of its portfolio invested in inflation-linked rather than fixed interest bonds. The trust also has exposure to gold.