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May Market Commentary

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May Market Commentary

Wednesday, May 3rd, 2017

It’s difficult to know where to begin this month. In France? Where we now know the French Presidential election will be a straight fight between Emmanuel Macron and Marine le Pen. In the UK? Where, having declared several times that she saw no need for a General Election, Theresa May summoned everyone to the polls on 8th June. Or in North Korea? Where the simmering tensions between Kim Jong-un and Donald Trump threaten peace and stability in the region.

Politically, the world was a volatile place in April – but the world’s major stock markets reacted with studied indifference. The French index was the biggest gainer, up 3% in the expectation of a victory for Macron on 7th May. Two markets – the UK and China were down by 2% – and the rest inched ever-so-slightly upwards.

…Or maybe we should start this commentary in the corridors of Brussels, where the EU was busy setting out its negotiating position for Brexit – negotiations which are not now expected to begin in earnest until after the UK General Election. For good or ill, Brexit is going to dominate the news agenda between now and March 2019, the supposed date when the UK will leave the EU. Clearly we need to report on Brexit in this commentary and – rather than distort the UK or Europe sections – it seems more sensible to introduce a separate ‘Brexit’ section from this month. Naturally we have placed it between the UK and Europe…

As Chancellor Philip Hammond led a trade mission to India there was disappointing economic news to start the month in the UK. Figures for February confirmed a fall in output in both the industrial and construction sectors, down by 0.7% and 1.7% respectively. The pound duly fell back on the weak economic data and the Halifax announced that house prices were growing at their slowest rate for four years.

But all this paled into insignificance when Theresa May changed her mind and called a General Election. She’d spent the previous week walking in Wales, and clearly views Jeremy Corbyn as somewhat less of a challenge than Mount Snowdon. All the indications are that she can expect to be back in Downing Street with an increased majority, allowing her to pursue the Brexit negotiations without needing to worry about the House of Commons.

Back with the economy, cheaper air fares held inflation steady at 2.3% and there was finally some good news as the International Monetary Fund upgraded its forecast for UK growth, lifting it to 2% for the year from the 1.5% it had forecast in January.

Good news too for the UK taxpayer, who has now recouped the £20.3bn used to bail out Lloyds Bank. Could the same eventually happen with RBS, with the troubled bank posting its first quarterly profit – £259m in the first three months of 2017 – for nearly two years?

There was also good news from British car manufacturers, with March being their most productive month for seventeen years, as they produced 170,691 vehicles and exported a car every twenty seconds.

…But sadly, the bad news returned at the end of the month with overall growth slowing to just 0.3% in the first three months of the year, and retail sales falling at their fastest rate since 2010. With online sales continuing to grow, you can unfortunately expect future commentaries to be reporting ‘yet more job losses on the nation’s high street.’

Eventually, the bad news won out with the FT-SE 100 index of leading shares being one of only two major markets to fall in April, dropping by 2% to end the month at 7,204. It was a different story for the pound, however, which ultimately rose by 3% against the dollar to $1.2952.

April was the month when Theresa May decided to seek the clear Commons majority she apparently needs for the negotiations – and when Europe set out its position that the divorce must be settled before there are any talks on a future trade deal.

As we noted above, substantive talks will not begin until the result of the General Election is known so – in public at least – the next six weeks are likely to see a lot of sound and fury and little of real significance. You need no more evidence of this than the recent meeting over dinner, which according to the German press, led Jean-Claude Juncker to describe Theresa May as ‘delusional,’ whilst UK Government sources said they simply did not recognise that version of events.

Even after the Election result is known it remains to be seen whether any genuine progress will be made before the summer holidays and the subsequent German elections in September. With twenty-two months to go to the March 2019 deadline, it’s easy to see the negotiations being concluded in one very late night sitting on 28th March 2019…

The big story in Europe was, of course, the French Presidential Election with Emmanuel Macron (23.9%) and Marine le Pen (21.4%) finishing first and second in the initial poll, and going through the run-off on Sunday 7th May. That is widely expected to see a comfortable victory for Macron, and both stock and currency markets duly breathed a huge sigh of relief. The ‘Macron rally’ added $290bn to the value of world stock markets, and the euro jumped to a five month high against the dollar.

Whoever wins on 7th May is going to face some big problems as they walk into the Elysee Palace. Clearly terrorism and immigration will be high on the list, but so too will be unemployment. While France has a high standard of living and high productivity, it also has a high unemployment rate – around 10% with some 3m people out of work. This is roughly double the rate of neighbours like the Netherlands and Austria, whilst the rate is below 5% in the UK and below 4% in Germany.

There are, however, some encouraging signs for the wider European economy, with the Purchasing Managers’ Index in Germany recently hitting its highest level since May 2011: the indicator for the Eurozone as a whole also stands at a six year high. Consumer confidence also appears to be improving, with indicators such as retail sales and new car registrations all moving in the right direction.

There was even good news on Greek debt as Eurozone finance ministers finally agreed terms with the Athens government, allowing them to ‘unlock’ a delayed bailout programme. For those of you that haven’t been keeping up, Greece is now part of the way through its third Eurozone bailout programme, with this one worth up to €86bn.

Both of Europe’s major stock markets were up in April: the German DAX index rose by just 1% to 12,418 while as we noted above, the French index – anticipating a Macron victory – rose 3% to finish April at 5,267. And we must put in a word for Greece – the Athens stock market was up 7% in April, reaching the giddy heights of 712 as it breathed a sigh of relief at the latest bailout.

Having announced a separate section for Brexit, it is tempting to do the same for ‘the pronouncements of the President.’ Donald Trump campaigned on drastic tax reform to stimulate the US economy, simplifying the tax system for individuals and slashing US corporation tax from its current level of 35% to just 15%. In April, Treasury Secretary Steve Mnuchin appeared to pave the way for this reduction, calling it “the biggest tax cut ever.”

Meanwhile, his boss was promising a “haircut” for US banking laws – at the moment, it seems that this may involve the separation of retail and investment banking – plus a renegotiation of the North American Free Trade Agreement.

Let’s turn to some concrete news: the US economy added only 98,000 jobs in March – far fewer than economists expected and only half the number for January and February. Despite this, though, the unemployment rate fell to 4.5%, the lowest since May 2007. Perhaps the low number of jobs created was a function of the US economy growing by only 0.7% in the first quarter of the year – the slowest rate of growth since the first quarter of 2014 and leaving the President some way to go to meet his election pledge of raising growth to 4%.

In company news there was another sign of the ‘new’ economy as the increasing share value of electric car maker Tesla saw it overtake General Motors in total capitalisation, having passed Ford in late March. Tesla’s total valuation is approximately $52bn: next up is Honda, which is currently worth $53bn.

Like all other world markets the US Dow Jones index rallied after the first round of the French Presidential election, and eventually finished the month up by 1%: having started April at 20,663 it ended at 20,941.

Far East
Tesla may be moving upwards but Toshiba seems to be heading in exactly the opposite direction. Having reported a loss of 532bn yen (£3.8bn) for April to December 2016, the company delayed publishing its audited accounts and admitted that its future may be in doubt.

Meanwhile, there was much better news in China, where growth in the first quarter of the year beat expectations. Growth was 6.9% according to official figures, compared to a target of 6.5% for the year as a whole. State-led infrastructure investment, demand for new property and an increase in consumer spending were all responsible for the higher growth rate, with retail sales in February up 10.9% on the same period in 2016.

Having spent his campaign criticising China for using an artificially low currency to “rape” American industry, the newly diplomatic President Trump had a meeting with Chinese leader Xi Jinping and said that China “was not a currency manipulator.” In truth, the almost weekly missile tests in North Korea are giving both men far more to worry about than currency manipulation.

Despite the tension in the region three of the four leading Far Eastern markets rose by 2% in April. Hong Kong was up to 24,615, Japan rose to 19,197 and the South Korean market advanced to 2,205. The one exception was China, where the Shanghai Composite index was down by 2%, ending April at 3,155.

Emerging Markets

April was a quiet month for the three major emerging markets we cover, but the corruption scandal in Brazil centring on the state oil provider Petrobras continues to have repercussions. A US judge has now fined Brazil’s engineering giant Oderbrecht $2.6bn in a case inevitably connected with Petrobras, as the engineering company agreed to a plea bargain deal with the US, Brazilian and Swiss authorities, pleading guilty to bribery in twelve Latin American countries.

Other than that a quiet month, but a pleasantly uniform one. It may be some time before this happens again, but all the three emerging markets we cover in this commentary saw their stock markets rise by 1% in April. India was up to 29,918: Brazil rose to 65,403 and the Russian market had its first positive month of the year, ending April at 2,017 – although it remains down by just over 9% for the year as a whole.

And finally…
Last month was, of course, a vintage crop for the ‘and finally’ section of this commentary. We were worried how this month would maintain the high standard – but it got off a good, slithery start with news from the Association of British Insurers that an anorexic python had swallowed £790 in vet’s bills. This was in their annual report, which revealed that the average cost of a claim on your pet insurance is now £757 – something of a shock for those of us that spent the bank holiday watching re-runs of James Herriot and thought it was seventeen shillings and sixpence.

Costing rather more than a trip to the vets was a trip from Taunton to Trowbridge. The towns are just 64 miles apart but that didn’t stop Great Western Rail offering a ticket for £10,000 on its website. The company blamed a (very expensive) ‘anomaly…’


January market commentary

Wednesday, January 4th, 2017


At the start of 2016, Brexit was seen as unlikely and President Trump was seen as impossible. David Cameron was busy negotiating a deal with his European counterparts which would surely secure a comfortable majority for the ‘Remain’ camp – and while Donald Trump might manage a few wins in the primaries, he’d eventually give way to one of the mainstream Republican candidates, who would in turn be beaten by Hillary Clinton.

We all know what happened and with elections due next year in Holland, France and Germany 2017 could be equally dramatic. But let’s first look back at December, and also cast an eye over the whole of 2016. It was a year when the pound fell by 15% against the dollar, when the FTSE ended at a record high and the Dow Jones index closed within touching distance of 20,000 – and when the price of crude oil nearly doubled from the low it reached in January.

All but three of the major stock markets we cover in this commentary were up in December, whilst for the year as a whole, eight were up, two virtually unchanged and only one (China) was down in the year. We also keep a watchful eye on Greece, where the market advanced 2% in 2016 as the country continued to battle with its creditors and the far-left government of Alexis Tsipras became increasingly unpopular.


December started on a downbeat note in the UK, with the pace of manufacturing growth slowing slightly and Bank of England Governor, Mark Carney, warning that increasingly sophisticated robots posed a threat to 15m jobs in the UK. (But not, fortunately, to the Governor of the Bank of England…)

Presumably some of the jobs under threat will be those concerned with burgers and fries, but McDonalds gave the UK a big vote of confidence when it announced that it would move its non-US tax base from Luxembourg to the UK. This means that UK tax will be paid on royalties the firm receives outside the US.

There was mixed news for the UK housing market in December. Nationwide reported average house price growth across the UK at 4.5% in 2016, with London for once below the average at 3.7%. The average price of a house in the UK is now £205,937 – but home ownership among the young has fallen significantly over the past 20 years. In 1996 46% of those aged 25 owned their own homes: that figure has now fallen to just 20%.

Very firmly in the ‘good news’ column, eight months of uncertainty came to an end for the steelworkers at Tata’s Port Talbot plant when the company gave a commitment to secure jobs and production there and at other steelworks across the UK. The growth of the UK economy was revised upwards for the third quarter – from 0.5% to 0.6% – and in company news Sky agreed to an £18.5bn takeover from 21st Century Fox.

We won’t weary you with the progress – or lack of it – of Brexit. The Chancellor dared to voice the opinion that perhaps a four year period of withdrawal might be sensible, duly raising the blood pressure of some newspaper headline writers. Meanwhile, Europe turned its collective back on Theresa May, discussing Brexit without her.

Whatever the Prime Minister’s problems, they weren’t shared by the FT-SE 100 index of leading shares, which finished the year at a record high of 7,143. The market was up 5% in December and 14% for the whole of 2016.


As we mentioned in the introduction, 2017 will be a significant year in Europe with elections due in Holland, France and Germany. This time next year will we be reporting on the European equivalent of Brexit and President Trump? It wouldn’t be surprising, and there was an indication of the popular mood when the Italian government of Matteo Renzi was heavily defeated in a referendum on constitutional reform held in early December.

Commentators are now predicting a “period of uncertainty” in Italy. That’s also a phrase which can be applied to the Italian banks with suggestions that the Italian government will be asking for €15-20bn from the European Stability Mechanism to help the country’s banking system.

The chief casualty appears to be Monte dei Paschi, the world’s oldest bank, which failed to raise the €5bn it needed to re-capitalise from private investors. The Italian government was forced to step in, with the bank crippled by years of losses and loans that can never be repaid. Before Christmas the bank’s funding shortfall was put at €5bn – a rather less festive assessment after the holiday put the figure at €8.8bn.

No doubt Angela Merkel tut-tutted at this Southern European profligacy as she announced plans to run for a fourth term as Chancellor: and no doubt the right wing Alternative fur Deutschland will have plenty to say on that score by the time the elections are held in September…

As we all know Christmas is a time for traditions, and VW reaching another deal over its emissions crisis is fast becoming one. This time it was with the US authorities over 80,000 VW, Audi and Porsche cars. There was equally bad news for Deutsche Bank as it reached a $7.2bn ‘settlement’ with US authorities over its mis-selling of mortgage-backed securities.

Despite these seasonal gremlins December was a good month for the German stock market, with the DAX closing up 8% in the month at 11,481. This enabled the market to post a 7% rise for the whole of 2016, and it was a similar story in France where a strong performance in December – up 6% to 4,862 – allowed the market to finish up 4% for the year as a whole.


Donald Trump is due to become the 45th President of the United States on 20th  January. His cabinet is now complete, with new Treasury Secretary Steven Mnuchin vowing a tax overhaul ‘not seen in decades’ in a bid to boost the US economy.

Peter Navarro – the man Trump has picked to head US trade and industrial policy – also appears to have been making vows, specifically about China. Navarro has described the Chinese government as ‘despicable, parasitic, brutal, amoral, callous and ruthless’ – and that’s just a start. Clearly, the Trump presidency will see an entirely different style of negotiating and diplomacy to the Obama years: to say that 2017 will be worth watching is an understatement.

…But the President-Elect appears to have made a promising start economically, with the news that Japanese company SoftBank is to invest $50bn in the US, creating up to 50,000 jobs. Trump also claimed the credit for air-conditioning company Carrier Corp’s decision not to re-locate to Mexico, keeping another 1,000 jobs in the US.

Meanwhile, the US Federal Reserve raised its benchmark interest rate by 0.25%, only the second increase in a decade. The rate was moved to a range of 0.5% to 0.75% as the Fed cited stronger economic growth and rising employment. Some analysts are expecting further rises, with Kathleen Brooks of City Index saying “the US economy will be on fiscal steroids in the next few years.”

Wall Street certainly seems to have taken steroids since Trump’s victory, with the market constantly reaching new highs in December and threatening to go through the 20,000 barrier. In the event the Dow Jones index closed the month at 19,763 – up 3% for the month, 8% for the last quarter of the year and 13% for the year as a whole.

Far East

Gambling seemed to be the key theme in the Far East in December, as Japan legalised casinos and those investors who’d taken a punt on the Chinese ‘selfie firm’, Meitu, hit the jackpot after it was valued at $4.6bn. Meitu’s key selling point is that it lets you ‘beautify’ your own selfies – a service a few of us might need  after Christmas and New Year…

More seriously, concerns were expressed that the Chinese property market is overheating, with many first time buyers in the major cities being priced out of the market: according to the National Bureau of Statistics the average property price rose by 11% in China’s seventy biggest cities for the year to September 2016.

Tackling this problem will be a job for the next leader of China’s central bank, as Zhou Xiaochaun steps down in 2017 after steering the Chinese economy for fifteen years: commentators have suggested that this will allow President Xi to further consolidate his hold on power.

Across the China Sea, Japanese Prime Minister Shinzo Abe signed off a record defence budget, reflecting a year of continued tensions with China, and North Korea’s nuclear and missile threats to the region. Presumably, the outlook is therefore good for Japanese defence contractors – but it is much less rosy for Toshiba, whose shares fell 20% in one day last week and are now down by 40% since  26th December. Most people think of Toshiba as an electrical firm: in fact, it’s now a diverse conglomerate, with the shares falling due to worries that its US nuclear business – responsible for a third of the company’s revenue – may be worth less than previously thought.

On the region’s stock markets the best performer in December was Japan, with a rise of 4% to 19,114. The market there is more or less unchanged for the year, but it is worth noting that it is up 16% in the final quarter of the year. China’s Shanghai Composite index fell by 4% in December to end the year at 3,104: it is down by 12% for the year as a whole, but all the damage was inflicted early in the year, with a slight recovery taking place in the second half of 2016. Hong Kong was down 3% in December to 22,001 and is another market to be virtually unchanged for the year as a whole. Finally, South Korea ended the year at 2,026 – up 2% in December and 3% for the whole year.

Emerging Markets

It’s the Emerging Markets section of the commentary with takes the New Year’s Honours, with Brazil the best performing stock market of the twelve we cover, closely followed by Russia. Despite falling 3% in December to end the year at 60,227 the Brazilian stock market rose by 39% in 2016, having ended last year at 43,350. The Russian index was up 6% in December to finish at 2,233 where it is up 27% for the year as a whole and 13% in the final quarter of 2016.

There was an interesting development in Russia as commodities trader Glencore and Qatar’s sovereign wealth fund together bought a 19.5% stake in Rosneft, Russia’s largest oil company. They paid $11.3bn for the stake (which equals that already held by BP) as Russia sought to sell some state assets in a bid to balance its budget and end a two year long recession.

The other major emerging market we cover, India, saw its stock market virtually unchanged in December at 26,626: it finished up just 2% for the year as a whole. The Indian central bank surprised most observers by holding interest rates at a six year low of 6.25% and the deadline for depositing discontinued 500 and 1,000 rupee notes came and went. The notes – worth approximately £6 and £12 – will no longer be legal tender as Prime Minister Narendra Modi bids to combat widespread corruption.

And finally…

We cover the thorny subject of debt in the first ‘and finally’ of 2017 – specifically, Cuba’s debt to the Czech Republic. Cuba owes the Czech Republic $276m, a debt dating back to the time when Cuba and the then Czechoslovakia were part of the Communist bloc.

On the very sensible grounds that they don’t have much money but do have a lot of rum, Cuba has suggested repaying the debt with bottles of rum – an offer which would give the Czechs enough Cuban rum to last a century. Sadly, the curmudgeonly, unimaginative Czech officials have said they’d like to be paid in cash. Perhaps the Cubans should throw in a few million cigars to clinch the deal…

Happy New Year…

October market commentary

Wednesday, October 5th, 2016


September was the month when nothing much happened on the world’s stock markets. Three of the 11 major markets on which we report were up, three were unchanged and five were down – but none of them by very much. The UK led the way, albeit only up 2%, while Japan and China were the laggards, both markets declining by 3% in the month.

One thing that was definitely up was the price of oil: at the beginning of the month the price rose after Russia and Saudi Arabia agreed to discuss ways to ‘stabilise the market’ and at the month end the oil producers cartel, Opec, agreed a preliminary deal to cut production for the first time in eight years. Brent crude rose 6% to nearly $49 a barrel on the news.

There was widespread international condemnation as North Korea claimed a fifth successful nuclear test. South Korean President Park Guen-hye called it an act of “self-destruction” and the US warned of “serious consequences.” Meanwhile, life in North Korea continued in its normal, rational way as Supreme Leader Kim Jong-un banned sarcasm, apparently worried that people would, “only agree with me ironically.”


UK Prime Minister Theresa May began the month at the G20 Summit in China, where she found very few people agreeing with her, ironically or otherwise. Japan’s government warned that Brexit could result in the country’s firms moving their European head offices out of the UK, “if EU law ceases to be applicable.”

That will perhaps be tested sooner rather than later: we will report on this fully in next month’s Bulletin, but the Prime Minister has now confirmed that Britain will trigger Article 50 and begin the formal process of leaving the EU, “by March 2017.” With new Chancellor Phillip Hammond also saying that he will abandon many of his predecessor’s key targets, there’ll be plenty to write about next month!

For September, most of the economic news for the UK was good. Figures reported at the beginning of the month showed the manufacturing sector had rebounded sharply in August, with the Purchasing Managers’ Index rising to 53.3 from July’s figure of 48.3 – with any figure above 50 indicating expansion.

There was also good news for the services sector, with the PMI jumping from a seven year low of 47.4 to post its biggest monthly rise in 20 years, up to 52.9. These two pieces of good news prompted most commentators to suggest that any recession in the immediate aftermath of Brexit was now unlikely.

Figures for July showed that the UK trade deficit had shrunk from £5.6bn in June to £4.5bn and UK car production hit a 14 year high in August as 109,004 vehicles rolled off the production line, up 9.1% on August 2015.

In the face of all this positive news, the OECD toned down its warnings of post-Brexit gloom – but there were still a couple of dark clouds on the horizon. The British Chambers of Commerce cut its forecast for UK growth for this year from 2.2% to 1.8%, and the BBC reported that small business confidence was down for the first time in four years.

What of the UK numbers? Inflation held steady at 0.6% and the Bank of England kept interest rates on hold at 0.25%. And as reported above, the FTSE-100 index of leading shares was up 2% to close the month at 6,899: it is now up 11% on a year-to-date basis.


By now you could probably write the opening paragraph of this section yourselves. Another month, another problem for Volkswagen. Or two in this case, as Australia announced plans to sue the beleaguered car maker, and the bill for the emissions scandal in the USA came in at $10bn.

Another German institution appears to be under threat, with the IMF recently describing Deutsche Bank as ‘the world’s most dangerous bank’ – the weakest link in a chain of globally significant institutions. Shares in the bank are at their lowest level for 30 years with Chancellor Angela Merkel having apparently ruled out any prospect of state aid.

With Commerzbank announcing plans to end dividend payments and cut 9,600 jobs, these are not happy times for the German banking sector.

…Or for EU chief Jean-Claude Juncker, who announced that the EU, “is facing an existential crisis” as member states co-operate less and less. His mood won’t have been helped by this weekend’s statement from Theresa May, or the referendum result in Hungary.

Meanwhile Austrian Chancellor Christian Kern became the latest European politician to berate multinationals like Amazon and Starbucks. “Every Viennese café, every sausage stand pays more tax in Austria than a multinational corporation,” he fumed.

So how did European sausage stands perform on the stock markets? They didn’t is the answer: the German market was down 82 points (just under 1%) at 10,511 whilst the French index had its second consecutive month of going virtually nowhere. It closed September up just 10 points at 4,448.


We’re now barely a month away from the US Presidential Election – due on November 8th – and Hillary Clinton remains the firm favourite: with new revelations coming out almost every day, the only safe prediction is that the contest will get a lot more heated and divisive before polling day.

US jobs figures for August were slightly disappointing, with 151,000 jobs created – down sharply on July’s revised figure of 275,000. The average monthly increase over the past 12 months has been just over 204,000 so these figures suggested that a rise in US interest rates might be delayed – although most commentators still expect a rise by the end of the year.

In company news, Apple launched the latest version of the iPhone, and media giant Liberty Media bought control of Formula One. Twitter shares were up on news of a possible takeover, and Yahoo conceded that ‘state-sponsored hackers’ had stolen data on 500m users, the largest publicly-disclosed data breach in history.

On Wall Street, the Dow Jones index was down 1% at 18,308. It is up by 5% for the year to date.

Far East

Fresh from warning North Korea about “serious consequences,” President Obama urged China to speed up measures to tackle over-production of industrial goods. Call me an old cynic but I suspect both will be roundly ignored.

Experts – this time it was former IMF chief economist Ken Rogoff – continued to warn about the slowdown in China, as suggestions continued that the economy is slowing down far more quickly than official figures suggest.

The Bank for International Settlements was the latest institution to warn about a possible banking crisis in China, as the banks continue to extend credit in a bid (presumably Government backed) to fend off the slowdown. This extension of credit may help to explain the record levels of Chinese investment overseas, with data for 2015 now showing that Chinese companies have invested more overseas (£111bn) than overseas companies invested in China.

Meanwhile the Bank of Japan was busy overhauling its massive stimulus package for the Japanese economy, setting long term targets for the economy and apparently abandoning its 2% target for inflation.

Despite the overhaul of the stimulus package – which initially sent world stock markets higher – it wasn’t a good month for the Japanese index, which was down 3% at 16,450. China’s Shanghai Composite Index was down by a similar amount to 3,005. The South Korean market was virtually unchanged at 2,044, with Hong Kong the only Far Eastern stock market to move up, although only by 1% to 23,297.

Emerging Markets

In Brazil, the new government of President Michel Terner has announced a privatisation plan in a bid to revive the country’s struggling economy. It plans to sell off four airports and two port terminals, as well as offer contracts for a range of projects from building new roads to operating mines. “The state cannot do it all,” said the new President.

Meanwhile, ex-President Lula and his wife have been accused of widespread corruption: with recent President Dilma Rousseff impeached for breaking fiscal and budget laws, politics in Brazil is coming to resemble Game of Thrones – but at least without the bloodshed.

Despite the ever revolving door of the courthouse, the Brazilian stock market was up 1% in September to 58,367. It’s now up by 35% on a year to date basis – easily the best performance among the markets we cover.

The Russian stock market was more or less unchanged in September at 1,978 while the Indian market fell back 2% to 27,866. They are respectively up 12% and 7% for the first nine months of the year.

And finally…

Numbers in China are often considered to have lucky or unlucky connotations. The number four is unlucky (because it sounds like the word for ‘death’) whilst the number eight – sounding like the word for ‘prosperity’ – is considered lucky.

But surely a group of Chinese investors were taking it too far when they bought 333 Kent Street in Sydney’s central business district? The price they paid was A$88,888,888.88, with the estate agent (who undoubtedly considers the number eight very lucky) reporting that this wasn’t the first time Chinese buyers had submitted ‘lucky’ bids.

On the off chance that the same investors are reading this Bulletin and would like a souvenir, various bits of the office are available including the mouse, keyboard and coffee cup used to produce this bulletin. Shall we start the bidding at £888.88?


EU Referendum Summary

Monday, June 27th, 2016

Britain Takes Back Control. Or Does It?

This is our report on the result of the UK’s Referendum on continuing EU membership and the likely consequences of a Brexit vote. It was written over the weekend of 25th/26th June and completed at 5am on Monday morning. It’s our attempt to give you an overview of how things currently stand following the victory for Leave, but you will appreciate that events are moving very quickly so there may be a slight disconnect between the comments we wrote early on Monday, and events that developed later in the day.

The Result

‘I declare that the total votes cast for Remain were 16,141,241. The total votes cast for Leave were 17,410,742.’

‘I will do everything I can as Prime Minister to steady the ship… but I do not think it would be right for me to be the Captain.’

Two announcements, coming little more than an hour apart, which together sent the UK political system and its economy into wholly uncharted waters and sent stock markets and currency markets around the globe into turmoil.

The UK joined the European Union – then popularly known as the Common Market – on January 1st 1973. Ireland and Denmark joined at the same time, taking the original six members up to nine. On June 23rd 2016 the UK voted to leave the EU, now comprising 28 members and with five candidate countries hoping to join. There was a majority of over one million in favour of Leave, and – despite a petition calling for a second referendum passing the two million mark over the weekend – that appears to be that. And as several European leaders have said, ‘out is out.’ The ‘most complicated divorce in history’ is about to start.

The Instant Reaction

Both the FTSE 100 index of leading shares and the pound rose steadily throughout Thursday, as the markets anticipated a win for Remain. The bookmakers reported several six-figure bets on the status quo. However, as the early results came in and it became apparent that Leave had done far better than expected, both the pound and FTSE Futures (trading in the Far East) went sharply in the other direction.

The FTSE fell by 8% after opening in London, with shares in banks and housebuilders being especially badly hit: at one point shares in Barclays and RBS were down by more than 30%. By the end of trading, the FTSE had bounced back and it closed 2.8% down on the day at 6,139. To give that some context, the FTSE ended 2015 at 6,242 and finished both January and February below that level. Supporters of the ‘business as usual’ school of thought would also point out that the FTSE finished Friday 17th June at 6,021 – up 70 points on the day. If you follow that line of thought then the prospect of Brexit was worse for the stock market than the reality.

The pound was also hit sharply. Having been as high as $1.50 on Thursday, it touched levels on Friday that hadn’t been seen since 1985, at one point falling by 10% to $1.33. It finally closed the day down 9% at $1.36. In early trading in the Far East, on Monday 27th the pound was continuing to fall against the dollar.

In truth, there was always going to be a sharp reaction, whichever side won. But with Leave having triumphed, the next few days and weeks will be especially critical. Bank of England Governor Mark Carney will undoubtedly be a key figure. He says the bank is ‘well prepared’ and he stands ready with £250bn to pump into the banking system: whether that would be enough to stand up to market sentiment and determined selling of sterling by the hedge funds remains to be seen.

George Osborne – the UK Chancellor and a man whose political ambitions appear to have been fatally wounded by Brexit – will make a statement at 8am on Monday, seeking to provide reassurance about the UK’s economic and financial stability.

The reaction around Europe

There was a pre-Referendum boost for the Leave camp when Markus Kerber, the head of Germany’s equivalent of the CBI, said that post-Brexit trade barriers would be ‘very, very foolish.’ The UK is a highly significant market for many German and continental firms, and when the decision was announced there was plenty of conciliatory language. German Chancellor Angela Merkel was quoted as saying ‘there is no need to be nasty to Britain’ over the ‘divorce’ terms.

However, pressure was developing over the weekend for the UK to speed up those ‘divorce’ talks. EU President Jean-Claude Juncker said it ‘was not an amicable divorce’ – but then again, he claimed, it had never been ‘a deep love affair.’

Several right wing groups across Europe saw Brexit as legitimising their own calls for referenda on continuing membership. But pro-Europe groups were also opening the champagne, claiming that the UK had always been a brake on further European integration and cooperation.

The UK’s credit rating

One of the first casualties of the Brexit vote was the UK’s credit rating. Credit ratings agency Moody’s cut the outlook for the UK’s credit rating to negative, saying that the result would herald ‘a prolonged period of uncertainty.’

So what happens now?

First and foremost, the UK needs a new Prime Minister. Jeremy Corbyn’s position as Labour leader is also in question, but it is the next leader of the Conservative party who will be negotiating Britain’s exit from the EU. The early frontrunner is Boris Johnson, supposedly in a ‘dream team’ with Michael Gove. At the time of writing, Home Secretary Theresa May is emerging as the ‘Stop Boris’ candidate. May supported Remain, but did so very, very quietly.

David Cameron has said that he will stay on until October. However, it may be that events force him to step aside rather more quickly. Several European leaders are now calling for a ‘quickie’ divorce and the world’s financial markets are unlikely to grant the UK three months to find a new leader. You can see an argument that Cameron is now the lamest of lame ducks and on that basis it may be hard for him to continue in office until the Autumn.

Article 50

Cameron appears to want the next PM to invoke Article 50 – the formal process giving two years’ notice of our intention to quit the EU. Should the process not be completed within two years, then it can only be extended with the consent of all the other EU members.

Cameron had said that Britain would immediately invoke Article 50 – but the uncertainty of his own position calls this into question. If he is replaced by a pro-Brexit candidate (as seems likely), he or she is likely to argue that Article 50 works against the interests of the country leaving the EU: the new PM may seek a period of informal negotiation first.

As mentioned above, however, if there was one clear trend that emerged over the weekend, it was the desire of many European leaders to see Brexit happen quickly. They fear that an amicable, drawn-out settlement would simply encourage other countries to seek their own version of Brexit. David Cameron is due at a European summit on Tuesday: he can expect to hear ‘get on with it’ in several different languages.

How will Brexit affect your finances?

At this very early stage, the full impact of Brexit on our personal finances remains unclear, but we can already observe the following points.

The Pound and Prices

If the pound continues to fall then importing goods from other countries will be more expensive. This will push prices up and lead to a rise in inflation: but it’s good news for exporters as their goods become cheaper to buy.


An early example of prices going up will be seen on the petrol forecourts. Wholesale petrol prices are quoted in dollars, so as the pound falls against the dollar, petrol prices will rise. The Petrol Retailers Association are already talking of a rise of 2-3p per litre.

Savings and Investments

Without question, the biggest threat to the stock market and your savings and investments is a prolonged period of uncertainty – the one thing markets hate above everything else. Assuming everything is worked out relatively quickly then the stock market should return to a normal pattern of trading – and as George Osborne will say today, the fundamentals of the UK economy are relatively strong. We certainly cannot assume that Brexit would be bad for shares: in the long run the stock market will be affected by events around the world – China’s economy, growth in the Eurozone, the outlook for the US – as much as it will be affected by Brexit.

Clearly any rise in interest rates (see below) would be good news for savers.

Interest rates and Mortgages

Before the Referendum vote, Remain were saying that a vote to Leave would push up borrowing costs, leading to higher mortgage payments and increasing renting costs. But if Brexit were to lead to a period of low growth then interest rates could be cut in a bid to stimulate the economy. David Tinsley, UK economist at UBS, has said that he expects two interest rate cuts from the Bank of England over the next six months, taking rates from the current 0.5% to zero.

House Prices

There appears to be some consensus that Brexit could lead to a fall in house prices, especially in London and the South East. The Treasury has spoken of a fall of 10-18% over the next two years. Clearly not good news for existing homeowners, but anyone with children struggling to get a foot on the housing ladder may take a different view.


During the campaign, George Osborne gave dire warnings of tax rises in the event of a victory for Leave. This would be directly contrary to the Conservative’s election pledge and would be difficult to implement: much more likely is an extension of ‘austerity’ for a further two years beyond 2020.

The Leave campaign did give a pledge to remove the 5% VAT on domestic fuel required by EU law – but there were so many pledges flying about that it is perhaps best to not build this into your household budget just yet.


David Cameron did claim that a vote to Leave would threaten the ‘triple lock’ on pensions, but this presumes a poorer economy and a lower national income. If economic performance did deteriorate after Brexit, then the Bank of England might opt for a return to Quantitative Easing (QE) and/or lower interest rates. More QE would push down bond yields and with them annuity rates: so anyone buying a pension annuity would get less income for their money.

What will the UK’s relationship with Europe be when the dust has settled?

At this stage, it’s almost impossible to say. As of very early on Monday, the Labour party is in turmoil with 11 members of the Shadow Cabinet having resigned. The papers are reporting that pro-Remain MPs may attempt to block the decision of the Referendum. SNP leader Nicola Sturgeon is also threatening to veto Brexit and is demanding a second Scottish Independence referendum.

But let’s assume that Brexit goes ahead. The more rational Leave campaigners have been at pains to stress the UK’s links with Europe: the more rational European leaders will not risk losing such a big market, especially as Europe moves slowly out of a recession. Perhaps the best guess is that the UK will leave the EU (and quite quickly) but will retain some sort of ‘associate’ status. This would involve the UK making some contribution to the EU budget, accepting some of its trading rules and doing its best to control immigration with a points-based system, all things which potential Prime Minister-in-waiting, Boris Johnson, has started to discuss publicly. In the best traditions of politics and darkened rooms, a compromise may be reached – with both sides spinning it as a win. Will it work? No one knows; but when the dust finally settles, we may find that ‘out’ was not quite ‘out’ after all.

The next few days and weeks will be interesting, to put it mildly. We appreciate that our clients may have concerns and questions, so please don’t hesitate to get in touch with us at any time.

April market commentary

Wednesday, April 6th, 2016


Another month, another dire warning from the economic great and good. In March it was the International Monetary Fund’s turn to warn that the world faces ‘economic derailment.’

As always, the blame was laid firmly at the door of the Chinese economic slowdown, with IMF second-in-command, David Lipton, warning that steps needed taking to boost global demand. ‘We are clearly at a delicate juncture,’ he said, which may well be IMF-speak for something rather stronger.

Interestingly, world stock markets did not seem to be at a ‘delicate juncture’ in March, with all the markets on which we report moving upwards in the month, some quite significantly. One of the reasons for this was remarks by Janet Yellen, Chair of the US Federal Reserve, suggesting that the US will now ‘proceed cautiously’ with regard to any future interest rate rises.

In the US, the Presidential race is increasingly looking like Hillary Clinton vs. Donald Trump – although that won’t be to the liking of the Economist Intelligence Unit. In the middle of the month their Global Risk Assessment ranked a Trump presidency equal to Jihadi terrorism as a threat to global economic stability. The Intelligence Unit gave the prospect of ‘the Donald’ entering the White House a score of 12. China experiencing a ‘hard landing’ was the highest threat at 20: the UK leaving the EU rated only an 8.

…And March was, of course, the month when George Osborne presented his Budget in the UK. But by the end of the month his plans for deficit reduction and moving next door to succeed David Cameron had been very much overtaken by the continuing crisis surrounding the UK steel industry.


March got off to a good start in the UK. Nationwide said that house price growth was ‘steady’ in February, and McLaren Automotive announced plans to invest £1bn in 15 new models and employ 500 more staff. Car manufacturing was at a 10 year high and car sales for February reached a 12 year high.

There was the now customary claim and counter-claim regarding Britain’s possible exit from the EU, with Bank of England Governor, Mark Carney, describing it as the ‘biggest domestic risk.’

But in the first part of the month everything was leading to Chancellor George Osborne’s Budget on March 16th. His plans started to unravel even before the speech, when the much-heralded and widely-consulted-on plans for pensions tax reform were abandoned in the face of opposition from Conservative backbenchers.

The British Chambers of Commerce also contributed to a worrying backdrop, downgrading its forecasts for UK economic growth: the BCC is now expecting 2.2% growth this year, from a previous figure of 2.5%.

Nevertheless, the Chancellor still managed to deliver his customary confident performance, buoyed by figures released on the morning of the Budget showing that unemployment had fallen a further 28,000 between November and January and more people were in work than ever before.

‘Britain,’ the Chancellor declared, was ‘Set to growth faster than any other major economy in the world.’ However his forecast for growth this year was even lower than that of the BCC, at 2%. Growth would then rise to 2.2% in 2017 and then level out at 2.1% for the following three years.

These forecasts, the Chancellor was not slow to point out, were based on the UK remaining within the EU. Leaving, according to the Office for Budget Responsibility, ‘could usher in a prolonged period of uncertainty.’

So despite the world presenting what the Chancellor described as a ‘dangerous cocktail of risks’ everything appeared to be on course, with Osborne still committed to removing the Budget deficit in the lifetime of this parliament.

Sadly, everything then started to unravel remarkably quickly…

Iain Duncan Smith resigned and the Chancellor’s plans for cuts to disability benefits were abandoned even before they’d reached the Commons. Welfare u-turn leaves Chancellor with £4.4bn black hole screamed the headlines.

However, the news was to get significantly worse by the end of the month, as Tata decided to put its Port Talbot steel plant up for sale, potentially threatening anything up to 40,000 jobs (depending on which newspaper you read). As the month ended the Prime Minister was hosting a cabinet committee and desperately looking for a buyer: with the UK now a relative minnow in global steel production you suspect it will prove difficult.

There was one last twist of the knife in March. Figures released at the end of the month showed the UK’s current account deficit had ‘soared’ in the last quarter of 2015: the deficit in the three months to December was £32.7bn – equal to 7% of GDP in that quarter according to the Office for National Statistics.

What did the FTSE-100 index of leading shares make of all this excitement? Not much was the answer, although it did manage to gain 1% in the month, closing March at 6,175. The index is down 1% for the first three months of the year.


There was yet more woe for beleaguered carmaker, Volkswagen, in March as prosecutors in Europe decided to widen their investigations into the emissions scandal, whilst the head of the company’s US arm resigned.

In the wider European economy, unemployment across the whole Eurozone came down to 10.3%, but there are worries the European Central Bank’s stimulus package is starting to falter. Falling energy prices meant that the Eurozone stayed locked in deflation, with consumer prices down for the second consecutive month.

The ECB has cut interest rates to zero against the backdrop of the fragile global economy, and its stimulus package is now running at €80bn a month. It’s difficult to see what other action the Bank can take.

It was however, a better month for the major European stock markets. The German DAX index rose 5% in March to close at 9,966 whilst the French index was up 1% to 4,385. The two markets are respectively down 7% and 6% for the first three months of 2016.


We’ve commented above on Janet Yellen’s statement that the Federal Reserve will proceed cautiously with regard to interest rate rises, and this was in evidence in March with the decision to leave rates unchanged. The ‘Fed’ said that the labour market was expected to strengthen – the US created 242,000 jobs in February – but that it was still looking for inflation to reach its 2% target figure. We may not now see the four interest rate rises this year that were mooted in December.

There was good news when it was revealed that US economic growth for the final quarter of 2015 had been revised upwards from the initial estimate of 0.7%: this was increased to 1.4%, with the economy overall estimated to have grown at 2.4% for the whole of 2015.

Despite now reputedly sitting on a cash pile of $216bn Apple didn’t have things all its own way in March as it battled the FBI over the unlocking of the San Bernardino killer’s iPhone. In the event, the FBI managed to do it without Apple’s help in a move the company described as ‘dangerous’ and ‘chilling.’ You suspect that this story of law enforcement vs. the tech giants has only just begun.

There was nothing ‘dangerous’ or ‘chilling’ for the Dow Jones index in March, which rose 7% to end the month at 17,685. It’s up just 1% so far in 2016 – one of four of the major markets we cover to be in positive territory through the first quarter.

Far East

There were contrasting views on the Chinese economy at the start of the month. Credit ratings agency, Moody’s, cut the outlook for China from ‘stable’ to ‘negative.’ Unsurprisingly, China’s chief economic planner took an entirely different view. Predictions of an abrupt economic slowdown ‘were destined to come to nothing’ said Xu Shaoshi, the head of China’s state planning agency.

The economic growth target for 2016 has nevertheless been cut to a range of 6.5% to 7% – compared to the 6.9% at which the Chinese economy actually grew in 2015.

China certainly doesn’t appear to be lagging behind in the knowledge economy, with the BBC reporting that the country is opening the equivalent of ‘a university a week’ – something which is contributing to a gradual shift in the composition of the world’s graduate population, with the trend inevitably being away from Europe and the US and towards the Far East.

There was good – or at least less bad – news in Japan, with the economy shrinking less than previously thought in the final quarter of 2015. Analysts had been predicting a reduction of 1.5% – in the event, the figure was only 1.1%.

The economy also slowed in South Korea, growing by only 0.7% in the final quarter of last year, compared to 1.2% in the previous quarter. Despite this, the South Korean stock market enjoyed a good month, rising by 4% to end March at 1,996 – up 2% for the first three months of the year.

Other Far Eastern stock markets followed a similar pattern, with the Chinese market up by 12% in the month to 3,004 – although it is still down by 15% for the first quarter of 2016. Japan was up 5% to 16,759 (down 12% for the first quarter) and Hong Kong rose by 9% to 20,777 (down 5% for the first quarter).

Emerging Markets

The three major emerging economies on which we report – Russia, India and Brazil – completed the ‘full house’ for us in March, with all their stock markets moving upwards in the month. Having started the month at 1,840 the Russian index ended at 1,871 – up 2% in the month and up 6% for the first quarter of the year.

There was a rather more spectacular performance in India, where the market rose 10% in March to close at 25,342 – however, it remains down 3% on a year-to-date basis.

Pride of place, though, goes to Brazil – for so long the source of nothing but bad news. The stock market powered up 17% in March to 50,055 and is now up 15% for the year. This came despite Brazilian oil giant, Petrobras, posting a record loss of $10.2bn for the last quarter of 2015 – thanks, inevitably, to the plunging oil price.

And finally…

Competition for inclusion in ‘And finally’ has never been fiercer than it was in March. An early front runner was Google’s driverless car and its seemingly fatal attraction for other vehicles. Its far-too-close encounter with a bus was widely reported in the media.

No doubt encouraged by this, the DVLA announced that trials of ‘driverless lorries’ would take place on the M6 later this year. They’ll be choosing a ‘quiet stretch’ of the motorway in a move that will apparently save fuel – but presumably hit sales of Yorkie bars.

But pride of place for March went to the nation’s pets, and the news that pet insurance claims have hit a record. No fewer than 911,000 claims were processed in 2015, including a python that was treated for anorexia. Claims for dogs increased at almost double that of claims for cats, with ‘swallowed owner’s sock’ among those conditions showing an upward trend!

Click here to view sources.

2016 Budget Report

Thursday, March 17th, 2016

George Osborne delivered his eighth Budget on Wednesday 16 March 2016.

Although the changes affecting private pension scheme provision weren’t nearly as great as they could have been, there are still a number of important changes.

Read our summary of the Budget 2016

Tax planning: time to get ahead?

Wednesday, March 9th, 2016

As we near the end of the tax year, now is the time to consider not only year end tax planning, but also planning for the new tax year.

It is one of the features of the political cycle that the more difficult and less palatable legislation tends to come at the start of a parliamentary term rather than as an election nears. Tax changes are very much a case in point: the rises come soon after an election, the cuts shortly before the election. When 2016/17 starts there will be a number of important tax changes scheduled to take effect which need to be built into your financial planning:

  • Lifetime allowance The lifetime allowance effectively sets the maximum tax-efficient value of all your pension benefits. It started life in 2006 at £1.5m, reached a maximum of £1.8m and will be cut from £1.25m to £1m on 6 April 2016. It will be possible to claim some transitional protection, although final details are still awaited. 
  • Annual allowance The annual allowance effectively sets the maximum tax-efficient annual input to all your pension benefits, regardless of source. It started life in 2006 at £215,000, reached a maximum of £255,000 and is now £40,000. From 6 April 2016 a new tapered annual allowance will be introduced, which may affect you if your total income (not just earnings) exceeds £110,000. The taper will mean that your annual allowance could be as low as £10,000. 
  • Dividend taxation The new tax rules for dividends begin on 6 April. If your dividend income is less than £5,000 you will have no tax to pay, but if you have substantial dividend income – perhaps from a shareholding in a private company – then your dividend tax bill could increase. 
  • Personal Savings Allowance This new allowance will mean that if you are a basic rate taxpayer you have no tax to pay on the first £1,000 of interest, while if you are a higher rate taxpayer, then £500 will suffer no tax. In line with these new allowances, interest from banks and building societies will be paid without deduction of tax (but it will still be taxable).

If any of the changes gives you pause for thought, do contact us. Each one offers planning opportunities, not all of which are obvious.

The value of your investment can go down as well as up and you may not get back the full amount you invested. The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.

Three ways accelerated tax payments are likely to affect you

Wednesday, February 24th, 2016

George Osborne announced last year that the tax system as we currently know it will be phased out by 2020, after the Treasury described the system of tax returns as “complex, costly and time-consuming.” In its place, a new digital system will be rolled out by the government which purports to be easier to use and manage for both individuals and businesses. Whether or not that will be the case remains to be seen; what is undoubtedly true is that there will be some major changes in the way you calculate and pay tax every year. Read on to see what we reckon will be three of the biggest changes you’re likely to experience.

  1. Paperwork and forms will be replaced with online content and apps – the new system will sweep away the long-winded, repetitive and arguably antiquated method of filing your tax return with a contemporary approach, utilising the latest technology. HMRC’s website will be the hub for the new tax system, with individuals and businesses being able to use apps on smartphones and tablets. Whilst this marks a step into the 21st Century which many no doubt see as long overdue for a system which has remained grounded in old-fashioned methods for a long time, it’s inevitable that the government will have a task on their hands convincing some of the security and reliability of a completely digital system.
  2. Annual tax returns will become a thing of the past – with the digital tax system, an annual tax return will be phased out in favour of more regular returns on the money you’re earning. Predictions have varied from quarterly returns to monthly reporting or even “real-time” tax returns, but there’s no real way of know what the government will opt for until an announcement is made. The idea behind making more regular returns is that the system will become more accurate, saving the treasury time and money by becoming more efficient. The new system has also been presented as quicker and simpler for the taxpayer, although this again remains to be seen.
  3. You may see the changes sooner than you think – in its document ‘Making tax easier: the end of the tax return’ published in March last year, HMRC stated that, “by early 2016 five million small businesses and ten million individuals will have access to their own digital tax account.” Whilst no follow-up to this figure has been published, what is true is that the amount of people accessing their tax details and completing their return online is rising year on year. Whilst the new system may not be completely rolled out until 2020, it’s very possible that you or your employer may start using the digital tax process much sooner than that.

Four key things to do before the end of the tax year

Wednesday, February 24th, 2016

Whilst the cold weather and long nights might make the beginning of April seem a long way off, the final few months of the financial year always seem to fly by. It’s therefore a good idea to start thinking about the most important things to do before 5th April arrives and the tax year ends. To get you started, have a look through our top four tips for what to do to ensure you are making the most of your investment opportunities whilst you can.

  1. Use your ISA allowance – you can invest a maximum of £15,240 per year in your ISA. That amount resets at the start of each tax year, and there is no way of carrying over any allowance that you haven’t used. Simply put, if you don’t use it, you’ll lose it. Remember, if you have both a cash ISA and a stocks and shares ISA, the £15,240 is the total of the combined accounts. However, you can now choose how you divide the allowance between the two accounts, something you couldn’t do until a couple of years ago.
  2. Pension Contributions and Flexible Pension Preparation – it’s worth checking your pension contributions every year, especially towards the end of the tax year. Pension contributions can often be a sensible way to look after your tax liabilities, but don’t forget you should always do this whilst keeping in mind your full financial plan. You should also be mindful of the lifetime pension allowance, currently £1.25 million but set to be reduced to £1 million from April 2016. Any pensions totalling more than that amount can be subject to further tax, which may impact on your financial planning overall. Make sure you check the current size of your pension if you’re considering making additional payments, as you may inadvertently push yourself into a taxable amount if you’re not careful.
  3. Capital Gains Tax Allowance – a tax break seemingly destined to be overlooked by many every tax year, the Capital Gains Tax Allowance stands at £11,100 for the 2015/16 financial period. What that means is that all profits from investments, or the sale of property up to that amount, remain tax free. Don’t forget that this figure applies to each individual, so a couple can enjoy up to £22,200 joint Capital Gains Tax Allowance. Moreover, a legitimate gift from a spouse or partner does not count towards this total.
  4. Savings for your children – it’s remarkably easy to overlook the fact that your children can benefit from virtually all of the above. The allowance for Junior ISAs this year is £4,080, so make use of as much of that as you can before it resets. Capital Gains Tax Allowance is the same for children as it is for adults, and it’s also possible to set up pension contributions for them. All worthwhile ways to make the most of your tax allowances before the end of the financial year.

February snippets – you may have missed…

Tuesday, February 23rd, 2016

A selection of recent articles and updates which you may have missed….

Pension errors to affect over 2 million

Over 2 million people will be affected by errors in calculating their state pension, says the Mail. Their entitlements depend on the treatment of National Insurance contributions while they were enrolled in ‘contracted out’ occupational pension schemes. But there are many discrepancies between the NI records held by the pension schemes and those held by the Department of Work and Pensions, which has not helped matters by telling pension schemes in 2012 that they no longer needed to keep the data. A big data reconciliation programme is under way but it won’t complete until 2018 and in the meantime, says, the Mail, many people’s pensions could be out by £5 or more per week.

Wealthy to pay more for probate

Probate fees for the wealthy are set to rise sharply, says the Financial Times. The government has proposed major revisions to probate fees, which are currently £155 for people with assets over £5,000. Probate is required before inheritors can claim assets from an estate. The proposal is to raise the exempt limit to £50,000 and then charge fees starting at £300 up to estates of £300,000, but then rising sharply up to £20,000 at a level of £2 million.

Millions at risk of hefty pension penalties

Up to 2.2 million pension savers are at risk of having penalties applied to encashment of their personal pensions, says the Telegraph. Old policies issues in the 1960s and 1970s often applied penalties on encashment before age 65, and many people now want to access cash at 55 under the new pension freedom rules. The Telegraph cited the case of a 55-year-old business owner who wanted to cash in a £28,000 pension to finance her business, and was given varying figures by provider Aviva for the penalty that would apply, ranging from £6,000 to £10,000. Aviva eventually waived its penalty but many others in a similar position may not be so lucky.

The home of Mum and Dad

The proportion of young adults living at home with their parents has risen to its highest level for over 20 years, says the Mail. Back in 1996 55% of adults in the 20-34 year old age group owned their own property; today it is just 30%. That means one in four people in this age group today still live with their parents. Accumulating a deposit and qualifying for a large enough mortgage are the main factors keeping them at home.

Not many care about marriage allowance

Decried at the time as a typical Chancellor’s gimmick, the marriage allowance introduced by George Osborne has proved just that. Only 330,000 of the 4.2 million people eligible for the allowance have bothered to claim it, says the Sunday Times. In theory, if one of the couple have an income below the personal allowance  (£10,600 this year) they can transfer up to £1,060 of their allowance to their partner, who would then save just over £200 in tax. But the procedure and forms are complex, and the Sunday Times reported the case of a 77-year old who claimed HMRC did the transfer the wrong way round so he ended up paying more tax and it took him six months to sort it out.

Savers waste billions in unclaimed tax breaks

UK savers and investors waste £4.6 billion a year by not claiming obviously advantageous tax breaks, says the Financial Times. £1.9 billion relates to pension funds but another £1.8 billion comes from not making best use of ISAs. Transferring the maximum into ISA each year (£15,240 for 2015-16) reduces the amount of income tax payable on interest, dividends and capital gains.

Millionaires pay more tax

The top 6,000 taxpayers in the UK have been successfully targeted by a special unit within HMRC, says the Financial Times. Since it was set up in 2009 it has collected an extra £1.3 billion, and last year’s haul of £414 million was up 54% on the previous year. The top 6,000 UK taxpayers collectively pay between £3 billion and £4 billion a year in tax.