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The humble £1 coin 24 years on

Archive for April, 2017

The humble £1 coin 24 years on

Wednesday, April 19th, 2017

Tuesday 28th March 2017 saw the Royal Mint release 300 million new £1 coins. The updated design is dodecagonal (that’s the fancy word for twelve-sided), bimetallic like the £2 coin and, perhaps most importantly, impossible to fake according to the Mint, thanks to a closely guarded security feature.

The old £1 coin will remain in circulation until Sunday 15th October, when it will be consigned to history along with the many other obsolete forms of UK currency that have gone before it. The round pound has been with us since 1983 when it was introduced to replace the £1 note. But what could one of the first pound coins have made you in the twenty four years since they were first introduced?

Imagine that £1 coin had been left in a drawer, a piggy bank or (perhaps most likely of all) slipped down the back of a sofa in 1983 and done nothing since then. Inflation up to 2017 would mean that the £1 would have had its buying power weakened by approximately 32p.

Had the £1 been invested in gold or in a cash savings account, the return would be healthier, but nothing to write home about, delivering a real value of £1.05 and £1.33 respectively by the end of 2016. Putting the £1 into UK residential property would have seen its real value at the end of 2016 rise to £2.42 – although this calculation doesn’t assume monthly reinvestment, which makes it difficult to compare to other forms of investment calculated.

Investment in shares would have done a lot better. Had the £1 been invested and tracked the rise in the FTSE all-share index, by the end of 2016 and after allowing for inflation, its value would have risen to £11.66, assuming that any income would have been reinvested every month to make the most of compounding over time.

The above calculations offer a neat reminder of both the corrosion to value caused by inflation and of the potential rewards of investment. Whilst investing will always include an element of risk, if you’re in a position to do so then an investment is the best way to help your money grow. It’s not all about return, but doing nothing with your savings means they’re almost certainly going to be losing value over time.

So when you get your hands on one of the new £1 coins, think about what it could be worth twenty four years from now and what you need to do to make sure it works hardest for you.

Pension Savings: a quick recap on your options

Wednesday, April 19th, 2017

It’s been two years since the government introduced pension freedoms, greatly expanding the options for how those who have saved into a defined contribution pension product can access their savings. There are now a number of different ways to take advantage of pension freedoms, so let’s have a look at each of them and the potential advantages and disadvantages of each.

If you can afford to do so, choosing not to access your pension at 55 can be one of the most beneficial options to take. You can continue saving into your pension if you want to, enjoying tax relief on all contributions until you turn 75. This also applies to any further gains you might make by leaving your pension pot invested. The main drawback is that you won’t be able to use your pension to support you, delaying your ability to retire. However, with many people choosing to continue working beyond the traditional retirement age, either part-time or full-time, this option is becoming increasingly popular.

The introduction of pension freedoms meant that everyone is entitled to take a tax-free 25% out of their pension pot. The benefits of doing this include being able to reinvest your money elsewhere in order to try and grow it further, to pay off a mortgage, or to have the freedom to splash out on home improvement, a holiday or anything else you want to treat yourself with. Obviously spending a quarter of your pension fund in one go means that you’ll have to stretch the rest of your savings to cover your retirement, whilst another drawback of taking the 25% is that any other withdrawals from your fund will be subject to income tax.

Another option is purchasing an annuity with your pension savings. Most annuities provide a guaranteed income until you die, but there are also fixed term annuities which last for a set period of time, or joint annuities which continue to pay a partner or dependant after your death. The main draw of annuities is the security and peace of mind they offer, but it’s essential to shop around for an annuity which gives you a good rate. Annuity rates depend on a number of factors including your age, health and lifestyle, and some are also linked to inflation.

‘Flexi-access drawdown’ is a further option which means you can withdraw your savings as and when you want, taking advantage of the 25% tax-free lump sum and reinvesting the remaining 75% into a number of investments outside of your pension pot. The advantage here is that you can adjust your income to reflect your needs, allowing as much of your savings as possible to remain invested and grow. The main drawback is that, like all investments, they can shrink as well as grow. Your income is also not guaranteed, and as your savings are finite, you’ll need to be able to support yourself once they’ve been used up.

With so many options available, the most important thing to remember is not to do anything without fully considering your circumstances. An option which works for one person might be a disastrous choice for another. Before making use of the pension freedoms available to you, seek professional advice and make an informed decision.

‘Protecting our families’ report – Aviva

Friday, April 7th, 2017

Aviva have just published their report into family finances including:

  • How families would cope in unexpected circumstances
  • Families perceptions of government support
  • The spending priorities of families

The key findings are worrying:

45% of parents with dependent children could not support their lifestyle for a month if the main breadwinner was unable to work.

Nearly one in four families (24%) have no savings to fall back on whatsoever and nearly one in five (18%) families could not reduce their monthly spending at all.

One in five (20%) of parents who have experienced a financial loss due to a health crisis don’t think they will ever recover financially or have no idea how long it will take.

You can find a full copy of the report here.


April market commentary

Thursday, April 6th, 2017

It’s tempting to think that Brexit is the only story worth reporting: in fact, there was plenty happening in March, from elections in Holland to a rate rise in the US, new growth targets for China and – also in the Chinese capital – a park which spectacularly failed to live up to its name…

The main global news was that finance ministers from the world’s biggest economies have dropped an anti-protectionism commitment after opposition from the US. G20 ministers usually end their meetings with a commitment to bolster and support free trade and last year vowed to “resist all forms of protectionism.” That was, of course, before we had President Trump and his ‘America First’ policy…

It was a relatively quiet month on world stock markets: seven of the markets we cover were up and five were down, but none of them by very much. The best performing market was France, with good news on both the political and trade fronts seeing Europe’s two leading stock markets move higher.


On March 29th – two days before her self-imposed deadline – Theresa May formally sent a six page letter to Donald Tusk, President of the European Council, informing him that the UK would be leaving the EU. We will now have two years of negotiations before – in theory – the UK could leave the EU on Friday March 29th 2019. There will be plenty of twists and turns over the next two years and there will be good and bad news, whichever way you voted in the Referendum.

A prominent supporter of Leave, James Dyson, started the month by opening his second ‘tech campus’ in the UK at Hullavington in Wiltshire, as he looked to double his UK workforce to around 7,000 and pronounced himself “optimistic” about the country’s future.

Vodafone also announced plans to create 2,100 service sector jobs and UK unemployment was down to its lowest rate since 1975 as it fell to 4.7%. However, wage growth also slowed, falling from 2.6% to 2.3%.

One man who might now be worrying about unemployment is Chancellor of the Exchequer Philip Hammond, who delivered what he must have considered a jolly fine Budget speech, full of reassuring news and witty cracks at the expense of Her Majesty’s Opposition. Unfortunately, Hammond was swiftly forced to backtrack on his decision to raise Class 4 national insurance contributions.

The Bank of England’s Monetary Policy Committee kept interest rates on hold at 0.25% – and at that level it is little wonder that the UK savings ratio (the proportion of income which households save) has fallen to its lowest level since the early 1960s.

UK inflation went in the other direction, pushed higher by rising fuel and food prices. It reached 2.3%, the highest level since September 2013, with the Bank of England expecting it to peak at 2.8% next year. It was confirmed that the UK economy grew by 0.7% in the final three months of 2016, with the Bank now expecting the economy to grow by 2% in the whole of 2017.

The FTSE 100 index of leading shares closed the month up 1% at 7,323 having reached a record high of 7,424.96 in mid-March.


It’s important not to get fixated on Brexit: life in Europe went on perfectly well despite the UK’s formal decision to leave the EU.

The Dutch election saw Prime Minister Mark Rutte’s Liberal party comfortably win the most seats, pushing the far-right Freedom party into second place. It is also looking increasingly likely that Emmanuel Macron will defeat Marine le Pen in the French Presidential race, so there will sighs of relief through Europe’s corridors of power. Economists have been predicting that the euro will fall below the dollar if Le Pen wins.

There was more good news for Europe on the economic front with the influential Markit Purchasing Managers’ Index rising to 56.7 and suggesting that growth in the Eurozone was at its best level for nearly six years. The report’s authors also said that job creation was “at its best level for nearly a decade” – although obviously there remains a very long way to go, given the problems of youth unemployment in countries like Spain and Greece.

French carmaker PSA – maker of Peugeot and Citroen cars – reached a deal to buy Opel from General Motors. This also includes Vauxhall and its 4,500 staff in the UK and there will inevitably be worries about job losses.

Boosted by the election result in Holland and the news about growth, it was a good month on Europe’s stock markets: the German index was up by 4% to 12,313 while the French market rose by 5% to 5,123. Even Greece joined in the fun, with the Athens market rising by 3% in March: ominously, though, it closed at 666…


The month in the US opened with Chairman of the Federal Reserve Janet Yellen saying that ‘interest rates may rise.’ A week later it was confirmed that the economy had added 235,000 jobs in February and the rate rise was all but certain: it duly arrived at the monthly meeting of the Federal Reserve policymaking committee, as the rate moved up by 0.25% to a range of 0.75% to 1% – only the third rate rise in a decade.

In company news, Intel made a $15bn bet on driverless cars as it bought Israeli company Mobileye: working with BMW, they are planning to have 40 test vehicles on the road by the second half of this year.

No driverless cars for Uber – and plenty of problems for boss Travis Kalanick who was filmed swearing at a driver who had complained that his income was falling. No doubt Mr. Kalanick will console himself with the thought that the latest round of funding values Uber at $68bn – which makes the $24bn stock market debut of loss-making Snapchat (just the $516m in 2016) look positively pitiful.

Ford confirmed its further commitment to the US with a pledge to invest $1.2bn in its Michigan plant. And the month ended with good news as growth for the fourth quarter of 2016 was revised upwards from 1.9% to 2.1%.

There was no upwards revision on Wall Street though, as the Dow Jones index fell back by 1% in the month to close at 20,663.

Far East

It was a relatively quiet month in the Far East, both for news and for the region’s stock markets.

Chinese Premier Li Keqiang announced that the country’s growth target for this year would be 6.5%, down from last year’s 6.7% – when the country’s economy grew at its slowest pace for 26 years. Li said that the state would tackle ‘zombie enterprises’ – state enterprises which produce more coal and steel than the market needs which frequently leads to ‘dumping’ abroad – but in the past this has proved notoriously difficult to achieve.

In Japan, the beleaguered Toshiba Corporation continued to slide as it was given permission to delay announcing its earnings. The company is still struggling with huge cost overruns at Westinghouse, the US nuclear firm it bought in 2006.

There were struggles of a different kind for former South Korean leader Park Guen-hye whose impeachment over a corruption scandal was upheld by the courts: three people died in the ensuing protests.

On the region’s stock markets, both China and Japan fell back by 1% in March, to 3,223 and 18,909 respectively. The Hong Kong market was up by 2% to 24,112 whilst the South Korean market ignored its former Prime Minister and rose 3% in the month, closing at 2,160.

Emerging Markets

It was a difficult month for the emerging markets we cover. Regular readers will know that in 2016 Brazil was the best performing market of the ones monitored in this report, rising by 39%. It also started this year strongly, gaining 10% in the first two months alone. However, it has now been confirmed that the country has been in recession for two years, with the economy shrinking by 3.6% in 2016: it is now 8% smaller than it was in December 2014. The main reason has been the fall in commodity prices, and the recession has seen unemployment rise by 76% to 12.9m – equal to a rate of 12.6%. Not surprisingly, the stock market declined in March, falling 3% to 64,984.

Back in November, Indian Prime Minister Narendra Modi announced that 500 and 1,000 rupee notes (worth around £6 and £12) would no longer be legal tender, in a move designed to reduce corruption. March saw the deadline for handing in the old notes and there was predictable chaos in the banking system, with 40% of cash dispensers being empty. Having handed in their old notes, customers couldn’t then get new ones. But the Indian stock market is clearly an advocate of the cashless society: it was up by 3% in the month, ending March at 29,620.

There were relatively few dramas in Russia, where the stock market has had a miserable start to the year. It fell 2% in March to 1,996 and is down 11% for the year as a whole.

And finally…

There has never been a month like March 2017 for the ‘and finally’ section. The world may not have gone mad, but it certainly went quirky.

A young man’s thoughts turned to spring and the thoughts of Mike Ashley, owner of Sports Direct and Newcastle United, turned to buying Agent Provocateur, the lingerie label which had gone bust. Given Mr Ashley’s penchant for publicity, the Newcastle players must be dreading next year’s first team kit…

Then there was the Indian washing machine introduced by Panasonic, which now comes with a special ‘curry’ button following customer complaints that they couldn’t get the stains off their clothes. Parents worldwide have written to Panasonic suggesting buttons labelled, ‘grass,’ ‘mud’ and ‘tomato sauce.’

…And finally, off to Beijing where a public park has introduced face recognition technology to ration loo roll. Visitors to the park were apparently tearing off extra loo roll and taking it home with them: the authorities acted swiftly and brought in the facial recognition software which now dispenses a fixed length of loo roll. The park is called the Temple of Heaven: let’s hope no one in the Temple of Heaven has eaten a curry…