What does the autumn statement, delivered by the chancellor George Osborne on Wednesday November 30th 2011, mean for you?
To help you take the appropriate action that you need to take with your current finances in the light of what the Chancellor had to say we have produced the following bullet points.
*Anyone who is younger than 52 at present will now have to wait until age 67 to get their state pension.
*If ever you needed a further incentive to maximise your personal pension contributions then this is surely it . And thankfully media rumours that he might reduce higher rate tax relief incentives for pension investors proved completely unfounded as we forecasted.
*On the other hand he did nothing in his statement to dilute the impact of further pension tax traps already planned to be introduced in April 2012. If you have a large pension fund which could grow in value to the current cap level of £1.8m then unless you act to secure this before next April you could lose up to £75000 in tax free cash benefits.
Investing for growth
*It is now a matter of fact that the UK economy will not now grow as quickly as previously forecast and as the Chancellor himself admitted his previous assumptions were optimistic. We have long looked outside the UK to global brand companies for growth and also to natural resources and the newer economies for diversified longer term profits for our investors .This has proved a profitable strategy in these volatile times but so too has our exposure to some UK smaller companies funds and those UK funds where the investment managers have specifically looked at the markets defensively.
Investing for income
*It is quite clear after what Mr Osborne had to say that savings rates in the high street banks and building societies are now going to remain at their all-time historically low levels for some time to come. Indeed the award winning "This is your money " website are now quoting financial experts who say it will be 2015 at the earliest before we see any increase given the fragility of the current UK recovery .We have already had bank base rates pegged at 0.5% since March 2009 .It is hard to believe today that as recently as July 2007 you could earn over 7% on your high street deposits , cash ISAs or pension cash . Now if you search all of the market you might get 3% but the vast majority of accounts from the main players on the high street are paying as low as 1% and many are even at 0.1%!
*So anyone looking for a boost to these record low levels of savings income in yesterday's autumn statement will not find it there. And the prospects for the next 3 years look equally grim. Three years ago in 2008 when we started to see the base rate slide we embarked on a series of interviews searching for the UK's top defensive income managers .Our goal was to select an elite team to manage a range of income boosting investment solutions that we could offer to clients as a genuine alternative to their record falling deposit rates. Choosing mainly defensive" managers was crucial to our strategy as some protection of the invested capital was almost as important to our clients as a much needed boost to their monthly income …particularly as many were moving from a cash only savings account.
*We chose 11 such managers for our original income boosting "team" and we review their performance regularly and yes we still interview them in our offices regularly! We don't need to wait on a transfer window either to change the team if a manger underperforms .Nor do we have to pay him or her to sever their "contract". And even more importantly in these austere times we also don't charge any transfer fee to any of our clients when we switch money between managers. This alternative income strategy has performed very well to date . If you had simply kept £100000 on deposit over the last 3 years you would on average be up around 4 % or £4000. That is a miserly monthly income of only £83 after tax!
*On the other hand those of our clients who chose to have their £100000 managed by our defensive income team in December 2008 have enjoyed an average monthly income of £583 which equates to 7% after tax. They have also seen their capital grow by a further 28%. ( Source Trustnet November 2011 )
*We all know that investment performance cannot be guaranteed and as such past performance is no guide to the future but by reducing the capital risk by exclusively choosing these defensive funds then we can certainly give a much needed monthly boost to income seeking investors. Especially if they are prepared to take at least a three year view on the capital invested.
To read the Chancellor's full autumn statement please visit the HMRC website.