10 Tips to Make You Richer in 2010

1 Pay off your debts. Those credit cards & personal loans are very expensive. The cost of borrowing money is much more than you get from a savings account.

2 Use your ISA allowances. Nobody likes paying tax, why pay it on your savings? Don't forget about the Investment ISA too.

3 Be careful who you take advice from. Ask the person, "Are you Independent & Impartial?" "What are your qualifications, the bare minimum or something higher?"

4 Insure your most valuable asset. People insure their cat, dog and mobile phone and forget about the most important thing....themselves. What happens if you lose your job or cannot work because of illness?

5 Save in a pension. They are simply long term savings plans with tax advantages. Why pay out money in income Tax & National Insurance? A pension allows you to keep & invest that money.

6 Over pay your mortgage. Most lenders allow you to pay off up to 10% of the mortgage amount each year. It saves you money in interest and shortens the time you have your biggest debt.

7 Avoid anything which seems too good to be true eg rates from Icelandic banks or current accounts which pay you 6% and levy hefty monthly charges.

8 Do not get obsessed with property. A large part of people's wealth in tied up in their house, buying more puts all your eggs in one basket. Consider alternative forms of investment

9 Transfer assets to a partner. Often one partner will pay less tax or have unused allowances.

10 Spend some money, you will have some fun & it will help the economy


As featured in the Swindon Advertiser 23 December 2009.

Bigger ISAs for over 50s

Over 50s now have bigger ISA allowances.

It's £10 200 in total, with a maximum of £5 100 in a Cash ISA. You can also invest in an Investment ISA..£5100 if you have used your Cash ISA allowance or the full £10 200 if you have not.

The returns from a cash ISA are not that great at the moment, so it may bve worth looking at the Investment ISA option depending on your attitude to risk & investment period.

The limits for under 50s will be increased to the same for over 50s on 6th April 2010.

As always, seek proper independent advice.

Posted by Sean Wilson, APFS, Independent Financial Advisers (IFA), Swindon, Wiltshire.

Free Pension Facsheets

Factsheets published by the FSA on pensions & retirement.

Pensions Colour / Ink friendly

Retiring soon Colour / Ink friendly

Retirement options Colour / Ink friendly

Managing in retirement Colour / Ink friendly

Your pension – it's time to choose Colour / Ink friendly

Your retirement options – income withdrawal Colour / Ink friendly

Equity release schemes – raising money from your home Colour / Ink friendly

Stakeholder pensions and decision trees Colour / Ink friendly

The State Second Pension (formerly SERPS) – should you be contracted out?
Colour / Ink friendly

Pension transfers – the risks of salary-related occupational pension transfers
Colour / Ink friendly

Important information about your yearly pension statement Colour / Ink friendly

Posted by Sean Wilson, Independent Financial Adviser, Swindon, Wiltshire.

House price falls to continue?

Probably yes.

House prices are still very high for first time buyers. A good way of measuring this is to look at the ratio of average house price to income of first time buyers as measured by Nationwide

This is presently 4.7, in 1995 it was 2.1. This alone suggests that house prices could halve!

Add in unemployment and low inflation, house prices are not likely to rise for some time.

Anthony Bolton predicts better 2009 for Investors

Legendary investor Anthony Bolton has predicted a better 2009 for investors.

He said in the Sunday Times on 14th Decemeber, “Everything I need to see for a bottom is there. Valuations look cheap and you often get this kind of high intra-day volatility at a turning point,” he said.

“All the pieces are in place for a rally in the first quarter. The first stage of the bull market will be quite strong followed by a long period of consolidation. In the long run the market could return to its peak [6,930 in December 1999] but it could take quite some time.”

Does he know what he is talking about?

From 1979 until 2007, Bolton delivered average annual returns of 20.3% , compared with 7.7% from the FTSE All-Share index in that period,

Interest Rate cut of 1.5%

As anticipated the Bank of England cut interest rates to 3%. The lowest in some 50 years.

Will mortgage rates come down?

That is the important question, banks and building societies have not been passing on reductions to consumers because they have been worried about their profit margins.

There are some lenders who would be able to lower rates substantially but are not doing so becasue of lack of competition in the market place.

Will savers be hit?

Yes, rates for savers will reduced much quicker than for lenders.

Lehman Brothers & Merrill Lynch...why the fuss? Important in Swindon?

An extra-ordinary weekend has seen US Investment Bank Lehamn Brothers file for bankruptcy.

Secondly Merrill Lynch has ben bought bu the Bank of America.

Both companies were badly hit by having bought bad mortgage related debt.

There will be repercussions this week. The Bank of England & European Central Bank have provided more money today to help credit markets and it is predicted that the US Federal reserve will lower interest rates.

How does it affect the consumer in Swindon & beyond?

Lehaman Brothers & MerrillLynch have been at the heart of the credit crunch. The cleansing/purging of the 2 companies is part of the clear up process.

AS the process goes on then credit will slowly begin to be made available to banks....which will eventually mean customers will be able to get cheaper mortages (theoretically).

Cheshire & Derbyshire “saved” by Nationwide

It looks like the Cheshire and Derbyshire Building Societies are about to be taken over by the Nationwide Building Society. The Derbyshire is the 9th and the Derbyshire the 11th biggest societies with about 1 million customers between them.

The Derbyshire has been hit because it could not raise money on the money markets...the credit crunch again. Whilst the Cheshire had encountered some problems with its commercial property lending.

The Financial Services Authority has had a hand in recommending the deals to the 2 societies and the speedy negotiations which have taken place

Will there be any windfall payments?

Borrowers & savers with the Derbyshire or Cheshire should not expect any windfall payments owing to the problems they have encountered.

Can you trust the financial pages of National Newspapers?

Since the dawn of mankind there have been get rich schemes. The financial pages of the national pages abound with rich succesful people, the implication being that you are the only one not making any money.

Many a time the city editors encourage you to invest in a fund or company or asset that is high risk, has peaked in value and is on the way down.

Some examples from the last few years.

1 Invest in gold...it hit a high in April 2008 and the price has retreated
2 Buy to Let Property. Too many unwanted flats, falling house prices.
3 Bubbles in India & China in 2007

Possibly the worst re-occurring offence is to give tips on company shares as though they were horse racing tips (Thanks to Lawrence Gosling of Investment Week for that analogy)

The solution
Have a broad based portfolio of assets not linked to the rise of fall of risky asets

Pensions advisers & advice...Swindon & beyond

In the old days when you wanted advice on your company pension, there was somebody you could call up or even meet to discuss contributions, investment choice & other matters.

However with cost cutting many firms outsource their pension services & employees do not have anybody to talk to.

Where can you get pensions advice?

You an contact an Independent Financial Adviser. We deal with pension everyday especially for self-employed people or those who had company pensions transferred into Personal Pensions.

The same principles apply whether you have a company, stakeholder, personal or self invested Personal Pension (SIPP).

You are looking to minimize charges and choose the right investments suited to your age and attitude to risk.

4.99% Mortgage Yorkshire Building Society...beware!

Mortgage providers are well versed in the art of getting their products to the top of best buy tables.

There is a horrific example currently from Yorkshire Building Society. It has a fixed rate of 4.99% for 2 years.

Sounds good? The reality is somewhat different

It has an arrangement fee of 3%, on a remortgage of £200 000, this is £6000!. You can also add this fee to the mortgage & pay interest on it.

You also pay a non refundable fee of 0.25% on application, £500 on the £200 000 remortgage example.

Conclusion

Avoid, truly shocking & rather misleading product.

Stamp Duty

This week the Chancellor announced some plans to possibly defer Stamp Duty to restart the housing market.

What is Stamp Duty?

It covers the registration of many types of official financial & legal transactions. The enforcement of it in the UK's American colonies was one of the triggers towards independence.

However the one you will be familiar with is when buying a house.

The rates are

over £125,000 to £250,000: 1%
over £250,000 to £500,000: 3%
over £500,000: 4%

Negative Equity: BBC Radio Swindon

Below is a transcript of my feature with Claire Bailey on the BBC Radio Swindon Breakfast Show 1 August.

What is negative equity?

Your house is worth less than the mortgage you got to buy it.

When does it occur?

When house prices fall. The Telegraph said yesterday 1.7m home owners or 1/7 of the total were already affected ! There has been a 9% fall from last year’s peak (Halifax house price figures). A Standard & Poor’s survey predicts the market could fall by up to 26.8%.

Who is the worst hit by negative equity?

1 People who bought houses at the peak of the market last year and especially those who took out 100+% mortgages such as the infamous Northern Rock Together product. It allowed people to get houses when they didn’t earn enough.

2 Those in averagely priced homes…the top & cheap ends of the market haven’t been affected.

3 People who dabbled in Buy to let property..again bought at the top of the market

Does it happen often?

The last time was in the early 1990s.

Why have house prices fallen?

House price inflation was around 10% for most of the last decade. This is ultimately unsustainable. The people who drive the market..first time buyers can’t afford to buy.

Plus the impact of the most used financial term of the last year…the credit crunch.

First time buyers can’t get mortgages because banks aren’t lending money….certainly not 100+% mortgages.

What should you do?

Wait, sit tight. House prices will fall until the bottom is reached. At that point first time buyers will be able to afford properties.

The mortgage market will recover too…

John Templeton: Investment Wisdom

Investing legend John Templeton recently passed away at the beginning of July. In 2007 Time magazine made him one of their 100 Most Influential People.

During his long life, he made one very pertinent remark on investing.

“When people are desperately trying to sell, help them and buy. When people are enthusiastically trying to buy, help them & sell”

Thanks to Lawrence Gosling of Investment Week for the quote.

Banking chiefs should be sacked says fund manager

Fund manager James Foster of Artemis says heads of failing banks such as Fred Godwin of Royal Bank of Scotland & Andy Hornby of Halifax Bank of Scotland, "should be shown the door".

He continues, "they had forgotten the basic tenets of banking".

He was referring to their current problems, the way in which these had arisen & how the management of the banks are tackling them.

From Professional Adviser p5 24 July 2008

Northern Rock re-emerge

For the first time in many months, I have received marketing material for Northern Rock mortgages.

They are the most financially secure company to buy a mortgage or a savings product from at the moment because of government backing.

How do the mortgages compare?

The rates are fine but they still maintain a traditional feature of Northern Rock products...high arrangement fees.

Bank of England lowers Interest Rates

The Bank of England yesterday lowered interest rates to 5%.

Will this mean lower mortgage interest rates?

Hmmm...it depends

1 Lenders had priced in the likely decrease into new tracker/discounted mortgages. it's like when supermarkets put up drink prices in November to claim a massive drop just before Christmas
2 Some organisations are not passing on the full 0.25% drop, with Nationwide you may only get a 0.12% drop.
3 Other banks are "reviewing rates within the next 2 weeks"

100% Mortgages Withdrawn

Abbey became the final large lender to withdraw 100% mortgages this week.

Prior to the credit crunch, borrowers were able to borrow up to 125% of the property value. Like other riskier types of borrowings such as sub-prime mortgages, product providers have removed these loans from their books.

it will casuse probelems for 2 types of lenders

1 First time buyers who don't have a deposit.
2 Buyers who took out 100% mortgages in the good times and now won't be able to get a new remortgage deal especially those on interst only mortgages. Their mortgages are likely to increase considerably.

Norwich Union...windfall....generous?

Norwich Union have not been slow in trumpeting a £3 billion distribution of money to With Profits policy holders.

Is it a good deal for the consumer?

They actually have over £5 billion left over from fund re-organisation. This is actually customers' money. They are being coy why they can't distribute the other £2 billion ot customers

90% of the money distributed is going to policy holders with 10% going to Norwich Union shareholders. They originally wanted to give a lower figure to clients but then the government's Policyholder Advocate put pressure on them.

In context, a lot of these policies are held in underperforming endowment policies for which Norwich Union have had to pay compensation for misselling.

A final note, they aren't paying out the customers' money to customers straight away. They are doing it over a 3 year period!

Interest Rates fall 0.25% to 5.25%

As widely predicted the Bank of England reduced interest rates by a quarter of a percent to 5.25%.

It is a bid to stimulate the economy by putting more money in people's pockets. Is this a good thing? Not if it encourages people to borrow more money, as that it partly why economic problems possibly loom.

Interestingly the reason why the Bank of England put up rates several times last year before last summer's "credit crunch" was because of fears of inflation caused by borrowing. Fuel & food inflation is still around....