Last year was a year of economic disruption and political upheaval. In the investment arena, this uncertain climate is most vividly reflected in $17 trillion (£13.2 trillion) of bonds worldwide that currently yield negative returns. Investors are paying governments and, in some cases, companies for the privilege of lending them money – a far cry from buying bonds for income.
A diagnosis of dementia, in whatever form it might take, is a tough time for any family, one full of uncertainty about the future. However, the financial aspects are one area where you can take back control and reduce stress levels by planning ahead.
Like everything to do with pensions, the state pension is fiendishly complicated – and the goalposts keep moving.
In 2016, faced with escalating costs, the government decided to overhaul the system and introduce what it called a new ‘flat’ rate state pension. However, it is not in fact flat at all and depends on the national insurance (NI) record an individual builds up over their working life.
Over the summer, expectations of an economic slowdown and political threats such as the US-China trade war created such high demand for secure investments that more than 30% of the world’s bonds (£13 trillion worth) fell into negative yield territory. This means that investors such as pension funds and insurance companies are now willing to buy bonds for more than their face value and take a loss, because they need the security and liquidity government and high-quality corporate bonds provide.
Conmen have always tried to cheat people out of their money. But investment frauds have become more sophisticated in recent years, and activity has soared ever since the Pension Freedoms of 2015 opened up the potential for criminals to dupe people out of their entire life savings in one swoop. Last year alone, Britons lost almost £200 million to scammers.
The gating of Neil Woodford’s flagship Equity Income fund in early June has alarmed investors. However, Woodford invested the fund in small and unquoted stocks that are difficult to sell quickly, listing some stakes in unquoted companies in Guernsey simply to circumvent the regulator’s rule that caps at 10% of net asset value (NAV) the proportion of unlisted securities an open-ended fund with daily dealing can hold.
Income tax rules
The income tax you must pay varies according to your income in a given tax year, which runs from 6 April to 5 April. Everyone receives a personal allowance – £12,500 for the 2019/20 tax year. You pay no tax on income up to this threshold.
The Japanese stockmarket has underperformed for four years, and was slammed in last autumn’s tech sell-off, which knocked 18% off stocks in sterling terms. While the Topix index is still languishing 40% below its 1991 peak, other major developed markets such as the US have recovered to their all-time highs.
This is the last write-up on the tactical asset allocator portfolio, which has been running since 2013. The investment brief was to be cautious and diversified across asset classes, using exchange traded funds wherever possible, and to avoid being down across all holdings at any one time.
While the portfolio has only doubled in size over the five years since its inception, it has never been down by more than a few percent month on month, although the publication-date constraints of having to deal on one set day per month has limited its agility.
Doctors and other public sector workers such as school heads and top civil servants face punishing tax penalties for inadvertently breaching the legal limit for tax-free annual contributions to their pensions.
The situation is so bad that hospital consultants and GPs, who invariably work extra shifts to cover NHS staff shortfalls, are effectively working for free once their tax penalties have been taken into account.