Autumn Statement 2013…..What could it mean to you?

The Chancellor of the Exchequer delivered his Autumn Statement on Thursday 05 December 2013. Most people were expecting a rather bland statement, partly because it is still some 16 or so months away from the next General Election and partly because the UK’s financial resources are still stretched. George Osborne MP did however manage to offer a few surprises, especially towards the end of his speech, partly aimed at small business enterprises.

As with all Budgets and Autumn Statements, the ‘devil is in the detail’, and I have endeavoured to provide a brief outline to the Chancellor’s Autumn Budget Statement below. This is not an exhaustive list, but provides some of the main issues:

Personal Planning & Taxation

State Pension

A rise of £2.95 a week will be applied to the Basic State Pension in April 2014. However an increase to 68 of the State Pension Age will be applied in the middle of the 2030s and on to 69 in the latter part of the 2040s.

ISA Allowance 2014/2015

The current full ISA allowance of £11,520 will increase to £11,880 in the new tax year.

TAXES AND ALLOWANCES

• With reference to when you start paying Income Tax, the personal tax allowance will increase to £10,000 from April 2014 and be linked to the Consumer Price Index (CPI) thereafter.
• Due to start in the tax year 2015/2016 (from 06 April 2015) is a tax break for married couples and civil partners, which is likely to cost the Treasury about £700m pa, enables them to transfer £1,000 of income tax allowance to their spouse / civil partner.
• Capital gains tax (CGT) will be applied on future gains made by the sale of residential property in the UK by non-residents from April 2015.
• Free school lunches from September 2014 will be made available to infant pupils (Reception, Year 1 and Year 2) at state schools in England, this will cost about £600m a year.
• Exchange Traded Funds (ETFs) which purchase shares will not have to pay Stamp Duty on the purchase.

Business & Charities

• Business rate increases will be capped at 2% instead of linking it to inflation (as measured by the RPI) in England and Wales. Re-occupation relief will see some retail premises in England receive discount (of 50%) on their business rates.
• New tax relief will be introduced for investment in social enterprises and new social impact bonds from April 2014. This may be of interest to Charities and alike.
• For approximately 1.5 million jobs for young people (under 21 years old), the Employer National Insurance contributions will be removed from April 2015.
• Over the next two years an extra 20,000 apprenticeships will be created.

In addition to these points, there was significant news on the UK economy.

ECONOMIC GROWTH

• This year the growth forecasts were revised from 0.6% to 1.4% (2013), for next year up from 1.8% to 2.4% (2014), and to 2.2% (2015), 2.6% (2016), 2.7% (2017) and 2.7% (2018).
• Support for British businesses of export finance capacity available increased to £50bn.
• Scheme with the aim of helping 50,000 more people start their own businesses via an increase in start-up loans.
• The Office for National Statistics has amended their figures for GDP in 2008/09 from a decline of 6.3% to a decline of 7.2%. This effectively wiped £112bn from the UK Economy.
• The “underlying deficit" in the UK was changed down to 6.8% for this year and 5.6% for next year.

Summary

No individual advice has been given in the course of this blog. This summary is not an extensive or exhaustive list of the Autumn Budget Statement. We hope that some of these highlights are of interest to your future financial planning.

If you would like to discuss any matter in the Autumn Statement with regards to your own individual situation and circumstances or any aspects of financial planning, both personal and business (SME), then please contact the team, either in Guildford or Woking.

Keith G Churchouse FPFS
Director
Financial Planner
Chapters Financial Limited

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

USA Leading or UK Lagging?

We have all witnessed a degree of increased globalisation over the last 20 years as a result of the information age.  Many large corporations have expanded their global presence and ventured more into overseas markets than ever before. This in turn has led to the major stock markets, and correspondingly the indices, being more closely correlated over time. 

We are all very aware of the Credit Crunch and the following aftermath in the markets, in currencies, cash-flow and economies around the world. However, we are now starting to witness much more positive data regarding the recovery of the UK economy as well as that of the USA. 

Obviously past performance is not a guarantee of future performance. 

This raises the question, are they recovering at the same rate?

USA Leading?

The Dow Jones Industrial Average (DJIA) closed above 16,000 for the first time on Thursday 21 November 2013, finishing at 16,009.99. This has seen the index growing over 22% from 02 January 2013, when the index opened at 13,104.30.

Even looking at the S&P 500 Index, which some believe to be a better ‘yardstick’ of the US stock market than the DJIA, this has risen 25% from opening at 1,426.19 on 02 January 2013 to close at 1,795.85 on 21 November 2013.

UK Lagging?

In comparison, the rise in the FTSE100 (as an example) is somewhat short of this increase, showing a growth of just 13% from an opening of 5,897.19 on 02 January 2013 to close at 6,681.33 on 21 November 2013. Therefore, if we are using the FTSE100 as the measurement of the recovery of the UK equity market, the UK is only recovering at approximately half the rate of the USA. This is an interesting observation, rather than a direct comparison. 

Some might argue that the difference could be due to the Sterling to Dollar exchange rate at these dates, which is an important consideration. However, the currency exchange rates on these dates were £1 = $1.6249 (02 January 2013) and £1 = $1.6199 (21 November 2013), therefore the impact of the exchange rate is less than 0.5% between these dates.

Which market / economy will correct and when?

The soon to retire Mr Bernanke, Chairman of the Federal Reserve, has already indicated that he may taper or slow down the fiscal stimulus into the US economy. Many economists believe that the markets have already factored in his statement in this regard, but if they have not, the impact may not occur until March 2014. 

The Bank of England has provided its own stimulus to the economy in the form of Quantitative Easing (QE) to the tune of £375BN. In comparison with the USA, it has not increased this QE programme since July 2012.

It is believed that Mr Bernanke will continue to signal the reduction in the stimulus as the US data on production, employment and other economic factors improve. This could mean that the indices in the US stock markets (DJIA / S&P 500) will not rise when compared with the UK index (FTSE 100) as the fiscal stimulus package in the USA is reduced and eventually stopped. How long will this take? I believe it will be at least 12 months before we see a significant correction between the correlation of the USA and UK equity markets, possibly even longer.

No individual advice has been given in the course of this blog. Past performance is no guarantee of future performance. Investment values can fall as well as rise and are not guaranteed.

If you would like to discuss the investment opportunities with regards to your own individual situation and circumstances or any aspects of financial planning, both personal and business (SME), then please contact the team, either in Guildford or Woking.

Simon Hewitt BSc (Hons) DipPFS

Financial Planner

Chapters Financial Limited

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

Where did 2013 go?

Our busiest months of the trading year are April/May and November. This has always been the case throughout my nearly 30 years in financial services. Many can understand the April/May date because of the end of the tax year (05^th April) and all this involves, including pension and ISA contributions. The November uplift is usually a surprise and this is because many finalise their financial planning at the end of the year before the festive season starts. Almost a final catch up before the year closes. From an economic viewpoint, it has been a significant year.

With the FTSE100 starting the year at 5,897 points (approx.), my open year prediction was that we would end the year with a starting digit of 7,XXX?. It looks like I might have to temper this prediction. (Past performance is not a guarantee of future performance). The FTSE100 is not an indicator of the health of the economy though and there are many other important and relevant economic factors to consider, examples of which might be: 

•  Foreign investment money stoking a possibly overheating London Property market is filtering through to the rest of the UK.
• The Government’s funding initiative of the 'HomeBuy' scheme, generating greater flexibility for usually First Time Buyers (FTB) to enter the property market. With recent reports that the average FTB was entering the property market in their 30's, action had to be taken.
• Cash deposit yields falling ever further with now confirmed low rates (through ‘Forward Guidance’) from the dynamic Canadian Banker that heads the Bank of England (BoE). Bank Base Rate has remained at 0.5% pa throughout the year to date. 
• Some banks and lenders being more approachable for SME/ Small Business finance.
• Growing Building/ construction starts ups helping with the stubbornly high unemployment data (October 2013 2.47M), which is starting to show falls (possibly quicker than Mr Carney thought).
• Largest number of Initial Public Offerings (IPO’s) since the start of the recession on London.
• Inflation (Consumer Prices Index/CPI) remaining above the current BoE target of 2.00% pa, at 2.20% (October 2013)   

Be under no illusion, our economic market has changed and I believe is in the final throws of shaking off the shackles of recession. This is a changed beast and is going to move forward, I think quicker than many of us expect. As you have seen in our previous November Blog, we have also seen the implementation of the Retail Distribution Review (RDR) in 2013 which, for some, has been a welcome change to the delivery of financial advice to the public in the UK. 

I hope, like Chapters Financial Limited, that you found 2013 a positive year for your financial planning. The flow of economics points to 2014 being a positive year, although I am sure there will be volatility along the way, and a positive outcome is not guaranteed. However, taking high quality financial planning advice throughout the year is worthwhile to ensure that you make the best of the economic climate, whatever it transpires to be. 

If you would like to receive further information with regards to your own individual situation and circumstances, then please contact the team, either in Guildford or Woking.

Keith Churchouse FPFS
Director
ISO22222 Personal Financial Planner
Chartered Financial Planner

2013, a year of change in the delivery of financial advice

2013 has been an interesting year in the financial world with, amongst other headlines, the Bank of England's base rate remaining at its historic low of 0.5% and a change of Governor, the growth in the FTSE 100, and unemployment remaining stubbornly high.

It was only a year ago that we, amongst many other financial advisory companies, were planning for the change in the way financial advice is delivered to the public in the UK. We saw some moving in a positive fashion, preparing to meet the demands of the Financial Services Authority (replaced by the Financial Conduct Authority (FCA) in April this year) under their Retail Distribution Review (RDR) requirements. However many providers, including most of the High Street Banks, found the significant changes too much and withdrew from the market. Each had their own reasons, but it reduced the access that some of the public have to financial advice, as confirmed by the FCA later in the summer of 2013, referring to their ‘concerns’ to the Treasury Select Committee in September 2013. To be clear, there have been benefits to the changes, such as transparency of charging, and we have been advocates of this for many years.

With these RDR changes now nearly a year old, the team at Chapters Financial has seen a significant increase in business over 2013. This may be partly due to a better economic environment, however, we would argue that this is also due to the reduction in advice providers and the maintenance and enhancement of the quality of advice our services provide. As you may have read on our website, we were delighted to have achieved BS8577 certification in late summer 2013, which confirms our high and consistent standards. To improve our coverage of West Surrey, we have also opened a new additional office in Central Woking.

We hope that 2013 has been as positive for you as it has been for Chapters Financial, as our chartered financial planning company heads towards the end of its first decade in business in the south east and London. We plan to expand still further in future years and hope that we can help many more clients, businesses (SMEs) and enquirers.

If you would like to receive further information with regards to your own individual situation and circumstances, then please contact the team, either in Guildford or Woking.

Keith Churchouse FPFS

ISO22222 Personal Financial Planner

Chartered Financial Planner 

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

Long Term Care – Changes that could affect your financial planning

The care of our elderly folk and the cost of this care provision has long been a topical subject in financial planning. As a specialist subject, financial advisers have to be qualified to provide advice in this ever changing area of advice.

In July 2013, a Government consultation paper was launched to consider reform of the method and timing of paying for an individual’s care costs relating to either residential care or care provided in their own home. The idea was to bring reassurance to millions of people who could be caught in this situation, by ending what many would argue was an unfair system of facing unlimited care costs or selling their own home to pay for these costs. This caused much distress.

Means Tested Again?

The fine print in the Government’s plans show that people with relatively modest assets (excluding their family home), of below £23,250, will only be eligible for the deferred payment plan to pay for their care costs. Therefore, a large number of people will not now be eligible for this scheme and will have to pay towards their own costs while their assets are above this level.

Government Backtracking?

This is seen by many as the Government breaking a pledge they made after the well-received Dilnot commission report on the funding of Long Term Care was published. The Government pledged to introduce (in 2016) a cap of £72,000 as the maximum amount an individual would have to pay in their lifetime towards their care costs, along with new rules on eligibility on state support. The scheme also promised that if anyone was facing the prospect of having to sell their home to pay for care costs they could ask the local authority to provide a long term loan which would eventually be paid out of the individual’s estate (i.e. deferred payment plan).

Deliberate Asset Deprivation

Many people are faced with having to pay for their own care during their own lifetime, while their assets (excluding their main home) are valued above £23,250. People often believe that they will simply be able to reduce their assets (for example, by gifting or transferring them to others or placing them in trust), such that their total assets are below the £23,250 limit and they will be able to benefit from the Government schemes. However, if the individual Deliberately Deprived themselves by disposing of assets for this reason, or the Local Authority believes that this is the reason, then the Local Authority has the power to recover costs which they have paid towards the individual’s costs.

 
Summary

Whenever a government indicates that they are going to implement new reforms then the devil is always in the detail. At Chapters Financial, we also maintain a view that it is important not to take action on suggested legislative change until it has occurred and is in force. It is all very well to listen to the speeches and rhetoric, however it is the actual legislation which matters. If an individual or family is facing the prospect of paying for long term care costs or they want to ensure that this provision is planned for in the future then we believe they should seek professional independent financial advice.

Figures provided in the content of this blog are for tax year 2013/2014 and are subject to change in the future. No individual advice is provided in the content of this Blog.

The team at Chapters Financial can help you with your financial planning including long term care planning and look forward to working with you.

Simon Hewitt BSc (Hons) DipPFS
Financial Planner
Chapters Financial Limited

 

Chapters Financial Limited is Authorised and regulated by the Financial Conduct Authority, number 402899.

Kicking the US fiscal ‘Can’ down the road

There is a saying of “Kicking the can down the road”, which means to delay a decision in the hope that the problem or issue will go away or that someone else will make the difficult decision easier to swallow, the later it is made. This saying has also recently been applied to the ‘Fiscal Cliff’ of the American fiscal deficit and the ways that it can be brought under control. A hard path to negotiate if ever there was one.

The US ‘Fiscal Cliff’ is the deficit which would have been caused by simultaneous changes in proposed tax rates combined with government expenditure. This was due to occur on 31 December 2012 until the US politicians (Senate and House of Representatives) finally agreed to extend the US Government’s borrowing limit/ debt ceiling. However, they only extended this by a matter of months and effectively “kicked the can down the road”.

You may have noticed in the media recently that the US government has started a partial shutdown after both Houses of Congress failed to agree a new budget. This has meant that the federal government has to save running costs and to achieve this has partially shut down non-essential departments and their related personnel. This could potentially affect more than 800,000 federal employees who will be on unpaid leave until the budget can be agreed. The knock-on effect to America’s GDP could be significant if the situation is sustained for a long period. The shutdown is significant, but is not the ‘main event’. The debt ceiling is.

Effect on the US Economy and Dollar

The planned budget agreement to resolve borrowing limits was meant to be ratified by both Houses of Congress by 30 September 2013. As you may know, this was not achieved. One consequence of the first shutdown in 17 years has seen an initial weakening of the dollar on 01 October 2013. Some commentators in the media are suggesting that these recent events could derail the world’s largest economy. I believe this is somewhat of an extreme view and do not hold this opinion. But the short term impact will be felt by the markets while uncertainty remains.

Outlook for US Economy

I believe that the main thrust of this impasse is partly due to President Obama’s health care bill and this is effectively being seen by some as a game of poker between the Democrat held White House and Senate, and the Republican held House of Representatives. Who will blink or fold first? As is usual in politics, I expect that some hurried negotiations will take place in some corners of Washington which will allow a new budget to be in place with a revised healthcare bill and the proverbial can will be kicked down the road again – possibly until there is a change of occupier in the White House or balance of power in the Houses of Congress.

At Chapters Financial Limited we remain optimistic for the outlook of the US economy and financial markets, although allocations to this area should be invested as part of an overall investment allocation process.

Past performance is not a guarantee of future performance. Fund values and currency values can fall as well as rise and are not guaranteed.

It should be noted that as financial planners, Chapters Financial remain positive about North America as an investment area and of the dollar as a currency.  

Each investment and its allocation/ recommendation is different and individual to the Client. To consider your circumstances with regard to savings and investments, you should take individual financial advice. No individual advice is provided in the content of this Blog. The team at Chapters Financial can help you with your planning and look forward to working with you.

Simon Hewitt

Financial Planner
Chapters Financial Limited

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899.

On-Site Auto-Enrolment Employee Pension Presentations / Seminars

As the momentum and delivery requirements of pension Auto-Enrolment (AE as it is sometimes known) become paramount for many more employers (as their Staging Dates come closer), we have prepared an employee focussed presentation that meets the needs of the new pension legislation and themed to the employers requirements. This is illustrated in the picture of our Financial Planner, Simon Hewitt, delivering the details and requirements of Auto-Enrolment to the employees of a medium-sized company in their locality in early autumn 2013. This was followed by a Questions & Answers session, along with hand-outs, to answers points raised by the audience, with some very positive feedback to this required retirement initiative.

Chapters Financial Limited is employed by companies to implement and deliver a smooth transition of the requesting companies Auto-Enrolment pension scheme, from scheme selection, initial administration, implementation, presentations and end administration including The Pensions Regulator notifications, where required. Our recent certification to British Standards /BS8577 confirms our system based programme aimed to deliver consistent high quality outcomes. We would hope that post-implementation, we can work with employers, their staff and pension scheme to ensure its continued success.

No individual advice is provided in the course of this Blog. Employers and those affected by Auto-Enrolment pensions. As independent financial advisers (IFA), we can guide employers to the right scheme for the needs of their employees and to implement the arrangement in good time (with enough notice) to meet the outcomes of this legislation.

Please contact Simon Hewitt and the team at Chapters Financial to discuss your needs on 01483 578800 (Guildford) or 01483 330800 (Woking).

Keith Churchouse FPFS
Director
Chapters Financial Limited
ISO 22222 Personal Financial Planner
Chartered Financial Planner
Certified Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, Number 402899. 

Where to go next? Investment allocations

There is a very old saying and theory that some investors 'sell in May and go away' ....usually with the plan that they return in early autumn to pick up where they left off and take new investment opportunities for the future period. Investing in real assets though should always be seen as a medium-longer term strategy, usually with the objective of investing for a 5+ year period.

The question however would be where to invest? Chapters Financial has always recommended diversity when investing, usually spreading any proposed investment across a range of funds to diversify risk and to offer the potential for returns based on a client’s attitude to investment risk. More information on our investment risk scale can be found here. Your view is also likely to be swayed by why you are investing, either for income generation, growth or a mix of the two, as an example.

Chapters Financial also maintains 'house views' on investment areas and the purpose of this blog is to share these with our readers as we enter the autumn season of 2013. Obviously, views can change quickly, with no individual advice being provided during the course of these current investment notes. You should take individual advice based on your own circumstances to meet your needs. Some of our current thinking is as follows:

Generic Investment Area	Current View
UK Equity Growth	Positive
UK Equity Income	Positive
Europe	Negative
Corporate Bonds	Neutral
North America	Positive
Japan	Negative
Property (Commercial)	Neutral
Emerging Markets (including BRICs)	Neutral

There are many other investment areas and opportunities and you should seek individual advice on any specific areas you wish to consider. We would however recommend diversity across a range of areas.

The value of investments and pensions and the income they produce can fall as well as rise and is not guaranteed.

However you plan to invest, through pensions, SIPPS, ISAs, Investment Bonds, portfolios, Unit Trusts, OEICS and the like, Chapters  Financial can help you with your asset allocations with the aim of meeting your needs into the future. We recommend that investments and pensions should be regularly kept under review to ensure that your financial planning continues to meet your needs and attitude to investment risk.

No individual advice has been provided in the content of this blog. The team at Chapters Financial would be pleased to help you with your individual or business (SME) financial planning. Please contact us on 01483 578800

Keith Churchouse FPFS

Director

ISO 22222 Certified Financial Planner

Chartered Financial Planner

Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899