Coming! Ready or not! Base rate rise in 2014?

It was great to speak to Danny Pike on BBC Surrey and BBC Sussex last week about the Governor of the Bank of England, Mark Carney's, speech at Mansion House in London on the significant possibility that the Base Rate will rise from its current historic level of 0.5% pa. You can hear this radio slot here:

The issue is not that rates will rise, but that we may not see the old 'norm' of 5.00% pa -the Monetary Policy Committee believe 2.5% to 3.00% pa in around 2/3 years’ time is more likely. There is no guarantee where they will settle in the future and at what rate. The only certainty is the uncertainty, but the trend is certainly pointing up. The strength of Sterling as a currency jumped in the aftermath of the speech. I think rates will now rise this year.

It was also good to discuss the positive economic data available which has moved faster than anticipated to put pressure on the Bank of England to delve into its tool box of instruments to keep the UK economy from overheating.

Data recently available provides the following examples:

• Unemployment falling to 6.6% (2.16M, Source: BBC 11 June 2014)
• House price indices rising quickly
• Positive and upgraded GDP figures (Gross Domestic Product/ effectively what we produce as a nation in a period)
• Sterling strong
• Manufacturing increasing well
• Stock markets at near highs
• Inflation falling

These are only examples and individually may not have significant impact. However, as a group together, they have all moved positively and at a pace unexpected by some. Obviously, past performance is not an indication that these will continue or improve further.

The impact of this possible change is likely to be felt by individuals and businesses alike. For companies, they might find their product costs for export increase, along with any borrowing costs they may have.

For individuals, the impact will have different effects on borrowers and savers.

For borrowers, the cost of their finance is likely to increase if not on a fixed rate arrangement. They should prepare and interrogate their household budget, adjusting costs now to tuck away a buffer against these increased costs where possible.

For savers, their deposit rate 'drought ' may be coming to an end. This may be dependent on banks and building societies passing these future rate rises on to customers, although I am sure they will not hesitate for borrowers. As I noted in my radio interview, the currently attractive Pensioner Bond offering at the beginning of 2015 looks good now. This view may change in time as rates rise steadily.

The message from this blog is be ready, however you could be affected. Reviewing your financial planning now, over the summer of 2014, could well be a wise use of time to prepare for the changes ahead.

The Chapters teams in Guildford and Woking are well placed to advise you on savings and financial planning for your finances. No individual advice is provided during the course of this Blog. If you would like to receive further information regarding your own individual situation and circumstances, please contact the Chapters team in either Guildford or Woking.

Keith Churchouse, FPFS
Chartered Financial Planner
ISO22222 Certified Financial Planner

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

Directors....are you ready?

I read an article through Reuters News Agency recently that confirmed the UK had overtaken Japan as the 2nd largest global pensions market. It is good to see that many of us clearly take saving for our retirement seriously. Hopefully with the continued introduction of the mandatory employer Auto-Enrolment/ Workplace Pension roll out for the next 2 years, we will see this pension’s savings market increase still further. Taking this further, having seen larger employers now enrolled, many SME's are seeing their Staging Dates coming in 2014 and Chapters Financial are certainly seeing a higher level of enquiries on this topic. We have certainly experienced the process and note that advice to reach implementation is vital to achieve the required objectives, from choosing a scheme, to setting up the paperwork to reporting the required notifications to The Pensions Regulator. Starting the process early is important, scheme implementation does take time to prepare, present and finalise (you have been warned!). 

The maximum contribution to pensions per individual in the tax year is falling from £50,000 in this tax year 2013/2014 to £40,000 from 06th April 2014 (from all sources/ Gross contributions). These dates and sums might well be of interest to directors and business managers who are looking to offset business profits as they approach their company’s trading year end. For many limited companies, this might be 31st March, which closely ties in with the end of the tax year. 

It is important to check the 'Pension Input Period' (PIP for short) of the pension you make your contribution to BEFORE making a large contribution. If the PIP period ends after the end of the tax year, you may find that your contribution is restricted to £40,000, rather than the current level of £50,000. 

If you would like guidance and advice on making pension contributions from your business, either by choice for directors, or through mandatory requirements for Auto-Enrolment, then please contact the team at Chapters Financial at either our Guildford (01483 578800) or Woking (01483 330800) offices. 

No individual pension/ financial advice is provided during the course of this blog. 

Keith Churchouse FPFS
Director
Chartered Financial Planner
ISO 22222 Personal Financial Planner 

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

 

Chapters Financial Investment Committee / The US Economy

Each client and enquirer has a different view and approach to investment. They are all different and this is only natural.

Many retail advisory propositions also have different views on the way funds in whatever format (Pensions, Investments, ISA’s as examples) should be invested, some preferring passive investment over more actively managed planning.

Over the last 9+ years, Chapters Financial has always preferred an actively managed approach to investment. We believe this adds greater value to our client proposition. Past performance is not a guarantee of future performance.

To further this active investment strategy approach to investments, Chapters Financial Limited maintains and updates a regular view of the investment markets. We obviously have our own opinions (if you know the team at Chapters Financial you will know that they are not a shy group!), and add to our robust procedures by consulting with an independent specialist, Steven Williams, Director at Cormorant Capital Strategies Limited on a quarterly basis.

More detail on the work of Cormorant Capital Strategies Limited can be found here: http://www.cormorantcapitalstrategies.com/
Chapters Financial Limited is not responsible for the content of external webpages.

At our last Investment Committee Meeting in January 2014, we considered many investment areas. As an example, we looked at the US sector and I have received additional feedback and comment from Steven Williams, which is detailed below:

There is a good chance that 2014 will be the year that the US economy escapes the mire that has characterised the last five years or so. Certainly the conditions for continued progress are in place.

The US job market is strengthening. The unemployment rate stands at 7.0%, nowhere near the sub-5% pre-crisis levels but much improved on the 10% rate in 2009. With non-farm payrolls increasing at a rate close to 200,000 per month, further improvements in the employment situation ought to follow. In addition, the necessary process of deleveraging is maturing. US banks can boast of greater than average rates of tier-1 capital, non-financial corporate profit margins have seldom been wider and, according to Moody’s economy.com, the ‘average share of after-tax income that households must devote to servicing debt is as low as it has been since 1980’. Furthermore, consumer confidence – which suffered a knock during the government shut-down - has rebounded. It seems consumers are cognisant of improving conditions now and expectant of continued improvement to come. Of course, the outlook is not without risks to the downside.

I count three major risks to the outlook for the US economy. The first, and most dangerous, is that of exogenous shock – a genuine surprise. The only insight I can offer into such an event is that they occur more frequently than most investors expect and that at this time the US, in common with other regional economies, is remarkably vulnerable. On the other hand, most investors are wearily familiar with the second and third risks on my list. 2014, just like 2013, will be characterised by the political battle for control of the budget, including more wrangling over the debt ceiling. Finally, the Federal Reserve will be keen to continue to taper its present stimulus package and a disorderly exit has the potential to upset financial markets across the globe (investors in emerging market economies beware).

But, for all of this analysis, investors ought to be aware that asset prices and the wider economy do not move in lock-step. Whilst there is, I think, an absence of compelling evidence to suggest that equity markets are significantly over-priced there is equally a lack of evidence to suggest the counter.

Steven Williams, Director at Cormorant Capital Strategies Limited

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.

Keith Churchouse FPFS
Chartered Financial Planner
ISO22222 Certified 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