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This has been coming for a long time. Nobody can predict when it might happen, but each month, there seems to be more signs that it's closer.
How can they think of raising interest rates by such a minimal amount, whilst simultaneously injecting a further burst of QE? This sounds totally crazy, I suspect because it is!
Time to run for cover & batten down the hatches me thinks.
Op-Ed: The Fed’s stealthy QE — $267 billion of fresh liquidity injected since mid-January
While solicitously "guiding" the markets to its "earth-shaking" 0.25 percent interest rate increase last Wednesday, the Fed has been expanding its balance sheet – big time -- by buying a huge amount of assets in exchange for cash to reassure equity and bond traders.
Only during the two weeks preceding the push of the federal funds rate (interest rate banks charge each other for overnight loans) to the 0.75-1.0 percent range, a total of $115.5 billion of new liquidity has been created.
If that was meant to confuse the gallery it is mission accomplished. Just look at weird headlines wondering how the markets could rally in reaction to "credit tightening," and muddled up commentaries about preferred maturities and asset classes as the Fed continues to wind down the long celebration of abundant and cheap credit.
But the gallery has changed. It seems that the famed "Fed-watchers," drawing six- and seven-figure annual compensations, have all been fired, because now, the ingénues think, the Fed is telling it all in its "forward market guidance."
So, here is the centerpiece of that "guidance:" The Fed is determined to "normalize" its extraordinarily bloated balance sheet, and negative real interest rates along the yield curve reaching almost all the way to the Treasuries ten-year maturities.
Fool me once …
That's very much at odds with what the Fed is doing. For example, these $267 billion the Fed added to its balance sheet since mid-January represent one-third of its last "normal" average monthly balance sheet of $820 billion before the onset of the financial crisis in 2008. That huge liquidity creation over the last two months has now brought the Fed's monetary base to $3.9 trillion – very close to record-high levels observed in August 2014.
What kind of normalization process is that? These numbers look more like a colossal new round of quantitative easing (QE) totally "missed" – but greatly enjoyed – by financial markets.
The Fed is also slipping by another feat of extraordinary economic management: It is increasing the supply of money while raising its price. It looks like the price of money is no longer determined by its demand and supply. But the Fed is doing it: It pushed up last week the effective rate banks charge each other for overnight loans from 0.66 percent to 0.90 percent, even though excess reserves of the banking sector (i.e., the pool of funds for overnight loans) increased since the beginning of this month by $115 billion to an incredibly high level of $2.2 trillion.
It's like the Groucho's number: Who ya gonna believe, me or your own eyes?
And the Fed's magic goes on. The latest rate hike is motivated by an "economy doing well," and an inflation rate that is still "within the policy targets."
A good "Fed-watcher" of yore would ask: Economy doing well? You mean an economy that slowed down to an annual growth rate of 1.6 percent last year from 2.6 percent in 2015? Or is the Fed enthusing over the fourth quarter 1.9 percent growth rate -- a sharp slowdown from 3.5 percent in the third quarter -- because it exceeded the dismal 1.5 percent noninflationary growth potential of the U.S. economy?
Maybe the Fed sees a lot of firepower in the slowing growth of inflation-adjusted after-tax household income?
This income variable drives three quarters of the U.S. economy (private consumption and residential investment), but its growth last year declined to 2.8 percent, well below its 3.5 percent increase in 2015.
Inflation's structural causes
How about jobs? Yes, we've made big strides there, but we are still struggling to connect 14.9 million people (9.4 percent of the labor force) with stable employment. And nearly 40 percent of the civilian labor force is out of the labor market. President Trump apparently counts on German-style vocational training to make these people employable again, but that's a long-term project still on the drawing boards.
Are we forgetting the promised "massive middle class tax cuts," the "largest since the Reagan era?"
Well, maybe we are, but it remains to be seen to what extent revenues from taxing the rich, and from an expected faster economic growth, can finance middle class tax cuts. The White House apparently wants a deficit-neutral budget and is rearranging public spending accordingly. That's the way it should be because the U.S. can't afford a widening budget gap. Remember, we need to push the primary budget surplus (budget before interest charges on public debt) to 3-4 percent of GDP (from a current deficit of 1 percent of GDP) -- and to keep it there for many years -- to stop and reverse the progression of America's $20 trillion in national debt.
Price stability is another problem. The headline consumer price inflation (CPI) shot up to 2.7 percent last month from only 0.8 percent in July 2016; its core component (CPI minus food and energy costs) has been firmly in the 2.0-2.3 percent range for more than a year, and the key service sector prices have also been rising between 3 and 4 percent for a long time.
But the real inflation story is told by the structural nature of unit labor costs – labor compensation minus labor productivity – because they put the floor below any medium-term inflation outlook. Last year's steadily increasing labor demand drove compensations to an annual growth rate of 2.9 percent. That brought unit labor costs up to 2.7 percent as the result of a pitiful 0.2 percent labor productivity growth.
Two things are readily apparent here. One, we have to increase the supply and skills (i.e., productivity) of employable labor in order to keep down the costs per unit of output. Two, there is nothing the Fed can do here; this is the domain of labor, education, healthcare and trade policies.
Investment thoughts
I believe that the Fed's strange and unsustainable operations should be seen as a laudable effort to help the new administration come up with appropriate fiscal, structural and trade policies in an environment of orderly financial markets, confident households and optimistic business community.
But the Fed must make clear to legislative and executive authorities that – at this point in the business cycle – it is absolutely essential to focus on price stability. The White House and the Congress must deliver – fast – on their part of the bargain, because any major inflation slippages would totally compromise the growth outlook.
The extraordinary activism of the Trump administration's economic policy is a good thing. But it has to keep delivering to put steady foundations below the market rally.
One of these things was done last week. Washington deftly used the visit of the German delegation to clarify its trade policy – free but fair – where the fair part has to be defined as a refusal to accept excessive and systematic trade surpluses resulting from inappropriate (aka, beggar-thy-neighbor) economic policies. That is what John Maynard Keynes wrote in the IMF's Articles of Agreement at Bretton Woods in July 1944. Washington may wish to "codify" that as a binding rule in the G20 platform of international economic policy coordination during the summit in Hamburg next July.
Meanwhile, we need policy coordination at home. The U.S. economy, financial markets and the dollar need a close coordination of monetary, fiscal, structural and trade policies.
That would allow the Fed to review its "forward market guidance" in order to protect its credibility. If that were done, funny things like boosting the supply of money while raising its price would no longer be necessary.
http://www.cnbc.com/2017/03/20/op-ed-the-feds-stealthy-qe-267-billion-of-fresh-liquidity-injected-since-mid-january.html
How can they think of raising interest rates by such a minimal amount, whilst simultaneously injecting a further burst of QE? This sounds totally crazy, I suspect because it is!
Time to run for cover & batten down the hatches me thinks.
Op-Ed: The Fed’s stealthy QE — $267 billion of fresh liquidity injected since mid-January
While solicitously "guiding" the markets to its "earth-shaking" 0.25 percent interest rate increase last Wednesday, the Fed has been expanding its balance sheet – big time -- by buying a huge amount of assets in exchange for cash to reassure equity and bond traders.
Only during the two weeks preceding the push of the federal funds rate (interest rate banks charge each other for overnight loans) to the 0.75-1.0 percent range, a total of $115.5 billion of new liquidity has been created.
If that was meant to confuse the gallery it is mission accomplished. Just look at weird headlines wondering how the markets could rally in reaction to "credit tightening," and muddled up commentaries about preferred maturities and asset classes as the Fed continues to wind down the long celebration of abundant and cheap credit.
But the gallery has changed. It seems that the famed "Fed-watchers," drawing six- and seven-figure annual compensations, have all been fired, because now, the ingénues think, the Fed is telling it all in its "forward market guidance."
So, here is the centerpiece of that "guidance:" The Fed is determined to "normalize" its extraordinarily bloated balance sheet, and negative real interest rates along the yield curve reaching almost all the way to the Treasuries ten-year maturities.
Fool me once …
That's very much at odds with what the Fed is doing. For example, these $267 billion the Fed added to its balance sheet since mid-January represent one-third of its last "normal" average monthly balance sheet of $820 billion before the onset of the financial crisis in 2008. That huge liquidity creation over the last two months has now brought the Fed's monetary base to $3.9 trillion – very close to record-high levels observed in August 2014.
What kind of normalization process is that? These numbers look more like a colossal new round of quantitative easing (QE) totally "missed" – but greatly enjoyed – by financial markets.
The Fed is also slipping by another feat of extraordinary economic management: It is increasing the supply of money while raising its price. It looks like the price of money is no longer determined by its demand and supply. But the Fed is doing it: It pushed up last week the effective rate banks charge each other for overnight loans from 0.66 percent to 0.90 percent, even though excess reserves of the banking sector (i.e., the pool of funds for overnight loans) increased since the beginning of this month by $115 billion to an incredibly high level of $2.2 trillion.
It's like the Groucho's number: Who ya gonna believe, me or your own eyes?
And the Fed's magic goes on. The latest rate hike is motivated by an "economy doing well," and an inflation rate that is still "within the policy targets."
A good "Fed-watcher" of yore would ask: Economy doing well? You mean an economy that slowed down to an annual growth rate of 1.6 percent last year from 2.6 percent in 2015? Or is the Fed enthusing over the fourth quarter 1.9 percent growth rate -- a sharp slowdown from 3.5 percent in the third quarter -- because it exceeded the dismal 1.5 percent noninflationary growth potential of the U.S. economy?
Maybe the Fed sees a lot of firepower in the slowing growth of inflation-adjusted after-tax household income?
This income variable drives three quarters of the U.S. economy (private consumption and residential investment), but its growth last year declined to 2.8 percent, well below its 3.5 percent increase in 2015.
Inflation's structural causes
How about jobs? Yes, we've made big strides there, but we are still struggling to connect 14.9 million people (9.4 percent of the labor force) with stable employment. And nearly 40 percent of the civilian labor force is out of the labor market. President Trump apparently counts on German-style vocational training to make these people employable again, but that's a long-term project still on the drawing boards.
Are we forgetting the promised "massive middle class tax cuts," the "largest since the Reagan era?"
Well, maybe we are, but it remains to be seen to what extent revenues from taxing the rich, and from an expected faster economic growth, can finance middle class tax cuts. The White House apparently wants a deficit-neutral budget and is rearranging public spending accordingly. That's the way it should be because the U.S. can't afford a widening budget gap. Remember, we need to push the primary budget surplus (budget before interest charges on public debt) to 3-4 percent of GDP (from a current deficit of 1 percent of GDP) -- and to keep it there for many years -- to stop and reverse the progression of America's $20 trillion in national debt.
Price stability is another problem. The headline consumer price inflation (CPI) shot up to 2.7 percent last month from only 0.8 percent in July 2016; its core component (CPI minus food and energy costs) has been firmly in the 2.0-2.3 percent range for more than a year, and the key service sector prices have also been rising between 3 and 4 percent for a long time.
But the real inflation story is told by the structural nature of unit labor costs – labor compensation minus labor productivity – because they put the floor below any medium-term inflation outlook. Last year's steadily increasing labor demand drove compensations to an annual growth rate of 2.9 percent. That brought unit labor costs up to 2.7 percent as the result of a pitiful 0.2 percent labor productivity growth.
Two things are readily apparent here. One, we have to increase the supply and skills (i.e., productivity) of employable labor in order to keep down the costs per unit of output. Two, there is nothing the Fed can do here; this is the domain of labor, education, healthcare and trade policies.
Investment thoughts
I believe that the Fed's strange and unsustainable operations should be seen as a laudable effort to help the new administration come up with appropriate fiscal, structural and trade policies in an environment of orderly financial markets, confident households and optimistic business community.
But the Fed must make clear to legislative and executive authorities that – at this point in the business cycle – it is absolutely essential to focus on price stability. The White House and the Congress must deliver – fast – on their part of the bargain, because any major inflation slippages would totally compromise the growth outlook.
The extraordinary activism of the Trump administration's economic policy is a good thing. But it has to keep delivering to put steady foundations below the market rally.
One of these things was done last week. Washington deftly used the visit of the German delegation to clarify its trade policy – free but fair – where the fair part has to be defined as a refusal to accept excessive and systematic trade surpluses resulting from inappropriate (aka, beggar-thy-neighbor) economic policies. That is what John Maynard Keynes wrote in the IMF's Articles of Agreement at Bretton Woods in July 1944. Washington may wish to "codify" that as a binding rule in the G20 platform of international economic policy coordination during the summit in Hamburg next July.
Meanwhile, we need policy coordination at home. The U.S. economy, financial markets and the dollar need a close coordination of monetary, fiscal, structural and trade policies.
That would allow the Fed to review its "forward market guidance" in order to protect its credibility. If that were done, funny things like boosting the supply of money while raising its price would no longer be necessary.
http://www.cnbc.com/2017/03/20/op-ed-the-feds-stealthy-qe-267-billion-of-fresh-liquidity-injected-since-mid-january.html
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Keep calling a crash and you're bound to be right one day.
It's calling the rises as well as the crashes that separates the knowledgeable from the guessers.
Where did the writers stand last June when the FTSE bottomed and has risen 20% since?
It's calling the rises as well as the crashes that separates the knowledgeable from the guessers.
Where did the writers stand last June when the FTSE bottomed and has risen 20% since?
reading the telegraph at the weekend someone was saying the bull run has a way to go yet
A significant part of the FTSE rise has been due to devaluation of sterling. None of the problems have gone away.
Lots of the positive comments originate from brokers, whose companies profits and their jobs depend upon telling people to keep on buying!
Having said that the price action last Friday is a cause for concern.
Let's hope it's was merely a bit of profit taking and nothing more.
Let's hope it's was merely a bit of profit taking and nothing more.
But for central bank intervention, I presume we'd have had the biggest crash ever in 2008/9. I can't see how America ever hope pay it's debts (19 trillion). In the UK, they very largely talk about deficit (Government borrowing) and conveniently forget to talk about debt.
btw we owe 1.64 trillion, 29.5K per citizen or 50.7K per taxpayer and are continuing to borrow
Of course there'll be a crash at some point and thereafter the market will recover and eventually go on to break another record high.
Any sensible person knows it's practically impossible to accurately predict the timing of troughs and recoveries;all that can be done is protect yourself by ensuring you keep 5 years worth of expenditure in cash to ride out the crash.....wealth is lost by being either a paniced or forced seller. The younger you are the less important a crash is;on the other hand to be short of cash when you're retired could be a real problem.
Any sensible person knows it's practically impossible to accurately predict the timing of troughs and recoveries;all that can be done is protect yourself by ensuring you keep 5 years worth of expenditure in cash to ride out the crash.....wealth is lost by being either a paniced or forced seller. The younger you are the less important a crash is;on the other hand to be short of cash when you're retired could be a real problem.
People won't be short of cash. Only problem tin of beans £100+. And it has to happen soon. Rising interest rates will bring EVERYTHING down except PM's.
oh to be a baby boomer waltz intoany building society sign a few forms tie your money up for 5,10 years and get 8,9 10%,now you have to pay some spiv to make you 4% when the markets booming,
One of the reasons they do not want to raise interest rates, is the effect it has on debt repayments. For each 1% interest rate rise, the annual federal deficit rises by $190 billion.
Under current law, Congressional Budget Office projects that net interest costs will more than double over the next 10 years, soaring from $270 billion in 2017 to $712 billion in 2026 and totalling $4.8 trillion over the period.
Interest costs are expected to continue climbing beyond the next 10 years and are projected to be the third largest category in the federal budget by 2028 (after just Social Security and Medicare), the second largest category in 2046, and the single largest category in 2050.
Under current law, Congressional Budget Office projects that net interest costs will more than double over the next 10 years, soaring from $270 billion in 2017 to $712 billion in 2026 and totalling $4.8 trillion over the period.
Interest costs are expected to continue climbing beyond the next 10 years and are projected to be the third largest category in the federal budget by 2028 (after just Social Security and Medicare), the second largest category in 2046, and the single largest category in 2050.
The weakness I mentioned last Friday has followed through today, but has met the hoped for support at bellow 7382 finishing a tad below at 7378.
The next support level is 7368 if it dips again tomorrow.
The next support level is 7368 if it dips again tomorrow.
ft only includes the great unwashed when it suits
in the days of huge saving rates,inflation busting pay rises,cheap housing costs,gold plated pensions etc ft was sub 2000
in the days of huge saving rates,inflation busting pay rises,cheap housing costs,gold plated pensions etc ft was sub 2000
forgot to add 15 grand annuity for a 100 grand pot
imaine getting 15 grand annuity for a 100 grand pot and living into your 80,s and 90,s,
,whilst your 50 grand house is now worth a million and your state pension is tripple locked,and governments have been pandering to these pensioners for 40 years
,whilst your 50 grand house is now worth a million and your state pension is tripple locked,and governments have been pandering to these pensioners for 40 years
Yes 1tp, I've mentioned before the opportunity legacy that was left to the baby boomers.
In comparison to the legacy the baby boomers are leaving behind as they snuff it.
It all started to go wrong in the late nineties.
It just gets worse every year now.
In comparison to the legacy the baby boomers are leaving behind as they snuff it.
It all started to go wrong in the late nineties.
It just gets worse every year now.
There are too many people in the country.
The politicians have ruined it for us.
The politicians have ruined it for us.
how many outsiders are living off benefits whilst on low wages
and of course those simply scooping up their whole costs paid for by taxpayers money
and of course those simply scooping up their whole costs paid for by taxpayers money
i,m 58 this year got my yearly pension statement from standard life this week 145/150 grand would just get me 5 grand a year if i wanted to turn it into an annuity
your alternative is not to buy an annuity but to keep investment in equities and drawdown what you need;bear in mind you'll be getting a guaranteed state pension.
None of us will experience like what we did back in 2008/9 again, thankfully.
All the countries debts are worse than in 2008/9. We should certainly be suffering a much worse experience when this lot unwinds.
1tp. I'd think the way to go is take your 25% tax free and your limit each year (12K I think), ensuring you pay no income tax. Put your max in an ISA, carry on investing & withdraw from your ISA. Legislation can change, so you never know what they might do. (e.g. remove the 25% tax free element of your pension)
1tp. I'd think the way to go is take your 25% tax free and your limit each year (12K I think), ensuring you pay no income tax. Put your max in an ISA, carry on investing & withdraw from your ISA. Legislation can change, so you never know what they might do. (e.g. remove the 25% tax free element of your pension)
"All the countries debts are worse than in 2008/9"
Every debit has a credit. It's a zero sum game. If the banks are in record debt, the public is in record debt, and the govt are in record debt in "all the countries" then they just owe it to each other.
The real return on cash at the moment is negative, and has been close to zero for years, and looks like being close to zero for several more years. In such an environment the dividends from shares are more appealing. Share prices are high but when returns on cash are negative they should be. Land prices and gold prices are high too. People predict crashes all the time, hoping to get lucky and call themselves a guru backing just one winner. These predictions are always one sided arguments.
Every debit has a credit. It's a zero sum game. If the banks are in record debt, the public is in record debt, and the govt are in record debt in "all the countries" then they just owe it to each other.
The real return on cash at the moment is negative, and has been close to zero for years, and looks like being close to zero for several more years. In such an environment the dividends from shares are more appealing. Share prices are high but when returns on cash are negative they should be. Land prices and gold prices are high too. People predict crashes all the time, hoping to get lucky and call themselves a guru backing just one winner. These predictions are always one sided arguments.
I don't buy that. The interest payable on each nations debt that has risen has gone up. It is not sustainable past a certain point.
What happens if an individual debtor can't, or won't, pay an individual creditor? It's not a zero sum game then. If it were, then there would be no risk and no variation in interest rates to reflect that risk.
People who have waited until the last minute to use their ISA allowance have had a right touch with most shares getting cheaper
a few thoughts regarding pension pots,
yes i,ll be using drawdown
but cant see the point in taking the 25% cash free to put in an isa paying next to no interest,you might as well leave it in the pot w,ith the company you,ve trusted for 40 yrs to build it up
i,ll start accessing it in a few years if i,m not working i,ll be able to take as you say a grand a month out without paying tax,
obviously theres more risks than in a cash isa
yes i,ll be using drawdown
but cant see the point in taking the 25% cash free to put in an isa paying next to no interest,you might as well leave it in the pot w,ith the company you,ve trusted for 40 yrs to build it up
i,ll start accessing it in a few years if i,m not working i,ll be able to take as you say a grand a month out without paying tax,
obviously theres more risks than in a cash isa
off course if you can manage ,emptying your private pot and deferring your state pension was a good idea when you were getting a 10% uplift for deferred years but alas this is dropping to 5% for people retiring after 2016
I think the idea of robbing your pot to invest in ISAs is a long term idea.
If you can only get an annuity that pays 3.3% less tax, which takes it down to 2.64% at basic rate. Then you'll be locked into that rate until you die. You'll never get your £150,000 back.
So you're not much worse off with an ISA anyway. And if interest rates rise you will be laughing going down the ISA route.
And at some point you can start spending your capital, which would be impossible with an annuity.
If you can only get an annuity that pays 3.3% less tax, which takes it down to 2.64% at basic rate. Then you'll be locked into that rate until you die. You'll never get your £150,000 back.
So you're not much worse off with an ISA anyway. And if interest rates rise you will be laughing going down the ISA route.
And at some point you can start spending your capital, which would be impossible with an annuity.
1st time poster, take your pension and invest it yourself. It's a no brainer for these reasons:
1) You can hardly fail to outperform your pension provider. Look at your Annual Statements and compare the rise in the value of your pension pot compared to the performance of the stock market. Lazy City types have been dumping their worst trades in your pension for years.
2) One of the consequences of the Great Repeal Bill will be a loosening of pension regulations; to put it bluntly, you will get less.
3) The money you realise by taking your pension then belongs to you and, eventually, your children. You can buy a property and let it out and pass it on to your children. You can invest in AAPL, Facebook and Google and insure yourself against the damage done by the devaluation of sterling. Or you can invest in stocks that pay healthy dividends - the first five grand is tax free although that falls to two next year. The point is that you are taking control of your own fortune, which is healthy. It's just basic, at the end of your days, you end up with something instead of nothing. I shouldn't bother protecting your investment in an ISA, the same lazy tarts who leech your pension will charge you for the privilege.
1) You can hardly fail to outperform your pension provider. Look at your Annual Statements and compare the rise in the value of your pension pot compared to the performance of the stock market. Lazy City types have been dumping their worst trades in your pension for years.
2) One of the consequences of the Great Repeal Bill will be a loosening of pension regulations; to put it bluntly, you will get less.
3) The money you realise by taking your pension then belongs to you and, eventually, your children. You can buy a property and let it out and pass it on to your children. You can invest in AAPL, Facebook and Google and insure yourself against the damage done by the devaluation of sterling. Or you can invest in stocks that pay healthy dividends - the first five grand is tax free although that falls to two next year. The point is that you are taking control of your own fortune, which is healthy. It's just basic, at the end of your days, you end up with something instead of nothing. I shouldn't bother protecting your investment in an ISA, the same lazy tarts who leech your pension will charge you for the privilege.
in principle surely the idea of drawdown is to leave as much in the pot as possible in the hope your chosen investor has more chance of making a decent return for you,dont see the logic myself of trusting someone with your pot for 40 years and then trying to get it out as quick as you can to invest it yourself,you might as well have saved 40 years of fees and never had one in the 1st place,
i,m a pension novice but would this calculation be feasible or pie in the sky given fair wind
my current state pension fcast is 145 if i get 4 more full nics in before 2025 i,d get the full 155
so if say at 61 i took 10 grand a year in drawdown out of my 150 grand private pot, 50 grand, would it be unreasonable to expect the investment to cover say 20 grand of that and still say have about 120 grand still left in after 5 years,then you can say lower the drawdown to say 5 grand ,to add to your 7 grand state pension keeping you under the tax threshold,
i was told to get proffesional advice on a 150 grand pot could cost around 3 grand,
i,m a pension novice but would this calculation be feasible or pie in the sky given fair wind
my current state pension fcast is 145 if i get 4 more full nics in before 2025 i,d get the full 155
so if say at 61 i took 10 grand a year in drawdown out of my 150 grand private pot, 50 grand, would it be unreasonable to expect the investment to cover say 20 grand of that and still say have about 120 grand still left in after 5 years,then you can say lower the drawdown to say 5 grand ,to add to your 7 grand state pension keeping you under the tax threshold,
i was told to get proffesional advice on a 150 grand pot could cost around 3 grand,
Would you mind sharing the value of your pension pot down the years? No worries if not, it's your welfare, but do please make the calculation for yourself.
united
as a couple me and the wife already use up the 5 grand in tax free dividends with shares we have in a certain telephone company,its this years no 1 to do list to split these shares in name to still get 4 grand tax free in dividends, but although very nice and its been guarenteed for the next few years, you cant really rely on dividends as part of your pension as they can stop at anytime with little or no warning
as a couple me and the wife already use up the 5 grand in tax free dividends with shares we have in a certain telephone company,its this years no 1 to do list to split these shares in name to still get 4 grand tax free in dividends, but although very nice and its been guarenteed for the next few years, you cant really rely on dividends as part of your pension as they can stop at anytime with little or no warning
You can buy a property and let it out and pass it on to your children.
Oh my God!
Go wash your mouth with soap and water.
Unitedbiscuits advising someone to BTL after the mountains of stuff he's written on Politics over the years condemning the practise.
Oh my God!
Go wash your mouth with soap and water.
Unitedbiscuits advising someone to BTL after the mountains of stuff he's written on Politics over the years condemning the practise.
i,m from the north east theres as much chance of the value of a btl going down as it is going up,and with the new tax rules its hardly the no brainer it used to be down south, imo
Another consideration regarding the management of your own financial affairs apart from the added risk, is whether you need the agro of all that in your retirement.
I'd draw a line through BTL straight away in that regard.
As for investing in the market. What if we have a long drawn out bear market? Would you be happy watching you lifelong savings slowly ebbing away day after day?
Hoping and praying for the market to turn, and you worrying yourself sick every day pondering whether to sell and pull out.
Then the moment you do sell the market turns.
Or worrying about your investments when you're lying in the sun on holiday instead of enjoying yourself.
You don't want that when your retired.
I'd draw a line through BTL straight away in that regard.
As for investing in the market. What if we have a long drawn out bear market? Would you be happy watching you lifelong savings slowly ebbing away day after day?
Hoping and praying for the market to turn, and you worrying yourself sick every day pondering whether to sell and pull out.
Then the moment you do sell the market turns.
Or worrying about your investments when you're lying in the sun on holiday instead of enjoying yourself.
You don't want that when your retired.
Sounds sensible to split the share holding 1st time poster. Don't worry too much about dividends drying up, it is unlikely with big companies but if it does happen, vote with your feet. That s the beauty of controlling your own finances. If you go for capital growth rather than a dividend, you can take a bit of profit when you need it, it amounts to the same thing.
I don't see much risk in the BTL business as long as Housing Benefit underpins the market, but it is not a living I would countenance myself. Plenty of options for you.
Have you looked at your historical pension pot figures, BTW?
I don't see much risk in the BTL business as long as Housing Benefit underpins the market, but it is not a living I would countenance myself. Plenty of options for you.
Have you looked at your historical pension pot figures, BTW?
I don't see much risk in the BTL business
Like lambs to the slaughter.
Like lambs to the slaughter.
With respect, Dr Crippen, your last post was very negative. The crash of 2007/08 did not happen overnight, it was a drawn out slide. There was ample to time to decide on what to do. And that's the difference, if your money is tied up you can't decide anything, you just have to sit and suffer through it.
I refer above to Dr Crippen's post before last, "too risky."
"Lambs to the slaughter,"? - you certainly would be if I had my way, Doctor.
"Lambs to the slaughter,"? - you certainly would be if I had my way, Doctor.
What's the point in retiring at all if you're going to carry on working with BTL, or managing stocks and shares.
And you haven't even mentioned corporate bonds which are a much safer option for income than shares.
You might as well carry on at work until you die.
You'll probably end up being the richest man in the cemetery.
And you haven't even mentioned corporate bonds which are a much safer option for income than shares.
You might as well carry on at work until you die.
You'll probably end up being the richest man in the cemetery.
I'll tell you what will happen to you unitedbiscuits.
They'll put your ashes in an egg timer.
Then you can work when you're dead as well.
They'll put your ashes in an egg timer.
Then you can work when you're dead as well.
Lets have a quick chuckle at Dr Crippen's definition of "work" and not hijack 1sttimeposter's concerns.
1st time poster
“cant see the point in taking the 25% cash free to put in an isa paying next to no interest”
The point of taking the 25% cash free
Let’s say you were retiring in 2018 and you decided to carry on investing & drawing down 4-5% each year. In 2020, the chancellor decides that those pensioners have been enjoying too much tax relief & tax free cash & decides to abolish the withdrawal of 25% tax free. Now, all of a sudden the withdrawal of some of the pot may be subject to income tax. So you should consider taking 25% tax free at your earliest opportunity, just in case. I certainly will be! Also, when you add the state pension (7.5K) to your pension drawdown, you could easily be facing a tax bill some years.
As for interest, with a stocks & shares ISA, the same or comparable investment funds you’d be invested in your pension will also be available in the stocks & shares ISA.
“might as well leave it in the pot with the company you’ve trusted for 40 yrs to build it up”
The company you said you use, Standard Life, also do ISAs. The same or comparable investment funds you’d be invested in your pension would be available to you in an ISA. There are lots of providers & you should scrutinise the charges. I use Selftrade.
You should also have a look at a drawdown calculator to work out how long your pot might last with various monthly withdrawals.
https://www.hl.co.uk/pensions/drawdown/calculator
“cant see the point in taking the 25% cash free to put in an isa paying next to no interest”
The point of taking the 25% cash free
Let’s say you were retiring in 2018 and you decided to carry on investing & drawing down 4-5% each year. In 2020, the chancellor decides that those pensioners have been enjoying too much tax relief & tax free cash & decides to abolish the withdrawal of 25% tax free. Now, all of a sudden the withdrawal of some of the pot may be subject to income tax. So you should consider taking 25% tax free at your earliest opportunity, just in case. I certainly will be! Also, when you add the state pension (7.5K) to your pension drawdown, you could easily be facing a tax bill some years.
As for interest, with a stocks & shares ISA, the same or comparable investment funds you’d be invested in your pension will also be available in the stocks & shares ISA.
“might as well leave it in the pot with the company you’ve trusted for 40 yrs to build it up”
The company you said you use, Standard Life, also do ISAs. The same or comparable investment funds you’d be invested in your pension would be available to you in an ISA. There are lots of providers & you should scrutinise the charges. I use Selftrade.
You should also have a look at a drawdown calculator to work out how long your pot might last with various monthly withdrawals.
https://www.hl.co.uk/pensions/drawdown/calculator
You could always whack your money in a tracker and forget about it.
Better results than you will get from the analysts at a fraction of the cost.
Better results than you will get from the analysts at a fraction of the cost.
Yes & there's also lots of Vanguard funds with very low charges. Certainly a lot lower than the sort of funds his pension is currently invested in.
1st time poster
Your comment about dividends from investment in a certain telephone company reads to me as if you have a high proportion of your wealth invested in a single company. If so, this is very risky. Most suggest you should have no more than 10% of your wealth invested in a single company. There are plenty of companies paying this type of dividend and spreading the risk across a no. of companies would be a less risky way of achieving this aim. A single adverse event in the telephone company could put a big dent in your savings.
Your comment about dividends from investment in a certain telephone company reads to me as if you have a high proportion of your wealth invested in a single company. If so, this is very risky. Most suggest you should have no more than 10% of your wealth invested in a single company. There are plenty of companies paying this type of dividend and spreading the risk across a no. of companies would be a less risky way of achieving this aim. A single adverse event in the telephone company could put a big dent in your savings.
you would be correct stow all in one company and i dont dabble in stocks and shares[except pension obviously ],there just shares accumalated through the wifes share save scheme,and for a laymen [ ME ],the amount recieved in dividends 4 to 5 grand tax free would far outweigh anything we,d get if we sold them and invested the money in the usual places,the shares are also not in an isa wrapper [ the amount rather crept up on us over the years ]so there would be some capital gains damage to stomach,did look into getting them into an isa wrapper but without paying for the advice was all rather complicated for this layman
Here's a thought, simply take whatever you can get out of your lump sum and put it in an ISA fixed term for better returns.
Say you raise a pot of £100,000.
You retire at 60 you need 25 years of returns
£100,000 divided by twenty-five years = £4,000 per year.
That's your pension tax-free.
You're not taking out your interest so your money will last longer than 25 years.
If interest rates rise, you might have the pleasant worry of not spending your money quickly enough!
Sorted, now go out and enjoy your retirement.
Say you raise a pot of £100,000.
You retire at 60 you need 25 years of returns
£100,000 divided by twenty-five years = £4,000 per year.
That's your pension tax-free.
You're not taking out your interest so your money will last longer than 25 years.
If interest rates rise, you might have the pleasant worry of not spending your money quickly enough!
Sorted, now go out and enjoy your retirement.
Pay yourself £50 an hour to research using the internet and helpful forums.
Spend that money on some luxuries that you wouldn't normally have.
I hope you are using your CGT allowance each year to reduce holdings.
Spend that money on some luxuries that you wouldn't normally have.
I hope you are using your CGT allowance each year to reduce holdings.
Exactly, Jack. You can take 11k PROFIT before April 6th. Then another 11k on that date.
Don't bother putting what you have in a ISA wrapper and definitely don't pay an advisor to tell you otherwise.
Don't bother putting what you have in a ISA wrapper and definitely don't pay an advisor to tell you otherwise.
Warren Buffet disagrees with diversification. If he was advising 1sttimeposter, he would tell him to stick with the stock that he likes, especially if it has served him well.
Don't bother putting what you have in a ISA wrapper
You can take 11k PROFIT before April 6th
What's this? Investment decisions based on tax liabilities?
That's no way to trade shares with ISAs around. The trading costs will probably outweigh the ISA charges anyway.
Why not hold your shares within an ISA, and pay the ISA providers a paltry amount each year. Then enjoy total flexibility with your trading tax free?
And no declarations to make on your tax returns either.
You can take 11k PROFIT before April 6th
What's this? Investment decisions based on tax liabilities?
That's no way to trade shares with ISAs around. The trading costs will probably outweigh the ISA charges anyway.
Why not hold your shares within an ISA, and pay the ISA providers a paltry amount each year. Then enjoy total flexibility with your trading tax free?
And no declarations to make on your tax returns either.
You don’t usually need to pay tax if you give shares as a gift to your husband
https://www.gov.uk/tax-sell-shares/what-you-pay-it-on
If you transferred half into your name, your annual dividend would be below 4K each.
You each have a capital gains tax of 11K each year. Note that this is a tax on gain. So if you paid 10K for some shares and then sold them for 21K some years later, that would be an 11K gain and you'd have no tax to pay.
If you have paper certificates, you could transfer them into a share account. I did this with a Halifax share dealing account some years ago. There are no annual charges in these type of share dealing account for just holding your shares electronically. ISA accounts do have some annual charges. The dealing charges in these accounts are normally less than those for dealing with paper certificates.
If you wanted to transfer some/all into stocks & shares ISAs.
You could sell some shares each year and re-purchase them in the ISAs. (It would cost you two lots of dealing charge + 0.5% stamp duty on purchase) You could both have an ISA account and could each put up to 20K each year into it.
https://www.gov.uk/tax-sell-shares/what-you-pay-it-on
If you transferred half into your name, your annual dividend would be below 4K each.
You each have a capital gains tax of 11K each year. Note that this is a tax on gain. So if you paid 10K for some shares and then sold them for 21K some years later, that would be an 11K gain and you'd have no tax to pay.
If you have paper certificates, you could transfer them into a share account. I did this with a Halifax share dealing account some years ago. There are no annual charges in these type of share dealing account for just holding your shares electronically. ISA accounts do have some annual charges. The dealing charges in these accounts are normally less than those for dealing with paper certificates.
If you wanted to transfer some/all into stocks & shares ISAs.
You could sell some shares each year and re-purchase them in the ISAs. (It would cost you two lots of dealing charge + 0.5% stamp duty on purchase) You could both have an ISA account and could each put up to 20K each year into it.
You do jump in with both feet, Dr Crippen.
I'm not saying 1sttimeposter should sell those shares, I rather think he should not. But the option is there. I thought he may not know.
I'm not saying 1sttimeposter should sell those shares, I rather think he should not. But the option is there. I thought he may not know.
Even big companies have significant adverse events, so it's not wise to have too much invested in any one company.
BT
http://www.telegraph.co.uk/business/2017/01/27/bt-profits-dive-wake-italian-scandal/
GSK
http://www.bbc.co.uk/news/business-29274822
BT
http://www.telegraph.co.uk/business/2017/01/27/bt-profits-dive-wake-italian-scandal/
GSK
http://www.bbc.co.uk/news/business-29274822
And I was suggesting he sell to reduce CGT liability. He could buy back inside an ISA.
Yes, that's a point. Depends on temperament and what you are comfortable with. Bottom line is, even if you use a pin, you will outperform most pension funds, get dividends and not have to pay their fees. Of course, I would be wrong in 1sttimeposter's case if his pension transfer value is growing at a faster rate than other indices.
ahhr i get it jack
before your last post i was just going to say lot of advice on using up cgt allowance ,but no mention of what if the holdings share price is not favourable to the price you bought them at,but hacksaws last post sort of covers that,we,re in the process of spiltting the holdings between us before the dividend tax is reduced next year
lots of interesting advice on here,probably goes to show how different people [minds] can use a pot to make a big difference on how much you can squeeze out of it
before your last post i was just going to say lot of advice on using up cgt allowance ,but no mention of what if the holdings share price is not favourable to the price you bought them at,but hacksaws last post sort of covers that,we,re in the process of spiltting the holdings between us before the dividend tax is reduced next year
lots of interesting advice on here,probably goes to show how different people [minds] can use a pot to make a big difference on how much you can squeeze out of it
Sears only a few years ago America's biggest retailer just announced they are not sure of survival. 140,000 work for them. Some big names over here likely to be in same position.
standards life fee for me is 1.5%,i no some stakeholder pensions charge alot less ,but what you consider 1.5 as to high, obviously depends on what they do for that 1.5
heard about bed and isa them but it was explained to the wife who had difficulty in explaining it to me,for example we have share certs bought at a huge range of prices over 25 years,as said above some bought at above the current market price and some bought way below the current market price
1.5% is obscenely high!
Take a read of this from the Times :-
The annual charges you pay on your investment and pension funds may seem like a tiny fraction of the overall total. However, they matter because they will eat heavily into your investment returns.
The Department for Work and Pensions (DWP) calculates that people who save throughout their working life into a pension would lose 24 per cent of their accumulated pot if the annual charge was set at 1 per cent.
If the charge was raised to 1.5 per cent, the chunk of pension pot that would be lost becomes an eye-watering 34 per cent.
However, the DWP’s calculations do not cover the full cost of the fund charges that investors bear. The typical headline charge figure quoted by most investment and pension funds takes no account of other “hidden” charges, such as dealing costs, which are borne by the investor but do not feature in the stated charges.
Take a read of this from the Times :-
The annual charges you pay on your investment and pension funds may seem like a tiny fraction of the overall total. However, they matter because they will eat heavily into your investment returns.
The Department for Work and Pensions (DWP) calculates that people who save throughout their working life into a pension would lose 24 per cent of their accumulated pot if the annual charge was set at 1 per cent.
If the charge was raised to 1.5 per cent, the chunk of pension pot that would be lost becomes an eye-watering 34 per cent.
However, the DWP’s calculations do not cover the full cost of the fund charges that investors bear. The typical headline charge figure quoted by most investment and pension funds takes no account of other “hidden” charges, such as dealing costs, which are borne by the investor but do not feature in the stated charges.
Bottom line is, even if you use a pin, you will outperform most pension funds, get dividends and not have to pay their fees
Again that's not the case at all.
How many shares are you going to invest in?
You could come a right cropper with selecting up to ten shares if one of them goes bust and others underperform.
Even a profits warning from one of them could be enough to turn a general market rise into a loss on your personal portfolio.
That's why people invest in unit trusts where they might be invested in a hundred companies.
Of course unit trusts do well to beat the market with their charges, but your own shares aren't free of charges either.
Again that's not the case at all.
How many shares are you going to invest in?
You could come a right cropper with selecting up to ten shares if one of them goes bust and others underperform.
Even a profits warning from one of them could be enough to turn a general market rise into a loss on your personal portfolio.
That's why people invest in unit trusts where they might be invested in a hundred companies.
Of course unit trusts do well to beat the market with their charges, but your own shares aren't free of charges either.
I'm not up to where we currently are with pension rules but the last thing you want to have to buy is annuity, which certainly was the case. Annuities are friends of the state and the enemy of individuals.
Pension annuities were designed to lessen the burden on the welfare state.
Calculating CGT on shares.
http://www.scruttonbland.co.uk/blog-post/calculating-capital-gains-tax-your-share-portfolio
http://www.scruttonbland.co.uk/blog-post/calculating-capital-gains-tax-your-share-portfolio
Annuities have got to be a good deal for the insurance companies.
They base their annuity rates on the current interest rates of long term gilts.
How can they lose?
They base their annuity rates on the current interest rates of long term gilts.
How can they lose?
Annuities are a total tip off. Imagine a law where you have no choice but to buy potatoes. You might not even want them, but because you have to buy them, you going to pay too much for them whether you want them or not.
its for people with your outlook dr
i,m sure when annuties were paying 12,13 grand for a 100 grand pot,it stands to reason doing your own investing you could have got a better return,i,m not out to make a killing or of high expectations,but if i had a pension pot that got me the amount of money i have decide i need ,i,d snap their hands off tomorrow no matter how bad a value in might represent to some people, unfortunately i havnt,
i,m sure when annuties were paying 12,13 grand for a 100 grand pot,it stands to reason doing your own investing you could have got a better return,i,m not out to make a killing or of high expectations,but if i had a pension pot that got me the amount of money i have decide i need ,i,d snap their hands off tomorrow no matter how bad a value in might represent to some people, unfortunately i havnt,
If someone said to me that you get tax exemption on pension contributions, but when you retire you pay tax on 75% of it anyway, and with that 75% you have to buy potatoes, nobody would think twice.
It would be a whole lot better if pension contributions and annuities were mandatory, and that their raison d'etre was to lower the welfare state bill, rather than dressing it up as being essential to everyone's self interest, when it certainly isn't.
Dr Crippen 21 Mar 17 18:21
The next support level is 7368 if it dips again tomorrow.
7368 is wrong, should have said around 7302.
So it worked out perfectly again.
It's remarkable how these support levels can be predicted.
It actually bottomed at 7,301.83. Which is about as close as you can get.
Then the selling was contained and overcome by buying.
Nevertheless the weakness observed last Friday will haunt the market for some time now.
Providing a good buying opportunity for the bulls perhaps?
It's always interesting when one sees these moves developing what the reports say caused the movements after they have happened.
Then when the market changes direction again, the reports are put into the bin where they should have been put in the first place.
The next support level is 7368 if it dips again tomorrow.
7368 is wrong, should have said around 7302.
So it worked out perfectly again.
It's remarkable how these support levels can be predicted.
It actually bottomed at 7,301.83. Which is about as close as you can get.
Then the selling was contained and overcome by buying.
Nevertheless the weakness observed last Friday will haunt the market for some time now.
Providing a good buying opportunity for the bulls perhaps?
It's always interesting when one sees these moves developing what the reports say caused the movements after they have happened.
Then when the market changes direction again, the reports are put into the bin where they should have been put in the first place.
Talk about false news. e.g.
'The FTSE was down 7.8 points today on fears over the effect of Brexit'
The FTSE was up 3.4 points today on increased optimism in Bhutan'
'The FTSE was down 7.8 points today on fears over the effect of Brexit'
The FTSE was up 3.4 points today on increased optimism in Bhutan'
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