All this talk of raising capital gains tax is ominous news for zeros.
By ‘zeros’ I mean of course zero dividend preference shares – that class of investment trust shares that lost investors millions back in 2002 and were responsible for the biggest scandal to hit the industry.
The zeros have recently been experiencing something of a comeback – despite their dodgy history – thanks to the fact they are taxed as capital gains not income. A lot of the zero shares launched in the past year have been in response to private client wealth managers, who in turn were responding to pressure from their investors.
Now, it looks like the brief resurgence could be already thwarted. Analysts at Numis Securities said today a rise in CGT ‘appears negative’ for zero dividend preference shares – a view that was also expressed by analysts at Oriel last week.
Of course, there has to be an investment case for the zeros too – with some, such as those from Ecofin, attached to attractive, stable companies. It is early days – but it will be interesting to see how strong the demand for zeros is after the emergency Budget on 22 June.
The next government had better prepare itself for some heavy lobbying from some of my breakfast companions this morning.
I went along to discuss the future of pension saving with some well-known people in the business, including Maggie Craig, director of life and savings at the Association of British Insurers, Tom McPhail, head of pensions policy at Hargreaves Lansdown and Laurie Edmans – who’s just been appointed one of the people who will run the government’s new national pension saving scheme, Nest.
One of the topics that got people most excited – after we had discussed the problem of people not saving enough for retirement, and not being aware of their options when they do retire – was Tom’s notion that the next government should appoint a minister for savings. Such a person, he argued, would focus purely on making sure people understood how to save their money – both for retirement and for other things, like putting down a deposit on a house.
Everyone around the breakfast table nodded agreement and said we should all start lobbying straight away – or, in Tom’s words, “kick the door down in Whitehall and get them to make changes”. “I wish I’d thought of it myself,” said Laurie.
It doesn’t sound like a bad idea – especially when you consider that people failing to save their money means they have to rely on the state in retirement, and that a lack of savings means reliance on credit card bills and potential bankruptcies – contributing to the state our economy is now in. After all, we have a minister for housing, a minister for investment and a minister for pensions. Why not one for savings too?
The Financial Services Authority said today that commission on financial advice will be banned – again. It has been saying this for quite some time and set out proposals telling everyone what it was going to do last summer so I’m not sure why people seem so surprised.
Ok – so it’s a confirmation of the proposals. And it’s a good thing that commission is getting scrapped – in principle. But read a little behind the lines and I’m not sure how much effect this will all really have.
The chancellor said nothing new about pensions today. But he did confirm that the fiendishly complex rules on pension savings introduced in last year’s Budget and December’s pre-Budget report are here to stay.
Not only does this ignore the advice of most of the pensions industry, who’ve been submitting pretty annoyed responses to the ideas over the past month or so. It also flies in the face of pensions simplification, which was introduced in 2006 and was supposed to make saving into a pension easier for most of us.
There are now a mindboggling number of rules on whether you can get pension tax relief.
Forget who will actually win this year’s general election – what will happen to the stock market?
I got Blackrock, the fund managers, to run me some figures on what happens to stock markets in the run up to a general election and the year after.
I’d like to say there was a clear pattern that would seem to justify selling or buying, but the results were inconclusive. Actually, I’ve rarely seen figures so evenly distributed.
So the Monetary Policy Committee has kept interest rates at 0.5 per cent. I don’t think we’ll be holding the front page for this one somehow, as it has come as no surprise to anyone.
The usual round of commentators on interest rate decisions who promptly send me press releases at 12.01 are struggling today to find anything interesting to say about it. However here is a brief selection of some of the more interesting views.
Amid all the doom and gloom surrounding pension savings at the moment, it turns out people think the best way to produce a retirement income is actually property.
Standard Life has asked around and found that 45 per cent of people think property is the best investment pot for retirement, just ahead of savings accounts – including cash Isas – and putting money into a company pension.
But this has prompted Standard Life’s resident nerd (in the best possible way of course), Andy Tully, to run some numbers showing how much retirement income you can actually get from your property. It doesn’t look pretty.
The trend for investors to flock to products taxed as capital gains seems to be coming to, if not an end, a bit of a wobble.
It seems product providers and private client advisers are now taking more of a ‘wait and see’ approach to the income vs capital gains issue, ahead of the general election. Lots of people think that a new government would act fairly swiftly to narrow the gap between capital gains tax at 18 per cent and income tax – set to rise to 50 per cent.
Yesterday, Invesco Perpetual withdrew the launch of a split capital investment trust, saying that there was too much uncertainty over the tax regime to go ahead with it. (Read about it here.)
Alliance Trust has become the latest investment company to bring forward its annual dividend payout, to avoid investors having to pay more tax.
The company just put out an announcement – after 5pm today – that it’s paying its fourth interim dividend to shareholders on 1 April. Last year it paid this on 30 April.
This follows a number of other investment companies – and other companies in general – bringing forward their dividend payouts before the rise in income tax.
From 6 April a new higher rate of 50 per cent will apply to those earning over £150,000, while the top rate of dividend tax will go up to 42.5 per cent, from 32.5 per cent currently.
Other investment trusts to have brought forward their dividend this year include Murray Income, Caledonia and HgCapital Trust – but the list is pretty small so far. Others are likely to follow though – watch this space.
Compulsory annuitisation is such an awful phrase. Most people think it’s an awful concept too. These people include the Tories – and as of yesterday, it’s looking more likely that something might be done about it.