Matthew Vincent

Does the general public care about huge levels of unsustainable debt? Not if it’s the government’s, apparently. As my colleagues wrote in this morning’s FT:

Ten leading investment funds all told the FT that a hung Parliament, potentially delaying action to tackle the UK’s £167bn deficit, was the biggest threat to the market… But Sunday’s polls suggest the public does not share market concerns about a hung parliament. In polls by ComRes and YouGov, they said that would be their preferred outcome. More…

Are Britain’s consumers so intoxicated, or numbed, from their 13-year credit binge that they no longer think of debt as a problem? Not so, claimed Sainsbury’s Finance – arguably the ultimate “off-the-shelf” lender – this morning:

Matthew Vincent

A reduction in capital gains tax (CGT)! Who’d have thought it?

By announcing an extension of the CGT entrepreneur relief, from £1m to £2m, the chancellor has not just cut the tax bills of business owners looking to sell up and retire – he has also allowed investors with a stake of 5 per cent of more in a company to enjoy a lower rate on their profits.

Damien Crossley, corporate tax partner at Macfarlanes, the City law firm said:

“The extension of entrepreneur relief from £1m to £2m is good news for owner managers of businesses who will now pay the lower 10 per cent capital gains tax rate on up to £2m of gains over their lifetime.”

Frank Nash, Blick Rothenberg, saw it as compensation for losing so much pension tax relief:

“The doubling of the capital gains tax entrepreneurs’ relief limit to £2 million will be a welcome move for retiring business owners particularly as the Chancellor has hit their pension funds so harshly with recent tax changes.”

But don’t be fooled. Capital gains tax will inevitably be raised for everyone before long – probably after the election. In an ironic inversion of New Labour’s 1997 election slogan, Louise Somerset of RBC Wealth management warned:

Wealthy taxpayers are unlikely to look at this Budget as being as bad as it gets, and I expect clients wanting to… lock in current tax rates before things possibly get worse.”

She, and others, point out that the difference between income tax rates of up to 50 per cent and CGT at 18 per cent is now so significant that many people will be putting a great deal of energy into ensuring they realise capital gains rather than income. No government is likely to allow that to happen for too long.

Steve Folkard, AXA Life’s head of pensions and savings policy, said: “It surely hasn’t escaped the chancellor that this is a massive difference, but closing the gap will not be a quick measure as it would be entirely unfair to make a change effective prior to the next tax year.”

A new chancellor may be less concerned about fairness.

Matthew Vincent

Is popular culture to blame for the state of household finances? It occurs to me that today’s indebted thirty-somethings had the misfortune to grow up in the 1980s to a soundtrack of such musically – and economically – dubious classics as ‘Money For Nothing’ by Dire Straits, ‘Gold’ by Spandau Ballet, and ‘Opportunities (Let’s Make Lots of Money)’ by the Pet Shop Boys. They clearly switched off whenever Radio 1′s ‘Oooh’ Gary Davies introduced ‘Money’s Too Tight to Mention’ by Simply Red – but then didn’t we all?

So it’s perhaps little wonder that this generation’s children are now growing up in households with average short-term debt of £8,653, according to Scottish Widows. They’re having to live with it, too – Equifax reports that one third of borrowers are only paying off up to 25 per cent of these credit card debts each month, with nearly one in four making only the minimum repayment.

But the children may grow up to be more financially savvy than their parents – thanks to the music of Tinchy Stryder, the undisputed ‘Prince of Grime’. For those of you unfamiliar with the latest urban sounds, Tinchy recently reached number one, in what Gary used call the Hit Parade, with the self-confidently titled ‘Number One’, featuring N-Dubz. And now, he is giving personal finance lessons in schools.

Matthew Vincent

Yesterday, three events made me realise why music has been a good investment for venture capital trusts (VCTs), but not for private-equity funds.

In the morning, I edited a column by Kevin Goldstein-Jackson, citing the fate of music label EMI. Kevin recalled his prescience in asking, back in 2007, whether EMI would be bought by a private equity firm that would “overpay, borrow too much – and cut the artist roster [and therefore sales] even further”. Terra Firma now appears to have done all three – halving EMI’s value to £2bn.

In the afternoon, I visited Ingenious Media, which manages a VCT investing in music festivals. This requires a fraction of what it costs to buy a music label – it raised £85m for all its trusts – but achieves margins of up to 30 or 40 per cent by charging people to listen to music in muddy fields, and then camp out in them.

In the evening, I attended the Brit Awards, at which thousands of people in more hospitable surroundings enthusiastically toasted popular artists by the names of Lady Gaga, Jay-Z and Dizzy Rascal. So hospitable were the organisers, and the sommeliers, that my hosts were dancing on the table by 9.30pm, and last seen heading for the bar – via the indoor dodgem cars, post ironic bingo hall, giant inflatable octopus and crazy golf course – at the after-show party.

It was then that, in the words of Best British female artist Lily Allen, “it all became clear”…

Matthew Vincent

There are some financial mistakes you only make once. Being sold an endowment mortgage, and forgetting to sell my Northern Rock shares, spring to mind. But they pale in comparison with telling a woman that Valentine’s Day is (and, to my shame, I quote): “…a wholly artificial construct, devised solely to give the retail and leisure sectors a much-needed boost in the traditionally quiet first quarter.”

This really is not advisable. Trust me. Not only does it quadruple the cost of what could have been a straightforward visit to KFC via Clinton Cards, but it also results in an annual reminder that sufficient cash needs to be parted with this year – and, indeed, on every subsequent February 14th.

However, it seems that going to the other extreme in the pursuit of true love can prove even more costly. A few days ago, the Office of Fair Trading (OFT) issued a warning about “common internet dating scams that can leave you heart-broken and out of pocket.” Not a good combination. Trust me.

According to the Cupid Cops:

“The increased potential to meet new people online is being used by scammers to con people out of their money. Scammers target singles columns and dating websites to search for potential victims. They create fictitious online profiles or send out unsolicited emails or letters, often with fake photographs. Scammers use the trust gained to persuade victims to part with large sums, with some frauds going on for years.”

I know the feeling – every time I read the special St Valentine’s Day menu, for the 6.45-7.15pm sitting, at my fifth-choice restaurant.

So what’s the OFT’s advice? “If you receive any requests for money, be suspicious.”

More easily said than done. Trust me. Most men, when faced with requests for money from retailers and restaurateurs, end up spending up to five times as much as women on “romantics gifts and treats”, according to Tesco Bank. And 7 per cent of lovelorn fools lavish more than £200 on the objects of their affections.

It can’t buy you love – but it can buy you peace and quiet for another 12 months.

Matthew Vincent

How to ruin an independent financial adviser’s plans for a holiday home in Marbella/new Jaguar XK/ambitious kitchen extension:

  1. Allow the only ‘star’ fund manager that anyone has ever heard of to come out of retirement
  2. Announce that he is to launch a new fund investing in the most over-hyped market in the world
  3. Let him tell the media that “the opportunity is simply too great to pass up”
  4. Say that you are aiming to attract £630m initially
  5. Then launch the fund as a London-listed investment company, which doesn’t pay commission to advisers on large lump-sum investments (only on Isas or monthly savings).

You’ve got to hand it to Anthony Bolton… for not handing over chunks of cash to intermediaries . He doesn’t need to. Just his reputation and the over-excitement over Chinese equities will be enough to raise £630m in days. Investors can apply for shares directly from February 26 until March 26 (or April 5 for online Isa applications). But if you’ve already decided you want to take a risk on China, I wouldn’t wait it until February 27 if I were you.

This is all rather clever. Not only does it save Fidelity millions in commission, it makes the fund’s outperformance a self-fulfilling prophesy.

Matthew Vincent

January transfer window latest: Man City have signed Patrick Vieira from Inter Milan on a six-month deal for an undisclosed fee, and are close to agreeing the £3.5m transfer of 19-year-old striker Victor Moses from Crystal Palace – but the Eastlands club will have to pay £14m to take Younes Kaboul from Portsmouth!

If your first reaction is, “Vieira’s never recaptured his form with Arsenal in 2004, so how’s he going to fit into a midfield with Stephen Ireland, Gareth Barry, and Nigel de Jong…?”, then there’s not much more I can tell you (although I suppose Mancini could move Barry out to the left and rotate Vieira with de Jong…)

But if, as I suspect, your reaction is closer to, “Why should I care?”, then I’ve got two words for you… “Inheritance tax!”.

It’s not exactly a common chant on the terraces – but might become the talk of the directors’ box following the launch of a new tax-saving product, based on football transfer fees.

Matthew Vincent

Can you believe it’s 2010 already? Doesn’t time fly?

But if you’re trying to build up a decent pension, time is not so much “flying” as running out. You now have virtually no chance of getting a decent final-salary pension. Nine out of 10 ‘defined-benefit’ (DB) schemes are closed to new entrants, according to a new survey by the Association of Consulting Actuaries, and 18 per cent are closed to additional contributions from existing employees – double the proportion just four years ago.

It’s only going to get worse in the coming years, as almost 60 per cent of employers say they will “review” (translation: “reduce”) their pension provision ahead of the government’s plans for automatically enrolling staff into new personal accounts. That will mean more poorly-funded defined contribution (DC) schemes, with employers and staff paying the bare minimum.

Matthew Vincent

The gap just keeps getting wider! No, not the gap between rich and poor – some of today’s National Insurance and income tax allowance measures for high earners will help to close that (not to mention the bank payroll tax). And not the gap between private and private sector pensions – measures to cap public sector employer contributions should make them less outrageously advantageous (although pension campaigner Dr Ros Altmann points out that the cost of public sector pensions will still rise by 45 per cent next year, cap or no cap!).

I refer to the yawning gap between income tax and capital gains tax (CGT).

Income tax for high earners will hit 50 per cent from next April, and today we learned that National Insurance on earnings above £43,000 is going up to 2 per cent from April 2011, not 1.5 per cent as previously announced. That’s a marginal rate of 52 per cent in 18 months’ time (National Insurance is nothing but income tax in a fluffy disguise). But capital gains tax was left completely unchanged in the pre-Budget report, at a flat rate of 18 per cent – contrary to many predictions.

That’s a gap of 34 percentage points – the widest in living memory (well, my memory, at least).

But before you try the – theoretically legal – wrapping up of profits in a company structure to take earned income as a capital gain, bear in mind that the Transaction & Securities legislation is coming. Consultation on anti-avoidance measures closed on October 31, but don’t be lulled into thinking that the chancellor forgot about it in today’s statement.

Although he had time to announce measures today, HM Revenue & Customs says he’s waiting until Budget 2010. If there isn’t an election before he gets to deliver one…

Matthew Vincent

Clearly, writing a column for FT Money – as well as a book and several choral compositions – just wasn’t enough for Anthony Bolton.

In Hong Kong earlier today, Fidelity’s star fund manager announced that he was returning to running money, with the launch of a new China focused fund – just two years after he stepped down from a 28-year stint running Fidelity Special Situations.

He gives his reasons in an exclusive column, which will appear in FT Money on Saturday (and on later today).

Already, the news has met with an ecstatic welcome. Chelsea Financial Services’ managing director, Darius McDermott, said: “Nothing quite beats a comeback. Boxing had Ali; cycling had Armstrong; fund management now has Anthony Bolton.” Bestinvest’s senior investment adviser, Adrian Lowcock, said: “Antony Bolton coming back to manage money is going to attract a lot of interest from investors. It would be a brave investor to bet against him.”

I think it will be a fascinating experiment in whether Anthony’s fundamentals-based, due diligence approach to stock-picking really can work in China. Consider some of his recent FT Money columns…

The FT’s Money blog is a forum for the latest news and insights from the UK’s personal finance scene. Matthew Vincent, the editor of FT Money and his team of reporters will upload their views and insights on what’s happening in the industry and how this affects people’s finances.

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Lucy Warwick-Ching is the FT’s new Money Online Editor and has been a UK Companies reporter covering tobacco, pubs and leisure companies as well as the deputy editor on House and Home.

Matthew Vincent is the FT’s Personal Finance Editor and was previously the editor of Investors Chronicle, where he also devised the award-winning online video The Market Programme, and produced the BBC-FT standalone magazine ‘How to be Better Off’. He presents the weekly FT Money Show audio podcast, and previously worked on the BBC TV programmes Short Change and Pound for Pound.

Alice Ross is deputy personal finance editor of FT Money. She specialises in pensions, investments and investment trusts. Alice joined FT Money in April 2008 - prior to that she was deputy editor at Money Management magazine.

Ellen Kelleher has been a personal finance reporter in the UK for close to four years. Before arriving in London, she worked in the FT's New York bureau where she covered the insurance sector.

Steve Lodge is a personal finance reporter on FT Money specialising in savings.

Josephine Cumbo has written about all aspects of personal finance but currently specialises in insurance. She also covered company news for Prior to working at the FT she was a news reporter for the ABC.

Tanya Powley is a personal finance reporter on FT Money specialising in mortgages and the housing market. Tanya joined FT Money in November 2009 after working in Australia covering personal finance for the Australian Financial Review and its sister magazine Asset. Prior to that, Tanya wrote about mortgages for UK trade newspaper Money Marketing.

Jonathan Eley is editor of Investors Chronicle, and has been with the title for ten years. Before that he worked for newswires and trade journals in London, New York and Hong Kong.