BNC Text G4H

Pre-retirement course: presentation. Sample containing about 27819 words speech recorded in public context

3 speakers recorded by respondent number C190

G4HPS1WP Ag3 m (John, age 40, financial advisor) unspecified
G4HPSUNK (respondent W0000) X u (Unknown speaker, age unknown) other
G4HPSUGP (respondent W000M) X u (Group of unknown speakers, age unknown) other

1 recordings

  1. Tape 089801 recorded on 1993-04-28. LocationNottinghamshire: Nottingham ( conference centre ) Activity: presentation

Undivided text

Unknown speaker (G4HPSUNK) [1] advisers, we have known them through the period their firm through the period of time [...] quite a number of ... years, and we can federate er er testify to their integrity.
[2] And you are an independent body?
John (G4HPS1WP) [3] That's right, yes.
Unknown speaker (G4HPSUNK) [4] I'm sure you'll expound without me saying any further.
John (G4HPS1WP) [5] Yes.
Unknown speaker (G4HPSUNK) [6] So John,
John (G4HPS1WP) [7] Thanks very much.
Unknown speaker (G4HPSUNK) [8] Over to you.
John (G4HPS1WP) [9] Thank you.
[10] ... Erm ... right, well we've got the lights down, we'll perhaps er use some of the slides er later, but er if I can just introduce myself by saying that some of you will already know Chris , this is the er nature of our business.
[11] Er we are involved er quite heavily in local authority and teachers generally, through unions and through other connections, so erm some of you will have seen us advertised anyway.
[12] Er there's the general insurance side which is based in Bournemouth ... and you may have had to contact them on previous occasions for quotations for motor and er house insurance, that sort of thing.
[13] Now, on erm the er insurance er the, the pensions and life side then that's my particular area, and obviously I'm based in Birmingham for that, although I actually live in Derby.
[14] So er I, I b basically go to the office one day a week, that's my admin day, and the rest, I, I tend to work within this area.
[15] Er I suppose erm ... er the, most of the people I've seen in the last ten years have been people either approaching retirement, planning for retirement or actually at the point of retirement ... and er we've obviously looked at this course over a number of years and we try to sort of distil it down to the basics of things that we think are important er and that we think will be useful to you.
[16] Erm so I'll start by looking at some of the er factors.
[17] Now in this first session I really want to look at the way that er er financial planning will affect you once you, once you retire, it may be that's the sort of area you've not looked at in detail.
[18] Well, I find [...] nowadays, people are much better at planning their retirement than they used to be, maybe because people are more aware of the fact th they won't necessarily be teaching till sixty or ... that sort of erm age.
[19] And er certainly in teaching there's been quite a big change over the last ten years in the way that people perceive retirement.
[20] I can say that you know, lots of heads and deputies ten years ago would have said to me well, what is a pen I mean what pension do I get?
[21] Do I get one from the state, or is it going to be, yes, where does it come from?
[22] And people have actually moved quite a long way in the direction of actually working out their own finances.
[23] And erm I think that er will be proved this morning, by the amount of knowledge that you er have between you.
[24] ... So er if I can just have the lights off at this stage please.
Unknown speaker (G4HPSUNK) [25] Lights off. ...
John (G4HPS1WP) [26] Thank you.
[27] ... Focus it in for you.
[28] ... Right.
[29] ... Perhaps by er the blinds as well, that might help a bit.
[30] ... [...] ... that one's possible at the front.
[31] ... Right thank you.
Unknown speaker (G4HPSUNK) [32] I think it's the other one.
Unknown speaker (G4HPSUNK) [33] No it's the other one.
Unknown speaker (G4HPSUNK) [...]
Unknown speaker (G4HPSUNK) [...]
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [34] It's all going so smoothly this morning isn't it?
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [35] Give it a chance, give it a chance.
John (G4HPS1WP) [36] [laugh] Right, thanks a lot.
[37] So er er you've all participated well so far [...] .
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [38] [laugh] So er as you can see, there is a FIMBRA logo on there, and that actually refers to the fact that we are regulated under FIMBRA er rules, that's the Financial Intermediaries and Managers Regulatory Authority.
[39] Now, don't worry too much about that, because er FIMBRA itself is a fairly new organization, and er it makes mistakes.
[40] As you probably read in the quality press, FIMBRA are always being taken to task for er not spotting investment groups that have gone too far, er and er when you get the collapse of something like the Levitt group erm which you'll be aware of perhaps was the er sort of boxing and impresario type route that was taken by the man in the dicky bow.
[41] And er I think somebody said to me beware of the man who wears a dicky bow during the day.
[42] Er this was
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [43] a boxing promoter who reckons you should only wear them for er n evenings, obviously.
[44] So er that s er that firm collapsed and people lost money and er that's why FIMBRA is there, er to try and protect the ... investor.
[45] But, er I think a golden rule must be, when you're looking at financial er matters is er make sure you know who you're dealing with.
[46] Because if you want to, if you want to beat the system, you can of course.
[47] I mean, er FIMBRA can do its regulatory bit, the same as the police can regulate or the, or the government can regulate, but only within certain er parameters, and if somebody really wants to cheat, then they will cheat anyway ... and er we've go we're in a very sophisticated position where the directors of B C C I were able to move money from one continent to another and it meant er it looked as if you'd actually got money in three separate areas, but in fact there was only one lot and it was being moved rapidly.
[48] Erm ... but that sort of thing can always go on ... so er I mean as far as you're concerned, are a major broker, are er obviously, obviously a, a reasonable choice in that we are accountable.
[49] Any major broker must be in the U K because er er they are exposed to the public view if you like, and if there are any errors or, or deceptions then they're likely to come up very quickly.
[50] So erm a golden er rule must be, avoid small operators [...]
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [51] that type of thing.
[52] They may be absolutely fine, and if you're going there for a number of years, you've probably got no er problem with them, but of course the smaller the organization the simpler is, it is for other erm factors to creep in.
[53] ... Er now, on another topic, I will go back to the idea of regulation later, you'll see that life expectancy is obviously important and er when you're looking at retirement I mean it's always been described as the longest holiday of your life and it certainly is that, and life expectancy is rising all the time, these figures have actually been superseded.
[54] So you can actually er say that someone at sixty five will live slightly longer than the figures on the on the board here.
[55] These are provided by the actuarial statistics er er er section of the life office, and they're actually very accurate.
[56] Erm but erm you'll notice first of all that there is a difference between male and female longevity.
[57] Erm we won't go into a discussion about that this morning, but there are lots of reasons why females live longer on average than males.
Unknown speaker (G4HPSUNK) [58] Can you narrow it down to various professions on the er expectancies?
John (G4HPS1WP) [59] Oh absolutely yes.
Unknown speaker (G4HPSUNK) [60] Cos I've heard one [...] .
John (G4HPS1WP) [laugh]
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [61] Well most yes, it may have altered, yes.
[62] I mean actuarial erm a lot of it is er er not open to public view of course, life offices have their own views of it.
[63] And if you went to General Accident and looked at their actuarial tables, they might be slightly different to other groups, but in that sense
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [64] you're right.
[65] There are risk factors involved.
Unknown speaker (G4HPSUNK) [66] For erm head teachers, if you retire at sixty, you can have fourteen, [...] sixty five you've got one. ...
John (G4HPS1WP) [67] Right, yes.
[68] That's er for
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [69] head teachers, yeah.
[70] I remember a, I remember er an A H T came out with some figures five years ago which may have prompted some early retirements then.
[71] Er
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [72] Doesn't seem you've got too long once you've finished.
[73] Er and I mean er a lot of that's perhaps the release of stress, so that you know you've been under pressure for a long time and then you, you take that away, and it may actually be detrimental to [...] but er it doesn't, obviously the figures are a little bit odd.
[74] If you, if you look at the figures er for that male age fifty, and add on the twenty three, that's seventy three.
[75] But if you look at the sixty five and add on the twelve, it's er seventy seven and of course if you go on to the actuarial figures actually get better as you get older in terms of actual lifespan.
[76] So that if you've been really rough, and you're ninety nine, you can look at the figures and you've still got nearly four years left.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [77] But don't forget these are, these are actuarial averages, and er we, you know the thing about beating the system this is often down to your input as well.
[78] You know, whether you're relaxed, whether you're from a long lived family ... so on and so forth.
[79] I am not here to discuss that now, but I mean it's just to make sure that you know that things aren't planned for five years or ten years, but possibly for a lot longer than that.
[80] Cos the we er did get people contacting the office to say I've got a lump sum, I'd like to put it somewhere for a couple of years, and er we always wondered why they're thinking of a couple of years.
[81] Are they going to spend it suddenly in er two years time, or are they expecting not to be around in two years time?
[82] So I mean think about it as long term planning, and certainly for those under er sixty ... the long term becomes extremely long term because er you know you're looking at perhaps a third of your life er which is er still to be accounted for.
[83] ... Er so these er are er the state pension arrangements, and you've had a speaker on state pensions anyway.
[84] I think these have got to be slightly updated with a new er with the new rates that have come through, cos that was right on six four ninety two.
[85] We haven't updated the slide yet.
[86] But the main thing is i it starts at sixty for women, sixty five for men, and of course that's erm important when you come to erm planning, because er if you've got er a male retiring at say fifty eight, he's actually got seven years to go before he, he draws state pension.
[87] And for a female it may be possible that she's not going to get a full pension anyway, she may have er had time out, not paid contributions right the way through etcetera.
[88] So a lot of the target planning I suppose that we've come across is people saying well when I retire, I shall actually go down to half salary at best, that's assuming th that you've actually made half, about half salary on your pension being forty eightieths or whatever.
[89] You've still got a fair gap to make up between that and your salary.
[90] ... And er with that in mind, it's possible that people do want to top up their income, because the one thing I will stress to you is that you don't want to have to start having to back-pedal er when you retire.
[91] You don't want to have things erm at a lesser level than you er started with.
[92] So when you're planning your retirement, make sure that you give yourself a reasonable standard of living in terms of income.
[93] Er it's no good saying you'll turn down the central heating and you'll only take one holiday instead of two, that's not really the purpose of retirement, and I think you've got to be objective about what you're doing with this.
[94] Er you'll find that we do have actually have a calculator which we can send out with a retirement pack and that actually gives you an aide-memoire to actually remind you about the things that you might forget ... erm with regard to erm things like er holidays er erm say, medical expenses, er fuel expenses, erm club fees, T V licence, all those things.
[95] If you've not done that exercise yet, it's quite a useful one to find out what figures you come up with.
[96] And er that will give you an objective starting point for what you actually need.
[97] Cos what you actually need isn't just your monthly figure, is it?
[98] It is the er sort of er five hundred pounds that goes out your bank account on direct debits, it's all the other incidentals during the year, and even er you know gifts for children, pets in the case of some people, if you've got er large dogs or whatever, then you know there's vet's bills, food, etcetera, that you know, is probably incidental at the moment, but not when you retire.
[99] So try and do that as objectively as you can, and don't forget if you've got a partner, do it together because we, I do get these won these reply slips back, and you can often tell who's filled it in.
[100] Especially if under clothing it's got fifty quid, you can assume it's the chap
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [101] er who's probably thinking well I do need some new boots for the garden, but er
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [102] but er ... if you put it in together you come up with a more realistic erm assessment.
[103] These things alter amazingly you know, I mean it's incredible that the, the sort of and yet that they both work.
[104] If you get somebody putting six hundred pounds for holidays, I'll be thinking mhm you know, they're not going to be able to do a lot on six hundred pounds a year, but when I actually get to talk to them I find they've got a caravan, and a friend who's got a site in North er er in North Yorkshire.
[105] And actually that's quite a good budget to do sort of er four or five weeks er you know caravanning a year.
[106] And yet somebody else might have three or four thousand down, and that's because they're jetting off to er foreign climes a few times a year.
[107] So it's all down to individuals, and that's why it's important for you to do your own budgeting exercise.
[108] And of course if you're finding that there's a shortfall there, then you've got to try and look at your you know assets, your lump sum etcetera, as a way of, of erm er trying to cover that shortfall.
[109] ... Erm, right.
[110] So, on the tax area, first of all you've got to consider whether you're a non-taxpayer, a basic rate taxpayer, or a high rate taxpayer.
[111] Well as you know er to be a basic rate taxpayer, you're paying twenty five pence in the pound, apart from the er the new rate you know the first two thousand five hundred you get at twenty percent, which came in at the last budget.
[112] Higher, higher rate, rate, well you don't start to pay that until you've exceeded the twenty three thousand seven hundred plus your personal allowance, so y you your basic rate of tax goes to twenty three seven hundred then you can add, add on your basic allowance, and for most people if they're earning er a single person twenty seven and a half and married person twenty eight and a half above that you're paying higher rate tax.
[113] ... And er of course in retirement, it's unlikely that anybody will be paying higher rate tax, unless you've been very lucky on your pension provision.
[114] Er but erm the fact is i if you're a non-taxpayer, obviously we've got to take a different view of the way you that you might invest money.
[115] That's not unusual, because I quite often find that one partner's not working and therefore they're not using up their tax allowance so at retirement or before, I can move money into their name, and there are good reasons for doing that.
[116] Erm ... you notice here that the amount is, didn't alter in the last budget.
[117] Erm so erm what I'll do is just indicate the amounts as they stand.
[118] Now, obviously this is three four four five, and that's allo that's available to each person, so if it's a married couple, they'll each get that amount, then there's a married couple's allowance, which is worth seventeen twenty, and that can be moved either to the male or the female or split ... er under the regulations as they stand.
[119] Obviously normally the high rate, the higher wage earner would have that er erm er allowance.
[120] So that would make erm er five one six five as a married man's or a married couple's allowance as it's now called, plus the three four four five.
[121] So actually it's quite generous in terms of what you can earn before you actually pay tax.
[122] Don't forget you don't pay any tax till you get above that level.
[123] You'll notice at sixty five that the allowances go up, and the er by getting to sixty five you're rewarded by a larger personal allowance and a larger married couple's allowance, but that starts to be abated at fourteen thousand two hundred.
[124] Er, which used to be a problem up until about three or four years ago when independent taxation came in in nineteen ninety.
[125] Now, independent taxation means that th that you've both got an allowance of fourteen thousand two hundred before age allowance is abated, but for teachers who're [...] you know [...] retired early, er some years ago, and they perhaps got a pension for themselves, a pension for their wife, then obviously when they got to sixty five, quite ou because it was calculated as a, as er one total, it actually abated their allowance quickly.
[126] Now, by some manoeuvring on this, you can often get the income to sort of fit both sides if you like, you know by putting income to each side, you can avoid losing your age allowance.
[127] Now once you get to fourteen thousand two hundred, your age allowance is abated, [...]
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [128] one pound for every two over the limit, and you're abated back to this level of allowance.
[129] Er, but it's worth er you know manoeuvring a little bit on that if you can.
[130] Erm if I could just stop there for a couple of minutes to ... er make a point about ... er independent taxation.
[131] Erm if we've got erm er a couple say age sixty, and they've got their personal allowances er as, as usual, er let's assume that the male's retired and he's getting an income of five thousand two hundred, let's just suppose.
[132] So we know that his er his five one six five allowance is fully used, in other words his, his tax allowance is fully used.
[133] Er in fact erm it could be perhaps plus some investment income as well, let's say that his wife though, er she, he's go he's got the erm five one six five allowance, so he's going to pay tax on whatever else he earns in other words.
[134] If say the female has got an income of only er two thousand a year, she's got er an unused allowance of fourteen forty five, in other words, erm that er three four four five allowance isn't being used now, I mean if we put ten thousand into his name, erm we would er suffer tax at erm say twenty five percent on most of it.
[135] Er so er let's say that the ten percent rate applies, er mind you ten percent is a long way from where we are now, but it makes the figures easy to look at, so ... er let's say that he's getting ten percent gross on his return on a building society, he'd actually get seven and a half percent net, er so on his ten thousand he's going to earn seven fifty.
[136] ... Okay?
[137] So that's his ten thousand investment income, well that's fine, you know, no problem, and there is a marginal rate here which you could in fact reclaim a bit of tax on twenty percent.
[138] But what happens if he gives it to his wife?
[139] Well er firstly, he can, even if it's his money give it to his wife as his partner, and she could then invest the money, and because she's not paying any tax, er she could get a ten percent return, so she could actually get a thousand pounds on that ten thousand and that would be payable gross.
[140] So immediately they've made two hundred and fifty pounds a year er bonus by having the wife's er name on the account.
[141] Now, the way that er gross accounts work is erm er fairly straightforward.
[142] You've got a form R eighty five which is available for bank and building society investors, and if you've got er a gross account then er you, you have to agree with the revenue that you are not going to be a taxpayer in the year that you take out the er R eighty five.
[143] It's no good if you think you might drop into tax later, [...]
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [144] avoid doing it because the revenue are checking one in twenty cases, and if you've got a partner who's likely to pay, not to pay tax, that's fine, if they are likely to roll over into tax, then don't use an R eighty five.
[145] The simple way there as you've probably been told by your tax officer here is just to reclaim it at the end of the tax year.
[146] You know if you've got any un a balance that you can reclaim, then do it then.
[147] Er there are other ways of getting gross income, obviously.
[148] And er one of the ways you can use is er National Savings Income Bonds, er which are er okay, but they're, the trouble is they're at a variable rate, so at the moment they're paying seven percent, so that's on National Savings Income Bonds, so that that person would get seven hundred a year at the moment gross, and of course er you don't need to t to fill in an R eighty five for that type of investment because it's not a bank or building society account.
[149] Erm the problem is that people who were in this account two years ago were earning thirteen and a half percent, well say eighteen months ago.
[150] And of course with the reduction in the erm er interest rates, then those have come down quite steeply.
[151] So it's a bit frightening when you think a pensioner's money may have been in that account at thirteen fifty on a, on ten thousand invested, and now they're down to seven hundred.
[152] If that was paying some important bills they'd be struggling.
[153] And er I can remember several cases years ag you know so going back two or three years where people were debating with me why didn't I put more into National Savings?
[154] Cos I was using that issue at that time, but we always make the proviso that if things change, you may have to alter your mind about where your money's placed.
[155] Because obviously it's linked to U K interest rates, and therefore you suffer whatever goes on there.
[156] It's not all negative, of course, I mean the fact is we've got low underlying inflation at the moment, and that means that i a seven percent return and if the inflation rate's less than three, you're actually, it's, it's really reasonably profitable.
[157] But of course profit's one thing, and income's another thing, and I think the problem with most er forms of income type investment is that we spend it, it's not a problem it's just, it just happens.
[158] But when you spend it when you're spending your income you're not accumulating your capital, so this person in five years time, although they've had their income which may vary between seven and thirteen percent, their ten thousand is still ten thousand pounds, and obviously that would have devalued in real terms against inflation, which is the other problem.
[159] So the point I'm trying to make is that you can't rely on one product to do the whole job.
[160] Th f for a tax plan, that's what I'm on at the moment, and, and, and that's a useful er device.
[161] Erm so think about if you've got a non-working partner or somebody on a low income to spread the money er so that you, has anybody already done this er you know prior to retirement?
[162] ... Yes, er perhaps one or two.
[163] Yes.
[164] I mean I er i it's more well known than it used to be.
[165] But where it isn't well known is the people who ought to know, and that's the pensioners, you know th perhaps er your er parents, people er older than yourselves who are drawing state pension, and er the advertising seems to have gone astray.
[166] Cos there's millions and millions of pounds that the revenue have got rushing about which should have been repaid to er investors.
[167] Er and of course it's people like erm my mother and father who never look at er things like that unless I actually point it out, they won't actually know that they're allowed to reclaim tax.
[168] You know, particularly, you know the female may have only a state pension you know the part state pension nothing else coming in, and a lot of these accounts are still net, not gross, so the revenue have got money to give away, and they're quite happy to do that providi providing that people tap them on the shoulder.
[169] So if you've got any elderly er relatives or people who want, or who you think may, the trouble is with relatives, they always think you're interfering, this is a snag.
[170] You ask about money and [...] wonder why.
[171] Erm but erm that's a, a very important point and er just remember that you have actually given the money to the other partner, technically in terms of tax anyway, and er that er can, can have an affect on things.
[172] Because I gave my wife some money obviously because I pay tax, she doesn't she's at home with the children, she didn't seem to object funnily enough, you know I said I'll move this money over to you.
[173] And then
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [174] you know you can invest this and we'll have a building society account we'll have a gross account.
[175] Yeah fine, fine.
[176] So anyway er I mean being a keen motorcyclist I borrowed a Moto Guzzi last year, you know a big V twin, beautiful bike, I went up into Derbyshire and had a you know ride on it, and thought well that's not bad, see I've always had British bikes, and I think I might g I might get one of those, so I came back in the house put the helmet down and said hey that Guzzi's not bad, I could get a decent one for about two thousand you know about nineteen eighty, you know nice Le Mans Two.
[177] And she said oh yeah, where are you getting the money from?
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [178] I said well, you know, out of the, out of the Bradford and Bingley.
[179] She says that's my account.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [180] I said but yeah I know, I gave you the money for tax purposes.
[181] She says well, she says, that garage is in a hell of a mess you know, and that Norton standing there doing nothing.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [182] So erm ... [...] have a problem trying to get it back.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [183] That's right, yeah so I eventually managed it, but it took some negotiating.
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [184] Do you have to give the capital sum to create this income, or is there ways of ... [...] income from a ... set sum of money to the other person?
John (G4HPS1WP) [185] No.
[186] No, er not really.
[187] The revenue want it paid into an account in your name or a joint account.
[188] They
Unknown speaker (G4HPSUNK) [189] Yes, but can that just be the income, or has it to be the whole capital?
John (G4HPS1WP) [190] Er, no the whole, the whole capital should be held by you, and paid to you or your or i in, in a case of a joint er couple because er once it's paid out, it would become the tax it would become the t the taxable interest of whoever received it.
[191] So really erm er you'd have to be a bit careful if you were doing that, and er I think the revenue would be pretty iffy about you holding money and paying it to a third party.
[192] Were you thinking about a child who could own er
Unknown speaker (G4HPSUNK) [193] No, I just [...] I just [...] question.
[194] You know I the ... splitting of ... income
John (G4HPS1WP) [195] Mhm. ...
Unknown speaker (G4HPSUNK) [196] between spouse, two spouses erm
John (G4HPS1WP) [197] It doesn't matter
Unknown speaker (G4HPSUNK) [198] [...] to transfer the lump sum so that that income goes to the one with the [...] .
John (G4HPS1WP) [199] No no, not really, not, not between not between a married couple no.
[200] No.
[201] But I mean obviously er the er
Unknown speaker (G4HPSUNK) [202] Or can you just put the income across?
John (G4HPS1WP) [203] Yes.
Unknown speaker (G4HPSUNK) [204] So you know four thousand [...] .
John (G4HPS1WP) [205] You can.
[206] You can, but I'd still advise it goes to a joint account ... rather than to er another person's account.
[207] Because I think the er the you know the revenue would think it was a bit odd that somebody else owned the money, and you paid the income to another party.
Unknown speaker (G4HPSUNK) [208] Right, that's [...] what I'm asking.
[209] How do, what's the method with it.
[210] Do you have a joint account for the, for the
John (G4HPS1WP) [211] Yes.
Unknown speaker (G4HPSUNK) [212] lump sum, interest accum accumulated goes to the joint account
John (G4HPS1WP) [213] Right.
Unknown speaker (G4HPSUNK) [214] and is then split between the two?
John (G4HPS1WP) [215] Yes well er if it's a joint account and the income's i i if it's a joint account and the income's generated from that account, then er it will be er treated as one going to the taxpayer, er you know, half of it going to the taxpayer, half of it going to the non-taxpayer.
[216] If it's the non-taxpayer owns the account in that case, then she can pay the whole of that thousand pounds into a joint account for them both, and they can both use the income, the revenue aren't going to b bother about where the money's gone, providing that it's received by the person who owns the investment.
[217] I think that that's the key to it.
Unknown speaker (G4HPSUNK) [218] Mhm.
John (G4HPS1WP) [219] That so somewhere in i in between you've got to be receiving the income that you generate.
[220] Otherwise [...] passing it on to a third party, but you're not in the case of a married couple.
[221] Obviously the point is that y y it's still within the, the er bounds of the er couple itself.
[222] If that's [...] .
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [223] But if you set it up jointly, you can't direct all the gross income if that's what you're thinking you can't say well I'll have all that income gross cos my wife's got an unused allowance, you've got to split it down the middle ... in the case of a joint account.
[224] So generally to make it, to make it straightforward, I tend to er differentiate, so that I've got some in the ta the non-taxpayer's name up to the limit, and then a joint account perhaps which will be usable by both of them er for instant access, that type of thing.
[225] Er I'll, I'll perhaps go back to that later, cos it does come into the way that money splits.
Unknown speaker (G4HPSUNK) [226] When you say joint account, do you mean building society?
John (G4HPS1WP) [227] Yes.
[228] Er, a building society or bank account, yes.
[229] Joint account.
Unknown speaker (G4HPSUNK) [230] Well er, a building society, I don't know whether people realize, but there are limits to the amount of protection you get on large sums of money.
John (G4HPS1WP) [231] Yes.
[232] Yes.
[233] I will actually l er go into that.
[234] I'll, I'll cover it now.
[235] Thank you for mentioning it.
Unknown speaker (G4HPSUNK) [236] [...] say, if you've got thirty thousand in, you'll only get protection on
John (G4HPS1WP) [237] Twenty.
[238] It's the first twenty.
[239] yes, under the Building Society Protection Act, if the society fails, you're protected up to twenty thousand, and you'll get eighteen thousand back, there's a ninety percent protection, provided they're members of the Building Society Association, which all are, er virtually, even down to things like the Clay Cross and the Staffordshire Railway, they're all members of the Building Society Association, so they're all covered.
[240] Er but if you have a joint account, you're actually covered erm to forty thousand, because i it would be seen as two separate accounts, so that each hold twenty.
[241] Er, so that's okay to an extent, but obviously we've got an approved list of building societies and banks, which we never used to have, but we've realized that er since B C C I p particularly and the housing market as bad as it is, there are some building societies and banks who may be in difficulties, and if they go down erm then they may not be taken over.
[242] Because y don't forget that in the past, building societies have always been taken over by you know, sort of friendly merger.
[243] But the Halifax said last year that they wouldn't take on any wounded soldiers, so that if er a society went to the wall and its debts were bad, then nobody may step in to s to actually erm erm ... solve the problem if you like.
[244] Er so don't, don't do, quite correct to say beware of putting too much er of your money in one area, and er even with building societies it's risky.
[245] But er if you stick to the sort of er top ten, you know the sort of Alliance and Leicester, the Leeds Permanent, the Halifax, the erm the sort of Nationwides, then you're unlikely to get into difficulties.
[246] I think where people are more at risk is where they've gone for TESSAs in th er you know that's the tax-exempt savings plan, and they've chased the rate through the papers you know the erm and they see that the s the Wolverhampton Building Society or the Tipton and [...]
Unknown speaker (G4HPSUNK) [247] Cheltenham and Gloucester, is offering higher rates.
John (G4HPS1WP) [248] Yes, but C and G are actually very good er very sound er on their er ratios, they're pretty good, but erm some of them aren't so good, and you know, be careful when you're coming to invest in building societies I'd stick to the major players at the moment, even though you may get a premium by going to a smaller society.
[249] Because the smaller societies often f charge more for their loans and give more erm to the erm to the investor.
[250] But of course erm you know the erm the smaller the society, the more risk there is in terms of solvency.
[251] Generally speaking.
[252] So erm it is worth mentioning.
[253] Erm and banks incidentally, your protection is seventy five percent of the first twenty thousand, er which is where that B C C I figure came from, do you remember all that thing about fifteen thousand is your return?
[254] Well, you'd have got fifteen thousand whether you'd got twenty thousand in there or two hundred thousand.
[255] That was the basically the problem ... and people weren't aware of that at the time.
[256] Er, so again it's a matter of security, and so if you've got lots of money in one area, better to move it about.
[257] Building societies are a bit naughty in that they're regularly advertising rates at over fifty thousand pounds, the Loughborough do it for one, in er my local paper.
[258] And I pick it up and it says Loughborough Building Society and you can see about half a percent er premium rate on fifty thousand pounds, and you think that might be worth going for, for, for somebody who's got a lot of capital, but is it really, because if you've got fifty thousand in there, you are at risk.
[259] And I can just remember what John Major said about the local authorities who'd er got into B C C I.
[260] He said the extra half percent was actually er a risk return, of course you know it wasn't explained perhaps as well.
[261] You know, local authorities aren't expert in looking at company law, and the way that finances work.
[262] So I think people got caught out quite badly at that, at that point.
[263] Erm, I think we all got to trust building societies and banks, and we still can, providing you know the limits and er and er the constraints upon er upon those financial institutions.
[264] I mean I can't see the government allowing a building society to actually get into erm er a case of insolvency, I think it, the, the, I think the Building Society Association would force a merger, but it may be on very poor terms or er you know, whatever.
[265] But hopefully er we're past the bottom of that loop.
Unknown speaker (G4HPSUNK) [266] J Just one last thing.
[267] Th I, I thought I had it clear, and now I'm slightly confused as a result of an answer that you gave, and I'm not quite clear again.
[268] If I invest part of my lump sum in my wife's name
John (G4HPS1WP) [269] Yes.
Unknown speaker (G4HPSUNK) [270] er so we can take, take up her full allowance
John (G4HPS1WP) [271] Yes.
Unknown speaker (G4HPSUNK) [272] sh she will
John (G4HPS1WP) [273] Yes.
Unknown speaker (G4HPSUNK) [274] be able in fact to take all that.
[275] And suppose okay well let's imagine just for a minute that she gets three four four five as, as interest
John (G4HPS1WP) [276] Yes.
Unknown speaker (G4HPSUNK) [277] [...] take [...] .
[278] Now, the, the interest, that three four four five
John (G4HPS1WP) [279] Mhm.
Unknown speaker (G4HPSUNK) [280] the account into which it's paid, does that account into which the three four four five interest is paid, does that have to be in my wife's name, or does it have to be a joint
John (G4HPS1WP) [281] No, it can be in joint names.
Unknown speaker (G4HPSUNK) [282] But, but sh that is still allowed then is it?
[283] If it's i I mean
John (G4HPS1WP) [284] Yes.
Unknown speaker (G4HPSUNK) [285] I thought you see it would have to be in her name, because she has
John (G4HPS1WP) [286] No, not necessarily.
Unknown speaker (G4HPSUNK) [287] to be in receipt of that income as far as
John (G4HPS1WP) [288] Yes, but then when that income's paid in, half of the income's taxable when it's assessed for you, and half would be paid gross to your wife, you know it's a diff it's a different, it's a different er
Unknown speaker (G4HPSUNK) [289] Yes, this is where I'm confused, [...] if you want to take up
Unknown speaker (G4HPSUNK) [290] Can I just [...] a minute, because I've got the same feeling.
[291] And I think what Bob is saying, there is only one account, but you'll have to endow two accounts, one that is giving rise to interest in the wife's name,
Unknown speaker (G4HPSUNK) [292] Yes.
Unknown speaker (G4HPSUNK) [293] which is taxable
Unknown speaker (G4HPSUNK) [294] Yes.
Unknown speaker (G4HPSUNK) [295] on her if she's liable
Unknown speaker (G4HPSUNK) [296] Yes.
Unknown speaker (G4HPSUNK) [297] but the interest is then paid into another account which is in joint names.
Unknown speaker (G4HPSUNK) [298] Yeah.
John (G4HPS1WP) [299] Yeah,tha that's if you want to use the income of course.
[300] It doesn't have to be.
Unknown speaker (G4HPSUNK) [301] Right.
John (G4HPS1WP) [302] It can be reinve it can be reinvested in the same [...] .
Unknown speaker (G4HPSUNK) [303] Yeah, I understand that bit.
John (G4HPS1WP) [304] Yes.
Unknown speaker (G4HPSUNK) [305] It was the question of making sure that we didn't pay tax on any of that three four four five.
John (G4HPS1WP) [306] Well,
Unknown speaker (G4HPSUNK) [307] I thought that if it went into a joint account, I had to pay tax on half of three four four five.
John (G4HPS1WP) [308] You would, you would, you would.
[309] But, but if we've used up her allowances er i you know it i if you want to keep it separate, if it's simpler separate that's okay
Unknown speaker (G4HPSUNK) [310] Right.
John (G4HPS1WP) [311] If you're near the limit, then it's probably worth it,
Unknown speaker (G4HPSUNK) [312] Right.
John (G4HPS1WP) [313] you know to keep it separate.
Unknown speaker (G4HPSUNK) [314] Right.
John (G4HPS1WP) [315] I mean, some people want it for income, so if they want that sort of fifteen hundred pounds coming in, and they both want access to it, I'm quite happy to pay it into a joint account, providing it doesn't actually give them a tax problem, in
Unknown speaker (G4HPSUNK) [316] Right.
John (G4HPS1WP) [317] other words, if half the interest is er is erm deemed to be the male's and therefore taxable, if it's a working account, it's never likely to get much interest on it anyway,
Unknown speaker (G4HPSUNK) [318] No.
John (G4HPS1WP) [319] cos the money will come in and go out.
Unknown speaker (G4HPSUNK) [320] Yeah.
John (G4HPS1WP) [321] Is, is that better?
Unknown speaker (G4HPSUNK) [322] Yeah.
[323] Yeah.
Unknown speaker (G4HPSUNK) [324] Yeah.
Unknown speaker (G4HPSUNK) [325] Tha that's after it's met the tax liability or not?
John (G4HPS1WP) [326] That's right.
Unknown speaker (G4HPSUNK) [327] When it goes into the joint account.
John (G4HPS1WP) [328] Yes.
[329] Yes.
Unknown speaker (G4HPSUNK) [330] It originally arose through the wife's account, and was covered by her allowances, and then the interest was then paid into a joint account
Unknown speaker (G4HPSUNK) [331] Yeah.
Unknown speaker (G4HPSUNK) [332] And then only half of that ... was the wife's [...]
Unknown speaker (G4HPSUNK) [333] Yeah.
Unknown speaker (G4HPSUNK) [334] By that time she'd absorbed all her allowances, therefore it didn't matter whether she'd
John (G4HPS1WP) [335] That's right.
[336] That's right.
[337] I mean you've got to be careful at the end of the tax year that you're actually okay on that ground, er but, and you can make a declaration to the revenue if you're over the limit, it's just that I mentioned that because some people like a joint account for it to be received into so that they can both spend it basically.
[338] Cos I mean I'm, I quite often use that as spendable income, because if I allow it to accumulate in a gross account, in a year or two it's actually gone beyond the
Unknown speaker (G4HPSUNK) [339] Right.
John (G4HPS1WP) [340] the personal allowance.
Unknown speaker (G4HPSUNK) [341] Yeah, right.
John (G4HPS1WP) [342] And that can make you a problem.
[343] You've just got to keep an eye on that.
[344] ... Er right so ... er capital gains tax.
[345] Now, this is a tax which hopefully won't affect that many of you here, but it is, it is agai a tax nevertheless.
[346] And er its er main exemptions are er on er owner occupied homes, private cars, life assurance policies, [...] , gilts etcetera.
[347] But erm most of the things that you will be de now the thing is about properties, that if you've got a second property for example, or erm you know that's not your primary residence, you would be liable to capital gain on a disposal, so if you'd bought the house for ten thousand and you sold it five years later for twenty, then the gain er on that would be the twenty er the ten thousand that you'd gained, less any indexation from nineteen eighty two, and they would then er er look at that as an allowance to use against it.
[348] So your first five thousand eight hundred would be used against it, and then any e excess over that would be added to your tax bill in that year, in other words it would be assessed as income in that year.
[349] Don't forget that you've got an allowance each, and it's not likely to affect many people, except where you've perhaps been left something that you want to dispose of or a property that you want to dispose of, in which case there could be a capital gains liability.
[350] But don't remem don't forget that you've each got an allowance of five thousand eight hundred, so something jointly owned, you've actually got a double allowance, and you get that allowance [...] year, so if you've got say an er a liability for shares of ten thousand pounds, let's say, that's your capital gains calculated liability, you can do five thousand in the first year, and five thousand in the second year, and that will keep you below your capital gains tax allowance.
[351] Yes?
Unknown speaker (G4HPSUNK) [352] Erm, you mentioned property?
[353] Erm your parents'.
John (G4HPS1WP) [354] Yes.
Unknown speaker (G4HPSUNK) [355] Is it therefore better for er a, a parent our parents [...] , our parents to give as a gift the house to both people in order to claim both allowances?
John (G4HPS1WP) [356] Yes.
[357] And there is a little wrinkle there as well, and th if, if they, if your parents are allowed to live there rent free, even though you own the house, you won't be liable to capital gains on disposal, er if they, if they actually pass the ownership of the house to you while they're alive, and then you continue to let them live rent free, as I understand it, you w there would be no capital gains liability on disposal.
Unknown speaker (G4HPSUNK) [358] Is, does that seven years?
John (G4HPS1WP) [359] No, no.
[360] That's inheritance tax, that's a different er a different er matter really.
[361] Er this is capital gains which is a different type of tax.
[362] So it's just one of those things that you should know.
[363] I mean, capital gains is liable to er a yearly review, you know, you've an allowance for each year, and the capital gain is on the property on the value of the property from the time it was purchased to the time it was disposed.
[364] Er, whereas erm inheritance tax is an allowance which is given once and I'll explain what that is.
[365] But as far as that's concerned, er I mean the, the house can be passed over to you, and would then become, er you would own the house but er unless you dispose of it, there'd be no liability to a gain, and er of course, at that time er if your parents in it rent free at the time of their er leaving the house, then you could then dispose of that without erm erm er liability.
Unknown speaker (G4HPSUNK) [366] Would that assume your parents are actually living when they gift it to you?
John (G4HPS1WP) [367] Yes.
Unknown speaker (G4HPSUNK) [368] And it becomes inheritance tax then if they die and leave it to you in their will?
John (G4HPS1WP) [369] Right.
[370] Right.
[371] Yes.
[372] Er th but don't forget that, that if they make the transfer, if they give the house to you, is that what you mean, yes?
[373] There would be a seven year rule on that.
Unknown speaker (G4HPSUNK) [374] Yes.
John (G4HPS1WP) [375] Yes, sorry, yes, that would be a potentially exempt transfer.
[376] Yes.
[377] Erm so that's true, that if they give you the house, it is, it is an inheritance tax problem as well.
[378] Er so looking at inheritance tax, er the house the estate the car, capital etcetera all count towards it.
[379] Having a will will help.
[380] And with the current allowance of one hundred and fifty thousand pounds er is reasonably good, in that if you have a property worth say seventy or eighty thousand and then you've got assets of worth perhaps forty to fifty thousand, you'll still be under the limit.
[381] Now, it's not your problem.
[382] Inheritance tax is not your problem, it's your children's problem.
[383] So er I mean you can actually say to your children, well okay you know if I, we die tomorrow in a road accident, there'd be a liability to tax, erm and say the estate's worth two hundred thousand, then fifty thousand would be liable to tax at forty pence in the pound, so there'd be twenty thousand pound debt to pay to the revenue.
[384] Now that twenty thousand pounds can be paid er it has to be paid before probate is granted.
[385] So there'd be delay in probate unless the children have got the money, so they have to borrow against the property or they have to raise money to pay the bill.
[386] So erm you can actually get round that by erm either reducing the estate, which is the simplest way of doing it, so one thing you can do is spend your money, which isn't a problem is it?
[387] If you [...] hundred and fifty thousand.
[388] And er fo for that reason, er you know, Lady got through three fortunes, and I think she di died with a few hundred pounds in the building society, and if you get the timing right, that's the way to do it.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [389] Because er I mean a lot of children these days, I think about my parents, it's their money, they spend it, and I don't really see that it's important for it to be passed on to us, but in the case of a large estate, it becomes more important, if you're looking at sort of two hundred three hundred thousand estate, then there's going to be a lot of erm er asset value which would be taxable.
[390] Er now you can make er you can make disposals in your lifetime obviously, you can make small gifts, you can make disposals up to three thousand pounds a year, which is your annual, your exemption if you like, and then anything over that is liable to the seven year rule, if you die within seven years of making the transfer, then there is a, there is a erm declining debt, er tax-wise.
[391] But erm don't forget that all these things are erm a little bit dodgy at your ages, I don't think you should be making big transfers at this stage, simply because you may need the money.
[392] If we go back to that first, second slide, if you're still alive in thirty years time, you may actually want the money that you've gifted to people ten years ago, and erm that's the problem you've got.
[393] So I don't think I should be saying, if I was working as an advisor on your behalf, I don't think you should be making big transfers at this stage, because it's always dodgy.
[394] I mean you may need to recall that capital later.
[395] If you needed a non-urgent operation say a hip replacement or something, and you didn't want to go into your own savings er you know then you've obviously given away part of your assets.
[396] There are other ways round it, as you can imagine.
[397] And there's a lo there's a whole industry built up about inheritance tax planning where you actually write something in trust for your dependents, and er that's simple in that if you're in good health now, you can write say a twenty thousand pounds inheritance tax cover, under trust for your children so that's paid outside the estate, it doesn't make the matters worse, and mo most conveniently at retirement it's simple to do because you might pay it on an annual premium or a regular monthly premium, and it might cost you twenty or thirty pounds a month, but at least you can forget it then.
[398] You've made some provision for your children it's written in absolute trust for their benefit.
[399] On your death, the money is paid directly to the children, they can then pay the inhe inheritance tax bill, and everything's hunky-dory.
[400] Er but of course you've got to fund that yourself, or at least that's what most people think.
[401] Er but in our London office, apparently they do a lot of inheritance tax planning because of the size of estates, and they actually invite the children in, and say to the children look, you know, if erm you die, the estate will be devalued by forty thousand because of tax, er if you want to make provision the, the er the contract is still written on the erm, the erm individuals' lives, but it can then be erm ... paid by the children, so your children can then pay the premiums.
[402] The only technical difficulty is that it's difficult in a family where there's two children perhaps one's ... well off and can pay, and the other can't, so you you've got technical problems there.
[403] But there that, that's one of the routes they can use.
[404] Another one that you might consider is joint tenancy in common.
[405] Has anybody looked at that?
[406] ... Er joint tenancy in common, this is where
Unknown speaker (G4HPSUNK) [407] Somebody did mention it John.
John (G4HPS1WP) [408] Oh did he?
[409] Oh right.
[410] But don't forget there are, there are er technical erm difficulties with that as well in some circumstances, and joint tenancy in common er you've got to look carefully at before you make any decisions.
[411] That's giving away half the estate er half the house value on the first er death.
[412] So you just be a bit careful on that one.
[413] ... Erm right, so passing on then, er are you a cautious or adventurous investor?
[414] What is your tax rate?
[415] Erm, do you want income or capital growth or both?
[416] Well for most people erm I mean they say to me, I don't want to be the richest man at Millford Hill, in other words I don't want to save in retirement indefinitely, but you are intending some capital growth as well, cos if you don't have capital growth, you don't protect your investment.
[417] Are you cautious or adventurous?
[418] I can usually tell by when I when I'm doing a fact-find reply obviously you find out whether their erm position is, is erm simply building society or national savings investment, or whether they've gone into shares or unit trusts or investment trusts, and you can see at what level they're operating and of course if they've still got their money under the bed, then
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [419] I refer them to Ken Dodd in Knotty Ash who's got a specialist company on that behalf.
[420] So
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [421] erm ... so cautious or adventurous, I think most people don't, I mean I've got adventurous on my form but it never gets ticked, because nobody's adventurous when they retire.
[422] I mean the time for you being adventurous was earlier, and I mean when you retire you've got to think about capital er protection as well.
[423] Er it's okay to say, yes three or four thousand I'll play about with and I think Japan'll be good for the next five years, that's a different matter, but if you're dependent on something for income and security, then you can't really take a risk profile on, on, on your money.
[424] Course erm I guess we deal a lot with British Telecom, and er and erm er Plessey and people like that, er well, G E C now.
[425] They erm they tend to perhaps have a different attitude if they've been given company shares, because they're [...] handled shares er fairly regularly, and that's a different matter, erm I mean erm are there many people here who have privatized issues?
[426] Ha has anybody got as far as British Telecom shares, or British Gas, or electricity?
[427] Yeah, so I should think quite a few.
[428] I mean I've filled in a few forms for them but I mean probably you're a passive owner like me in the sense that I don't go and actively trade them, er I keep them in a long term investment, and that's it.
[429] So er shares are relatively high risk, ad obviously your tax rate's important as well.
[430] So that's the first consideration when I'm looking at somebody's investments, how do they view their own investment strategy?
[431] ... Erm consideration two.
[432] Your home, staying or moving, [...] any debts other than a mortgage, should you pay off your mortgage.
[433] Anybody got that question, anybody like to consider that one?
[434] Yes?
[435] Well you see mortgages are a, a, a pretty dodgy subject really because you've got so many er different er er variables on a mortgage, but the m but the basic erm pattern of mortgages is that if we've got a ten thousand pound loan over ten over say twenty years, ... so that's twenty years there.
[436] And this is what's called a repayment er type profile.
[437] What you actually do is you pay off the loan gradually over that peri period of twenty years, so you get from that point to that point and it's, it's sort of level to start with, you're paying mainly interest off and not much capital, so when you get a statement from the building society, you still seem to owe virtually the same that you started with.
[438] And then in the last sort of seven to eight years, it starts to decline quite rapidly because you're actually paying off the capital at that stage, and th that's where I may meet somebody at say fifteen years, they thought their mortgage would run to age sixty five and they actually retire at sixty, they've got five years left and they're about there.
[439] And the question normally is well, do I pay it off or not?
[440] Well, erm a lot of your tax relief under the MIRAS system, which you're aware it gives you tax relief at source up to thirty thousand, has been absorbed up here, that's where most of your tax relief is, so down here the tax relief on the capital element is nil, and of, it's only, if it's only about three thousand outstanding, I might say, well, get rid of that, you know, just, just erm er cash it, and then you've got the l you c can forget your mortgage commitment altogether.
[441] You won't make a lot of difference.
[442] Cos I do find people with repayment mortgages actually erm er a lot of them pay over the odds, so they might be paying seventy or eighty pounds a month anyway to clear the mortgage, so mentally they've already made their decision to actually accelerate the payments on it.
[443] Erm so that's one thing to bear in mind.
[444] Erm on the other hand if you've got ten thousand on a, an endowment basis, this is a different matter.
[445] Now an endowment is obviously based on a principle of interest only on l loan, so over the same term, of twenty years, you've only ever paid interest off the loan and you still owe th a after twenty years, you'd still owe the building society ten thousand pounds.
[446] Er most people, well quite a few people will have an endowment mortgage, is that right?
[447] Yes.
[448] Now what happens here is that erm normally, you'll have a, a ... er an endowment attached which erm has got a sum assured and that sum assured may be about six thousand say, and onto that are added bonuses.
[449] And those bonuses [...]
Unknown speaker (G4HPSUNK) [sneeze]
John (G4HPS1WP) [450] each year can't be taken away once they're added.
[451] And er again, when we get to year fifteen, I get one or two clients who say to me well actually the Norwich have just sent me a bonus record through and I've actually got nine thousand in the pot already, I think I'll pay the mortgage off.
[452] Er now of course erm that would be a pretty dodgy thing to do because of er the way the Norwich work their bonuses.
[453] And er most of you will be aware that, where does most of your money come from on an endowment?
Unknown speaker (G4HPSUNK) [454] Terminal.
John (G4HPS1WP) [455] Terminal.
[456] Right.
[457] And Norwich would be delighted if you cashed early, because that means that their pool, their, their main fund is not at is not going to have to pay you any terminal bonus.
[458] So they'll only as attached and your sum assured, and thank you very much.
[459] Because your bonus is really a, used to be around about five percent but if you look at them now, they've restructured them, which means they've reduced them.
[460] Always read restructured as reduced, erm so that you
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [461] you've got erm three, three and a half percent say per annum, er plus erm a superbonus which is perhaps five percent of additional bonuses, so it looks better but it isn't really.
[462] But I mean basically that sort of contract you want to complete.
[463] Even if you decide at the end of the day that you're not bothered about the MIRAS tax relief, you want to see the back of this loan, keep your endowment running, because that's where the real meat of the contract is.
[464] And erm although there's been sort of all sorts of stuff in the press, have you seen all this stuff in the press about endowments?
[465] It's ridiculous.
[466] I mean over the last two years it's been shock horror headlines, you know, will endowments fail to repay the loan, [...] are endowments good value and I ke some of the journalists I've read bef over the last two years have actually completely reversed what they said t two years ago when P E Ps were declining because of poor share markets and bonuses were coming through quite nicely on the endowments, they said oh endowments are the thing to do.
[467] That's what you want, a decent endowment, it takes out all the fluctuations, and er the they've big reserves, and of course the minute the endowment starts to look a bit poorer, it's switch back to P E Ps, course I've always said that P E Ps were a good idea, and the charges are much better now than they were, and I'm just thinking of the poor chap that's read the paper two years ago, over his tea and toast on a Sunday and thought mhm good idea, I'll take an endowment, and two years later it's the same person saying aha, no, pretty bad news an endowment.
[468] I mean as usual with financial journalism, er i it's somewhere in between, I mean endowments are having a bad run at the moment and that's because they've paid out such excellent bonuses in the past so if you've had a maturity in the last four or five years, you'll have seen how good they are.
[469] But they can't [tape change] ... matter.
[470] In other words, er they weren't trying to sort of scrape it together to actually repay your, repay your twelve thousand pound wh loan at the end of twenty years.
[471] They would actually give you a fairly good sum assured.
[472] Now what's happened the problem would be for your children, who are faced with erm building societies and banks who are red hot to sell endowments because of the better commission value to the company, and the, the endowments to make them competitive have actually been structured so that it's the minimum premium, the minimum possible premium.
[473] And that means the minimum possible return.
[474] So even at ten and a half percent rejection, if you look at the latest figures, it costs you thirty pounds a month for an Eagle Star low-cost super super-duper endowment, but at the end you're only going to replace your money, if you've got erm the ten and a half growth rate, ten and a half percent, which is unlikely i in current circumstances.
[475] So if you've got children looking at mortgages, just tell them to be careful ... and that I think really my advice would be to, for anyone starting off a new mortgage now, to definitely go for repayment, until they've sorted out what they're doing, because if you cash an endowment within two years, if you can't keep up the payments, if you lose your job, then y you get nothing back.
[476] So you could have paid a company five hundred, six hundred pounds, and have no surrender value whatsoever, in the first two years, cos they'll take their charges out on a twenty year, a twenty five year contract.
[477] So to my mind, er the, the people dare dance should have been yourselves er I mean some years ago where your jobs are very secure, you knew that you were likely to see the end of the term in e e employed.
[478] That's a different proposition.
[479] But er I, unfortunately they are sold as er a sort of er a sort of a major positive factor in house buying.
[480] And I mean I know the screens are flickering in the Halifax and the Bradford and Bingley e even as we speak, and they do this fabulous analysis, you know you can see that to, to go for the repayment is not as efficient as the endowment, but it's all a theoretical exercise.
[481] And ... I think for youngsters it's much better to have a repayment and then maybe change it later on to, to a savings type mortgage.
[482] Erm but er that's a bit of an aside,th I think I think it's important because I think the old, the old style endowments were much stronger.
[483] The other thing is, you're probably getting L A P R, that's life assurance premium relief, on any contracts that were taken out prior to nineteen eighty four.
[484] And L A P R is half of the current tax rate, so you'll be earning twelve and a half percent on your, has anyo any pre-eighty four contracts?
[485] Right.
[486] Don't forget that if you alter your pre-eighty four, you lose your tax advantage.
Unknown speaker (G4HPSUNK) [487] March I think it was.
John (G4HPS1WP) [488] Sorry?
Unknown speaker (G4HPSUNK) [489] March eighty four.
John (G4HPS1WP) [490] March eighty four, that's right, yeah.
[491] Er and er anyone who's got that sort of contract, take my advice to keep it.
[492] So even if you do repay your loan on a building society account, er don't forget that erm er the erm ... building society will then want to charge you for keeping the deeds of your house.
[493] Cos if you take them back, you've got to keep them somewhere ... and building societies and banks are charging much more than they used to for actually keeping safe deposit.
[494] So just work out with your building society whether they'll do it cheaply.
[495] Or if you've got a solicitor who is handling your legal affairs, then perhaps they do it er for nothing or cheaply.
[496] I mean y I think the charges that banks are making in order to make up some of their losses, they're going to be passed on to the average investor, you know the average client, so erm you know the Halifax will do it free, I've heard recently that they are actually charging for er holding your deeds.
[497] And some of them actually cha make sure that you have to keep your house and contents insured through the society, which again can be more expensive.
[498] So er just beware of what you're doing when you, when you, course you can actually keep a mortgage a a account open, in other words you can keep it open on a pound a year whatever it is with the Halifax.
[499] And they will actually keep your deeds, erm [...] work out if it is cheap enough to do it that way.
Unknown speaker (G4HPSUNK) [500] If we leave that, supposing you topped up your mortgage, which, with an [...] endowment mortgage
John (G4HPS1WP) [501] Ah.
Unknown speaker (G4HPSUNK) [502] but a top up mortgage of course isn't because you can't
John (G4HPS1WP) [503] No.
Unknown speaker (G4HPSUNK) [504] you can't get the, the tax benefit that you got originally with an endowment.
John (G4HPS1WP) [505] Right.
[506] Mr .!
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [507] keep their repayments low.
[508] Now there is one window, and I'm glad you mentioned that because you just reminded me that, that, that you can get fi good fixed-rate loans at the moment.
[509] Y very good fixed-rate loans.
[510] Erm if they, if you've got a heavy mortgage, and I'm not suggesting that many of you will have a heavy mortgage, it's not a bad thing when you're retiring to fix a rate, because we've not been able to do that for a long time.
[511] And at the moment the building societies and banks are chasing business, they're really desperate, and er they'll, they'll give you a very good fixed rate.
[512] Now I've got some tables in the car, and if you'd like me to fetch them during break, I'll, I'll leave them on the table for you.
[513] Because I just fixed my mortgage for four years with the Halifax, and it's a total gamble fixing mortgages, by the way, if we, you know, because I don't know where interest rates are going to go, but I, I fixed at seven point seven five percent for four years.
[514] You can get a seven year fix with Barclays, at about eight point five percent.
[515] That's over seven years.
[516] If you go for a ten year fix, Bank of Scotland are doing it at about eight point nine nine.
[517] ... That's ten years.
[518] Now you can see what's happening.
[519] Shorter term fix at very low rates, medium term fix medium rates, and so on.
[520] Now, what you've got to do is to think well if you've got a mortgage over er I wouldn't think you'd consider this if your mortgage was under twenty thousand, it's not such a big
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [521] liability, but if you're getting beyond that, you've got to think well is it worth me spending money to actually erm er ... get the mortgage fixed?
[522] Erm it I think it is, because I think we're in a, we're in a dip, if I can just go off the ... the, the idea of conventional investments at the moment.
[523] But this is the interest rate dip we're in here, I mean we've seen, we've seen [...] I reckon we're somewhere around here, we could be either side of that, but I think ... what we're going to find next year is that the Chancellor, because he's had to keep interest rates low and he's stimulating the economy, er you're going to find that eventually he's going to have to push interest rates up to control inflation.
[524] Because everybody de everybody's denying inflation is there.
[525] And it is at the moment because nobody's buying any goods.
[526] But the minute we all start buying goods again, it's ith an endowment.
[526_1] I think that the compan companies out there have not made any profits for about five years, and they're desperate to return to er an even keel, and they are going to force up the price of goods and services as soon humanly possible, and we'll pick up the bill.
[527] And inter interest rates will have to come up to control er the rate of inflation, if the government pursues its normal course.
[528] So I think there is a case for going for a fixed-rate.
[529] How much does it cost?
[530] Well, if you're going with your own society,th it's about two fifty to three hundred.
[531] I mean the Halifax charged me three hundred pounds for this ... and I've already got a mortgage with them, so they don't need to do any sort of er er in depth surveys, or, or, or assessments on the house.
[532] So I rang the Halifax and er I said I'd like this fixed rate please.
[533] I said erm if you're already a Halifax customer, what's the charge?
[534] Cos I thought well, he'll probably say, you know, half to you.
[535] You know, with being a Halifax customer.
[536] She said three hundred pounds.
[537] So I said oh, er, is there, there's no discount for being a Halifax customer?
[538] No, no, no.
[539] I said but you've not got to do any work for this.
[540] She said well that's the rules, you know that's how we're doing this, we're offering a fixed-rate for three hundred pounds.
[541] So I said okay, okay, yeah, send me the forms.
[542] She said do well you don't need any forms, cos it's only you, we're only going to alter it on the computer
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [543] only going to alter it on the computer anyway.
[544] So she says if you just write me a letter and get your wife to sign it, we'll do the rest, put your three hundred pounds in the [laugh] in with your application.
[545] So I thought, this is money for old rope, you know.
[546] But er there you go you pay your money and you take your choice.
[547] Er I mean y y the i if you are moving from one society to another, then obviously er you will be charged, and there will be the two hundred and fifty pound fixing fee, plus whatever else.
[548] So y I've got to weigh up whether I'm actually going to make a profit over four years or whether it's going to be, but I'm not doing it for that it's not so much making a profit as the fact that I can secure the loan for four years and know that I haven't got any extra to, to find, and when you've retired, if you've got say seven years on your mortgage and you're thinking well if mortgage rates go up erm I could get stuffed you know if they doubled again ... then you could actually fix on that assumption.
[549] But erm it is a risk because you don't know whether they're going to go up or down.
[550] And er we could all get it wrong, and we could be in the E R M,i if we go back into the E R M then er you know if they stabilize interest rates across Europe er then we could be okay.
[551] But I mean a fixed rate is a bird in the hand, really, and I think they're quite good at the moment.
[552] So I'll bring that list in for you to have a look at, and you might spot your own society in there and give them a ring and see what they, they've got on offer.
[553] Er okay so I think that er [...] covers mortgages, but if you've got any house if you've got any house improvement loans which were taken out anything like credit card debts anything where you're paying er a high rate of interest, then I think you should get rid of those every time [...] .
[554] You know cancel any of your big debts because it's going to help your budgeting if you know that you've got rid of a lot of er
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [555] bits and pieces.
[556] Erm and er you can then budget accordingly.
[557] ... Er right, I'm just having a check to see whether, Scott is it half past ten?
Unknown speaker (G4HPSUNK) [558] Yes.
Unknown speaker (G4HPSUNK) [559] Er ten forty five.
John (G4HPS1WP) [560] Ten forty five so we've gone a bit [...] .
Unknown speaker (G4HPSUNK) [...]
Unknown speaker (G4HPSUNK) [561] Ke the, the k kettle's boiling so at the most convenient time, John, if you'd care to [...]
John (G4HPS1WP) [562] Right.
[563] Okay.
[564] Yeah, yeah.
Unknown speaker (G4HPSUNK) [565] rather than the clock.
John (G4HPS1WP) [566] Okay, I will do.
[567] Er I'll just talk erm just talk briefly about emergency access money, cos this wi this covers one point I [...] in the next session.
[568] Erm it's to erm reserve er for emergencies, obviously, I, I'd use a building society or bank, to cover holidays and domestic needs, to set up hobby or retirement applications, so we'd always say, leave a fair amount in the building society, and the only thing th advice I'd give you is one, stick to the major societies, and secondly, if you're looking for larger investments, use a postal account.
[569] Anybody got one yet?
[570] Right.
[571] Okay.
[572] They're getting more popular.
[573] And er certainly I think they're good value.
[574] Erm postal accounts have got er a definite er advantage over other er methods of er er building society holdings.
[575] Purely because you've got no staff.
[576] I mean the Cheltenham and Gloucester, the Britannia, erm the erm Bristol and West, they've all got no staff, they just have a computer and er and erm they send you er everything through the post.
[577] But the rates are obviously slightly better than you will get elsewhere, about three quarter percent above an ordinary ninety day account ... and the main advantage normally instant access on these accounts.
[578] So where, if I'm putting twelve thousand in for sort of a, a holding fund for, for individuals I might put three thousand into a local society so they can pop down to the Nottingham Building Society for any bits and pieces, and th the, the bulk of it can go into a postal account to, with a better rate.
[579] But er I would warn you about er er accounts which obviously tie your money for a lot longer than maybe six months or a year ... because you're always at the mercy of the er of the er building society then if their rates turn down or if you want access, you've got penalties, and I think if, there's no point in chasing interest rates through building societies generally, because if you take an average over five years, there isn't a lot of difference between one society and another.
[580] And you know what's happened I mean there's a lot of trickery involved where they get you into an account that if you read the small print it says Ju rates guaranteed until June ninety three and as soon as June ninety three, and as soon as June ninety three comes around, your, your seven percent becomes five percent.
[581] So you've always got that thing to think about.
[582] So with building societies generally, it's got to be somewhere you like, somewhere that you, you've got instant access to, stick to the major players.
[583] I remember one teacher retiring several years ago in Nottingham said to me er he says I'm sticking with the Nationwide, me.
[584] He says [...] .
[585] Well why's that I said?
[586] Well when I cycle into Nottingham, they let me keep my bike in the branch while I go shopping.
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [587] And that's [...]
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [588] Rather than replacing the push bike [...] .
[589] Erm just before we break, erm it might be worthwhile just having a look at a few examples.
[590] And erm we won't have time to go through all of these afterwards, but if I hand a few round to you, what I'd like you to do is er just have a go and jot down some of the er solutions that you would provide.
[591] Put yourself in the position of a financial adviser, for the couple that you see, these are all theoretical couples obviously, theoretical individuals, and just jot down on this the sort t.
[592] Mr .!
Unknown speaker (G4HPSUNK) [593] Can you go [...] widows, widowers or single people?
John (G4HPS1WP) [594] Yes, yeah.
[595] ... But er I think it doesn't really matter whether it's erm it's er you know relating to your own circumstances, it's more l it's more ab about just solving problems really.
Unknown speaker (G4HPSUNK) [596] Can I just ask about the postal accounts at this stage.
[597] Er where do you find out about those?
John (G4HPS1WP) [598] Er postal accounts.
[599] Well you can get them in the financial press, erm usually the Telegraph on a, on a weekend or the Money Mail or the, any of the loca any good quality paper, or you can buy some of the financial guides that you get in er, in er newsagents these days.
[600] I mean I use things like Money Management, and they're quite useful, erm but er you don't need to erm er spend a lot of time looking round.
[601] There is a building society shop in Nottingham, isn't there?
Unknown speaker (G4HPSUNK) [602] Yes.
John (G4HPS1WP) [603] And I think they can do quite a bit on that.
Unknown speaker (G4HPSUNK) [604] [...] ?
John (G4HPS1WP) [605] Yeah, I will.
[606] I'll try and find you one.
[607] Yeah, oh there's a good one.
[608] ... Right.
[609] ... Some of these are extreme examples, some not.
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [610] And er once you've had a look at that, you can er perhaps break for coffee, and we'll have a chat about it after the break.
Unknown speaker (G4HPSUNK) [...] ... [tape off for coffee break] ...
John (G4HPS1WP) [611] Right, erm so we'll er just start with a quick erm er look round what people have decided on for investment er in individual cases.
[612] So i i if you can er give me the background if I ask you to sort of give me a bit of background for the case, I'll write it up here, and I'll write down the solutions and see what, see what you've done.
[613] Er okay er so has anybody done erm er let's start with erm er Miss , has anybody done Miss ?
Unknown speaker (G4HPSUNK) [614] Yes.
Unknown speaker (G4HPSUNK) [615] Yeah, yeah, we're half way down it.
John (G4HPS1WP) [616] Oh no, right, yes okay.
[617] Er so if you can start us off. ...
Unknown speaker (G4HPSUNK) [618] Thank you, to the local authority, I'd
John (G4HPS1WP) [619] Yeah.
Unknown speaker (G4HPSUNK) [620] I'd defer it.
John (G4HPS1WP) [sniff] [laugh]
Unknown speaker (G4HPSUNK) [621] [...] I'd defer it.
[622] I
John (G4HPS1WP) [623] Yeah.
Unknown speaker (G4HPSUNK) [624] get [...] to make some more.
John (G4HPS1WP) [625] Yeah, you can't really defer your pension you have to take it when you retire, don't you?
[626] I don't think you can defer it.
Unknown speaker (G4HPSUNK) [627] Can you?
John (G4HPS1WP) [628] You, you can defer a state pension, but it's not really that, that viable.
Unknown speaker (G4HPSUNK) [629] Can't you do that?
[630] We thought you could.
John (G4HPS1WP) [631] Not with er not with a local authority pension, as far as I'm aware.
[632] I wouldn't recommend it anyway.
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [633] [...] put it back into your pension fund?
John (G4HPS1WP) [634] Er
Unknown speaker (G4HPSUNK) [635] To grow, to take [...] ?
John (G4HPS1WP) [636] You can if it's a, if it's a private pension, yes you can do.
Unknown speaker (G4HPSUNK) [637] But you can't [...] .
John (G4HPS1WP) [638] No no let's assume, let's assume that she has to take it.
[639] I don't think you can.
[640] I mean nobody's ever asked me that question before.
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [641] Sorry.
John (G4HPS1WP) [642] Can I defer my pension?
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [643] Anyway, if we can start with er with, with the position as it's there, you know if we can take that.
Unknown speaker (G4HPSUNK) [644] Er two, private income.
[645] Shares.
John (G4HPS1WP) [646] Right.
[647] Okay so she's getting, is it ten thousand from Lloyds?
Unknown speaker (G4HPSUNK) [648] Five.
John (G4HPS1WP) [649] Yeah, five from private shares
Unknown speaker (G4HPSUNK) [650] Five from her pension.
John (G4HPS1WP) [651] Yeah.
[652] So she's got an income of ten.
Unknown speaker (G4HPSUNK) [653] She's got her own house.
Unknown speaker (G4HPSUNK) [654] No mortgage.
John (G4HPS1WP) [655] No mortgage, right. ...
Unknown speaker (G4HPSUNK) [656] Lump sum plus redundancy money of twenty grand.
John (G4HPS1WP) [657] Yeah. ...
Unknown speaker (G4HPSUNK) [658] Building society deposits twenty grand.
John (G4HPS1WP) [659] Yeah.
Unknown speaker (G4HPSUNK) [660] And [...] value of eight grand.
John (G4HPS1WP) [661] Yeah, so she's
Unknown speaker (G4HPSUNK) [662] Total forty eight.
John (G4HPS1WP) [663] So she's got forty eight thousand right so er what was the inter er er you would question the instruction.
[664] Cos she was [...] .
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [665] She, she's got a modest lifestyle.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [666] [...] That, that's, that's your ten thousand a year income, she can get by on that er this is interesting cos it's all shares.
[667] I, when I wrote it I thought well she's inherited this from her family and
Unknown speaker (G4HPSUNK) [668] Yeah.
John (G4HPS1WP) [669] that that's ongoing income, so what would you suggest there then?
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [670] I think a world cruise.
John (G4HPS1WP) [671] World cruise, yes.
[672] I've had that before.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [673] Send her round the world three times.
Unknown speaker (G4HPSUNK) [...]
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [674] [...] keen and adventurous, [...] .
John (G4HPS1WP) [675] Okay, so if you can give me some suggestions that might, might actually improve, cos we've got to be seriously thinking that she's fifty six, this is the other key to it.
Unknown speaker (G4HPSUNK) [676] Mhm.
John (G4HPS1WP) [677] And she's got a long time to use this money, and okay this might be sufficient now, but will it be when she's seventy, seventy five, so we've got to make that money work so
Unknown speaker (G4HPSUNK) [678] Something to pay but [...] tax.
John (G4HPS1WP) [679] That's right.
[680] Yes, I mean er something to er mitigate or er evade and evade is a bad word isn't it really?
Unknown speaker (G4HPSUNK) [681] Avoid.
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [682] Avoid.
[683] Avoid.
[684] Avoid tax, yes.
[685] Yes.
[686] Or tax, tax planning.
[687] Anyway, erm the er what were your solutions then to that?
[688] You started it, so you know.
Unknown speaker (G4HPSUNK) [689] Well, the first one we got kicked on the head because [...] take the pension.
John (G4HPS1WP) [690] Oh right.
Unknown speaker (G4HPSUNK) [691] Erm ...
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [692] No, okay, can I pass that on to somebody else, yes?
Unknown speaker (G4HPSUNK) [693] I've done the lot.
Unknown speaker (G4HPSUNK) [694] Keep your bank account in credit.
John (G4HPS1WP) [695] Yes.
Unknown speaker (G4HPSUNK) [696] Get a TESSA.
John (G4HPS1WP) [697] TESSA.
[698] Right.
[699] P E P?
Unknown speaker (G4HPSUNK) [700] P E P?
John (G4HPS1WP) [701] P E P.
Unknown speaker (G4HPSUNK) [702] Keep five thousand in a local instant access building society. ...
Unknown speaker (G4HPSUNK) [703] [...] , fingers crossed.
Unknown speaker (G4HPSUNK) [704] Put five thousand in a top ten postal account.
John (G4HPS1WP) [705] Yes.
Unknown speaker (G4HPSUNK) [706] Put the rest in unit trusts with a long established firm. ...
John (G4HPS1WP) [707] Yeah.
[708] Unit trusts.
[709] ... Right.
[710] Okay.
[711] So,
Unknown speaker (G4HPSUNK) [712] Index-linked [...] .
John (G4HPS1WP) [713] Er right, [...] another suggestion of index-linked, would you recommend that as
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [714] reasonable?
[715] [...] . Er well I'll put those down, so let's find some of these because obviously you won't have met them all, maybe.
[716] But erm certainly erm I, I think that was erm a, a very good response to this because erm obviously we've got er a g a fair selection here, you've got erm building society instant and top ten postal, that's the postal account there, erm TESSA, P E P and unit trusts, and possibly index-linked certificates, and I'll go back to those but I mean certainly that was a good er a good spread, and I think er you know you should be er thinking, well you know this lady's going to have some safe growth in the in the future.
[717] Erm and obviously she's used to shares she's not going to be worried about unit trusts or P E Ps cos she's already had er a lot of share er a P E P share income here anyway.
[718] So she'll be quite happy w to spread it like that.
[719] Erm the only thing that erm I thought she might er do was erm er something else on a ten year basis, because she's only fifty six, I mean that's relatively young, so would you possibly suggest anything that could go for ten or more years?
Unknown speaker (G4HPSUNK) [720] An annuity.
John (G4HPS1WP) [721] Erm
Unknown speaker (G4HPSUNK) [722] [...] with profits annuity.
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [723] With profits, yeah.
[724] Or, or endowments I was thinking of, rather than a
Unknown speaker (G4HPSUNK) [725] But she's no children, why she doesn't want to actually [...] ?
John (G4HPS1WP) [726] No no, but an endowment's purely savings if it's taken as a, as a maximum investment plan or a, or a, an i i a pure endowment.
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [727] And he's erm ... when we were thinking about tax planning, I was thinking that if a, a, a qualifying endowment, if it's run for ten years, the one big advantage is that it always pays without deduction of tax.
[728] So it's always t tax-free cash, and any tax-free cash that we can accumulate would be very useful.
[729] Because you've no idea in ten years time what your er er position will be with regard to income and tax.
[730] I mean, for a start we've got twenty five pence in the pound tax rate, where will we be in five years time?
[731] Thirty percent?
[732] Thirty two percent?
[733] So any tax-free cash that she's got might be useful.
[734] I mean I won't go into detail, but I mean she could do endowment, she could do it on a maximum investment plan basis, to back up her P E P, erm and save regularly through different funds.
[735] So I mean that was a good solution.
[736] Er any others for Miss , with any other alterations to that?
[737] Any, any other suggestions?
Unknown speaker (G4HPSUNK) [738] Can I ask a question?
John (G4HPS1WP) [739] Yes.
Unknown speaker (G4HPSUNK) [740] I didn't know this one.
[741] Erm if you're buying an endowment policy is it possible to put er put it in as it were paid up, or do you have to find the premiums out of your income?
[742] Erm
John (G4HPS1WP) [743] You can, you can make a single premium contribution to it,
Unknown speaker (G4HPSUNK) [744] Ah.
John (G4HPS1WP) [745] that's a useful point actually, I, I'll, I'll cover it now, cos er the lady over there mentioned an annuity, the two can be done together.
[746] It's called a back-to-back, and er the insurance company issue two, two contracts.
[747] They issue an er they issue an annuity, which is erm er if you're not sure what an annuity is, this is a temporary annuity, and they might say in the case of Miss they might say well what about a ten year annuity?
[748] Er in actual fact it's a ten year contract, you buy er a nine year annuity, and the first premium goes to the endowment when you put the money in so let's say we er put a thousand pounds in in the, the first year, and that fund's on an, on an annual premium.
[749] Now the next nine premiums come from the annuity, and that feeds in here.
[750] Now at the end of the ten years of course the erm the accumulation here erm is completed, we've, we've actually funded the policy right the way through, so it's now a qualifying policy, tax-free down here, and the annuity has been exhausted, so that's gone, so you've used one to fund the other.
[751] And at the end of the ten years of course that's all tax-free cash.
[752] The annuity is actually quite a attractive because there's not much tax er liability on an annuity anyway, only a very small proportion and for her in this situation she could actually make a single contribution of say eight thousand pound, the maturity from the endowment, and actually buy this sort of contract straight off.
[753] In which case she doesn't have to worry about funding from income, which is what your question was wasn't it?
Unknown speaker (G4HPSUNK) [754] Yeah.
John (G4HPS1WP) [755] She doesn't have to fund it from income.
[756] And it would all be funded from within the contract.
[757] Er they're very good in fact, I mean even the erm if you look at say the result from Clerical Medical over ten years, erm ... fifteen thousand invested, er currently er returning something like forty three thousand over er the five the ten year term, so that's not bad.
[758] You know, well over double your money, which is what a building society would have done, it would just about have doubled your money over ten.
[759] ... But of course the problems are with this contract that it wouldn't suit everybody, one because you've got no access for the ten years, you've bought the contract up front, and if you want access to it, it's very limited and of course if you cash an endowment early as we know it'd damage the, the er the income sorry the, the growth at the end of the plan.
[760] Er but we can write these with some f flexibility, and erm there is a deferred income version, where you can run it so you were say you didn't need income five years, you can run it for five years, then la then leave it erm and just take the annuity income as er as, as er regular income.
[761] So you can actually move it about a bit, but it's not that flexible a contract.
[762] But in the case of a younger person, looking for er very secure growth, it's not a bad thing to do.
[763] So erm Miss , I mean she's an easy case to do really,
Unknown speaker (G4HPSUNK) [764] What
John (G4HPS1WP) [765] cos she's got loads of, sorry?
Unknown speaker (G4HPSUNK) [766] What sort of return would you get over ten years on, on a gold brick.
[767] Bullion.
[768] Jewellery, diamonds.
John (G4HPS1WP) [769] Er hard to say, because you're moving into er specialist areas like commodities.
[770] Erm I mean we don't even look at the figures on those, because it's not the sort of investment that we would actually consider erm useful for a, for a longer term investor.
[771] I m she's a little bit different in that she could erm take erm a flyer into something like that
Unknown speaker (G4HPSUNK) [772] Yeah.
John (G4HPS1WP) [773] but commodities are high risk by the nature of er the narrowness of the market.
[774] And I mean recently I came across somebody who'd got some part holdings in diamonds, and of course the diamond market's gone into ... rapid decline because of the er is it Namibian diamonds, and, and the Russians er breaking up the De Beer market.
[775] And you can, you can have that thing looking very very difficult, very, in very short time.
[776] So I mean she'd have to be a very speculative investor, she'd have to be right up to er adventurous, for her to think about that.
[777] Er but I mean as, as to returns, I mean you'd have to look at specialist press for that erm
Unknown speaker (G4HPSUNK) [778] Yes.
John (G4HPS1WP) [779] I mean I've got some indications in er a couple of books I've got in the car, er but erm again I've not been asked that question you know, what's the bullion return, things like that, it's, it's a little bit out of the ordinary, but you can find the figures.
[780] Yes?
Unknown speaker (G4HPSUNK) [781] Can you explain P E Ps?
[782] Don't know about them.
John (G4HPS1WP) [783] Right, okay, well I'll do it now, so we don't, so we're not mechanically going through this, cos I mean if you don't know what a P E P is, it's worth looking at now.
[784] So, a P E P is erm er introduced by er Mr Lawson, who you might remember some time ago had er a job ... as the Chancellor and is now working part-time in the City.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [785] Yeah.
[786] ... He, he does get p paid more than two, two pound fifty an hour as I understand.
[787] I mean I l the, the pundit system in this country is absolutely delightful, I mean you don't need [...] do you, when I mean the economy's in, in, in reverse and things are going horribly wrong and they wheel on Mr Lawson to explain what he would have done,
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [788] had he still been in control, and I'm thinking God, [...] how do they, how on earth can they possibly go and say that you know?
[789] It's like, it's rather like asking Henry Kissinger to sort of er er give us some advice on foreign policy in Sou in South-East Asia or whatever.
[790] I mean,i i i it's, it's almost an, an obsession with society.
[791] Isn't it?
[792] To bring back people who erm you know perhaps have had their time
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [793] [laugh] and ask their opinion.
[794] Anyway, six thousand into a standard P E P, now er P E Ps are erm er an instrument which were basically to do with shares, originally ... and the shares were invested in U K companies, and er the real dividend value of a sh the share, the, the shares have a dividend, and the real value of a P E P is the dividend yield.
[795] Now if a go if a company's got a high dividend yield, it might be about six percent gross.
[796] And of course it'll be four and a half after it's paid tax, you know if you've got any tax credits from your nationalized shares, you'll see those come through, and y you've got the net return.
[797] Now P E P allows you to er allows the managers on your behalf to reclaim the tax, so a lot of the funds are geared for income, and when you're retiring, income geared P E Ps are excellent news.
[798] Now, the e the early versions were erm a lot less er flexible, they were the dinosaurs, and if anybody's got an original P E P, they'll know that all the dealing transactions, all the adjustments have all got to be noted and filed, and if anybody's had a Lloyds Bank P E P since nineteen eighty seven, they'll probably have a compete cabinet full of paperwork by now.
[799] Which you don't have on a mede modern P E P because they can be written through investment trusts, unit trusts, single shares for three thousand or specialist, er self-select P E Ps.
[800] Self-select P E Ps are a little bit different, is that when you, you the managers give you a choice of shares and it's rather like pulling the handle on the one-armed bandit, you say right, I'll start with er er I C I and I'll back that up with B A T, and, and you leave them in for as long as you want, and you pay a charge when you move the shares, so you can actually control the P E P.
[801] Er very difficult unless you're into the share market er on a regular basis, but erm if you want a P E P, er er I, I'd certainly say they're worth having, and certainly for some of the people er in this room.
[802] But don't be erm er led into doing growth, growth P E Ps necessarily, because growth P E Ps really won't give you much of a deal.
[803] If you want a growth-type investment, such as I don't know, Far Eastern fund, or something like that, or a, or even a European Special Situations, you n you, you might as well not use the P E P because they wh you get about one percent on er a growth P E P.
[804] And that's not going to be of use to anybody is it?
[805] You're not saving any tax on that, on that difference.
[806] So a one percent dividend yield, not, not worth writing as a P E P.
[807] But what they've done is, they've actually dis distorted the rules on P E Ps as time's gone along and the Chancellor's allowed them to do it, and the distortions are getting more and more elaborate, and er I think they keep knocking on the revenue door and saying er we, we've designed this one, is this okay?
[808] And so far the revenue have been going yeah, yeah, go away go away.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [809] And er eventually somebody will spot it, and realize that they've actually moved well away from what p P E Ps originally were.
[810] You see one of the rules is that you keep money in cash until it was invested.
[811] And Fidelity kept saying well, er if we don't feel like investing it this month, can we keep it in cash a bit longer?
[812] And if we're keeping it in cash, can we buy some gilts? or can we buy some fixed interest securities?
[813] Yeah, okay, you can do that.
[814] So now a anything goes in a P E P.
[815] Which is great while i while it, while it lasts.
Unknown speaker (G4HPSUNK) [816] What does P E P mean?
John (G4HPS1WP) [817] Personal equity plan.
Unknown speaker (G4HPSUNK) [818] [...] you can have it nine thousand if you pay six into the fund and another three thousand [...] .
John (G4HPS1WP) [819] Yes.
[820] And then three thousand in that's the single share P E P in any one [...] .
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [821] And you need to choose a P E P manager per year, so if you're already with one P E P manager, you've either got to buy him out and give it to another P E P manager, or you can, you can erm er choose another one each year in other words, I do a different P E P each year, with a different manager, and that keeps everything moving so that you've got a good spread.
[822] Some of them are getting very elaborate, and you're seeing the stuff in the press for things like ten percent gross yields, has anybody seen those?
[823] ... A a absolute scream, they are.
[824] But I mean they actually do work, er ten percent gross yield and erm if you asked me to explain how they get the ten percent, I'd have to use some notes they gave to me cos it's, cos it's complicated, but they use derivatives, and they buy in er in the shares and options market, and erm the company I'm thinking of actually own the shares, but you take options on them, and they take commission on the options, they also take dividends, er and by the time you've read the, the, the spiel, it sounds a bit like you've fitted all these petrol savers to your car and you're driving to Nottingham, and the tank overflows, it's that sort of
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [825] it's, it's that sort of theory.
[826] But there's a, it, it actually does work, it actually does work.
[827] I m I mean we have approved these schemes, I mean th they are nothing to do with direct share ownership.
[828] I mean you might have about forty percent of the fund in shares and the rest will be input options, derivatives and all sorts of complicated devices.
[829] But basically as far as you are concerned you can get that sort of dividend yield, which is brilliant because i y as a tax-payer if you can te ten percent ... erm the, the fund is written as a unit trust and you'd be paying seven you'd be paid seven and a half percent on that one, so which one would you choose?
[830] Have it written as a P E P and it makes good sense.
[831] But I think the distortions are getting rather weird now, and I, I think that, that the, in a, in a future budget when the Chancellor's less pressed, I mean P E Ps really weren't a priority this year, were they?
[832] I'm sure he'd got a few more bits of paper on his desk than what shall we do about P E Ps?
[833] But when he gets round to it, I think he'll control them a bit more closely, now you can invest in that sort of fund quite safely, and although it won't give you any capital growth, because if they're giving you ten percent income, obviously the capital growth's going to be limited, but er if it's the income that you're after, not a bad thing to do, so I mean at the moment I may actually combine one income-type er P E P with one growth and income, where the, where the, perhaps the yield is about five percent.
[834] Er the original criticism, if you can remember it, was all the ch all the stuff about charges, do you remember all that?
[835] About, you know, the horrible charges, and they were horribly badly charged, I mean, Lloyds Bank you reckon they could activate ten and a half percent in its first year to actually break even ... you know, because of the initial charges setting up fees, etcetera.
[836] Now that's pretty heavy going.
[837] It wasn't Lloyds fault, it was just that they were complying with the original P E P regulations about reporting and, and er so on, so they had to charge more.
[838] So it, if it's an ordinary unit trust, your initial charge can be somewhere about five to six percent, however, a number of companies have realized that they can discount if you, if they've got your s if they've got your commitment, they'll discount.
[839] So in some groups, if I say right, this client's willing to commit himself for three years minimum, they'll discount the initial charge down to about two percent.
[840] In some cases down to nil ... if we take a five year contract.
[841] In other words, if you come out early, you'll be charged, erm er a sliding scale.
[842] On that five on the five year one, if you come out year three, you'll get three percent exit charge.
[843] Now we've been asking for this for years.
[844] Because nobody likes to pay up front.
[845] I mean, it's not fair is it really?
[846] I mean you're taking five percent of your money when you first go into the fund, and, and that's an exceptional er amount of money that you won't get back, but if i if they're saying well we'll invest the whole lot for you, but you've got to keep with us,w then y you've got the option.
[847] And if in three years you decided the performance was less than adequate, it would be worth you losing two percent to come out.
[848] Now having said that I mean the late long established er unit trust group, I mean as a, as a company we've got to be very careful who we use, we've got an approved list erm in London and in Bournemouth we have erm a, a department which analyzes products, and those products come onto our approved list when they've, when they've fulfilled a number of criteria.
[849] Are the charges reasonable, er is the performance good, is the managing group secure?
[850] And er a number, a number of other factors.
[851] So once it's got onto our approved list, we're pretty sure that we're, we're really in the right area.
[852] And that would be you know companies you're probably already familiar with, you know people like M and G, erm Fidelity, erm ... er [...] .
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [853] Erm anybody who's into unit trusts who will perhaps recognize some of those names.
[854] And then into the investment trust, [...] and Colonial, er and erm er let's see, [...] , people like that.
[855] So w w w that's constantly reviewed.
[856] Not that I do it, I mean if I tried to read all that stuff, I'd never leave home but I mean they actually give a a an advice list which we can then comply with.
[857] So as far as you're concerned, P E Ps have got a tremendous part to play at the moment, and I do recommend that you take advantage of them.
[858] Two years ago, difficult for me to get a client to move from a building society because they were saying well I'm getting about nine percent with the Abbey National, er why should I take the risk on a P E P?
[859] Well the risk now is staying in Abbey National because your rate's down to about four percent net.
[860] And the, the dividend yield from a P E P can be anything from sort of five to ten percent and the potential for capital growth.
Unknown speaker (G4HPSUNK) [861] And it's tax-free.
John (G4HPS1WP) [862] And it's tax-free.
[863] But you've got to make a mental leap, because I mean for the last five years, things have been pretty horrible, since eighty seven really, I mean we've only had the pick up in the last year.
[864] But it's an act of faith to say well,i you know well, I'll go into a P E P.
[865] But if you look at the low-risk a aspect of a P E P and you also look at the low charges, it's got to be worth looking at, and certainly in terms of spread for Miss , worth erm worth considering, I mean she'd be er a perfect investor for that.
Unknown speaker (G4HPSUNK) [866] Some years a tin under the bed was better than equities, cos they were
John (G4HPS1WP) [867] That's right.
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [868] Except er I, I mean I'd say that the income funds actually performed quite well, if you didn't look at the capital value.
[869] You see, I mean I, I, I've got lots of clients who've had capital-l er er income-led funds on this sort of thing for years.
[870] And I mean if they'd not looked in a paper ... in nineteen eighty seven eighty eight, and realized that fifteen percent of the fund had suddenly gone missing cos it had you know dropped ... they they'd have still got income from their investments, and if they didn't need to cash it, then it would have been no problem at all.
[871] The funny thing is that er if you look at the better dividend funds in the year of the crash, the dividends actually went up, cos dividend yields from companies were good in that year, so people wouldn't have lost out, their income would have been quite stable.
[872] Er obviously if it was in decline, terminal decline then your income and your capital would fall as well.
[873] But I mean we've had five years of bad stockmarket performances, and in cyclical er economics I think if you look at the sort of post-war boom
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [874] slump, we're, then we're back into I wouldn't say a boom, er that's not really the right description, but we're certainly back out of the er woods as far as erm er shares go in the U K.
[875] Erm whether it'll be a sustained erm recovery is another question, but I think you can take the view that you know you will, you will get some mileage out of share performances in the next couple of years.
Unknown speaker (G4HPSUNK) [876] Even the banks.
[877] Er the share prices are higher now than they were [...] months ago.
John (G4HPS1WP) [878] That's right.
[879] That's right.
[880] And I mean the banks have erm er r really been an i indicator of [...] economic performance, and, and that, that's the case.
[881] That it
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [laugh]
Unknown speaker (G4HPSUNK) [882] [...] quite a, quite a shock
John (G4HPS1WP) [883] Yes.
Unknown speaker (G4HPSUNK) [884] to them I think.
John (G4HPS1WP) [885] Yeah, that's right.
[886] So if we can have a look at another case, er did anybody do erm ... excuse me, Mr and Mrs ? ... ?
[887] Anybody do ?
[888] No, I didn't hand one out.
[889] ... Erm ?
[890] ... Mr and Mrs ?
[891] Right, okay, just start with Mr .
Unknown speaker (G4HPSUNK) [892] Er he's got a pension from the local [...] of four thousand.
John (G4HPS1WP) [893] Yeah.
Unknown speaker (G4HPSUNK) [894] Erm his wife [...] is self-employed, has got four thousand, but it's not [...] .
John (G4HPS1WP) [895] So it could come up could [...] go.
Unknown speaker (G4HPSUNK) [896] No mortgage.
[897] And the building society savings of twenty eight thousand. ...
John (G4HPS1WP) [898] Right, so erm what do we do with that then?
[899] S s cos they needed a secure income, didn't they?
Unknown speaker (G4HPSUNK) [900] Yes. ... [...] .
John (G4HPS1WP) [901] Er what's the
Unknown speaker (G4HPSUNK) [902] I, I Mr 's got four thousand,
John (G4HPS1WP) [903] Yes.
Unknown speaker (G4HPSUNK) [904] so with the married man's allowance, he's got, he's well under.
John (G4HPS1WP) [905] Yes.
John (G4HPS1WP) [906] Six five.
Unknown speaker (G4HPSUNK) [907] [...] .
[908] And his wife has something like er three four four five,
John (G4HPS1WP) [909] Yes.
Unknown speaker (G4HPSUNK) [910] er which may or may not be there because we don't know how much her income is.
John (G4HPS1WP) [911] I think we'd have to ignore that allowance
Unknown speaker (G4HPSUNK) [912] Yes.
John (G4HPS1WP) [913] and just assume that she, she'll just about use it, erm
Unknown speaker (G4HPSUNK) [914] Er okay.
[915] Er well in that case then, I, I put eight thousand into a building society for easy access, car, holiday, [...] , whatever,
John (G4HPS1WP) [916] Yeah.
Unknown speaker (G4HPSUNK) [917] and I put twenty thousand pounds to give, I, I mean I took it that she would use her allowance, er I took it erm as twenty thousand pounds to give his wife as high a possible gross earning
John (G4HPS1WP) [918] Yes.
Unknown speaker (G4HPSUNK) [919] and so divided it that the remainder went to the husband to take up the one thousand one hundred and sixty five.
John (G4HPS1WP) [920] Right.
[921] Right.
[922] So you could actually erm erm put something in joint names even, and it would use up his allowance.
Unknown speaker (G4HPSUNK) [923] I mean if you took that ten percent, it would be two thousand a year from [...]
John (G4HPS1WP) [924] Yes.
Unknown speaker (G4HPSUNK) [925] erm and if that was so,
John (G4HPS1WP) [926] Yes.
Unknown speaker (G4HPSUNK) [927] roughly half of that could go to him
John (G4HPS1WP) [928] Yes.
Unknown speaker (G4HPSUNK) [929] to make up his allowances,
John (G4HPS1WP) [930] Right.
Unknown speaker (G4HPSUNK) [931] a a and the rest er
John (G4HPS1WP) [932] Right.
[933] That's fine, but how would you do it?
[934] Er was it just a high rate building society, or?
Unknown speaker (G4HPSUNK) [935] No, I would put it in gross earnings, perhaps erm half into National Savings
John (G4HPS1WP) [936] Yes.
Unknown speaker (G4HPSUNK) [937] er and look round for something else.
John (G4HPS1WP) [938] Right.
[939] So National Savings, that's not a bad decision, cos I mean National Savings are absolutely secure, and the other thing is that you don't need to put twenty five thousand pounds in to get the highest rate, you'll get the highest rate from two thousand pounds upwards, so it's very good for small amounts.
[940] So it's excellent here, but we know that it's at a variable, and I think the problem that you were probably facing is how do you secure a ... a better rate than that.
[941] Erm you know the, the answer must be that erm er just before I answer that, I mean has anybody else done Mrs , and Mr ?
[942] Anybody else do that one?
Unknown speaker (G4HPSUNK) [943] We did it, but it was ... very similar.
John (G4HPS1WP) [944] Right, okay, fine, that s saves a bit of time.
[945] But I mean the thing is here that the twenty thousand pounds, if it's invested er into National Savings, you c you've got another ten thousand and you could look for er a fixed return.
[946] Now normally, fixed returns we do use, you know like guaranteed income bonds, guaranteed er returns, but unfortunately, if you look at the Halifax list, or the er any building society list, their fixed-rate returns are very dodgy and they're round about sort of er six and a half to seven percent at the most erm if you tie for three to four years, and they go up to about seven and a half, maybe a little bit more if you tie for five years.
[947] Now I'm not too sure whether interest rates, I'm not very keen on tying interest rates, you see I think we're going up again, perhaps within the next eighteen months, so one way round is to use another type of investment, and you could use an offshore erm fund, er building society stroke investment fund, er which would actually give you a better rate.
[948] Has anybody used offshore funds at all?
[949] Right.
[950] Er.
[951] Was that a, is that pure building society investment, or?
Unknown speaker (G4HPSUNK) [952] No, it was a ... a bank gilt fund.
John (G4HPS1WP) [953] A gilt fund?
[954] Right.
[955] Erm
Unknown speaker (G4HPSUNK) [956] [...] Jersey.
John (G4HPS1WP) [957] Jersey gilts?
[958] And an and what was your opinion of that, did it work or not?
Unknown speaker (G4HPSUNK) [959] The cheque keeps coming.
John (G4HPS1WP) [laugh]
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [960] Yeah.
[961] There was a problem with gilt funds about three years ago, and T S B ran up against the problem of falling gilt yields and trying to maintain the, the flow to the investor, which they did, but th they failed to tell the investor that they were having to erm sell gilts and er trade under market value, so in fact you reduce the fund, but there are halfway stages, and I mean at the moment I can get round about eight percent, plus ... on, on erm er offshore funds.
[962] And they, they invest outside U K and you're p perfectly legal to use these, and as long as they're Securities and Investment Board regulated, you're okay.
[963] So you could put some money into er an offshore fund. [...]
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [964] something which is regulated and i is part of a major organization, a bank, or an insurance company, you're pretty well okay.
[965] And that, that eight percent plus could then be paid into your account.
[966] But it's likely to be more stable than the U K, because if the U K rates continue to fall, they'll move their money into erm other er currencies.
[967] It'll always be a sterling fund, but it can be moved into other currencies, or into gilts, as your fund obviously is.
[968] So there is that flexibility there.
[969] So that's one of the few options you've got at the moment.
[970] I mean, fixed rates are dangerous because once you've fixed, if interest rates then go up, you've lost out on your er return and you can't get your money out anyway, so I mean at the moment it's really erm er er very deeply into the cycle of low, of low interest rates.
[971] Okay, so now that was fairly straightforward, erm let's have a look at another case.
[972] Mr , he's interesting.
Unknown speaker (G4HPSUNK) [973] We've got Mr .
Unknown speaker (G4HPSUNK) [974] Yes.
John (G4HPS1WP) [975] Right.
[976] Mr .
Unknown speaker (G4HPSUNK) [977] Not very much on him though.
Unknown speaker (G4HPSUNK) [978] No.
[979] ... I've got him.
John (G4HPS1WP) [980] Right so, er right, if you can start us off with Mr then, tell us the
Unknown speaker (G4HPSUNK) [981] Well, I've, I didn't look er erm I can see deficiencies in what I've done now you've been through the other
John (G4HPS1WP) [982] Well, it doesn't matter.
Unknown speaker (G4HPSUNK) [983] Yeah.
John (G4HPS1WP) [984] I mean, if you just tell us what you
Unknown speaker (G4HPSUNK) [985] Well, I thought he should put erm er about ten thousand into a building society ... er type investment
John (G4HPS1WP) [986] Right.
Unknown speaker (G4HPSUNK) [987] of some sort.
John (G4HPS1WP) [988] I'll just set the scene for the others in that he's er fifty five isn't he?
[989] He's just come back from Australia
Unknown speaker (G4HPSUNK) [990] Yes.
John (G4HPS1WP) [991] and he's in inherited a family home, so he's got a home to live in, but he doesn't earn very much does he?
Unknown speaker (G4HPSUNK) [992] No, but he's got a hundred and twenty thousand nest egg.
John (G4HPS1WP) [993] So he's got three thousand pounds income, and he's got a hundred and twenty thousand pound nest egg.
Unknown speaker (G4HPSUNK) [994] Yes.
[995] I've concentrated on investing the nest egg really.
John (G4HPS1WP) [996] Right.
[997] Okay.
[998] So you've got ten thousand into the building society.
Unknown speaker (G4HPSUNK) [999] Yes, I think he needed something quite secure and accessible.
John (G4HPS1WP) [1000] Yeah.
Unknown speaker (G4HPSUNK) [1001] Then er I thought perhaps he should go for erm ... erm something that's er ... will give him a, a good income, but er
John (G4HPS1WP) [1002] Mhm.
Unknown speaker (G4HPSUNK) [1003] growth as well, so I wondered about er say thirty thousand in investment trusts, or perhaps
John (G4HPS1WP) [1004] Yes.
Unknown speaker (G4HPSUNK) [1005] with a P E P you see that
John (G4HPS1WP) [1006] Yes.
Unknown speaker (G4HPSUNK) [1007] thirty thousand split between those.
John (G4HPS1WP) [1008] Yeah, that's fine.
Unknown speaker (G4HPSUNK) [1009] And then I, well if it's really income he needs, I thought he could look at an equities portfolio for the eighty thousand, say, forty thousand in er groceries and forty thousand in pharmaceutical.
John (G4HPS1WP) [1010] Right.
[1011] So er sounds like you can act as inv investment manager for this man actually.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [1012] Erm, er ... but er yes,so eighty thousand to er in equity portfolio, and that would give him a yield of maybe erm you know four percent, something like that after tax deducted, so er let's say erm say you know er say three thousand two hundred from that roughly, and
Unknown speaker (G4HPSUNK) [1013] [...] P E P exceed the limits?
John (G4HPS1WP) [1014] Er, yes it would.
[1015] We'd have to put most of it into investment trusts
Unknown speaker (G4HPSUNK) [1016] Yes.
John (G4HPS1WP) [1017] and just use up the P E P.
Unknown speaker (G4HPSUNK) [1018] Unless it was his wife as well.
John (G4HPS1WP) [1019] Yes erm
Unknown speaker (G4HPSUNK) [1020] He's single.
John (G4HPS1WP) [1021] Yes, he's single.
[1022] And of course he could use it up in subsequent years, he could move some of this into a P E P.
[1023] So er that would er
Unknown speaker (G4HPSUNK) [1024] And he'd get a little bit on his building society, wouldn't he?
John (G4HPS1WP) [1025] Right, yes, you would, yes.
[1026] I mean he'd perhaps get erm you know er let's say four hundred pounds a year on his building society, so he'd have some extra income, er four five, just over five thousand pounds a year, that's [...] .
Unknown speaker (G4HPSUNK) [1027] More than doubled what he's got.
John (G4HPS1WP) [1028] Yes, that's right, er I mean the thing is you don't know how much income you've got to generate really.
Unknown speaker (G4HPSUNK) [1029] No.
John (G4HPS1WP) [1030] And er in, within that as you know you can actually er go for er the higher income if he wanted to he could push the income up on the hundred thousand say, we could make the income round about seven percent if we wanted to do.
[1031] Seven percent plus.
[1032] Which would give him seven thousand a year, rather than five.
[1033] So, er there's a fair bit of er I was interested in what you said about equity portfolios, erm the er thing is you'd have to have that privately managed, wouldn't you?
Unknown speaker (G4HPSUNK) [1034] Yes.
John (G4HPS1WP) [1035] And private management means that you would go to a bank or stockbroker, and then you would pay them an annual fee, and there would be other charges, you know for selling er and buying of shares,
Unknown speaker (G4HPSUNK) [1036] Yes.
John (G4HPS1WP) [1037] and my er feeling is that under say a hundred and fifty thousand, that y that you're going to find the charges are quite heavy, because it's not a group investment, it's an individual investment.
[1038] Erm some of the banks actually lay off the charges to some extent, but I think he might find that a bit expensive to run, erm and of course they'll take their charges even if they don't make a profit for you.
Unknown speaker (G4HPSUNK) [1039] As often as not.
John (G4HPS1WP) [1040] A s and, and quite frankly, er you're going to have to be a little bit careful.
[1041] I mean you could use group investments, I mean what you did with the investment trusts gives him a better spread,
Unknown speaker (G4HPSUNK) [1042] Yes.
John (G4HPS1WP) [1043] lower charges, and I think you could perhaps use other funds to erm er increase that.
[1044] Er but erm certainly the theory's okay, I mean he's got instant access here, investment trust and equities, and if he needed the income, he could certainly get it.
[1045] I mean you've got quite a lot of movement in there and, and you could do quite a bit for him.
[1046] I mean I imagined he was working in Earl's Court, you know, pulling pints of Fosters and er
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [1047] possibly er needing a few bob to er you know tide him, but that, that's fine.
[1048] Did anybody else do Mr ?
Unknown speaker (G4HPSUNK) [1049] We thought about him buying some property and letting it out.
John (G4HPS1WP) [1050] Yes, yes, that's not a bad idea.
[1051] He could become a landlord.
[1052] So you, you could put him into property, erm but erm I don't know if he'd been in the U K for the last few years whether he'd be that keen on commercial property.
Unknown speaker (G4HPSUNK) [laugh] [...]
John (G4HPS1WP) [1053] Would you like the whole of the Dockland development for a hundred and twenty thousand?
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [1054] So t
Unknown speaker (G4HPSUNK) [1055] That much?
John (G4HPS1WP) [laugh]
Unknown speaker (G4HPSUNK) [1056] It's quite pricey [...] .
Unknown speaker (G4HPSUNK) [1057] It is a good time now to buy isn't it?
John (G4HPS1WP) [1058] Yes, it is a good time to buy Mr , yes, we ought to encourage him to buy.
[1059] So property and he could rent, and the rental income then could er be used er as a, as a useful form of income.
[1060] So that's a possibility.
[1061] Erm so any other possibilities for Mr ?
Unknown speaker (G4HPSUNK) [1062] We thought he might find the [...] house was too big for him, sell it and buy something smaller.
John (G4HPS1WP) [1063] Right, yes he could do.
Unknown speaker (G4HPSUNK) [1064] Get some capital that way.
John (G4HPS1WP) [1065] Yes, he could do.
Unknown speaker (G4HPSUNK) [1066] Or he could marry a rich sheila.
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [1067] A wealthy widow has a lot [...] .
John (G4HPS1WP) [1068] Yes, he could start corresponding with Miss , [...] .
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [...]
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [1069] [...] run a guest house or take [...] .
John (G4HPS1WP) [1070] Yes, run a guest house yes, yes.
[1071] Right, okay. [...]
Unknown speaker (G4HPSUNK) [1072] [...] surprising he can get rid of the property by you know, sort of letting the building society or someone have it, have the capital out of it, and use that capital as well, cos if he's single he's got no dependent well,
John (G4HPS1WP) [1073] Yes, yes.
Unknown speaker (G4HPSUNK) [1074] we assume he's got no dependents,
John (G4HPS1WP) [1075] Yes.
Unknown speaker (G4HPSUNK) [1076] so he could actually have the benefit of that money as well.
John (G4HPS1WP) [1077] Right, you mean like a home income scheme?
Unknown speaker (G4HPSUNK) [1078] Yeah.
John (G4HPS1WP) [1079] Yes.
[1080] Er, very wary of those, really, and we're not recommending them at all.
[1081] Er but that's only because of the erm the difficulties of erm er of, of ownership of this sort of thing.
[1082] I mean you u some of them used to be the growth roll up, you know the
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [1083] the, the debt rolled up against the value of the home, and once it gets to seventy five percent, you lose the home, or could do, and of course people who took this out, it was before the housing collapse, [...] you're in difficulties.
[1084] So unless you're very elderly, and you're living in a very er splendid dwelling it's probably not worth it.
[1085] I mean I ... [tape change] ... [...] If we have ten thousand pounds, we could put four thousands into an, an annuity, and say six thousand into a P E P, to give a simple example, and the P E P could then accumulate value over the te over the five years, let's assume it's a five year one, but it could be ten.
[1086] And that would give him about eighty pounds a month at the moment.
[1087] So that would be a guaranteed eighty pounds a month, and at the end of five years, we'd assume that the P E P had actually grown enough to give him his money back, you know it's, it's because this, because it's a temporary annuity, it would be lost after the five years.
[1088] It's not a lifetime annuity, and that would have grown to replace his er capital.
[1089] So he'd get the ten thousand back.
[1090] They're quite flexible, because he can actually take the income from the P E P if he wants to increase his er income as he goes along.
[1091] In Mr 's case, I'd probably write it for longer than five years, probably do a ten year one.
[1092] The snag is at the moment is that annuity rates aren't too hot, cos they've gone down with interest rates, so er I think maybe that I'd hold off doing that until later, and use other types of investment, and then maybe at maturity, roll it back into, into erm a er ... single premium annuity.
[1093] That's an alternative.
[1094] ... Now
Unknown speaker (G4HPSUNK) [1095] I I have a gut feeling against annuities.
[1096] I don't like things that disappear, and I don't like
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [1097] And you can't have your money back, [...]
Unknown speaker (G4HPSUNK) [1098] No.
John (G4HPS1WP) [1099] once they've got your money.
[1100] Actually they do work well, I mean there is, there is one scenario where it does work well, if you're elderly, and you're in good health, then annuities are, are pretty good value ... because they look on their actuarial charts, if you're an eighty eight year old, and er make an assessment and say well, for every ten thousand you give us, we'll give thirteen thousand a year.
[1101] So you've not got to live that long before you're into profit.
[1102] You've got to make sure that you're in good health, and you're a er hale and hearty individual, so if you're from a long lived family, erm I once er made a mistake on er delivering one of these courses and er I think erm erm there's an elderly lady used to work on the course, do you remember Miss, Miss ?
Unknown speaker (G4HPSUNK) [1103] Oh yes.
John (G4HPS1WP) [1104] And she's a super lady.
[1105] And er very straight-faced in fact, and she was sitting at the back of the room, and I, I'd just said to everybody, I said nobody here's got a life purchased annuity, have they?
[1106] You know, cos I knew everybody was far too young.
[1107] And er this hand went up from the back, you see.
[1108] ... And I thought oh, well that's interesting.
[1109] So it was Miss .
[1110] And then I, and I made this bit of a faux pas, I says, oh you must have got a very good rate, cos I knew she'd been retired years and years, you see.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [1111] And everybody fell about laughing, realized [...] .
[1112] But er I mean er she, she was in a perfect position to do it, I mean she'd been retired a long time, she was in good health and obviously an annuity would be perfect for her er where it wouldn't be for a younger person, so I mean life annuities not got.
[1113] But I think you're right on temporary annuities, they are good if the rate's good.
[1114] The ones that I did two years ago, which are giving a return of something about er nine to nine and a half percent a year, plus the potential for return in capital, will actually be very good.
[1115] I mean th th they've done better than anybody than everything else, because as rates have come down, I can go back and see a client and the National Savings has fallen, and the building society's fallen, but the, the annuity's still plugging away.
[1116] And it's horses for courses, it's secure.
[1117] It's a bit dull, but it does actually provide you with a level of income that you want.
[1118] And what you don't know is the question mark is at the end will you get your money back or not?
[1119] Well sometimes if I'm doing er say a sixty year old, to sixty five, he's got his state pension to come in at sixty five, so even if the P E P hasn't quite recovered, he might just decide to leave that where it is, and then his state pension comes in, his income is then made up, and off we go again.
[1120] So the thing is with all financial planning that you try and keep things very flexible.
[1121] And one of the flexibilities may actually be to say well if we've got this guaranteed income, we can afford to do something else with the rest.
[1122] Cos the problem is that th even di share dividends aren't guaranteed.
[1123] I mean, banks and building societies, whoever, can cut their dividend rate, and you suddenly find your income falls dramatically in one year.
[1124] So an annuity can't fall once you've bought it it's guaranteed, so you can see there are advantages to it.
[1125] And er it's a matter of getting the right mix.
[1126] So I, I wouldn't be entirely suspicious of an of annuities, but at the moment the er the erm temporary rates aren't too good.
[1127] Er right, so er if you take just one more example and then I'll have to get back to er what we do.
[1128] Did we finish off Mr ?
[1129] Anybody have an alternative for Mr ?
[1130] ... No.
[1131] Erm what about erm another case, have we got another case that er we, we haven't covered?
[1132] ... Nobody wants challenge me.
[1133] [laugh] No I mean it's not, it's not that, it's just that if you've got, if you've got anything you want to say on these cases, then it's worth bringing it out now.
Unknown speaker (G4HPSUNK) [1134] You've not mentioned premium bonds.
[1135] Is it worth, putting a certain amount s just, just in case, just in case
John (G4HPS1WP) [1136] [...] by seven percent on ERNIE, [...] .
[1137] ERNIE's just been down-rated by the way to reduce the ou the, the ac the average now is less than seven percent.
[1138] It's gone down to about five point something hasn't it?
[1139] I in line with interest rates.
[1140] Now there was a theory in the south of England, that when one retired, for the first year, you dumped most of your lump sum into premium bonds on the hope of a big win, and then after the first year you invested it, you see, having taken the big win.
[1141] Cos if you see the, the theory was that if you left it there indefinitely, er obviously the money declines in real value, doesn't it, because you're getting no increase on it.
[1142] So, I mean to me, it's a pure gamble.
[1143] Er absolute gamble.
[1144] So I mean erm I was going to say put money on the Grand National, but you can't really do that can you?
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [1145] But as far as, as far as erm the, the er the, the investment in, in premium bonds, it's got to be a flutter, it can be nothing else.
[1146] And I mean I, I find some clients are really lucky, you know they've got a few ... fiddly bits of issues and they keep getting fifty pounds here and fifty pounds there,
Unknown speaker (G4HPSUNK) [1147] Every time I come back from my holidays, the first thing I open is the premium bond win.
John (G4HPS1WP) [1148] Yeah, well, you see [...] .
Unknown speaker (G4HPSUNK) [1149] Won three times since last summer.
John (G4HPS1WP) [1150] Good god.
[1151] ... Yeah, do you want sell your [...] ?
Unknown speaker (G4HPSUNK) [1152] [...] enough to encourage one.
John (G4HPS1WP) [1153] Yes.
[1154] Yeah, I think, I think really the er the er overall view of it is that it's not serious investment, I mean it is just pure flutter.
[1155] Er, and I mean if you want to buy you know a few hundred of it then fine, you know you could b it'll do the job, you know if it's, it's not a, a thing that er
Unknown speaker (G4HPSUNK) [1156] Er you wouldn't include it on your list of ... essentials?
John (G4HPS1WP) [1157] No, not at all.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [1158] Otherwise you might be desperate to get awa to do something, or get away on holiday, but you're still waiting for that big win.
[1159] [laugh] It's a
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [1160] Wait for ever.
John (G4HPS1WP) [1161] Yeah, you w yeah, that's right.
[1162] So er to look at it er another way,w I, I'll stop before I go back to the erm slides, because I want to show you a few on you know erm er the way that money's worked over the last forty years, but if you look at index-linked certificates, cos somebody mentioned that, are they worth having?
[1163] That's National Savings, and to my mind the only good issue they've got at the moment, and er once you get with index-linked certificates, they were originally the granny bonds that were launched er in the early er late seventies, early eighties.
[1164] And er they erm were there to provide additional growth on savings, and it was, it was the inflation, the R P I plus a b a bonus which equalizes out at three and a quarter percent per annum.
[1165] Notice, this is the sixth issue.
[1166] Yeah.
[1167] The fifth was better.
Unknown speaker (G4HPSUNK) [1168] That's the one I got.
John (G4HPS1WP) [1169] Yeah.
[1170] I mean, I, I did what I could in the fifth issue, but you just run out of cash, that's the trouble, but I mean the sixth issue is good.
[1171] Your maximum investment is now ten thousand pounds each.
[1172] Wouldn't recommend masses into it, but because it's no income potential, and it's not that flexible, you've got to keep it for five years to make it really work.
[1173] But if you do keep it, then the results should be pretty good.
[1174] Having r you see I've had clients saying to me well, I'm not sure about this one.
[1175] You know I, I like the other stuff, but this one's a bit iffy, you know.
[1176] And they'll quote to me that inflation's at two percent.
[1177] ... Okay, well you've got two percent plus three and a quarter, that makes five and a quarter.
[1178] And that it has to be paid before probate is granted.
[1179] So there'd be d issue, so it's tax free.
[1180] Four fi five and a quarter tax free, you've got to put an awful lot of money in the building society to get that sort of return haven't you?
[1181] You're thinking that the gross is round about seven percent.
[1182] So you think well is that a good bet?
[1183] I, I'd suggest that it is a good bet, particularly if you think that erm if we do get rising inflation, er in the next year we could be, I mean the projected figures are round about er, by the middle of next year, round about five percent.
[1184] This is from various investment houses in, in, in the city, so five percent plus three and a quarter, eight and a quarter percent, and I would bet any money that interest rates haven't gone up that quickly.
[1185] Y I mean you they might have risen slightly, but you won't be getting that sort of investment return, you won't be paying any tax, and you're guaranteed your money's absolutely safe.
[1186] And if we do get a period of rapid inflation, because if one looks back at seventy four seventy five, with inflation running at over twenty percent a year, stock market out of control, erm and er and er building society rates very poor, erm you know seventy four begins to look a bit like ninety four to me.
[1187] Erm but I mean obviously it's a different situation, and the Chancellor's still got some manoeuvring to do, but we could end up in, in rapid inflation again, because we haven't had it for ten years.
[1188] I mean I've the figures on here, I'll show you in a minute, doing absolutely brilliant.
[1189] For the last ten years, we've been able to retire and keep our living standards up.
[1190] I know it because I see people regularly that retired five years ago six years ago, seven.
[1191] They're fine.
[1192] No real problems if they've been sensible with their money.
[1193] But what happens if we get that sort of period again?
[1194] ... Er you see R P I linking on your pensions is brilliant, you know there's no, no question about it.
[1195] Nobody in industry has actually got an absolute guarantee, I mean even the British Telecom schemes said they'll pay, they'll pay the rate of inflation if they feel they can afford.
[1196] But that means at some point they may actually go below it.
[1197] Not likely, but it could happen.
[1198] So you're fully index-linked.
[1199] Now,d don't forget index-linking is not the same as salary increases, and in a time of rapid inflation, prices go up, salaries go up, and the government can interfere in any way it wants with the R P I index.
[1200] It can take factors in and out.
[1201] It can take in mortgages, it can take in property, it can take in other values, so that R P I is a very much a, a negotiable figure.
[1202] It's like my wife saying well it costs me a lot more at Sainsburys than two percent, you know, increase over the last year.
[1203] And, and that's true.
[1204] Er so it's a moveable index.
[1205] So when you're retired, you've got to think that you're not salary-linked, you're only R P I-linked.
[1206] And that's where these certificates are the only guarantee that I can provide which will actually say well if we get fifteen percent inflation in nineteen ninety seven, they will pay fifteen p percent inflation, plus the three and a half percent three and a quarter percent bonus.
[1207] So you can see it's a very very good contract.
[1208] It may not look it now, but I think it will be over the next five years.
[1209] At the end of five years, you've got the option er and you can er then extend the er into the erm er next issue if you wish, or you can go on the extension rate, which isn't usually good, or in index-linked certificates' case, they'll perhaps give you indexation, but no er bonuses.
[1210] So it's perhaps better to reinvest.
[1211] I mean the old index-linked certificates, when they came up I put them back into the fourth issue, and then the fifth issue and so on because the bonuses are better.
[1212] Only er National Savings are worth keeping your eye on, because the government's very keen to make a few shillings out of National Savings, and you might get some good issues in the future.
[1213] Erm so erm that's the one I'd recommend at the moment.
[1214] The fixed-r the fixed- rates really aren't worth going for.
Unknown speaker (G4HPSUNK) [1215] So by the same token, I assume, building societies are also starting paying something over inflation rates, [...] issued?
John (G4HPS1WP) [1216] Yes, erm building societies I mean I think you're thinking about their equity schemes aren't you?
[1217] Erm yes.
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [1218] Those are a bit, those are a bit of an untried er area.
[1219] I'm not stopping people doing it, because people ring me up and say should I do it?
[1220] And this is where you, the, the building society offer you er the rate of erm er return on the stock market ... erm and er a bonus on your account if it doesn't make the rate.
[1221] Er have you seen those?
[1222] Er Alliance and Leicester did one, and they, they're offered to investors in the building societies.
[1223] Just be a bit er bit, bit er wary of them in the sense that you don't know who's managing the fund, er because it's their money, it's not your money, they don't actually invest the money from you, it's their money they're investing.
[1224] And they'll give you the profit if they make it.
[1225] It's to keep you invested in building societies, only they, they're frantic because all the money's going out and they want to keep their erm their erm deposits up, so they're offering these schemes, and they are quite good, there are no charges as such, but er you'll get the value of the fund that they've made, or you'll get a say two or three percent bonus per annum on top of the er share rate, er if you keep it for four or five years.
[1226] So they're not bad value, but I, again I wouldn't overdo it, because we don't know what the schemes will actually produce, and if you're going to that I'd er most of the schemes are limited to five thousand minimum.
[1227] Erm, I'll have a look at some of the other ... er things that you can do with your money, cos time's getting on.
[1228] ... Erm this is the inflation figures I talked about briefly.
[1229] In nineteen eighty two, a loaf was thirty seven P and in ninety sorry eighty two, thirty seven P, ninety two, it's fifty four P and er I'm reliably informed by er my wife that you can actually get loaves less than that if you go to the ... er large supermarkets where they're discounting the bread to get you in the store obviously.
[1230] But that means that bread's not really gone up that much.
[1231] Er beer, er seventy two pence in nineteen eighty, hundred and twenty eight pence ninety two.
[1232] And you can see here the affect of er forty six percent increase in the price of bread, seventy eight percent on beer, eighty four on cars, and R P I has moved up seventy nine percent.
[1233] So if you're R P I linked, not too bad.
[1234] But those figures are tremendous compared to the figures I used to have, because we update these every two years, and the ninety ni eighty to ninety figures were poor, and the and worse than that between er er you know the previous two years.
[1235] So don't think that they'll hold necessarily.
[1236] Inflation, the effects on your pension, you've got the engineer on a level er annuity and the headmaster on er an index-linked annuity.
[1237] Erm er in other words, index-linked pension, and he's n virtually doubled his money between nineteen eighty and nineteen ninety.
[1238] And that means that er you know the indexation has actually worked very well.
[1239] ... Erm ... so if you're getting another job obviously, you've got to think that you may not need as much income, er if you're taking the early retirement well obviously you may be more income dependent, and do a personal budget, going back to that pro forma, if you spend a bit of time doing a budget, you will find it beneficial.
[1240] You'll know what you're spending, and where you're spending it, and you then control you p your finances a bit more accurately.
[1241] Cos when you're working, you don't really have the time or the interest in actually seeing where the money goes.
Unknown speaker (G4HPSUNK) [1242] Er can you tell me please er how I can avoid a particular charge.
[1243] Erm I wanted to do a personal budget, so I went along to my bank and I said I want to close all the erm automatic payments that you make on my behalf.
John (G4HPS1WP) [1244] Yes.
Unknown speaker (G4HPSUNK) [1245] And they said, sure, that'll be thirty pounds.
John (G4HPS1WP) [1246] Well don't you get a, a monthly statement?
Unknown speaker (G4HPSUNK) [1247] Well, yes, but I wanted them to do me a list you see.
John (G4HPS1WP) [1248] Oh I see.
Unknown speaker (G4HPSUNK) [1249] And I thought thirty pounds was rather a lot.
John (G4HPS1WP) [1250] Oh it is a, it is a, it is a lot of er money to pay,
Unknown speaker (G4HPSUNK) [1251] Yes.
John (G4HPS1WP) [1252] I mean usually you can identify them from your bank statement.
Unknown speaker (G4HPSUNK) [1253] I'll, I'll do it free myself.
John (G4HPS1WP) [1254] Yeah, it's a bit expensive
Unknown speaker (G4HPSUNK) [1255] I was thinking if they would charge me fifteen,
John (G4HPS1WP) [1256] Yes.
Unknown speaker (G4HPSUNK) [1257] I wouldn't, it would have saved me a chore, [...] .
John (G4HPS1WP) [1258] Right.
Unknown speaker (G4HPSUNK) [1259] But I thought thirty [...] expensive.
John (G4HPS1WP) [1260] Yes.
[1261] Yes.
Unknown speaker (G4HPSUNK) [laugh] [...]
John (G4HPS1WP) [1262] The, the direct debits that you've been paying for years but you're not sure where they go to, that sort of thing?
Unknown speaker (G4HPSUNK) [1263] That's right. [...]
John (G4HPS1WP) [1264] Yes.
[1265] Yeah.
[1266] So this is not to do with the price of eggs, it's to do with erm eggs in one basket, and er obviously er the basic theory [...] with any investment advice is don't put all your eggs into one area er in one basket if you like.
[1267] If the ship goes down or the basket gets broken, that's what happens.
[1268] Mixing the metaphors there, but er basically don't take a risk on one company or one product.
[1269] And er keep a spread.
[1270] ... Erm, short-term investments, just a summary.
[1271] [...] bank accounts, building society, National Savings ordinary account, investment account, er National Savings, which isn't bad if you want small amounts of money invested but er access is a month.
[1272] And TESSA.
[1273] Now you're all familiar with TESSA, aren't you?
[1274] ... You all know what TESSAs are?
[1275] Er Tax-Exempt Special Savings Account, from the, from the banks and building societies.
[1276] You can invest up to nine thousand pounds over five years, er rates vary with the society unless you're lucky enough to have a fixed rate.
[1277] And the return should be quite good because you're not paying tax on the, on the investment, if you cash early then you pay tax on it.
[1278] So it's a five year investment.
[1279] Er but if anybody's got TESSAs running at ma matur er er er retirement, I'll inevitably keep them going, cos they're normally half way through now, some people have made three payments with TESSA, there's only another two payments to make, that's only another eighteen hundred and then six hundred in the final year.
[1280] So it's worth keeping those going.
[1281] Er if you fully fund a TESSA at nine thousand, we'd estimate around eleven to twelve thousand back, and not the sixteen thousand that was projected at the top of the cycle about three years ago.
[1282] Erm Leamington Spa ought to have been shot for their TESSA advertising.
[1283] You know the people who rang me up to say hey sixteen thousand on nine over five years?
[1284] Not bad.
[1285] But of course they were quoting at the very top of Leamington's rate, and since then it's gone right down.
[1286] In fact Leamington got a few things wrong, because they've now been taken over.
[1287] Er, but erm ... er nevertheless, the, the fact is that the TESSA is a good investment, providing that you don't need access to your money, and you're going to get a tax advantage from it.
[1288] ... Erm, capital bonds, they used to be good rates, they, they've deteriorated really, National Savings certificates well I've covered index-linked, the only one I'd really say er isn't super unless you're a higher-rate taxpayer is the fortieth issue, which is paying under six percent, it's not really worth picking up [...] for five years.
[1289] Gilts, complicated.
[1290] Anybody into gilts?
[1291] Anybody got?
[1292] Yes, you've got the Jersey gilts haven't you?
Unknown speaker (G4HPSUNK) [1293] No, [...] .
John (G4HPS1WP) [1294] Did you buy [...] yourself?
Unknown speaker (G4HPSUNK) [1295] I bought [...] three quarter percent [...]
John (G4HPS1WP) [1296] Right.
Unknown speaker (G4HPSUNK) [1297] [...] seven [...] .
John (G4HPS1WP) [1298] Right, you bought those through the National Savings stockrooms.
[1299] Erm ... yeah.
[1300] Now er i i if you're buying gilts individually, you've got to know what you're doing unless you want to hang on to them to the end of the terms, cos gilts are government securities, and they have the different rate, rates of return, different maturity dates.
[1301] And the only way to really run gilts if you're serious is to actually trade them.
[1302] And a trade, trade in gilts is, is just as complicated as shares, not for the small investor.
[1303] Now, I've got a retired accountant in Nottingham who spends his days trading gilts, but not what I'd want to do.
[1304] But he's got all the charts and he knows what he's doing.
[1305] But basically a gilt has got a fixed rate of, of value at the end and the beginning, so it's worth a hundred pounds day one, a hundred pounds day you know whatever,h how many days it's in force, if it's a five year gilt, it's worth a hundred, a hundred pounds then.
[1306] In between it can vary, depending on interest rates and the market.
[1307] So gilt traders actually s buy and sell gilts in order to make a profit.
[1308] And er Sun Life who're a, who, who er you know are favourite for er for er gilts management, er er were busy buying index-linked gilts about twelve months ago when nobody wanted them.
[1309] Cos th er index-linked gilts were po were we very poor, because against interest rates they didn't give you a lot of guarantees obviously, you know, interest rates were high, index-linked gilts were er already languishing.
[1310] But I think they'll come up well in the next few years.
[1311] But what they'll probably do is sell those before they actually reach their premium.
[1312] They'll probably sell the gilts on then re reinvest in other investments.
[1313] But it is complicated and I er mean really for the average investor, unless you're a non-taxpayer, because the in er the income from the gilts is gross, it may be worth er it may be worth a non-taxpayer holding gilts, and er getting a gross yield of maybe eight and a quarter, nine percent.
[1314] That's, that's fine.
[1315] But if you're trying to trade them, you come unstuck ... cos you, you've got to make all sorts of er predictions about interest rates.
[1316] Mind you you might be better than the Chancellor at that, but er
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [1317] you know.
[1318] It's a difficult market that.
[1319] So let's have a look at the effect, effect on in on building society investments and other inflation the effects on it.
[1320] Erm, between nineteen seventy three ... er and er nineteen ninety one, reinvestment in building societies gave quite a good return actually erm gave four thousand three hundred and ninety eight return.
[1321] ... Er R P I was five seven eight eight, so in, in other words, R P I [...] ahead of building society rates.
[1322] So in the longer term, building societies don't do well.
[1323] You've had five years of phenomenal results in building societies, they've been really exceptional.
[1324] But I think those days are now over ... and anybody who's been in building societies, there's now a feeling er that things have altered quite a long way.
[1325] Erm asset backed investment, well we've covered shares, investment trusts, P E Ps, property, gold coins.
[1326] Don't know much about gold coins erm ... I mean I suppose they're a tradable asset.
[1327] But er I've just finished Treasure Island with my daughter, that's as far as I've got.
Unknown speaker (G4HPSUNK) [laugh]
John (G4HPS1WP) [1328] Erm.
[1329] Er property, er very much a variable, you don't know where you are with property really.
[1330] I mean it's, it's, it can be a good investment, and maybe the time is now to, to go for it, but of course, it's er hard to release er your asset if it's a falling market.
[1331] Because people are finally trying to sell houses.
[1332] Investment bonds we haven't covered, and they are a variation of a unit trust really, but they're issued by live companies, and you can do other things with them, and they have got tax advantages.
[1333] One of the better ones at the moment are the with profits bonds, where you're guaranteed a re returns, rather like an endowment, if you buy it as a single premium again.
[1334] And they are quite useful if you've come across those from Prudential, G A, [...]
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [1335] er they're quite useful.
[1336] And good for income as well.
[1337] ... Er, comparisons on investment returns since nineteen forty five.
[1338] If you had a thousand in a building society and a thousand equities, you'd be a very happy man in nineteen forty five I would think, but if you look at what happens between then ... and nineteen ninety, the building society's written, risen by eight point nine times, and look at the equities, a hundred and eight thousand, ... er that really is stunning, you know that, that re return on equities.
[1339] But don't forget that those can always be in reverse, and if you look at the, there's a [...] chart, which shows five year periods wh where shares didn't make any profits at all.
[1340] We're just getting to the end of that now, we'll be another mark on the er five year list you know between eighty seven and ninety two.
[1341] Well, you've probably lost or, or not gained on shares.
[1342] But don't forget that over a longer period, shares are bound to do better.
[1343] Because when there's inflation in the system, company values are inflated, company er profits are inflated, so companies go up with inflation.
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [1344] So erm worth bearing that in mind.
[1345] Er, adjusted for erm the R P I, one thousand pounds adjusted on a building society would have actually lost you money.
[1346] Your thousand pounds would now be worth five hundred and ten, if you take the effect of R P I.
[1347] And er I like to think that if you'd bought a nice full-nose Morris in nineteen forty five, and you wanted a replacement in nineteen ninety, you'd have still got a reasonable Metro wouldn't you?
[1348] You'd have still got your wheels.
[1349] So in that sense, the build the, the equities have kept pace, but if you think in the short term, you'll always be out of, out of order with shares, if you're thinking of going in for three or four years, you you're likely to get your fingers burnt.
[1350] You've got to look at it at five years plus.
[1351] And er management through er investment trusts, P E Ps, er and er share portfolios, the best way of achieving er security.
[1352] Er this is just to show income from building societies during the seventy five to ninety period, and the yellow line shows a decline or at least a jiggly line, which just reflects interest rates, and the un unit trust income rising over that time is the orange line.
[1353] Just making the point that in the early years, your income will be less, then there's a crossover point, because the value of the asset grows, and so does the yield on the fund.
[1354] ... Er these are guaranteed areas, annuities, local authority loans, which used to be popular, pay gross, but they're not around that much these days, they're not that competitive.
[1355] And local co-ops sometimes offer good rates on, on fixed-rate deposits as well.
[1356] But they've all fallen foul of erm low interest rates at the moment.
[1357] So erm National Savings again worth, worth mentioning those ... erm ... deposit accounts not really up to much at the moment.
[1358] ... So annuities are very safe then, regular repayments, partly tax-free, but not available, once you've spent your money, that's it.
[1359] ... And you get part of your money back tax-free.
[1360] Er P E Ps I've covered.
[1361] And I just want to look at capital deployment here.
[1362] I mean in summary, I, I'd say that this is the sort of thing they'd look for in a, in a portfolio.
[1363] Some in immediate access, which is your building society, some back to back through either a an endowment scheme, or a P E P scheme where you've got the security of the annuity to back it.
[1364] Then some National Savings, possibly some income bonds, and then onto the growth side which would be bonds, unit trusts, shares, P E Ps etcetera.
[1365] So they're er the three blocks of er investment.
[1366] And I'd even go, I think really you've got to look at it as sort of immediate-term, immediate access, ... er medium-term investment, and longer-term investment over here.
[1367] Cos even National Savings cycle over a five year period, and what you want to achieve is money coming back into your hands regularly over that period so you can take another look at what you're doing.
[1368] So when I'm seeing clients mainly at the end of a, of a three year, fixed-rate deposit, again at five years when we get a National Savings maturing, and so on and so forth.
[1369] And really that should be er a secure portfolio that you don't ... need to worry about too much.
[1370] It should actually pull through all your need.
[1371] And on the building society side, that's your instant access fund,y anything you need in the meantime, if we've said that we want to achieve eight hundred a month income, and that's really the basic income, any holidays, any incidentals, come from this account.
[1372] And er you know we keep the income steady on the other two parts.
[1373] ... Erm, so if you're looking for advice, independent financial advisers.
[1374] Well, we deal with a wide range of different groups, and erm we've got to produce a best advice list, and er we try to find you the best contract available in the market.
[1375] That doesn't mean we're always right, incidentally.
[1376] Er but we try and eli eliminate the poorer companies, we try and make sure that we go for strength and security, as much as return.
[1377] And er that means adopting the current market.
[1378] Erm so ... erm if you're looking for advice, er try to get sound, impartial advice, free and without obligation.
[1379] And please get a written report, a proper written report.
[1380] If you haven't got one, it's not worth proceeding.
[1381] Because that written report is your evidence that they've actually taken information, analyzed it, and come back to you with a solution.
[1382] And if there is anything that you want to discuss with your adviser, positive or negative later, you can go back to your report, say well this is what should have happened, and can you explain what is happening?
[1383] So it's your document if you like.
[1384] Only I've come across one or two head teachers who've taken out things like A B Cs recently, and they didn't realize that they wouldn't get a lot of value if they ... cashed them early, you know, if they cashed them within two or three years.
[1385] Erm one chap thought he could cash his A B C before his pension, and he'd actually bought a massive amount of A B C business, to retire at fifty five.
[1386] And of course if he doesn't retire at fifty five, the authority or, or the school, his A B C's just destroyed his pension.
[1387] And er I mean I tried to indicate you know to him that he could claim against the company and get his premiums back, but unfortunately, there was no letter and no i indication, and the person was no longer with the company.
[1388] So it was his word against the company.
[1389] And all the product details were there, I mean you know that all the product details would be in front of you, but whether you actually read the small print, it's, is, is, is the er is the issue really.
[1390] And you can't get compensation for that.
[1391] I mean I doubt it'll matter in this case, it's not that serious.
[1392] But it was serious in the sense that he was given wrong advice.
[1393] So make sure you're dealing with a company that's, that's ... committed to what you know the market that you're in, that you're, you know, that you're familiar with the people that you're working with.
[1394] Independent advice er comes from major brokers, the banks and building societies have come out of independent advice pretty well, because they've decided that it's expensive and a hassle, cos we're regulated all the time and of course it makes, we've, we've got to analyze the products on the market, so we've got to pay people to do that.
[1395] So it is expensive, relatively.
[1396] But, the banks and building societies ha have found that people didn't want independent advice, because they didn't ask for it.
[1397] So now, unless you go in and actually bang on the counter, they'll give you the advice of their tied erm agency.
[1398] Er I mean Standard Life for instance tied with the Halifax, G A with the Derbyshire, erm endless societies have tied.
[1399] Er Bradford and Bingley I think have remained independent.
[1400] Erm, but there are other organizations as well erm and er you see Nat West, you know you remember the man with the wings who used to walk round in the advert?
[1401] You know.
[1402] Well he's taken his wings off now and joined Clerical Medical.
[1403] Er so er I mean the, the thing is that they, they, they a are in a position where they can improve their profits by er sectoring the operation.
[1404] You'd do it if you were on a bank executive and you said well only five percent of people ask for independent advice, why do we bother with all that lot?
[1405] You know.
[1406] Er just make it available, if somebody asks for it, they'll go and drag somebody up to have a look at you, and they will keep er er they've made it so they keep an independent arm, but it's not the major part of their business.
[1407] They are interested in volume, obviously, and that's what y that's what they're going to go for through their products.
[1408] No that's no problem, except that you must know who you're talking to.
[1409] Cos if you read adverts in the paper and things, you wonder who [...] .
Unknown speaker (G4HPSUNK) [cough]
John (G4HPS1WP) [1410] It says things like impartial advice, doesn't it for mortgages, erm in the Nottingham and the Derby paper, and then you read at the bottom it says erm an appointed representative of Legal and General.
[1411] Well, you know I h I hardly think that's impartial.
[1412] I mean, it will be, perhaps where they try and place the mortgage for you but erm I w I bet you they won't recommend anything but Legal and General when it comes to actually, you know, covering your mortgage.
[1413] So, er that's the er point to ra er to, to make there.
[1414] I mean we use Standard Life, we use Clerical, we use most of the major groups, erm but it's always a matter of trying to find the best contract at the time.
[1415] I mean, at the moment, three or four groups are actually pushing up their annuity rates again er to get business in.
[1416] So I'll probably use those three groups until they've got enough business and then they'll, they'll retract the rate, and I'll wait for somebody else to come along.
[1417] So you know that's the way that the system works and we've got the choice to, to actually make those decisions.
[1418] Erm it's er it's er entirely up to you obviously wh wh whether you take, where y you take your advice, but erm I would make the point that if you're retiring in the next year or so, erm best to take advice erm relatively early, you know maybe two to three months before you retire.
[1419] You've then got the time to look at your report, decide whether it's suitable, perhaps have another chat with your adviser, and then at that stage you're ready to go ahead.
[1420] Erm you know the difficult thing for me is when I'm working with people who've actually been given no notice at all, and that's happening with lots of organizations where on Friday you're suddenly told you've got no job, but your pension's available.
[1421] Er they may have had some inkling, but you know they might have applied for a [...] timings, you know it suddenly comes.
[1422] And that's difficult, because you need a bit of lead in time to actually think it all through.
[1423] The mistakes are made in investment terms when you actually rush at something, and you decide to go ahead and invest before you've really studied all the options.
[1424] And then obviously once you've done that, you might live to regret it, in that erm the erm ... the investment itself might not be suitable for you.
[1425] So er take your time, and erm do l look at all the options in front of you.
[1426] And just one final word of warning, and that is to do with newspapers.
[1427] [cough] There's a lot of stuff in newspapers about you know erm er investments and what you can do with your money and ... get the P E P with one and a half percent discount, and all the rest of it.
[1428] Er but erm if you do er business through a paper, then nobody is responsible for the investment business that you do.
[1429] I mean, nobody's there to back you up, if you need a, if you need any assistance, or it's or the company's not really bona fide then you've got no comeback.
[1430] So I think you've got to look at this as er saying well, if you get external advice, at least you're covered and er I mean er if a, if a company's in difficulties, we perhaps would know before you would, erm that erm you know that we shouldn't really be investing with them.
[1431] So I mean what you're getting is the expertise, and the, and the assistance of erm an external ... adviser.
[1432] Erm, if you want to know how a advisers are paid, erm you know then I er would explain that under the terms and conditions of er 's business, we're actually paid erm a salary by , and er I obviou obviously get er you know a car to get about in etcetera, but the, the, when we place business er the er commissions that we get, generate are paid to , they go down to head office in Bournemouth, they're then used to give us our er our you know returns, advances and what have you.
[1433] So that's where the money goes.
[1434] But don't forget that that is not an additional charge to you.
[1435] So that erm I mean if I recommended a Norwich Union income plan, and you nipped into Nottingham to buy, the charge would be the same, whether you bought it from me or from Norwich.
[1436] And er the, the difference is that I will know, at any one time, whether Norwich are offering you the best rate or not.
[1437] And I can decide then on which o which company I'm going to use.
[1438] Erm so you don't lose out by using an adviser.
[1439] And where possible, we do try and pass on any discounts that are available to you.
[1440] Er I mean if a particular group's promoting a product which we're already using, then I might switch investment to that product if there's a big discount.
[1441] Because it's very competitive at the moment, and people are actually discounting charges quite regularly.
[1442] And where that's available, obviously we'll pass it on.
[1443] So erm er ongoing charges there aren't any.
[1444] We don't l levy any charges for mon er monitoring portfolios.
[1445] Er but we're not I must explain we're not discretionary managers.
[1446] Now discretionary management is a another thing.
[1447] I mean have you come across that?
[1448] That's where you actually sign over er the management of your whole portfolio to another individual, as you would with a share portfolio with a bank.
[1449] And that is a different matter, because you're then, they then make decisions on your behalf, and th they will actually move and, and, and reinvest er take commissions from some of those reinvestments and that's all going to them, and fine if they do the job.
[1450] But you've got to think carefully whether, about whether discretionary management is really erm what you want.
[1451] In the sense that you've got no control over your portfolio at all, and it's just invested and they give you a statement.
[1452] Er,
Unknown speaker (G4HPSUNK) [1453] Harriet Mason's supposed to have discretionary advisers [...] .
John (G4HPS1WP) [laugh]
Unknown speaker (G4HPSUNK) [1454] [...] in charge of.
John (G4HPS1WP) [1455] Oh right.
[1456] Oh.
Unknown speaker (G4HPSUNK) [1457] It's erm
John (G4HPS1WP) [1458] Yes.
[1459] Yeah, yes.
Unknown speaker (G4HPSUNK) [1460] They're not supposed to handle their own shares if they're in a position to have inside information.
John (G4HPS1WP) [1461] Yeah, well I mean, that's a, that's a difficult one, inside information, when you get down below the top ranks there are lots of people in the mid mi medium-ranks who would know about insider dealing, and I'm sure use it.
[1462] But that's something we're not party to.
[1463] Er but anyway, discretionary management can cost a lot of money, erm but you've got to weigh up whether it's actually worth it.
[1464] I think in the case of share portfolios, you need a lot of money to make it work properly.
[1465] And er you always want to look at the track record.
[1466] I mean my belief is that if Standard Life and M and G can't show me a profit on a, a good managed fund, I doubt that anybody in a another institute is going to do any better.
[1467] Cos er the, the people that run these funds are highly paid and highly experienced, and erm you know I don't think banks or building societies or any other institution is going to pay more, they're buying in their skills, [...] the top offices.
[1468] I mean that's just ... view of it, erm and er I m obviously there are individual funds that perform very well, you know.
[1469] And when you're getting advice, don't forget that erm if it's, particularly the, a single company, they will be showing you figures which actually show their products in a reasonable light.
[1470] I mean, you would, wouldn't you?
[1471] Er so er I mean they're going to show you the seven year figure, maybe don't show you the ten year figure, because they don't look too good over ten years.
[1472] Erm so you can get those figures yourself from Money Management, and from er various erm newspapers, and you can actually check performances if you want to.
[1473] But again, that's the sort of thing the we'd monitor.
[1474] Erm, I, I'd like to thank you all for your participation this morning by the way, and I will give you out erm these reply if you'd like re erm a, an information pack from us, or if you wish to have a chat with me, then you can send in this, you can give it me back at lunchtime, and I can send it into the office, and they'll send you a retirement pack with an income planner and what have you.
[1475] So if you'd like one of those.
Unknown speaker (G4HPSUNK) [...]
Unknown speaker (G4HPSUNK) [1476] Does your service offer a [...] service?
John (G4HPS1WP) [1477] Er, yes it does.
[1478] Erm in that erm er we've got facility to review portfolios.
Unknown speaker (G4HPSUNK) [...]
Unknown speaker (G4HPSUNK) [laugh]
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [1479] Yes.
Unknown speaker (G4HPSUNK) [1480] [...] what we're looking at again.
John (G4HPS1WP) [1481] Yes.
[1482] Well that, that automatically comes up erm if erm you've got which are turning round, and ou our records will automatically show maturity dates etcetera.
[1483] But I usually arrange with a client over what's seen in two years' time or one year's time, whatever.
[1484] It's normally down to individual circumstances.
Unknown speaker (G4HPSUNK) [1485] Are you on the phone? [...] phone [...] ?
John (G4HPS1WP) [1486] Well yes.
[1487] I mean you'll find that my home number's on here and tha because I will advise you from home during the week, I'm quite happy for
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [1488] for people to phone the home line.
[1489] ... Er but erm ... obviously I'll sometimes need some time to get back to you.
Unknown speaker (G4HPSUNK) [...] ...
Unknown speaker (G4HPSUNK) [...]
John (G4HPS1WP) [1490] Oh sorry.