ViewPoint: A Question of Trust; The Permanence of Change; 7 Days to Friday 18th October 2013

S e w e l l B r y d e n G u n n ViewPoint: A Question of Trust; The Permanence of Change; 7 Days to Friday 18th October 2013.

Regarding Inheritance Tax as well as Tax in general: There have been a number of cases where aggressive and even fairly low key mitigation schemes have unravelled at some considerable cost to the would be Tax Saver. Investors contemplating how they should re organise their affairs to minimise the amount of Inheritance Tax (IHT) that will be charged to their estate on their death, will very often forget to include in their planning such items as any lifetime (chargeable) transfers they have made in the previous 14 years or earlier, or the residence and domicile of settlor, trustee and beneficiary. Even legacy assets which were supposedly correctly settled into a trust years ago may come under the scrutiny of HMRC/Capital Taxes Office simply because the investor did not get the right advice at the time and or set up the wrong type of trust which subsequent legislation has rendered useless if not more costly than if nothing at all had been done at all. “Interest in Possession” Trusts which were never periodically reviewed are a classic example of where supposedly robust mitigation schemes may have sometimes been thwarted by the consequences of seemingly unconnected legislation. It can all end in tears!

The lesson must surely be that if you are seeking to mitigate tax, be sure to get correct advice in the first place from an appropriately qualified professional,  ensure that any mitigation plans and schemes are reviewed periodically, preferably with an adviser, and be wary of over aggressive tax “products” which seek to mitigate by “distortion” and which in the final analysis could fall victim to the Tax Authority’s “look-through” policy.

The Permanence of Change

I deliberated somewhat before deciding to make any comment at all about the announcement that Neil Woodford, fund manager, is leaving his fund management home of 25 years at Invesco Perpetual, a prominent fund management company, to explore pastures new.

A number of advisers in the industry have made “off the cuff” remarks when asked to comment and have subsequently sought to retract or redact their original comments!!

Our “house view” remains that it is “business as usual” and that  Neil’s imminent departure from his long standing position just goes to show that once again: “Everything is permanent until it changes!

This Viewpoint by Neil A Sewell, Chartered Financial Planner, Investment Analyst, Pensions Specialist and a practitioner in IHT Trust & Estate work at SewellBrydenGunn: Chartered Financial Planners, Securities Investment and Pensions Advisers – helping clients create a better tomorrow, today.

Over The Past Week: Snapshot View of the Markets: Below are closing numbers as at Friday 18th October 2013.

For more discussion about how the financial markets may affect your own personal or business financial situation, protection, pensions or investments, why not get in touch?: 01276 471083 OR cedar@s-cm.com

Market Numbers

FTSE 100                              6622.58         2.09%    on the week

FTSE All Share                     3533.23        2.18%    on the week

Brent Crude $ per barrel       109.94        -1.20%     on the week

Gold $ per troy ounce pmL  1316.50        4.03%     on the week

Silver $ per troy ounce pmL     21.87        1.63%     on the week

Copper US$ per tonne lme3  7269.00       1.58%     on the week   (LME 3 months)

Wheat Futures CBOT            705.75          1.95%     on the week   (US$ per bushel – Contract 5000 bushels/136 tonnes)

Palm Oil US$ per tonne        870.00         4.19%   on the week   (eg CMEGlobex – trading unit 25 tonnes – mirror and settle to Malaysian ringgit benchmark)

MPC Base Rate  %               0.50  (Bank of England Base/Repo Rate) since 05/03/2009

Euro Repo Rate %                0.50  since 02/05/2013 (previously 0.75)

US Libor %                            0.10900   last week : 0.10380

Euro Libor %                         0.04571   last week : 0.04571

GBP Libor %                         0.46875  last week : 0.46938

Euro Euribor 3 mnths %     0.22   last week : 0.23

Sterling CDs 3 mnths %       0.48  last week : 0.48

RONIA  %                            0.4575  l wk : 0.4347 (Repurchase Overnight Index Ave Rate)

SONIA   %                            0.4322  l wk : 0.4283 (Sterling Overnight Index Ave Rate)

HFRX                                    1205.54           0.88%  on the week  (Global Hedge Fund Index)

Tesco [}{]                               369.15            3.14% on the week                       xd

Sainsbury                               395.00           1.67% on the week

BT  [}{]                                   365.10            4.88% on the week

BP  [}{]                                   447.45             1.77% on the week

Rexam                                    492.30            2.99% on the week

ARM Holdings  [}{]                £10.14            3.05% on the week

HSBC  [}{]                              679.00            -1.54% on the week  

RBS  [}{]                                 372.70             -1.11% on the week

RMG:LSE (330 launch)       502.50              10.44% on the week

Standard Life                         359.60               1.15% on the week   xd

WPP                                       £12.86                 3.88% on the week   xd

10 Year Government Bond (Gilt) Price     £95.98      Yield    2.72%

15 Year Gilt Yield Index. 15th of the month approx.  Yield    3.12%

One Pound will buy 1.6188 US Dollars

One Pound will buy 1.1820 Euros

CPI Inflation stands at 2.7% as at Sept 2013     Currently the old Gov’t measure of inflation

CPIH Inflation stands at 2.5% as at Sept 2013   Currently the new Gov’t inflation measure

Retail Prices Index (Carli):  3.2% – Sept 2013  No longer a Gov’t measure of inflation

Retail Price Inflation RPIJ – Jevon’s formula – NEW:  2.5% as at Sept 2013

Inflation Target expected to stay in place: 2.0%  based on the Consumer Prices Index (CPI)

The Chancellor confirmed in his Budget Speech Wednesday 20th March 2013 that the 2% Inflation target for the Bank of England would stay in place.

The Government’s Inflation Target is announced each year by the Chancellor of the Exchequer in the annual Budget statement. The Bank of England Monetary Policy Committee has as one of its aims, the aim to set interest rates so that over- or under- inflation can be brought back to Inflation Target over a reasonable time period without creating undue instability in the economy. Inflation Target is not a permanently fixed level and may vary depending on prevailing economic and fiscal conditions.

KEY to Important Indeces:

RONIA – Repurchase Overnight Index Average Rate – Launched June 2011

Changes to Method of Calculating Inflation Measurement Index – March 2013

pmL Metal and Precious Metal Pricing used in Market Numbers 

lme3  – London Metal Exchange 3 months

[}{]  –   Denotes a Stock or Share of a FT Global 500 company

xd    –   Denotes a Stock or Share price quoted as ex-dividend

Please ensure you read and take note of the disclaimers mentioned here.

Whilst every effort is made to ensure accuracy of the above information, this cannot be guaranteed and cannot be relied upon to be free from errors, omissions or inaccuracies.

This information update is provided for convenience and interest only and is not intended nor does it constitute any form of regulated or other advice and no liability is accepted, nor does any information provided here constitute nor is it intended to be any form of invitation or solicitation or recommendation to buy sell or hold in any capacity and no liability is accepted. You should not use this update as a basis for making decisions.

SewellBrydenGunn (business name and trading style of SCM Finance) and or any of its members employees partners proprietorship or other stakeholders (we) from time to time may or may not have an interest in any items contracts stocks shares securities or other instruments mentioned here. For your own safety and convenience you should always assume that we may have an interest or position in any of the above and consequently you cannot rely on it to be impartial information.

You should confirm independently any information you wish to rely on to make any decisions – in any case you should seek and take appropriate and timely independent financial legal or other advice including full and proper discussions about the level of financial legal or other risk involved before deciding on any action transaction or inaction.

Past performance is not an indicator of future performance. The value of investments and any income from them can go down as well as up and you may get back less than originally invested.

“Secure” “investments” such as Cash on deposit, can provide relative safety to the amount invested or held in this way and can be expected to offer relatively low growth over the medium to long term. They cannot fall in actual value, but can fall in “real” value due to the effects of inflation.

At the other end of the risk scale, “Adventurous” investments (more volatile Equities – Stocks and Shares) carry a relatively much higher risk of capital loss but with the potential for relatively much higher capital growth over the medium to long term. They may be subject to a considerable level of fluctuation in capital value. They do not offer any guarantees.

At the extreme end of the risk scale – Aggressive/Specialist/Highly Speculative – are investments such as leveraged contracts, derivatives, options and futures. Directly investing into these investments carries a very high risk of capital loss, but with the potential for a higher return (or severe loss) over the short the medium and or the long term. They are very volatile and are only suitable for investors who can afford to, and are prepared to, risk the entire capital value and for some investment contracts, risk substantially more than the original capital value, as well as being prepared to take a very active role in managing their investment throughout the day, every day. These types of investment are definitely NOT suitable for the majority of investors since most investors are “passive” once they have made their initial investment – ie they expect to review their investments from time to time but without being actively involved on a daily basis. These investments do not offer any guarantees.

Photo Credit: SBG PhotoStock

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