Sorry for the hiatus!!

Dear Reader, sorry for the hiatus since February. I have been worried about the complete mess in pensions. It is a shame that the state retirement age is being raised in the United Kingdom. There should be coordination throughout the European Union. It does not make much sense us Brits toiling up to 70 when the French want to retire at 60 and to get an economic contribution from us via the Common Agricultural Policy (CAP). We might have to join the euro so as to make our influence felt!!

Sorry for the long hiatus in the blog!!

I have noticed that I have not discussed Indepdent Financial Adviser (IFA) matters in the United Kingdom (UK) since December 14th. The main highlight for 2009 for me was the retail distribution review and the continuing argument about commission versus fees. It looks like independent financial advice will be restricted to higher income people in Britain, if the customer has to pay fees.
The pensions industry is in a right mess and we still have to resolve the problem of zombie endowment funds.
www.searchifa.co.uk

UK pension rules get even more complicated!!

Thanks to UK chancellor Alistair Darling, pension rules are getting even more complicated. The government wants to hit "fat cats" but reducing higher rate pension relief to earners of £130,000 a year compared with the previous level of £150,000
will bring in extra revenue of £100m but hit wealth creators.
The Labour government is discriminating in favour of unfunded public sector pensions,
which the country can't afford. These liabilities are going up and up.
For instance, local authorities are already devoting a large size of their fire service budgets to service pensions.
With the uncertainties generated by the fact that the government can change the rules anytime it likes, I am surprised people still contribute to personal pensions.

I am going to repeat stuff from sister blog!!

I am going to repeat stuff from the sister blog "Accountancy Distilled", which today looked at the gold price. This has rallied 12 per cent since India bought 200 metric tonnes from the IMF in early November and is now $1,180.50 an ounce. This blog is not an investment newsletter with recommendations as such but the gold price probably shows us that there are quite a few nervous investors out there. You can buy
physical gold, gold certificates, gold futures, gold coins, gold jewellery and the shares of gold miners. I don't have any of these gold-linked assets but I wish I had a few Victorian
sovereigns for sentimental value.
The "Accountancy Distilled" blog started off with a bit of a rant against Gordon Brown in who,in his former incarnation of British Chancellor, ordered the independent Bank of England to sell gold at $252 an ounce against its advice. I suppose if the British central bank was not so spineless there could have been a few resignations about it but why walk the plank early when the pensions are so juicy?
I suppose now is not the time for IFAs to recommend gold purchases to their clients following the sharp rise. However, maybe it is not the time to be in fixed income gilts. This is not a recommendation but perhaps an observation!! Inflation is already rising quite sharply (petrol prices, New Year VAT increase) and if the Bank of England does not support the pound with an interest rate rise or two, then things
could get quite interesting.

Would it have been cheaper to nationalise RBS?

With state control of Royal Bank of Scotland (RBS) creeping up to 84 pct, I wonder if it would have been cheaper to nationalise the bank? This might have created a hornet's nest between London and Edinburgh but it might have been cheaper, since it looks like the bank is going to be broken up anyway. Selling insurance assets like Direct Line won't making it any easier to repay taxpayer support and kow-towing to the European Commission shows how weak the government is.
Probably the UK government's balance sheet would not have been big enough to formally take on the RBS assets but state control might have avoided the furore about banker bonuses. The UK Treasury is probably regretting its disinterest in RBS taking over ABN Amro, where it looks like Spanish bank Banco Santander waltzed off with the best assets of the Dutch group while the British bank just took on board a lot of toxic debt.
The UK government did at least save the banking system a year ago since the economy could not have coped with the collapse of RBS or of the Halifax. It is a shame that taxpayers and bank employees are going to pay dearly for the mistakes of the past.

We are in a right pickle over pensions in the UK.

The poor state of UK public finances apparently dictates a rise in the state pension age from 65 to perhaps 70. Yet at the same time companies can forcibly retire someone
at 65. So what are we going to do with the five year gap?
Contributing to pensions seems unnecessarily expensive and uncertain. Private pensions get hit by charges, which offsets the tax relief, while state pensions get hit by the government moving the goal posts.
We also won't be able to pay the goldplated pensions of council employees, members of parliament etc. The recent volatility of equities has shown that we can't rely on
share performance to pay on all types of pension promises.

Personal accounts delayed four years to 2016.

The latest big idea in the British pension mess, personal accounts, are to be delayed
four years to 2016. A total of 8 pct of pay will be contributed by employees (4 percentage points), employers (3 percentage points) and the government with 1 percentage point. However, Moira O'Neill of the Investors Chronicle quotes pensions expert Dr. Ros Altmann, who wonders what pension income will be achieved. Current forecasts are too optimistic given worsening annuity rates.
I think one concern is that pension income could be heavily taxed in the future to pay for the demographic bulge of old people. The state pension age could be lifted quite quickly to 70 in order to save money. It would be interesting to see what people would live on. I suppose the complexity over pensions could be reduced.