Monthly Archives: October 2015

Cyber-crime and your personal data

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Last week was National Get Safe Online Week, so I suppose it was somewhat ironic that one of the week’s big news stories related to a cyber-attack on TalkTalk, which saw many individuals left vulnerable to fraud.

Unfortunately for TalkTalk customers, the risk that fraudsters may now be in possession of their personal information is not the whole story; it also brings with it the added risk that other fraudsters may seize the opportunity to contact individuals, claiming to be from TalkTalk with instructions on how to ‘safeguard individuals from fraud’, claiming to be from a third-party security company, or claiming to be software companies offering advice or a fix!

Frustratingly, we have no control over how companies manage our personal data, but we can control how we manage it ourselves. While I’m not a client of TalkTalk, it certainly made me stop and think about just how much personal information we are prepared to share via the internet, particularly on social media platforms.

Take Facebook for example: we proudly update our status to share beach photos of ourselves and our family, advertising that we are away on holiday and our homes are therefore empty. We also share our dates of birth, children’s and pets’ names, previous schools and home towns. Whilst all of this information is posted innocently and intended for our Facebook friends and contacts, it can be a fraudster’s dream.

According to the National Crime Agency, cyber-crime is one of the most significant criminal threats to the UK. So, what can we do to help protect ourselves? A good place to start would certainly be to ensure that your devices are protected with secure passwords and up to date anti-virus.

Get Safe Online suggests that there are a number of sensible and simple measures that we should follow in order to protect ourselves. Their six top tips are as follows: –

 Cyber crime - 6 tips to keep it personalSource: https://www.getsafeonline.org/protecting-yourself/getsafeonlineweek2015/

As a business, we have worked hard to ensure that our IT systems are as secure as possible and have trained our staff to look out for potential scams but, as the TalkTalk debacle has highlighted, nothing is invincible and there’s no such thing as ‘no risk’.   However, with our continued vigilance of our systems and your individual vigilance with your personal data, we can certainly all help to ensure that we maintain a ‘low risk’ profile.

 

Investment Plans and Forecasts Don’t Mix

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Sketch courtesy of Carl Richards of The Behavior Gap.

 

I set off early this morning to get into the office and write this week’s blog, but clearly I hadn’t predicted the short-term traffic problem correctly, as an accident had turned the M56 into a temporary car park.

I guess this was quite apt given that this week’s blog focuses on one of Carl Richards’ great sketches and gives a typically British angle to its meaning.

Something we often get asked is ‘I know you can’t time the market, but in your view, where is it going?’

We get still get this question from people at meeting after meeting and, it often comes after we have spoken about the importance of behaviour and how we can’t predict short-term market performance.

Despite the irony of this, we fully understand why people continue to ask questions about timing. Firstly, there’s an assumption that having an opinion — whether it’s about the market, the economy, or Japan — makes someone look smart. Being able to speak confidently about these subjects must mean you have more money and your investments will do better, right?

Wrong.

Secondly, if you don’t talk about sport or politics, that only leaves economic issues. Again, not true – it just feels that way! Maybe you like to talk about all three, but it’s reached the point where talking about the economy and markets is an official spectator sport – one that we all feel capable of playing!

Moreover, while it may be fun to chat about what the market might do next at the golf club, don’t kid yourself. What we know about the market comes down to a number of guesses, also known as forecasts.

Forecasts about the future of the market are very likely to be wrong. All we don’t know is by how much and in which direction. So, why would we use these guesses to make incredibly important decisions about our money?

You shouldn’t because you know better and relying on what’s really just a hunch is an all but guaranteed recipe for financial pain.

Instead of relying on guesses to dictate our financial decisions, we need to focus on the investment basics:

    • Figure out where you are today
    • Make a guess about where you want to go
    • Buy diversified, low-cost investments that have the best shot of getting there
    • Behave for a long time.

Obviously, following these rules isn’t nearly as interesting as speculating about whether the FTSE will break 7000 before the end of the year again – by the way, try looking at the papers at the beginning of the year and see what the so-called experts predicted for the markets for 2015! However, it is a list that will keep you from doing something dumb, like thinking it’s a good idea to bet your portfolio on a guess.

So, just in case I’ve left you in doubt, please don’t forget: plans and guesses don’t mix! That’s probably why I should have used my sat-nav this morning!

Lessons from the FTSE 100 Record.

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Although it has recently fallen by 10 per cent, the FTSE 100 reached an all-time high in late April, surpassing its previous peak achieved on the eve of the millennium.

This illustrates just how long it can take for the stock market to recover from a crash, but it’s not really representative of an investor’s experience since 1999. People tend to fixate on headline indices, but it’s important to understand that there’s more to a real return than the numbers that make the news.

A more realistic measure of the investment return of the UK’s largest listed companies is the total yield, which includes the reinvestment of dividends. By that measure, £100 would have fallen in value after the dot.com crash but would have recovered its original £100 value by the end of 2005 and since grown to £168.

The total return is more meaningful than the headline you see in the paper, but it’s still far from accurately representing a diversified investor’s experience over the past 14 years.

Diversifying beyond the FTSE 100 might involve holding small companies that offer important diversification benefits and have a history of performing better than large companies in the long run. During this period, UK small companies more than tripled in value, so an investment in the whole UK market, measured by the FTSE All-Share, would have made the £100 investment grow to £190 over the same period.

On top of that, investing in global markets can improve expected returns and increase diversification; over this period, a global portfolio of shares returned £176 from the initial £100 investment.

As advisers, we like to ensure that you have exposure nationally, internationally and across all the major asset classes – shares, bonds and property – and we like to ensure these investments are made at minimal cost, so that you keep more of the return.

The next time you hear that one of the world’s headline indices has risen or fallen …. you should  think hard about how meaningful this news is to your broad portfolio of investments.

A good headline, that unfortunately TAPERS off…

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From 6 April 2016, a date not too far away, the annual pension contribution allowance – currently set at £40,000 per annum – will start to taper away for people with high income.

The proposed legislation has not received Royal Assent and could change, but I suspect it won’t. The Government estimates that only 1 per cent of taxpayers will be affected by these changes (approximately 300,000 pension savers).

Will this apply to you?

If you have ‘threshold income’ of £110,000 or more AND ‘adjusted income’ of £150,000 or more, then this will apply to you.

‘Threshold income’ is broadly all of your taxable income, including salary, interest, rent and dividends.

‘Adjusted income’ is broadly your threshold income above the amount paid into any pension by you or your employer.

How will this apply to you?

For every £2 of ‘adjusted income’ you have over £150,000, the annual allowance will reduce by £1 to a minimum of £10,000. Therefore, for individuals with adjusted incomes of £210,000 or more, the annual allowance will reduce to £10,000. If your adjusted income falls between £150,000 and £210,000, then a tapered amount applies, as follows:

taper allowance

Your opportunities

This does present the opportunity for some individuals to maximise their pension contributions in this tax year through thorough planning. However, these options may not be available to everyone:

Option 1.

There is a prospect for those that will be affected to maximise their pension contributions now. This could be done from savings, or by bringing some remuneration forward to this tax year.

For example, a business owner who takes a total annual income of £130,000 and receives £40,000 of pension contributions into their pension from the company each year would find the maximum pension contribution being capped at £30,000 next year – their adjusted income is £130,000 + £40,000 = £170,000.

However, if the individual brought forward £20,000 of income into this tax year, their net income averaged over the two tax years would be broadly the same. However, the business would be able to pay £40,000 into their pension during the next tax year, as their ‘threshold income’ would be £110,000 and their ‘adjusted income’ would be £150,000. They could also potentially fund their directors loan account with the additional £20,000 brought forward and draw it next year.

Option 2. 

If you are not yet a member of a registered pension scheme, joining a scheme this year will generate up to £40,000 of contribution to carry forward for future years.

Option 3.

Make full use of any accumulated payments that you could have paid in previous years and use this amount in this tax year.

 

We would be happy to discuss this further, so please get in touch and if you know of others that may be caught out by this,  feel free to pass this blog onto them.