Moira O’Neill: There is no such thing as a stupid question when it comes to ethical investing

Moira O’Neill: There is no such thing as a stupid question when it comes to ethical investing

Did you start the new decade with a pledge to finally get to grips with investing? 

Moira O’Neill
Wed, 01/29/2020 – 15:22

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But as soon as you search Google for ‘beginning investing’, you will come across baffling jargon. Terms such as robo-advisers, trackers and SIPPS have nothing to do with robots, fitness or drinking. Even the firm that I work for, and which is the parent company of Moneywise, is an investment platform, which has nothing to do with railway stations.

It is not an easy language to learn. And if you want to invest your money in line with your principles, you will come across an alphabet soup of terminology.

Last year was when everyone finally woke up to the impact of climate change, and I see no reason for this to change in 2020.

The well-documented climate emergency, and scourge of plastic waste highlighted in awareness campaigns and documentary series, such as David Attenborough’s Blue Planet II, have helped to thrust the environmental issue up the political agenda and into the public consciousness.

However, 40% of investors* find the terminology around ethical investing complex – which is likely to be a significant factor as to why only 23% say they invest in ethical funds.

Nevertheless, some investors are flocking to investments that offer not only a sustainable return for investors but, more importantly, a sustainable future for the planet. Even my own children are showing an interest in where their Junior ISAs are invested and how that contributes to saving the planet. Everyone’s idea of ethical investing will be different so you will have to be prepared to do some research.

The Investment Association, which represents the UK funds industry, has designed new industry-wide definitions to clarify the complexities of sustainable and responsible investment.

It is a great start. But it was no easy task getting an entire investment funds industry to agree on a common framework to help navigate the complex world of responsible investment, and many investors will be unable to speak the new common language. It includes phrases like ‘positive tilt’, ‘sustainability themed’, ‘private impact investing’, ‘SDG Funds’ and ‘norms’, which seem to me classic ethical alphabet soup – albeit sustainably sourced.

By contrast, interactive investor has collected 140 ethical investing funds together into a long list and divided them into just three categories to help you get started. We had help from the Moneywise team to do this.

Our categories are called ‘Avoids, Considers, Embraces’ – an approach deliberately designed to be consumer friendly. This is what the terms mean:

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The top 10 list of investors’ favourite ethical investments on the interactive investor platform is dominated by the funds in the Embraces category. Some of the investments are sector specific, with clear ethical criteria, including investments in infrastructure, wind, health, solar and clean energy.

The most bought ethical options in 2019 on the interactive investor platform were:

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But even with our list, there are lots of questions to ask as we haven’t completely ruled out the complexity or the jargon.

Please get in touch with Moneywise or myself if you have a question about ethical investing. We can guarantee that we won’t call it stupid. 

Moira O’Neill is head of personal finance at Moneywise’s parent company interactive investor

Moira.oneill@ii.co.uk

*558 interactive investor website visitors completed the poll from 22-24 August 2019.

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UK house prices rise at fastest rate in 14 months

UK house prices rise at fastest rate in 14 months

Average annual house price growth was 1.9% in January, says Nationwide

Stephen Little
Wed, 01/29/2020 – 12:53

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UK house prices rose at their fastest rate in 14 months, suggesting that confidence has returned to the market following the General Election in December.

Annual house prices rose by 1.9% in January – up from 1.4% the previous month, according to the latest Nationwide House Price Index.

This follows twelve 12 successive months in which annual price growth has been below 1%.

On a monthly basis, house price growth rose by 0.5% in January, taking the average UK house price to £215,897.

Robert Gardner, Nationwide’s chief economist, says: “Indicators of UK economic activity were fairly volatile for much of 2019, but the underlying pace of growth slowed through the year as a result of weaker global growth and an intensification of Brexit uncertainty.

“Recent data continue to paint a mixed picture. Economic growth appeared to grind to a halt as 2019 drew to a close, though business surveys point to a pickup at the start of the new year.

“The underlying pace of housing market activity has remained broadly stable, with the number of mortgages approved for house purchase continuing within the fairly narrow range prevailing over the past two years. Healthy labour market conditions and low borrowing costs appear to be offsetting the drag from the uncertain economic outlook.”

With uncertainty now lifted following the General Election, some analysts believe there will be a ‘Brexit bounce’, with property prices surging.

Samuel Tombs, chief economist at Pantheon Macroeconomics, says: “Indicators of demand at the very start of the home-buying process are red hot.

“We think the pick-up in demand can be sustained this year by the continuation of low mortgage rates and solid wage growth, driving prices up by about 4%.”

However, Howard Archer, chief economic adviser at EY Item Group, remains cautious.

He says: “Certainly, there is compelling evidence that the housing market has had an initial leg-up from increased optimism and reduced uncertainties following the decisive General Election result as well as greater near-term clarity on Brexit with the UK now leaving the EU on 31 January with a deal.

“While we suspect that the housing market may get a further near-term boost from reduced uncertainties, we remain relatively cautious over housing market prospects over 2020 and suspect that the upside will likely be limited.”

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Inheritance tax should be slashed to 10%, say MPs

Inheritance tax should be slashed to 10%, say MPs

A cross-party group of MPs want to change inheritance tax and gift-giving rules

Stephen Little
Wed, 01/29/2020 – 11:44

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A cross-party group of MPs is calling for a radical shake-up of inheritance tax (IHT), cutting it from 40% to 10%.

They also suggest scrapping the rule that currently allows gifts to be made tax-free so long as the giver lives for seven years after they make the gift.

A report by the All-Party Parliamentary Group (APPG) for Inheritance and Intergenerational Fairness, says IHT is “unpopular” and “ripe for reform”.

Currently, IHT is charged at 40% on estates above £325,000 or £650,000 for married couples or civil partners.

Assets given away seven years before death are also exempt from IHT.

The APPG says that it wants to cut IHT to 10% for estates above £325,000, while those above £2 million would pay 20%.

The seven-year rule would also be replaced with a 10% tax on all lifetime gifts above £30,000 each year.

The report says that small estates would therefore not pay the gift tax, while larger estates would be able to avoid it as donors presently can by making gifts seven years before their death.

John Stevenson MP, chairman of the APPG, says: “The huge complexity around how the tax is levied, and the reliefs available on it, leads to lots of confusion and a strong sense of injustice. The rich get away with not paying and IHT is perceived as an unfair penalty on hard working savers.”

“Our bold proposals for reform seek to address this unfairness by simplifying the system and ensuring that the higher value estates that currently take advantage of so many reliefs and exemptions actually pay some IHT.”

A Treasury spokesman says: “IHT makes an important contribution to the public finances. We keep the tax system under constant review and will consider the APPG’s findings.”

Inheritance tax: what you need to know

IHT is a tax on the estate – property, money and possessions – that is paid when someone dies.

It is payable when the assets of an estate total in excess of £325,000. Any assets above this amount are liable to a tax of 40%.

However, married couples can combine their IHT thresholds, meaning that up to the first £650,000 of their combined estate is IHT-free, as any unused nil-rate band can normally be passed on to the surviving spouse.

There is also an additional threshold called the Residence Nil Rate Band, which is increasing year-on-year. You can use the HMRC calculator to find out how much the additional threshold on your estate might be.

Inheritance tax must be paid by the end of the sixth month after the person dies.

There have been frequent calls for the tax to be overhauled in recent years.

Gift giving

The APPG anticipates the most households will remain unaffected by the changes and that smaller estates will pay nothing.

According to the APPG, fewer than 5% of deaths actually result in payment of IHT.

It says the changes would make the system fairer and help reduce tax avoidance.

However, Rachael Griffin, tax and financial planning expert at Quilter, warns that some people could lose out and that taxpayers will now need to think carefully about gift giving.

She says: “We know that many parents and indeed grandparents are looking to pass on their wealth while they are still alive, be it for school fees or to get on the housing ladder.

“And with the generations of today being the first to be worse of then their parents, taxing the flow of the wealth being passed down might not win the Government many favours.”  

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Asda slashes petrol prices by up to 3p per litre

Asda slashes petrol prices by up to 3p per litre

Filling up at Asda fuelling stations became cheaper overnight. 

Brean Horne
Wed, 01/29/2020 – 10:21

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Supermarket Asda has slashed the price of unleaded and diesel by up to 3p per litre overnight.

Drivers filling up at any of Asda’s 322 petrol stations will pay no more than 120.7p per litre for unleaded and 124.7 p per litre on diesel.

The spread of the coronavirus has caused a sudden fall in demand for oil, according recent figures from the RAC.

While Asda’s petrol price cut will come as welcome news for drivers, other supermarkets have been criticised for only passing on wholesale price cuts to drivers who spend more money in-store.

Luke Bosdet, fuel price spokesperson at the AA says: : “Average UK petrol and diesel pump prices have been at their highest since January since 2014 and, despite wholesale costs declining over the past two to three weeks, they have stayed stubbornly above 128p a litre for petrol and 132.5p for diesel.

“This new price cut is in line with wholesale petrol falling from an average of 39.4p a litre in early January to the 37.0p between Wednesday and Friday last week.

“Sadly, only communities with an Asda fuel presence are likely to enjoy £1.50 being slashed off the cost of a tank of fuel overnight.”

“Instead, two other major supermarkets have gone back down the fuel voucher route, tying savings of 5p a litre to spends of £40-£50.

“Once again, if you’re on a low income and your spending power isn’t up to it, you miss out. Given the time of year with customers trying to pay off Christmas debts and fuel costs falling dramatically, that discrimination is quite simply mean.”

Dave Tyrer, Senior Fuel Buyer at Asda says: “”We’re pleased to be dropping fuel prices for the first time this year.

“January has been a tough month for motorists so we’re glad to be dropping the cost in line with falling wholesale markets.

“We will continue to put the savings straight back into drivers’ pockets without any vouchering requirements, meaning all our customers, regardless of their budget, will benefit from a price cut at the pumps.”

How to cut your car fuel costs

The cost of filling up your car can fluctuate over the year. These tips can help you cut the price you pay for fuel. 

1. Shop around

Shopping around for the best petrol prices will help you cut the cost of your fuelling bill. 

Websites like PetrolPrices.com are a quick and easy way compare prices at petrol stations in your local area. 

If your cheapest petrol station is quite far away from you then it’s worth considering whether driving that distance could end up eating into the money you save at the pump.

MoneySuperMarket has a handy fuel cost calculator which lets you compare how far you should travel for cheaper fuel. 

2. Use loyalty schemes

Loyalty card schemes can help you cut the cost of what you pay at the pump. 

Supermarkets Morrisons, Sainsburys and Tesco all offer schemes which allow you to earn points while you shop which can be used to pay for fuel. 

BP, Shell and Texaco also offer their own loyalty schemes which could help you save on fuel costs once you’ve collected enough points. 

3. Watch how you drive

Making adjustments to the way you drive can help reduce the amount of fuel you use. 

For example, it’s best to avoid heavy acceleration, excessive speeding and harsh braking.

Using the wrong gear and straining your car’s engine can also use up more fuel than is necessary. 

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