Five contentious personal finance policies the Tories could pursue with their huge majority

Five contentious personal finance policies the Tories could pursue with their huge majority

With the biggest majority since 2005, and the highest number of Tory MPs since the 1980s, Boris Johnson could use the next five years to push through some radical, and not necessarily popular, policies

Edmund Greaves
Fri, 12/13/2019 – 11:09


With a “stonking” majority secured, Boris Johnson’s government now has five years in which it could pursue some controversial policies that might be unpalatable to some voters.

1. Individuals could pay more towards social care

The funding of social care for the elderly is a growing issue. As the population of the UK continues to age, there will be increasing demand for older-age care. However, governments have so far failed to tackle the issue and provide any clarity on what the state can and will provide and what individuals will be expected to stump up for their own care. 

The issue is politically toxic, particularly even the suggestion that people may have to sell their homes to pay for later-life care. 

Former Conservative prime minister Theresa May attempted to address the issue in her 2017 manifesto. However, the solution she put forward was quickly labelled a “dementia tax” and dealt a huge blow to her election hopes. 

Only a government with a strong majority could risk tackling the issue again. Now in this position, Boris Johnson may feel emboldened to take it on. 

This time around the Tories have been much more vague about social care. The party has committed to £1 billion extra in social care funding per year. But beyond that not much detail.

The government could now take the opportunity to administer some tough medicine – namely that people with assets should be expected to contribute to their own social care.

2. Pensions tax relief could be cut

Tax relief on pensions was worth as much as £40 billion this year. Successive cash-strapped Chancellors have eyed up that growing sum and questioned whether or not it still represented good value for money. 

The current system of tax relief means that the highest earners are the greatest beneficiaries. Basic rate taxpayers see their pensions topped up with an extra 20% from the government, whereas higher rate and additional rate receive 40% and 45% top ups respectively. 

For years, governments have considered replacing this system with a flat rate of pensions tax relief. It would mean a lower tax bill overall, but would likely benefit lower earners, especially if, for example, the flat rate was set at 25% or 30%. 

No government has yet felt able to take this on, and risk upsetting higher earners by removing one of the few – and most generous – tax breaks they receive. 

However, with a strong majority – and new supporters in what were once Labour heartlands – the Conservatives may feel able to revisit it. 

3. Tax could be simplified

The UK tax code is the largest in the world and has tripled in size since the 1990s. A government with a strong majority could take strides to remove some of this complexity. 

The government already commissioned a study into simplifying Inheritance Tax (IHT), one of the least popular taxes. While the recommendations that followed were fairly tame, this was during Theresa May’s hung parliament tenure.

Having a big majority could create an opportunity to make greater changes.

However, promises made in the Conservative party manifesto could end up having the opposite effect. The government has once again pledged not to increase income tax, national insurance or VAT. These taxes combined provide the vast majority of funds to the public coffers.

Should the government wish to increase its income, it will have to look at less-straightforward ways of doing so. Governments in this position often target more complicated or lesser-known taxes hoping that there will be less scrutiny and public anger. Therefore, having tied its hands on its three main taxes, other taxes may rise or gain in complexity. 

4. Bring in the “Everything Isa”

Isas are meant to be so simple. Put up to £20,000 a year into one and you’ll get no tax implications on any of the deposit or growth inside.

But they’ve grown more complex over time and there is now retinue of Isas to choose from, leaving normal savers frequently confused. There is now a:

  • Cash Isa
  • Innovative Finance Isa
  • Help to Buy Isas (now defunct)
  • Junior Isas
  • Lifetime Isa
  • Stocks and Shares Isa

The Help to Buy Isa has now gone, but plenty of people still hold them. The government could act to create the fabled “Everything Isa.” This would be one simple Isa allowance of £20,000 pots to be spread over whichever and however many Isas an individual chooses. 

Savers could choose how to spread their money depending on whether they had the time frame and appetite to invest, were planning to buy a home, or wanted to keep their money in cash. 

5. Reform house building policies and stamp duty 

Housing is one of the most politically-contentious issue the country faces, although it appears to have been forced down the list of priorities in this election.

The Tories have made a number of proposals for helping more people to own homes, but a lot of it is just tinkering. A more radical approach could do any one of the following:

– Build a lot more houses. This one is controversial though because individuals often resist having additional housing built near their own homes, but also don’t want housing built on the green belt. 

A recent Bank of England study claimed that the high cost of housing was down to low interest rates rather than a supply issue. In essence, because property is an asset not a consumable item, low interest rates encourage more people to own and horde property because the long-term returns are much more guaranteed than putting your money into a savings account.

– Get rid of stamp duty for good. Many argue that stamp duty gums up the market because it disincentivises people from moving, it’s unfair because it offers a tax break to one segment of the population but not others, and it discourages efficient use of properties.

Empty nesters are sitting on big properties because they don’t want to pay out stamp duty when they downsize, and others stay in homes they have outgrown for the same reason and because there is not the supply of larger homes required. 

– Bring back 100% mortgages. The single biggest barrier for many young people isn’t whether they earn enough money to pay a mortgage, it’s that deposit requirements combined with high house prices keeps huge numbers of people out of the housing market.

Bringing back deposit-free mortgages wouldn’t be without risks, but interest rates are incredibly low at the moment. A Tory government would have to repatriate some powers from the Bank of England to do it, but this isn’t beyond possibility and would fit with a wider narrative of a post-Brexit government determined to reshape the country. 

What the new Conservative government means for your pension

What the new Conservative government means for your pension

Boris Johnson has pledged that the new Conservative parliament will not curtail existing retirement benefits, but he’s offered no reassurance to Waspi women


Rachel Lacey
Fri, 12/13/2019 – 09:59


The Conservative party promised to preserve the triple lock on the state pension in its general election manifesto. This means that the state pension will continue to increase each year by the greater of wage growth, inflation or 2.5%.

It means that in April next year, state pension payments should increase by 3.9% of £343 a year.

Controversial winter fuel payments – which pay all eligible retirees between £100 and £300 once a year, irrespective of income – will also be protected alongside free bus passes and other pensioner benefits.

As part of ongoing reforms to auto-enrolment, the Conservatives will also review the tax treatment of pension contributions of the lowest paid workers, usually women. This will target those earning between £10,000 and £12,500 a year who often miss out on tax relief on their pension contributions.

The result of the election, however will come as a blow to older Waspi women. Jeremy Corbyn had pledged that if Labour won the election it would fully compensate women who have missed out on years’ worth of state pension following increases to the state pension age which they claim were not sufficiently communicated. Compensation for the four million affected women born in the 1950s was estimated to cost £58 billion with individual payments reaching as much as £31,300.

Boris Johnson has not made any pledges to support or help these women in any way.

Although the prime minister has acknowledged problems at the other end of the spectrum – where highly paid doctors are being stung by such punitive pensions tax bills that they are turning down extra shifts and reducing their hours, there is still no more clarity on the possible changes to the NHS pension. Proposals announced so far have been described as a sticking plaster by critics.

While Brexit will undoubtedly be at the top of the new government’s to-do list, Tom McPhail, head of policy at Hargreaves Lansdown says, pensions minister Guy Opperman’s ‘oven-ready’ pensions bill should be passed quickly, following time constraints in the last parliament. “This Bill will strengthen protections for occupational scheme members, pave the way for pensions dashboards to be developed and open up the option of a new type of shared-risk pension scheme.”

The long-awaited pensions dashboard is a platform that will enable savers to view all their pensions in one place. However because it requires data from government and private pension companies – many of which may have closed, or only hold paper records, it’s a project that has been dogged by problems.

McPhail adds: “In addition we expect to see pension tax reform back in the table. This is for a couple of reasons. Firstly, the Conservatives have already acknowledged the problems with the Annual Allowance Taper and its impact on higher earners such as doctors; they had also acknowledged the problem of lower earners missing out on tax relief because of the way their employer operates their scheme. They have to fix these problems. Tinkering will only make the pensions system more dysfunctional than it already is; the best answer would be a fundamental reform of the tax treatment of pensions across the board.”

Pensions tax relief has long been a thorny issue. George Osborne consulted widely on the issue during his time as chancellor – exploring reforms including a flat rate of tax relief for all savers – while more recently, former chancellor Phillip Hammond, described pensions tax relief as “eye-wateringly expensive”. However, he too took no decisive action on the tax break that costs the government £40 billion a year. 

“The pressure is on the Chancellor to be positive and ambitious, the spending taps will be turned on and we expect a big Budget in February,” adds McPhail. “The Conservatives have also promised not to raise income tax, National Insurance or VAT so at the margins they will look for fiscal savings; pensions cost tens of billions of pounds and there is the opportunity to save money here. Finally, the new government has the political capital to tackle knotty domestic issues such as pensions and social care which would otherwise have been too difficult to even attempt.

 “We believe there is a way the UK’s pension system could be made simpler, fairer and more efficient, with proper incentives to save for all; there is now the opportunity to pursue this reform.”

Jon Greer, head of retirement policy at Quilter took a similar view and said that it was now time for issues like pension and social care to come back to the fore. “With the political posturing over hopefully these policy areas will get the attention they deserve. And with a Queen’s Speech just a week away we could get clarity sooner rather than later. However, the dreaded B word will likely mean we still have some time to wait for any meaningful change,” he says.

Myron Jobson, personal finance campaigner at interactive investor meanwhile called on the newly-fortified Tory government to do more to get younger and lower paid workers saving in pensions. 

“Automatic enrolment is a fantastic initiative which has help millions save for retirement with minimal effort. We believe more can be done to further bolster the initiative,” he says. ” At present, it is only compulsory for workers to be enrolled by their employer if they are at least 22 years old and earn a salary of at least £10,000. We call on the government to revise the eligibility criteria on both accounts. We feel that the DWP’s proposal to reduce the minimum age limit to 18 in the mid-2020s is lethargic and risks leaving a whole generation of workers behind and should be brought forward.

“The £10,000 earnings threshold applies only to a single employer, meaning people working for multiple employers, many of whom are women, often miss out. Let’s fix this by making the threshold cover multiple jobs.”





2019’s most viewed properties on Rightmove revealed

2019’s most viewed properties on Rightmove revealed

The list includes some of the most expensive and luxurious properties in the UK – including the home of former West Ham striker Andy Carroll

Stephen Little
Thu, 12/12/2019 – 10:38


Not everyone on property websites is looking to buy. In fact, many of us spend our time clicking through looking at properties we can only dream of affording.

Rightmove has revealed the top five most-viewed homes for sale in 2019 and in top spot is the home of former West Ham striker Andy Caroll.

1. High Road, Essex, £5 million


Source: Rightmove

This nine-bedroom mansion – previously owned by former West Ham striker Andy Carroll – has a replica Angel of the North sculpture in the driveway and comes with a huge mirror above the bed in the master bedroom.

Other mega-mansion must-haves include a home cinema, two dressing rooms, an annexe games room and a massive garden – perfect for summer barbecues.

2. Glenborrodale Castle, Scotland, offers above £3.75 million


Source: Rightmove

This magnificent castle dates from 1902 and is ideal for buyers who want to live out their Game of Thrones fantasy.

The property also boasts a detached coach house, a gym and a boathouse and jetty. With glorious views of Scotland, the grounds of the castle extend to an incredible 132 acres.

3. Beetham Tower, Manchester, £3.5 million


Source: Rightmove

This classy penthouse on the 45th floor has some spectacular views across the city, including Old Trafford.

It also boasts floor-to-ceiling windows, a cinema room and multiple terraces from which to enjoy the high life.

4. Overdale, Cheshire, £3.95 million


Source: Rightmove

After a hard day’s work, what better way to relax than by taking a dip in a glamourous indoor swimming pool or a hot tub?

Live the millionaire dream in this seven-bedroom family home that has almost everything you could want in property, including some stunning views of the Cheshire countryside. 

5. Canonteign Manor, Exeter, £3.95 million


Source: Rightmove

This elegant Grade I-listed home was once garrisoned for the King during the Civil War and has since been inhabited by a succession of prestigious families.

It features 10 bedrooms and has 10 acres of private countryside and an outdoor swimming pool.

Investment trust red flags investors should look out for before buying

Investment trust red flags investors should look out for before buying

One of the most important starting points in investing is knowing where to look for opportunities, yet what is perhaps more difficult is knowing exactly what characteristics to look out for.

Tom Treanor
Wed, 12/11/2019 – 10:00


Closed-end investment funds – some of which are also known as investment trusts – are a popular option for investors and the sector has expanded rapidly in recent years. This widening of the opportunity is surely good news for investors; however, with more choice comes greater difficulty in trying to sift the good from the bad.

It is crucial to be aware of the positive signs that suggest a strong investment opportunity. In the closed-end space this might involve judging the robustness of the investment manager’s philosophy, the strength and independence of the board which provides oversight for the fund, or perhaps the long-term performance.

Equally, if not perhaps more important, is to be aware of the factors that should raise a red flag before you hand over your savings.

Looking past the marketing spiel and examining the detail of a closed-end fund is a vital habit to adopt. Checking a closed-end fund’s factsheet to find out if it is trading at a premium or discount to its net asset value is a good starting point. If it is trading at a discount – where the closed-end fund’s net asset value is higher than the value of its shares – an investor should question what is driving it.

A closed-end fund can trade on a discount for a multitude of reasons. Wide discounts often occur if there is question over the validity of the asset value, poor corporate governance, or where the assets are distressed. Closed-end funds exhibiting these characteristics should be treated with caution.

This is not to say that a wide discount is always a warning sign. Sometimes, the market’s perception of the fund fails to keep pace with changes and improvements that have been made, resulting in an anomalous discount and, potentially, a ‘bargain’ price.

This situation can occur even for high-quality closed-end funds. Times change, and a discount can be a good entry point to a fund that has made improvements that aren’t yet recognised in its share price. Nonetheless, do your research to make sure the discount isn’t there for good reason.

Focus on research

When looking for other red flags, the key to uncovering warning signs involves digging into the detail. Are there any signs of trouble being stored up for the future?

Examining what we call ‘qualitative’ factors, such as the effectiveness and performance of the board, forms part of this process. Ask yourself, does it have a history of standing up for the fund’s shareholders? Or has it perhaps shown an inclination to act in the manager’s best interests rather than those of shareholders?

A strong board should be fully independent from the investment manager, enabling it to question decision-making and ensure it always works in the best interests of its shareholders (i.e., you, the investor).

The voting structure is another important area. Do all shareholders have full voting rights? If not, it could make it more difficult to enact change, and can be a sign that the fund is not open to development. Examining the shareholder base is also crucial – are there large shareholders resistant to change?

A further area of concern is management contracts. Terms which include a punitive termination clause can prove restrictive – there are examples of funds where the termination of the management contract triggers a payment of multiple years of management fees. Clauses such as these can often prove a barrier to a restructuring that may be in the best interests of shareholders.

When it comes to the underlying investments, again looking into the detail is important. You could find the fund does not directly own the assets in which it invests, instead acting  as a feeder fund into a master fund run by the investment manager, and that master fund will in turn own the underlying assets.

This kind of relationship can sometimes mean the board does not have full control over the underlying assets, in which case the fund’s directors may be powerless to intervene or order a sale of assets– something to be concerned about if performance faltered.  

Ultimately, you must make an investment based on your own judgement and personal circumstances. Selecting where and with whom to trust your savings can be a difficult one to make, but with the right knowledge and understanding of the warning signs, an investor can improve their understanding of the risks involved, with hopefully superior long-term results. 

Tom Treanor is head of research at AVI Global

Any opinions expressed in this article do not constitute financial advice, are the author’s own and do not necessarily reflect the views of Moneywise.