As Donald Trump prepares to wow the Davos convention with his scintillating wit, his sophistication and his steely commitment to winning, the Financial Times turns its attention to less serious matters. Namely, a round-up of the reasons people give for failing to get their annual self-assessment forms in on time.
Top prize, courtesy of HMRC itself, must surely go to “my ex-wife left my tax return upstairs, but I suffer from vertigo and can’t go upstairs to retrieve it.”. But there are some real crackers here. Do read the article in full.
There is, however, a more serious aspect to the issue. As the FT also reminds us, the forms have been changed to reflect the recent shake-up in the ways that dividends are taxed, and the fact that interest etc is now paid gross – two things that can catch even experienced SA-100-ers unawares and gasping for guidance. As one of the FT’s quotes notes, the elderly are among the sectors most affected by these two new practices, and many will find themselves struggling with the changes.
Nor is this all. Some of the recent policy shifts have left even advisers gasping to keep up with the pace of change, and a valid question has arisen as to whether the Revenue can reasonably continue to maintain that ignorance of the law is no defence? (That’s the FT saying, not us, guv.) And the courts have not been particularly consistent in the ways that they interpret the obligations on the individual to know what he or she is doing.
Bring back Adam Hart-Davis and Hector the tax inspector. “Tax doesn’t need to be taxing,” he chirruped brightly. Those were the days.
The Telegraph has some good news and some bad news for Santander customers who may be coming to the end of a fixed-term mortgage deal, but who may not have had time yet to negotiate a replacement. The good news is that the bank’s usual 4.74% “standard variable rate” (which most borrowers would regard as a worst-case fallback) is being reduced to a “follow-on rate” of 3.75% which will automatically apply to anyone whose fixed deal ends from 23rd January. This, the Telegraph says, would save a householder with a £150,000 mortgage around £83 a month – very nearly £1,000 a year.
The bad news is that we lied just now about how the change will be automatic. Account holders with even just one missed payment or other arrears during the last year will be excluded from the offer and will find themselves paying the full standard variable rate. And so will some “mortgage prisoners” who’ve been locked into the standard variable rate for many years after missing payments. (Presumably not just with Santander but with other lenders too.)
The mortgage prisoners are complaining, the Telegraph says, that the extra weight of not being eligible for attractive fixed-term mortgages has only added to their woes and pulled them even further into the financial mire. Time for an amnesty, we wonder?
The Daily Mail throws caution to the winds with a slightly scary feature on how investors can emulate the hedge fund managers by shorting troubled stocks. “Vulture investors”, it says, made £200 million last week on Carillion, and they’ve also been turning their attention to the high street chains which (as we reported last week) have been having such a rough time of it.
Debenhams, Sainsburys, Pets at Home and Ocado are all on the wrong end of the hedgies’ betting lists, the Mail says. With Provident Financial (the crashed doorstep lender) and Marks & Spencer also carrying burdens of up to 12.9% of their shares out on loan to short-sellers.
Would we at IFA Magazine advise clients in general to short-sell? Do you really need to ask? But don’t shoot us, we’re just the messengers. That’s what they’ve been reading this week, worse luck.
It’s the pros and cons of smart meters that the Sunday Times Money section is leading with this weekend – an unlikely discussion point between clients and advisers. However, it’s smaller companies which are on Ian Cowie’s mind in the Sunday Times. He reports that while the FTSE 100 has delivered just above 11% over the past 12 months, the average for 20 investment companies in the smaller companies sector has been a respectable 33% for the same period, based on AIC data. He also highlights that smaller companies have outperformed their larger bretheren over the past five and ten year periods. He quotes research by Paul Marsh, emeritus professor of finance at the London Business School, which shows how small companies have tended to beat blue chips for much longer than that – way back to 1955. He reminds us that it’s not just a growth story either. Smaller companies are also capable of delivering respectable dividend growth too. For those investors keen to boost exposure to the sector, he reports that on average, share prices of smaller company investment trusts are typically trading at 11% discount to NAV compared to 7.5% for the UK all companies sector. Trusts highlighted are River and Mercantile UK Micro Cap, JP Morgan Smaller Companies and Standard Life UK Smaller Companies.
This month marks three years at the helm for Ross Teverson, manager of investment fund Jupiter Global Emerging Markets, which is the Financial Mail on Sunday fund in focus this weekend. Jeff Prestridge reports that over the past 36 months, he has delivered investors returns better than the average emerging markets fund – 51 per cent compared to 46 per cent. He has also increased the fund’s size from £25million to £159million. Teverson is first and foremost a stock picker who prefers to assemble a portfolio comprising no more than 50 stocks. His style means that the fund’s portfolio is usually at odds with competitors. For example, Prestridge highlights, it has just 16 per cent exposure to China, considerably less than most rivals. His view is that better opportunities lie elsewhere.
Although the fund and most other emerging market trusts have had a strong past two years, in the article Teverson says that he still believes that valuations ‘look reasonable’ on historical grounds.
‘They are not cheap compared to two years ago,’ he adds. ‘But they look attractive when compared to other assets such as US equities.’
What he likes about emerging markets is how the asset class has evolved since he has been at Jupiter. Previously, it was primarily considered a ‘commodity’ play, dependent upon commodity prices for markets to boom. But as emerging market economies have grown and businesses have developed in key areas such as healthcare and consumer spending, investment opportunities have broadened. Teverson also manages the Jupiter Emerging & Frontier Income Trust.
Prestridge also suggests that savings rates might be about to rise. Between now and the end of next month, the taps on Funding for Lending and Term Funding will be turned off. This means that the banks and building societies will no longer have access to the cheap money available under these initiatives. So, instead of relying on the Government for borrowing, they will have to turn to savers. That should mean higher savings rates as they look to encourage customers to lodge new funds with them. Only time will tell.
Also in the MoS, Sally Hamilton is warning those who have what she terms “gold plated “pensions to “beware the vultures” circling over them. Hamilton reports that fears that the transfer frenzy could be running out of control caused the Work and Pensions Select Committee, led by Labour MP Frank Field, to accuse the City regulator of ‘sleepwalking into another huge mis-selling scandal’ – particularly in relation to the British Steel Pension Fund. The MPs’ accusation that the Financial Conduct Authority was sleep-walking into a scandal was fiercely denied by its chief executive Andrew Bailey last week. He pointed to the watchdog’s wide-ranging investigation into the boom in transfers, including among British Steel scheme members. The regulator is preparing to introduce new advice guidelines in March. With reports of unscrupulous advisers doing the rounds and worse still, of many scams in place, for those individuals facing big decisions ahead, getting sound professional advice from appropriately qualified advisers has never been more important.
After an unbroken 150-year record of dividend payments, this remains an ideal ‘buy and forget’ fund. If you had to take a stab at the name of the fund, we reckon that many of you reading this would guess correctly, that it is the Foreign and Colonial Investment Trust on Richard Evans’ agenda in the Sunday Telegraph this weekend.
With its unbroken history of annual dividend payments that stretches back a century and a half, Evans correctly describes this as an “extraordinary achievement. The dividend has also been increased every year since 1970 and over the past decade it has doubled, which is equivalent to an annual rise of 7.3pc – comfortably ahead of inflation.