Is there really an easier way to boost pension returns? The Sunday Telegraph Money section is taking a relatively simple approach to encourage readers who are auto-enrolled into an employer’s pension scheme to review the fund/s in which they are invested in order to seek opportunities to improve their returns. The summary of the article, which is based on research carried out by Hargreaves Lansdown, is that individuals can do better than sticking with the default fund available – which the article reports is likely to have just 65% exposure to equities. With a little bit of homework, it suggests that investors may improve their long term growth prospects by switching to a more growth-orientated fund, albeit accepting that there might be a higher risk of volatility along the way. With contributions set to rise in April to %% for employees and 3% for employers, the worry is that cash-strapped workers may decide to opt out altogether.
“How to take the sting out of inheritance tax and save your family thousands of pounds.” It’s a title that is likely to attract readers’ attention for sure, but for clients of professional advisers there is little in this article in the Financial Mail on Sunday that they will not have considered or discussed. The main focus of the article by Jeff Prestridge with comments from a range of experts is that IHT can be reduced in many ways – through different ways of gifting, on making sure there is a will in place, use of pensions, trusts and alternative investments such as AIM stocks.
The Sunday Times Money section continues its Pension Equality campaign, this week with an article by Kate Palmer which reminds readers that when it comes to auto-enrolment contributions, the qualifying earnings rule should be remembered. Just to remind you, this relates to the fact that the amount that a person contributes is based on a band of income – currently £6030 to £46,350 –and not all of their pay. Sunday Times money argues that this disadvantages lower paid workers and those who have more than one job, by excluding the first £6030 of their income from pensionable contributions.
Dividends don’t begin and end at Dover. Those are the words of Ian Cowie, writing in the Sunday Times about the value of a reliable dividend income from equities. Interestingly, he warns about the risk of inadvertently becoming too reliant on the income produced by oil giants – notably Shell and BP – which account for a large proportion of the dividend income produced by FTSE companies. His warnings relate to Government efforts around the world to boost renewable energy as well as the obvious risks to oil production such as the Gulf of Mexico disaster in 2010. Perhaps of most interest are his thoughts on how diversification can play out in the pursuit of income just as it does for growth – his chosen route it via investment trusts. He reminds readers that Asian companies in particular carry a lot of cash and that overall it makes sense to diversify your sources of income by industry and internationally.