Surprise, surprise! Well, not exactly. It’s our guess that professional advisers will not be in the least surprised to read that many of the one million people who have taken advantage of the pension freedom rules, may well be facing unexpected tax bills for infringing some of the rules. As advisers know, although the regime was intended to simplify pensions, when it comes to tax, the somewhat complex rules can catch out unsuspecting individuals – especially those surrounding the MPAA. The Sunday Telegraph Money section leads with a detailed article on this subject. It highlights some of the techniques which can be used in order to retain the most efficient structure to a pension portfolio for the future and to keep flexibility around contributions.
“Bond yields begin to signal another global recession in the making”. That’s the dramatic headline of an article in the Sunday Telegraph Business section which starts out by reminding readers of last week’s fall from grace and departure of Bill Gross from his position as head of the Janus Henderson Global Unconstrained Bond fund following recent losses. IT proceeds to comment that with bond yields testing record lows again, these are “powerful recessionary indicators”.
As was covered in the Sunday Telegraph, the potentially hefty tax bills likely to be faced by many of those who inadvertently strayed into areas of pension freedoms which meant that tax was incurred, is also on the agenda at the Sunday Times Money section. It’s Ian Cowie with the message this time, with is very clear portrayal of some of the scenarios in which the tax rules could end up hurting unsuspecting investors. Rather than simply maligning the situation, he takes a positive approach to highlight the potential for use of VCTs by those for whom the MPAA might limit the ability to make pension contributions. It’s not going to be news to advisers, but it may just provoke questions from clients.
Meanwhile, the Sunday Times Money headline suggests it will help readers to understand “when to dump a failing fund”. However, the article itself tends to focus on when to sell a failing share rather than fund and it shows a chart of “when you should have sold bitcoin”. All a bit confusing if you ask us! Still, it’s probably not going to provoke many questions at review meetings you may have with clients this week.
The use of jargon: like it or loathe it, the use of jargon has become an integral part of the language of investment but it can be hugely confusing for clients and DIY investors alike. Given the FCA’s enthusiasm for encouraging investment firms to cut out the gobbledegook, saying that firms should describe the objectives of their funds “in a concise way and without using jargon”, the article points out that it has not provided guidance on what constitutes jargon however. The article then looks at the factsheets of the five largest funds to see how easy they are to understand, based on research from Moira O’Neill at Interactive Investor who attributes a “gobbledegook rating” to each fund from one to five. As you might expect, the funds don’t exactly come out smelling of roses. If you want to see the details, then you can read the report.
Writing in the Financial Mail on Sunday, Jeff Prestridge looks at the latest Bestinvest “spot the dog” report on funds which consistently have underperformed. He reports that these poorly performing so called “dog funds” are generating £537million a year in fees for their managers. The article names and shames by highlighting many of the serial underperforming funds (Woodford has a special mention here) and also serial outperformers. We’ll spare you the details here as you can review the list for yourself should you wish to.