Financial Review December 2015

‘Pre-nups’ now feature in loan conditions at ‘bank of mum and dad’
More and more young couples forced to rely on the ‘bank of mum and dad’ when buying a house now find that the loan comes with strings attached. Parents keen to protect their often considerable investment are demanding that children sign a ‘pre-nup’ with their partner to ensure the parental contribution remains within the family if the relationship breaks up.

This is the latest in a series of uses for the pre-nup that were unforeseen by the Supreme Court judges that granted couples the right to arrange their divorce settlement before their wedding day. Solicitors specialising in family law say there has been a big rise in interest in pre-nups, but that they never expected to see this coming from parents and the wider family, keen to protect their investment in a couple’s future.

Government’s Help to buy ISAs begin to look more interesting
Interest of up to 4% will be paid on new Help to Buy ISAs – accounts aimed at helping potential property buyers save for a deposit. Banks and building societies are unveiling their deals as part of the Government-backed scheme.

As with a traditional cash ISA, interest will be free of income and capital gains tax. The Government will also top up savings in these accounts. When savers take money out to buy a house the Government will add 25% to whatever is in the account, up to a maximum of £3,000. That 4% is the best rate, and with others at 2% this may not last beyond an introductory offer. The hope of building societies and banks is that they will attract mortgage business via the new accounts.

Plans for a Help to Buy scheme for potential first-time buyers were announced in the budget in March and came into force at the start of December.

Ticket fraudsters don’t play the game as fans lose £1.2m
Music and sports fans have lost more than £1.2 million to ticket fraud in the past six months, police figures have revealed. Nearly 3,000 cases were reported, with the Rugby World Cup, Ed Sheeran and Taylor Swift particular targets, said Action Fraud.

On average, customers who bought fake tickets lost £444 per transaction. But it is a crime believed to go largely unreported as people write off their losses and secure repayment via their credit card company. Action Fraud, however, is urging people to report when they have been victims, so that the police can do more to crack down on those behind these crimes, who often work across the UK targeting high-profile events.

Bank governor sees no end in sight for UK’s low interest rates
Bank of England governor, Mark Carney, has said UK interest rates are likely to remain low “for some time”. Rates have been held at 0.5% since March 2009. Most economists are not expecting the Bank to raise rates until mid-2016 at the earliest.

Mr Carney said that even with limited and gradual rate increases, it still will be a relatively low interest rate environment. He said he did not see any need for negative interest rates. Speaking to the Treasury select committee, Mr Carney also said productivity was more likely to exceed than undershoot the Bank’s latest forecasts, reducing the pressure on inflation.

Dutch finance minister refuses to milk Starbucks for tax
The Dutch finance ministry says it will fight an EU ruling ordering it to recover more than £21 million in tax from Starbucks. Competition commissioner, Margrethe Vestager, ordered the Netherlands to recover back taxes from the coffee chain, accusing it of benefiting from an illegal tax deal. Starbucks has already said it will appeal the EU decision.

The Netherlands is under pressure to reform its tax system, which has attracted international firms with tax rates of less than 10% in some instances. The European Commission said the tax deal with Starbucks is a form of state aid, but the Dutch government disagrees. If it loses its fight against the ruling, it could be forced to seek to recover hundreds of millions of euros in tax from a wide range of global blue-chip companies based in Holland.

Coin commemorating the queen’s record reign is worth a mint
A new £50 coin commemorating the Queen’s record reign as a British monarch has been launched by the Royal Mint with a limited run of 100,000. The coin is available on the Mint’s website at its face value and, like previous limited issues, is certain to stir interest from coin enthusiasts and those gambling on a profit if it grows in value. Although the £50 coin is legal tender, it is not ‘circulatory tender’ and cannot be used in shops.

The Queen is the longest reigning monarch in British history, having surpassed her great-grandmother Queen Victoria’s record – a milestone reached in September.
Classic cars may drive better returns than FTSE 100 shares
Buying classic cars, jewellery and gold could prove to be a better investment than investing in the FTSE 100 or a central London home, according to the latest Knight Frank wealth report. The index tracks 10 asset classes from stamps, coins and art to wine, furniture and jewellery.

Over the past 10 years the index has beaten the FTSE 100 index – not taking into account dividend reinvestment – and prime London homes. Over the past 12 months it rose by 10% compared with a rise of only 1% for the top end of the central London housing market.

The report, however, found that 63% of wealthy investors buy luxury assets because of a passion rather than to make a return on their money, and only 23% invest because it is a safe haven. Although vintage cars, wine and coins have seen a steady rise in value, jewellery is still regarded as one of the safest investments.

If you could see what I can earn, when I’m cleaning windows
It’s been a great year for artists, musicians and window cleaners, in monetary terms at least, shows the official survey of UK annual salaries. Musicians have seen pay rises averaging nearly 20% in 2015, while cleaners are getting 18% more, and window cleaners 12%. This is based on the huge list of pay scales drawn up by the Office For National Statistics.

At the other end of the scale, among the biggest losers are PR directors, property managers and estate agents. Top salary earners were chief executives, finance brokers, pilots, marketing directors and lawyers. Farmers came in at number 226 with an average wage of £22,146. Journalists fared better, coming in at at 88 on a list of 352 jobs.

Baby boomers save more for a rainy day
Baby boomers are a “frugal not frivolous” generation, claims analysis of data showing people in their 60s and 70s are saving nearly twice as much as 30- and 40-year-olds. The stereotype that pensioners are splurging their pensions on holidays, cars and gadgets is a myth, and instead they are cutting back on non-essential spending when they retire.

The average person aged between 70 and 74 saves £4,043 a year from their income while someone in the 40-44 age bracket puts aside an average of more than 40% less at £2,411.

India overtaking China for economic growth
India grew more rapidly than expected in the third quarter of 2015, keeping on course to overtake China as the world’s fastest growing large economy. Its economy expanded by 7.4%, after growth of 7% in the second quarter. The International Monetary Fund (IMF) believes China will expand by 6.8% this year, and 6.3% in 2016.

Economists have highlighted India’s favourable demographics when comparing the two nations, although HSBC says China abandoning its one child policy will eventually boost growth rates and add 30 million to its workforce by 2050.

Falling prices boost disposable income 10%
The falling prices of car fuel and lower home energy bills have given UK households a 10% boost to their disposable income compared with last year. Despite a slowdown in pay growth, the average weekly discretionary income – what is left after paying for essentials – at £193 was £17 higher compared with 2014.

In the past year, fuel costs have fallen by 14%, while the cost of gas and electricity has dropped 4%. Supermarket price wars and retail competition in general saw retail prices fall by 2% in the year to November, according to the British Retail Consortium.

Morrisons tumbles out of the FTSE 100
Supermarket chain Morrisons has fallen out of the FTSE 100, following a sharp drop in its share price amid concerns about its recovery plans. The company had narrowly missed demotion during the last quarterly reshuffles in June and September. The chain had been in the list for more than 14 years, but its share price has tumbled in line with falling sales. The price has fallen around 17% this year.

The decision was made by the London Stock Exchange. The move into the FTSE 250 could trigger share sales by tracker funds that only follow the UK’s FTSE 100 companies.

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