Financial Review October 2015

Watches and the latest iPhones keep Apple top of the pops
Apple has been named as the most valuable brand in the world, with a value estimated at over £100 billion after the successful launch of the iPhone 6 and the Apple watch. The list is compiled by analyst, Interbrand, and Google and Coca Cola were second and third after Apple. Predictably other brands in the top-10 include Microsoft, and Facebook with its value having jumped by 50% over the past year.

Of UK brands, Burberry is the highest, placed at 73 in the list of 100. Mini, owned by BMW, just makes it onto the list at 98, with Land Rover, owned by Tata of India at 87.

Interbrand says it has been a good year for brands, with their global value rising steadily as the world moves out of recession and back towards consumerism, where brands are all-important.

Minimisation leads to demands for better corporate tax system
Pressure is increasing for companies to pay tax in the countries where they conduct business, under new proposals to cut corporate tax minimisation. An Organisation for Economic Development (OECD)/ G20 report found rules allowing companies to shift profits to low-tax jurisdictions mean that £65-£150 billion is lost to governments each year because of the manipulation of tax rules. That equates, says the OECD, to between four and 10% of global tax revenues.

While governments are being encouraged to adopt the proposals, they do not have to do so. The report says no single problem was identified, but it is critical of transfer pricing used to divert profits to low tax areas.

Richard Murphy, of Tax Research UK, said the proposals represented some progress but that the governments of the UK and US in particular were not committed to implementing them. “Anyone who thinks this will solve the problem with international tax is living in cloud cuckoo land,” he said.

The report was triggered by criticism of big global brands, including Amazon and Starbucks, that pay small amounts of tax in the UK despite having sales worth billions of pounds.

Banking complaints surge to 500,000
The number of people complaining about their current accounts jumped by a third in the first half of the year, the financial regulator has said. There were over 500,000 complaints and the Financial Conduct Authority (FCA) has warned banks to take action to address the problems. In its defence, the industry says it has stepped up efforts to reduce the number of unhappy customers.

Many consumers have been complaining about packaged accounts, which include insurance policies. Banks charge a monthly fee for these accounts, but people say they have been signed up without their permission, or have found the insurance largely worthless. PPI has continued to dominate complaints, but the FCA has now said it will soon set a final date for these to be raised. This is likely to be 2018.

Incentives needed for pension saving
The pension system in its current form fails to provide an incentive for people to save, accountancy firm PwC has claimed. It says the complexity of pensions is putting people off saving, particularly women and younger workers. It also suggested that contribution levels were insufficient to provide the retirement income people expect.

On average, people want a retirement income of £22,200 a year, but to achieve that an employee starting work at 22 would need to save a total of 15% of their annual salary towards their pension. A PwC survey, however, found that only a fifth of people were putting more than 10% of their salary into a pension. It said this confirmed a big gulf between expectations and reality, and has called for changes to the tax treatment of pensions to make them look more attractive and for better financial education of young people.

Investors tempted by whisky galore
Forget stocks and shares – the latest asset that has caught the eye of wealthy investors is whisky. According to auction house, Bonhams, sales of old and rare whisky are at a record high this year. Sales in the first half of 2015 grew by more than a third compared with last year with more than 20,500 bottles of single malt sold on the open market.

The popularity of expensive whisky has been driven by China as its growing middle classes develop a taste for luxury goods. However, there has also been increasing demand from UK collectors.

Scotch whisky is a popular sector, but demand has also been growing for Japanese whisky. This has led to the launch of an online whisky index where people can buy units in a barrel while it is still maturing. The business suggests investors could see a 7% return on their investment, but success is never certain until it is out of the barrel and onto a still fickle market.

Common sense prevails as savers choose not to blow pension pots
Most lump-sum pension withdrawals have been by under-65s, with four in five cash lump sums paid to those under the traditional retirement age, and three in five to those under 60. The Association of British Insurers, which represents most pension providers, said 95% of cash sums withdrawn were for the full amount of small pension pots.

Almost £2.5 billion has been taken from pensions since the new freedoms came into effect in April. These allow over-55s to withdraw their pensions as a lump sum or use their pot as a bank account rather than buying an annuity that pays an annual income. While nearly £2.5 billion looks a lot to be taken out, it in fact accounted for less than 1% of pension funds held by the over-55s. This confirms that far from splashing out and being left with nothing, most people are making sensible use of their pension pots, while avoiding poor value annuities in favour of flexibility.

UK Alternative finance market goes from strength to strength
The total lent and invested through the UK alternative finance market could break through the £5 billion mark by November. By the end of August the figure was £4.36 billion.

Fleximize, which lends to small and medium-sized enterprises based on monthly revenues, allowing them to pay back more in good months and less in others, estimates that the sector has provided about £211 million a month this year. In 2012 the alternative finance market was worth around £267m and last year the figure was about £1.74bn.

September car sales hit new record
New car sales have registered their highest level on record for September, with gains in private, fleet and business sales. The month saw 462,517 cars registered, up 8.6% on last year, said the Society of Motor Manufacturers and Traders. More than two million cars have been registered so far this year – the first time the two million mark has been passed in September since 2004. Car sales have now increased for 43 months in a row. March this year saw the highest monthly level of new car sales so far this century.

Even before the VW scandal broke, petrol cars were staging a comeback, with 46% diesel against 51% petrol – the others presumably being hybrids and electric cars. This suggests many of the sales have been of smaller family cars, where cheap finance deals have allowed them to score over second-hand vehicles.

Shoppers have 30 days to get their money back
New consumer protection measures, including longer refund rights, have come into force under the Consumer Rights Act. For the first time anyone who buys faulty goods will be entitled to a full refund for up to 30 days after the purchase. Previously consumers were only entitled to refunds for a ‘reasonable time’.

There will also be new protection for people who buy digital content, such as e-books or online films and music. They will be entitled to a replacement if the downloads do not work, but not a refund. If a download also infects a computer with a virus, the provider could also be liable to pay compensation for getting the virus removed.

Investors’ Gold kilo bar costs a mint
The Royal Mint has launched a gold kilo bar for the ‘serious investor’ at a cost of approximately £25,000. Customers can purchase the bar within minutes from its online trading platform. They can choose to have it delivered to their home by insured delivery or kept in a Royal Mint facility in Cardiff, protected by the Ministry of Defence.

The launch of The Royal Mint platform a year ago has opened up the gold market to retail investors, who have the option of buying a fraction of a bar for as little as £20. Since the platform was launched sales of its gold and silver bullion have risen by 57%. It is now hoping wealthy individuals will splash out on this new bar, described by the Mint as a “high value purchase opportunity”.

The gold trading platform, royalmintbullion.com was launched a year ago, opening up trading to people who were previously put off by the complexities of the market. To date it has attracted over 12,000 customers from around the world.

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