The results are in, and it’s not good news!

As you know, we have been awaiting the result of the government's consultation on whether to apply Inheritance Tax (IHT) to unspent pensions; well, we don’t have to wait anymore.  

The following is an article by Alina Khan in today’s FT Adviser:

“Published yesterday (July 21), the government put out its draft legislation to apply IHT on unused pensions funds and death benefits.

Although the proposals remain largely unchanged from when Rachel Reeves announced them in the Autumn Budget, the government has made a few revisions to what it had previously announced.

Between October 2024 and January 2025, the government consulted on the process for reporting and paying IHT on unused pension funds and death benefits.

It proposed that pension scheme administrators would be liable for reporting and paying any IHT on the pension element of an individual’s estate.

Following the consultation, the government has announced personal representatives rather than pension scheme administrators, will be liable for reporting and paying any IHT due on unused pension funds and death benefits from April 6, 2027.

It also confirmed death in service benefits payable from a registered pension scheme will remain out of scope of IHT.

Government has ‘blown its opportunity’

Roddy Munro, pension specialist at Quilter, was thankful government had listened to some responses but was concerned without further amendments, how the policy was actually enacted risked “turning a targeted tax reform into an administrative minefield.”

“What we could end up seeing is a massive transfer of private wealth back to the state. What’s more, while only a small fraction of estates will pay more tax, a far greater number will face needless complexity, delays, and stress — often at the worst possible time,” he said.

HMRC has blown its opportunity to bin the original proposals, stubbornly sticking with a system that will create confusion, complexity and additional costs for bereaved families.

Rachel Vahey, AJ Bell

Andrew Tully, technical services director at Nucleus Financial was disappointed to see the government had not listened to “very strong views” that using IHT was not the best option to boost Treasury coffers.

“Including pensions within the IHT environment will deliver poor outcomes for customers, beneficiaries, personal representatives, the industry, and HMRC.

“This complex process will cause bereaved families confusion and stress at a difficult time and doesn’t fit well with the support firms may want to provide people who are likely to be vulnerable following the death of a loved one.”

A report released this month by The Investing and Saving Alliance, found alternative policies could raise the same level of tax revenues as bringing IHT into the scope of pensions.

Rachel Vahey, head of public policy at AJ Bell said: “HMRC has blown its opportunity to bin the original proposals, stubbornly sticking with a system that will create confusion, complexity and additional costs for bereaved families.

“Options were put forward by the industry which would have been far more straightforward than bringing unspent pensions into IHT, while still raising the same amount of tax.

“Although most savers will be unaffected and should not need to change their financial plans, some now face difficult choices about how best to arrange their finances. Many have saved and invested in good faith and now face the possibility of punitive rates of taxation when passing pension money to their loved ones.

“Bereaved families also face a huge administrative burden, with the government insisting they settle the IHT bill within six months. Many people have complex financial affairs, especially those who die unexpectedly, meaning settling the bill quickly may not be straightforward.”

Despite this disappointing outcome, it is important to remember that nothing will change until after 6th April 2027 (pension funds remain outside of one’s estate until then), and so making a knee-jerk reaction to this news will almost certainly be counterproductive.

Rest assured, I will be in touch again with my planning suggestions once the dust has settled on this news.

Please feel free to pass this to anyone who might find it interesting. 

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Financial Advice improves clients' finances – it’s official!

I hope I'm preaching to the choir here, but I hope you'll find the following from sonia.rach@ft.com interesting and/or reassuring.

“Almost two in five (37 per cent) of advised Brits have said they are £40,000 or more better off thanks to professional financial support.

Research from Standard Life’s Retirement Voice report indicated that three in four (77 per cent) people who receive financial advice believe their adviser has made them financially better off.

One in eight (13 per cent) of respondents estimated their financial adviser has helped to grow the total value of their pension, savings and investments by £30,000 to £40,000.

Some 14 per cent think advice has increased their finances by £20,000 to £30,000.

Warren Bright, head of intermediary advised distribution at Standard Life, said: “In today’s tough economic climate saving for day-to-day expenses, never mind the future, can be difficult.

“Professional advice helps to deliver tangible benefits for those speaking to an adviser — not only in monetary terms, but also in levels of confidence and financial wellbeing.

Standard Life’s research also found that ongoing advice delivers several benefits compared to taking advice on a less regular basis.

Among those who have an ongoing relationship with an adviser, 82 per cent said advice had improved their finances, compared to 72 per cent of those who said they only spoke to an adviser on an ad-hoc basis.

Furthermore, those who have frequent contact with an adviser were more likely to consider they are delivering value for money than those who took advice as and when they needed it (84 per cent vs. 79 per cent).

According to Standard Life, they were also more inclined to believe that their standard of living was better because of their adviser’s services (74 per cent vs. 65 per cent).

The research revealed that ongoing advice can also help to improve people’s financial wellbeing, with 77 per cent indicating feeling confident they know their options for using their pension savings.

Among retirees, those who take ad hoc advice are twice as likely to worry that they’re making bad decisions with their retirement finances than those who are still in regular contact with their adviser (21 per cent vs. 10 per cent).

Bright said: “We know that those who have an ongoing relationship with an adviser are more likely to enjoy these benefits than those who take advice on an ad-hoc basis, or not at all.

“With significant structural changes to the advice framework pending, the introduction of targeted support and anticipated moves to address adequacy, the role of professional advisers in helping build the financial security and confidence of more UK savers has never been more important.

“Professional, personalised advice will continue to play an important role in helping people make smart financial decisions, feel more secure about their financial position and achieve their long-term goals.”

sonia.rach@ft.com

Please feel free to pass this to anyone who might find it interesting. 

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

‘IHT on Pensions does not work at all’

An interesting headline, but just because someone doesn’t think it will work doesn’t mean it still won’t happen.

The following is a brief article by Alina Khan, published in FT Adviser, discussing the potential application of Inheritance Tax to pension funds on death, as proposed by Rachel Reeves in her Budget last October. While we await the outcome of the ongoing consultation on this issue, I thought you might find the piece insightful. It highlights how various stakeholders are exploring creative and possibly more workable alternatives for generating tax revenue from pensions upon death.

“There will always be winners and losers with any new tax policy but it is better than having a policy that does not work at all, according to Tom Selby, director of public policy at AJ Bell.

Speaking as part of a panel discussion at a Tisa (The Investment and Savings Alliance) report launch, Selby alongside Kirsty Anderson, retirement and tax specialist at Quilter and Andrew Tully, technical services director at Nucleus, discussed alternative policies to the government’s plan to bring IHT into the scope of pensions.

The report by Tisa looked at two alternative proposals.

These were for inherited pension pots and DB lump sum death benefits to only be taken as taxable income over time if the beneficiary is a dependent.

The second was for a standalone flat rate ‘inheritable pension tax charge’ to be paid on all unused pension funds and DB lump sum death benefits above a threshold.

Selby pointed out that with any new policy there will inevitably be some losers but that was better than the current proposal, which he said did not work.

“Whatever is brought forward [by the government], whether it will be IHT [on pensions], one of the two proposals from the report or something else entirely, people are going to pay tax on death in a way they don’t pay tax on death at the moment,” he said.

Any challenges a new tax policy would bring would need to be “worked through”, according to Selby but he reiterated there would always be some losers in any scenario.

The current proposals to bring IHT into the scope of pensions was the most “complex, convoluted and time consuming” way to tax pensions on death, Selby said, urging the government to take a step back and fully examine whether IHT was the best route to go down to raise revenue.

Poor consumer outcomes

Tully believed the current proposals would cause poor outcomes for everyone, from beneficiaries who will receive benefits slower, to personal representatives who will have more work to do and ultimately for HMRC who will get money slower.

He felt the proposals laid out in the Tisa report would speed up the process and allow beneficiaries to access funds quicker.

“If we can get the money out to beneficiaries quickly, within a couple of months, that has to be much more preferable than waiting nine to 10 months,” he added.

Tully also pointed out many people have multiple schemes and therefore the process may be delayed due to one scheme taking longer than others to process the request, if the current proposals were to go through.

“Having to wait until the slowest common denominator [the pension scheme] figures out what they are doing in a year’s time, before everyone else can start paying out, doesn’t feel like a particularly helpful situation.

“So being able to leave each scheme to pay money out as quickly as possible can be a huge benefit for the beneficiaries,” he added.

Although it was not part of the modelling in the Tisa report, Anderson felt it was important to mention consumer behaviour and how the government’s proposals would discourage people from saving into their pension because of the unknown IHT liability.

Speaking to advisers, Anderson had anecdotally heard of many questioning the point of using pensions going forward if people will be penalised for saving into them.

“While it [pensions] will change and evolve it will definitely still have its place but if people are no longer going to save into their pensions or not save as much, it is going to possibly move the reliance back on the state. It is something we need to consider,” she said.

Renny Biggins, head of retirement at Tisa, similarly had heard anecdotal evidence of clients being advised to draw their pension down quicker with people in the future potentially not contributing as much because of the IHT liability.”

alina.khan@ft.com

Rest assured, as soon as the results of the consultation are published, I will be in touch again.

Please feel free to pass this to anyone who might find it interesting. 

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Pricey Pineapples

A short Wimbledon inspired piece this week.

But it’s not about what’s happening on the grass… no, our eyes are already on the trophy.

In particular, the pineapple on top of the men’s trophy

Source: All England Lawn Tennis and Croquet Club

It seems to have captured attention this year, with lots of people asking about its meaning and history.

But actually, it’s not just Wimbledon. If you keep your eyes open in London, you start to see evidence of a bit of an obsession with the fruit:

Source: Wikimedia Commons

The pillars at the ends of Lambeth Bridge… topped by pineapples.

… golden pineapples on the railings in Devonshire Square…

… and if you look closely at the top of the south towers of St Paul’s Cathedral*… yup. Pineapple*.

Not just London of course – head up to Dunmore on the River Forth in Scotland to see the most spectacular of all https://www.nts.org.uk/visit/places/the-pineapple

So what gives?

In the 1700s, pineapples were the ultimate luxury good. They were basically impossible to import from the “New World” without them rotting – only one or two might make the journey across the Atlantic in a fit state to be eaten.

The surviving specimens ended up on the royal tables of Europe, where they had the double win of being unusually delicious and rare as to be priceless. And of course, once a king has something… the lords and ladies want it too.

So they started building greenhouses (called “pineries”) to grow their own – at Kew Gardens, Hampton Court Palace and Kensginston Palace. In 1764, it cost about £80 to grow a single pineapple – roughly £12,000 in today’s money.

Rich families would ostentatiously serve pineapples at dinner parties. Slightly less rich ones would simply have the pineapple on the table (often re-using it multiple times). And there was even a roaring trade in pineapple rental for a single evening; it really was the ultimate status symbol.

And like all symbols, it spread everywhere. Pineapple = wealth and luxury.

But technology changed everything – steamships, canning and refrigeration meant that by 1822, a pineapple could be bought for about 25p in today’s money… the rare becomes the everyday.

Or does it…

https://freshdelmonte.com/rubyglow/

Del Monte currently have this “special” red pineapple available for $395! Tastes just like being back in the 17th century (I assume).

*In fact, London may have dodged a bullet there - architect Sir Christopher Wren allegedly wanted the main dome of St Paul’s to be a pineapple 60ft high!

Please feel free to share this with anyone you think might find it interesting. 

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Bidding is Big Business

he most valuable painting ever sold at auction was Leonardo da Vinci’s Salvator Mundi. Sold for $450m in 2017.

Source: Leonardo da Vinci - Getty Images https://commons.wikimedia.org/w/index.php?curid=64103353

And it was sold, broadly, in an auction process which is in your mind’s eye already. You know, something like this:

Source: Sotheby’s

A rapid-fire auctioneer gabbling and gavelling away, as people make curious gestures (a bit like in the painting) to signal their bid.

But.

There are auctions happening constantly which make $450m look like pocket change.

In particular, internet search. Google searches generate about $260 BILLION per year in advertising revenue*.

The sponsored slot at the top of the screen? That’s the most valuable.

Source: Google

Now, Google don’t use a gavel. They use something called Generalised Second Price auctions (GSP) to try to make sure that no-one pays too much or too little:

•  All sellers say their maximum bid to appear in the top slot.

• The seller with the highest bid wins (obvs).

• But they pay the next highest bid.

So, in the search above, for slot #1 Sports Direct would pay whatever Adidas had bid. And Adidas would pay whatever Hoka had bid. And so on.

The psychology of it is this:

• Imagine Sports Direct were prepared to bid £200 for slot #1.

• Imagine Adidas were prepared to bid £100 for slot #1.

• Sports Direct’s ideal would be to pay £100.01 – juuuuuust enough to beat Adidas, and saving itself £99.99 it doesn’t need to pay.

• So, Sports Direct pays £100 (Google is prepared to miss out on the extra 1p to keep advertisers coming back)

• And Adidas’ pain at coming second is eased by knowing that it will pay HOKA’s third-place price for a second-place slot.

Everyone’s annoyance at losing the auction is cancelled out by getting the next-best spot at a discount! And all of this is happening in the background every time someone searches for anything.

Lots of papers have been written on whether this is the best theoretical system** … but as Google has been using it since 2004, I reckon it’s more than smart enough!

I’ll leave you with our favourite auction story.

In 2015, a Chinese billionaire bought a Modigliani painting for $170 million. And he bought it on a credit card, so that his family could bank the reward points and “continue flying for free”! I guess that’s how you stay a billionaire…

Please feel free to pass the newsletter link on to anyone you think might find it useful. 

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

What’s the most successful advertising campaign in history?

Coca Cola rebranding Santa Claus to red and white has to be up there. Nike with “Just Do It” perhaps? More parochially, I’ve had Hastings Direct’s telephone number in my head since childhood: “0800 Double 0 1066”

Nah. There’s one that’s so good, it created a social norm (and a Bond film).

“A diamond is forever”

Source: Diamonds Are Forever

Launched by De Beers in 1948 to try and boost flagging sales of diamonds after the war, they made up the whole tradition of engagement rings.

Just. Made. It. Up!

And the psychology of it was super smart:

Source: De Beers

It even told someone how much to spend!

In 1940, 10% of engagement rings had a diamond. By 1980, 80% of rings were bling. And De Beers’ sales in the US went from $23 million to $2.1 billion. Today, the global diamond ring market size is over $80 billion.

Now that’s a good campaign!

But. Technology is changing the game.

Because in 1948, you bought a natural diamond (usually from De Beers), or you bought nothing.

But in the last two decades, clever people have worked out how to create artifical diamonds, some of them purer than anything found in the ground.

And the lab diamonds are now selling for about a tenth of the price of a natural one:

https://www.paulzimnisky.com/Lab-Diamond-Sales-Grow-as-Prices-Fall

And, no matter how good your branding, price eventually starts to tell. Lab diamonds now account for nearly half of all diamond engagement rings**. Ten years ago, that number was basically zero.

De Beers are now being priced out of the market they created! Billions of people will keep buying engagement rings. But they won’t be De Beers diamonds.

Doesn’t matter where you look in the world, from diamonds to football clubs to semiconductors.

Someone is always coming for the king.

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Clarification on Recent Transact E-mail

For those clients who hold investments with Transact, you may have recently received an email from them regarding an error in your annual statement. We’d like to reassure you that this message is genuine and there is no cause for concern.

The issue relates to how certain charges were displayed, not how they were applied. Transact has confirmed that your investments have been charged correctly, and updated statements should now be available on your Pick-Up page.

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

EBI announces planned fund switches within Earth and Core Portfolios

I hope you are well and looking forward to a sunny weekend.

As a testament to ebi’s ongoing commitment to improving investment outcomes, whilst also reducing costs, we are pleased to announce a couple of updates to ebi’s portfolio suites. This will involve a fund switch within the Earth portfolios and a share class switch within the Core Portfolios. Please refer to the relevant section below depending upon which portfolio suite you are using.

ebi is your appointed Discretionary Investment Manager; this means they are able to make changes to the underlying investment funds and allocations as they deem appropriate for the investment strategy.

These switches will be instructed automatically, and you may notice trades occurring on your wrap platform account over the next few weeks. No action is required on your part.

For those invested in General Investment Accounts (GIA), we have checked the capital gains position, and excluded the wrapper if this change might lead to a tax liability.

There are no implementation or advice charges associated with these transactions.

The upcoming changes involve adjustments to specific funds within the portfolios, as outlined below:

Vantage Earth

For the Vantage Earth portfolios there will be a sale of one of the assets, which will be replaced with an alternative asset as detailed below:

Key reasons for the switch: 

• The Ongoing Charges Figure (OCF) of the new fund (0.12%) is slightly lower than the current fund (0.13%)

• ebi has secured access to a restricted share class of the Fidelity World ESG Fund. While the standard institutional OCF is 0.15%, ebi clients benefit from a reduced rate of 0.12%, providing a 0.03% discount.

• The new fund offers broad, diversified, and ESG-screened exposure to developed markets, tracking over 4,000 large, mid, and small-cap securities across 23 countries. It provides more balanced sector exposure, including energy, helping reduce risk and improve alignment with the broader market.

• The fund uses MSCI as its benchmark, a respected and transparent provider in the asset management industry, enhancing ESG reporting and communication.

Vantage Core

For the Vantage Core portfolios, ebi has secured access to a lower-cost share class of the iShares North American Equity Index Fund (already held within the Core portfolios).

Key reasons for the switch: 

• This switch results in a 0.02% OCF saving for the accumulation share class and 0.03% for the income share class.

• These savings equate to a 0.01% overall OCF reduction for the accumulation equity portfolio and 0.02% for the income version.

• As the Core portfolios continue to grow, ebi hopes to access similar discounts on other regional iShares funds. 

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

EBI Market Update – Trump’s Tariffs

Our investment partners Evidence Based Investments (ebi) have issued an update on their view of the Trump tariff situation.

We have added this update to our website; please click on the following link to take a look.

EBI Market Update – Trump’s Tariff’s

Please feel free to pass the link on to anyone you think might find it useful. 

I am just off on holiday with my family for a couple of weeks, but Adam and Kim will be available if you need anything. Rest assured, I will have occasional access to my e-mails and I will do my best to respond if anything urgent should arise.

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner

Trump goes for shock approach to Tariffs!

I have just received the following from Shanti Keleman, MPS Chief Investment Officer at M&G and I thought you might find it interesting and possibly a little reassuring:

“Going into yesterday’s tariff announcements, we thought the clarity would be preferable to the uncertainty. It wasn’t. The number of countries impacted and the rates announced were more than we expected. Equity markets have – rationally – reacted negatively. If the government charges a tax on purchases of goods, then the goods will cost more. That higher cost will reduce what consumers can buy, leading to lower sales, less revenues and ultimately less money to return to shareholders.

The big question is whether these policies last. We’ve already seen multiple reversals in the 10 weeks with US President Donald Trump in office. Even with a firm resolve, pleasing voters will become a necessity as we get closer to US mid-term elections. There is a large imbalance between what the US buys and what it sells. It’s possible to lower the buying fairly quickly, via measures such as tariffs that raise prices and reduce demand. Increasing what the US sells to the rest of the world will take years, as companies need to build new factories and reorganize where they buy the materials and parts to produce goods.  Companies will want clarity on the rules they’ll be operating under, to decide where to produce goods. An environment with constant change doesn’t give that.

As of 2nd April, the S&P 500 Index had fallen -6.8% YTD (measured in sterling terms). It’s expected to be down another 3% today – 3rd April – as of (9:30am UK time). Ironically, some of the largest impact will fall on US multinationals, as they make and sell products around the world. The US dollar was also weaker, bucking the trend of the currency generally rising in response to uncertainty. The falls need to be seen in the context of a very strong period of performance in 2024.  Other equity markets have fallen, but by lower amounts. The FTSE 100 Index is down -1.2% today and the Euro Stoxx 50 Index has fallen -1.4%.

Our view is that the likelihood of tariffs staying in place for an extended period of time in the proposed form is low; the costs would be too high for voters. We’re not making any changes to our portfolios based on this specific announcement. Our equity exposure is diversified across different regions, which has worked well as the US market’s strength has faded. While government bonds have held up well, they haven’t delivered significant rises to offset the equity losses. We don’t think this is likely, as the risk of inflation will keep the interest rates paid by bonds from falling sharply. If we saw a steeper fall in equity markets, we’d likely view it as a buying opportunity.” 

As always, if you have any questions about this piece or any other finance-related matter, please do not hesitate to contact me.

Yours sincerely,

Graham Ponting CFP Chartered MCSI

Managing Partner