Financial Planning for Women ……by Women!

Posted on 31st March 2011 by Trevor in Uncategorized

More and more women are taking steps towards achieving financial independence and security. It’s about being in control and having the freedom to choose how to live your life. According to recent surveys, when it comes to personal finances, men and women truly are from different planets.

Survey results reveal that men and women have similar life priorities and financial goals – but the means by which they achieve these goals differ greatly. Asked about achieving financial goals, men and women show a significant divergence in their money styles. More women describe themselves as “bargain hunters”, while more men describe themselves as “risk-takers”. These results suggest that women set out to reach financial goals through practical methodologies.

Financial concerns also vary between the sexes. Women face unique challenges that translate into different financial needs:

  • Women retire earlier but live longer, and so they face the risk of outliving their retirement savings.
  • Around 50% of women aged 65 and above will require some form of long-term care, so it’s important to be prepared.
  • On average, women earn 25% less than men do.
  • Since women take about 11 years away from work (more than men do) to care for children or elderly parents, they end up saving less.
  • Approximately 90% of women will be solely responsible for financial decision-making at some point in their lives.
  • Women prefer to build a long-term relationship with an adviser whom they can trust and with whom they feel secure.

Fortunately, there are ways women can become financially successful, and at the same time be happier and less stressed. Start by getting professional advice to help you build a personalized financial plan. A financial plan provides a strategic road map that helps you to pinpoint and achieve short-term and long-term financial goals and priorities.

It does not matter what state your finances are in today, or how old you are. If you start planning now by setting some goals and working towards them, you can begin to make a significant difference in your lifestyle – and the better off you will be.

In order to offer guidance and assist women in better understanding the world of finance, we arrange regular seminars and networking events.

Contact Stefanie Richert and Tatiana Valenzuela to discuss your finances today 03 5724 5100

Offshore bonds; a good pension alternative for the UK resident and the returning Expat.

Posted on 31st March 2011 by Trevor in Blog

The decision by the UK Government to cap tax relief on pension contributions could have a major impact on the retirement plans of wealthy individuals. From 6 April 2011, the Annual Allowance will be reduced to £50,000, and from 6 April 2012, the Lifetime Allowance will be reduced to £1.5 million. This will force many individuals to consider alternative investment structures to fund their retirement.

The Annual Allowance is a cap on the amount of tax relief an individual can claim per tax year.

Any excess contributions are subject to tax. The Lifetime Allowance is a cap on the total value of an individual’s pension savings they can build up. Any funds exceeding this cap will trigger tax charges of 25% or 55% depending on how benefits are taken. Increasing numbers of individuals are likely to be affected by these rules following salary rises because the allowances will no longer be increased with inflation. People will also be seeking new homes for ad hoc monies such as bonuses or any inheritance they may receive. 

It is estimated this legislation change will affect 100,000 individuals, of whom 80% earn in excess of £100,000 per year (Deloitte, February 2011). The current marketplace offers various long-term investment vehicles that may be suitable for retirement planning, one of which is a single (or regular) premium offshore bond. 

Case Study

Robert is a successful businessman, aged 45 and from Southampton. He pays £150,000 per annum to his Self Invested Personal Pension and receives full tax relief. Upon hearing about the reduction in tax relief, Robert visits his IFA to investigate alternative investments that may work alongside his existing pension. Robert wants to retire in 10 years and then sail around the world for 5 years before settling in Cornwall. 

Robert is already contributing the maximum to his stocks and shares ISA, and wishes to continue funding his pension up to the Annual Allowance in order to obtain maximum tax relief.

 His IFA suggests Robert considers an offshore bond for the following reasons:

  • There are no limits to the investment amounts or fund size.
  • The underlying fund does not suffer income or capital gains tax, apart from any withholding tax that may be deducted at source on income arising from investments held in some countries that cannot be reclaimed by us.
  • Robert could withdraw up to 5% per policy year of total premiums paid without triggering an immediate income tax liability. If unused, the allowance rolls forward on a cumulative basis.
  • Since Robert is planning to be non-UK resident for a few years, any future gain could benefit from Time Apportionment Relief (TAR). TAR reduces the amount of the gain liable to income tax by virtue of non-UK residency.
  • Assuming the 5% allowance is not exceeded, Income Tax will not be payable until Robert either encashes the bond or a segment/s of the bond, or until the death of the last life assured. By this time Robert may be paying a lower rate of income tax.
  • Robert will not be restricted to a 25% tax-free lump sum. Robert can make withdrawals as and when he wishes (subject to taking into account any income tax liabilities). Robert could always surrender a segment or segments, if capital in excess of the cumulative 5% allowance was required.
  • Top-slicing can be used to reduce the effective rate of tax on a gain unless Robert is a higher rate tax payer at the time.
  • A wide range of funds may be accessed, often with institutional discounts.
  • An active investment strategy may be pursued if required since switching the underlying funds does not trigger a Capital Gains Tax (CGT) liability.
  • It is possible to appoint a Discretionary Manager to oversee the underlying investments and make the necessary investment decisions on Robert’s behalf.
  • When Robert gets older, he could assign his policy into a trust to benefit his son. The trust could be used to help mitigate any future UK Inheritance Tax liabilities.

Robert is impressed with the tax planning opportunities and the flexibility offered by the offshore bond. He particularly likes the idea of gross roll-up and TAR, and the way segments of the policy can be assigned to individuals who are 18 years of age or older. He believes this will be useful when his son starts university and requires financial assistance.

This case study should demonstrate how an offshore bond could be of benefit to an individual retirement and UK IHT planning.

Anyone living in outside the UK should also consider this as the best way to wrap up your assets before becoming tax resident back in the UK!

April 2011 Finance in Focus

Posted on 30th March 2011 by Trevor in Finance in Focus

QE or not to QE?

It seems that QE2 will get a serious review during the Federal Reserve’s April meeting, and could be cut short by two months in order to send financial markets the message that they will not allow inflation to get out of control.  This assumption is taken from Federal Reserve Bank of St. Louis President James Bullard, when speaking to reporters in France on March 26, said  “If the economy is as strong as I think it is, then I think it may be reasonable to send a signal to markets that we’re going to start withdrawing our stimulus, and I’d start by pulling up a little bit short on the QE2 program… We can’t be as accommodative as we are today for too long, we’ll create a lot of inflation if we do that.”

So what could happen?

  1. Some still believe that QE3 is a distinct possibility, and they have invested accordingly. These investors would be in for a rude awakening if QE2 was cut short – think in terms of Silver investors who bought at the top of the market thinking silver was destined for $50 an ounce. 
  2. Others believe that QE2 will continue through to its scheduled June conclusion without any hiccups along the way. This is the more moderate camp who have parked capital in Gold, Silver and Oil, who didn`t buy at the top of the market, but had planned to reduce positions once QE2 ended in June.
  3. And there are those that believe QE3 was a non starter, and QE2 would probably finish according to schedule, but wanted to front-run the selling by positioning themselves for the inevitable asset realignment by being in position in late April (after April options expiration for example).

So what should you be watching out for in April? 

  1. If more hints from Fed officials regarding ending QE2 early start surfacing in the media, coupled with stronger jobs numbers, then take them as a collective indication that the time has come to cash in on some of the profits from commodity related investments.
  2. An early end of QE2 would strengthen the U.S. Dollar on a short term temporary basis, and could bring headwinds to commodity-based currencies such as the Aussie and Canadian dollars.
  3. GOLD – if we start to see gold fall under 1400 we may see a reversal to the base around 13201340 region (which could again be a buying zone) the Gold bull story is far from ending.

Has Reality Changed?

  • The change in the Middle East is from some form of government to Chaos. Change in the Middle East is NOT positive for the West, it is a huge unknown.
  • The mountain of OTC derivative paper is not going away. 
  • Peak Production of Energy is behind us. Peak Oil means Peak oil is upon us. Energy will become scarcer in the future and thus more expensive.
  • The Debt in Japan, Europe and the USA is NOT going away but it is getting bigger!  Consider US government revenues of $2.228 trillion (CBO FY 2011 forecast). If rates go up (and they will) 1/3 of America’s current tax take would be spent on INTEREST ONLY!  Take Japan and it could be closer to 70% just to cover the INTEREST ON DEBT!  In Europe we will have act two from Ireland and Greece with likley defaults, then there is Spain and Portugal.

US Housing

Recent reports on home sales and new home construction continue to come in below even the most conservative expectations, which has again led to talk of a double dip for housing. We have consistently downplayed the talk of a double dip because we believe it provides an oversimplified view of the housing market. There is no doubt that housing prices are falling again. Prices had previously been supported by an enormous amount of fiscal stimulus, including tax credits for first-time buyers and trade buyers, tax-loss carry backs for homebuilders, massive purchases of mortgage-backed securities by the Federal Reserve and a whole host of foreclosure mitigation programs by the mortgage providers Fannie Mae and Freddie Mac and the U.S. Treasury. Now that many of these programs have ended or are winding down, home prices are again reflecting the weakened underlying fundamentals, which are dragging prices lower.

Focus on Wind and Solar

Whenever renewable energy is mentioned, wind and solar usually get the attention. Yet, wind and solar, along with biomass and geothermal, fall within the “Other Renewables” category that makes up just 3.6% of U.S. power (See Chart Below). Most countries are similar . . .

 

So should one add nuclear positions to the Portfolio?  Yes in our opinion.  When is the best time to buy?  When everyone else is selling! That has happened with U308 stocks some fell 50% — huge buying opportunity is at hand. 

YEN?

Well it surged to a record high against the dollar, hitting an all-time peak of Y76.25 on March 16.  The reason why: speculation that Japanese institutions would repatriate funds to deal with the aftermath of the crisis.  The G7 stepped in (first time in over 10 years) to stabilize the Yen and a line in the sand seems to have been drawn at just over 80 yen to the US$  . . . with the massive amount of funds the bank of Japan has put into the market and the massive amount of DEBT the Japanese government will take on to rebuild this should be the turning point or perhaps tipping point for YEN strength. Now is the time to sell Yen and seek reward elsewhere.

GOLD.

Notice the correlation of gold going up as Debt goes up  . . .

 

While Gold is cheap relative to its inflation adjusted all time high (US$2300), Gold mining stocks are absurdly cheap. How cheap?  The Gold Miners ETF (GDX) reserves roughly $430 an ounce.

Fact: The 25 companies that comprise GDX have roughly 700 million ounces in reserves. And currently the combined market cap of all 25 companies is about $300 billion.

So the market is literally pricing this Gold at $428 per ounce, round up to $430.

GDXJ – the junior gold miners is similar —  

note above: GOLD – if we start to see gold fall under 1400 we may see a reversal to the base around 13201340 region (which could again be a buying zone) the Gold bull story is far from ending.

Worried about your pension? Unsure about your investments? Your Banner adviser can help you make sense of your finances.

More than that, they will make sure they understand your financial priorities and, drawing on their extensive experience and expertise, work with you to help you achieve them. So whatever your objectives – fund your children’s weddings, retire early, pass on your wealth to your family, enjoy the holiday of a lifetime, increase your retirement income – they will do their utmost to find solutions that work for you.

Life is not always plain sailing: your financial situation may change, as may your priorities. Yet clients know that they can trust their Banner adviser to steer them through the financial consequences of whatever life brings.

Importantly, all our advisers are independent and therefore their advice is truly impartial.

info@bannerjapan.com  or call 03 5724 5100

A good article on why everyone should stop stressing about radiation in Japan.

Posted on 28th March 2011 by Trevor in Uncategorized

Viewpoint: We should stop running away from radiationBy Wade Allison University of Oxford

More than 10,000 people have died in the Japanese tsunami and the survivors are cold and hungry. But the media concentrate on nuclear radiation from which no-one has died – and is unlikely to.

House and power station at Dungeness Modern reactors are better designed than those at Fukushima – tomorrow’s may be better still

Nuclear radiation at very high levels is dangerous, but the scale of concern that it evokes is misplaced. Nuclear technology cures countless cancer patients every day – and a radiation dose given for radiotherapy in hospital is no different in principle to a similar dose received in the environment.

What of Three Mile Island? There were no known deaths there.

And Chernobyl? The latest UN report published on 28 February confirms the known death toll – 28 fatalities among emergency workers, plus 15 fatal cases of child thyroid cancer – which would have been avoided if iodine tablets had been taken (as they have now in Japan). And in each case the numbers are minute compared with the 3,800 at Bhopal in 1984, who died as a result of a leak of chemicals from the Union Carbide pesticide plant.

Becquerels and Sieverts

  • A becquerel (Bq), named after French physicist Henri Becquerel, is a measure of radioactivity
  • A quantity of radioactive material has an activity of 1Bq if one nucleus decays per second – and 1kBq if 1,000 nuclei decay per second
  • A sievert (Sv) is a measure of radiation absorbed by a person, named after Swedish medical physicist Rolf Sievert
  • A milli-sievert (mSv) is a 1,000th of a Sievert

  • Q&A: Health effects of radiation
  • Energy solution or evil curse?
  • So what of the radioactivity released at Fukushima? How does it compare with that at Chernobyl? Let’s look at the measured count rates. The highest rate reported, at 1900 on 22 March, for any Japanese prefecture was 12 kBq per sq m (for the radioactive isotope of caesium, caesium-137).

    A map of Chernobyl in the UN report shows regions shaded according to rate, up to 3,700 kBq per sq m – areas with less than 37 kBq per sq m are not shaded at all. In round terms, this suggests that the radioactive fallout at Fukushima is less than 1% of that at Chernobyl.

    The other important radioisotope in fallout is iodine, which can cause child thyroid cancer.

    This is only produced when the reactor is on and quickly decays once the reactor shuts down (it has a half life of eight days). The old fuel rods in storage at Fukushima, though radioactive, contain no iodine.

    But at Chernobyl the full inventory of iodine and caesium was released in the initial explosion, so that at Fukushima any release of iodine should be much less than 1% of that at Chernobyl – with an effect reduced still further by iodine tablets.

    Unfortunately, public authorities react by providing over-cautious guidance – and this simply escalates public concern.

    Over-reaction

    On the 16th anniversary of Chernobyl, the Swedish radiation authorities, writing in the Stockholm daily Dagens Nyheter, admitted over-reacting by setting the safety level too low and condemning 78% of all reindeer meat unnecessarily, and at great cost.

    Bottled water distributed in Tokyo Bottled water was handed out in Tokyo this week to mothers of young babies

    Unfortunately, the Japanese seem to be repeating the mistake. On 23 March they advised that children should not drink tap water in Tokyo, where an activity of 200 Bq per litre had been measured the day before. Let’s put this in perspective. The natural radioactivity in every human body is 50 Bq per litre – 200 Bq per litre is really not going to do much harm.

    In the Cold War era most people were led to believe that nuclear radiation presents a quite exceptional danger understood only by “eggheads” working in secret military establishments.

    To cope with the friendly fire of such nuclear propaganda on the home front, ever tighter radiation regulations were enacted in order to keep all contact with radiation As Low As Reasonably Achievable (ALARA), as the principle became known.

    This attempt at reassurance is the basis of international radiation safety regulations today, which suggest an upper limit for the general public of 1 mSv per year above natural levels.

    This very low figure is not a danger level, rather it’s a small addition to the levels found in nature – a British person is exposed to 2.7 mSv per year, on average. My book Radiation and Reason argues that a responsible danger level based on current science would be 100 mSv per month, with a lifelong limit of 5,000 mSv, not 1 mSv per year.

    New attitude

    People worry about radiation because they cannot feel it. However, nature has a solution – in recent years it has been found that living cells replace and mend themselves in various ways to recover from a dose of radiation.

    These clever mechanisms kick in within hours and rarely fail, except when they are overloaded – as at Chernobyl, where most of the emergency workers who received a dose greater than 4,000 mSv over a few hours died within weeks.

    However, patients receiving a course of radiotherapy usually get a dose of more than 20,000 mSv to vital healthy tissue close to the treated tumour. This tissue survives only because the treatment is spread over many days giving healthy cells time for repair or replacement.

    In this way, many patients get to enjoy further rewarding years of life, even after many vital organs have received the equivalent of more than 20,000 years’ dose at the above internationally recommended annual limit – which makes this limit unreasonable.

    A sea-change is needed in our attitude to radiation, starting with education and public information.

    Then fresh safety standards should be drawn up, based not on how radiation can be excluded from our lives, but on how much we can receive without harm – mindful of the other dangers that beset us, such as climate change and loss of electric power. Perhaps a new acronym is needed to guide radiation safety – how about As High As Relatively Safe (AHARS)?

    Modern reactors are better designed than those at Fukushima – tomorrow’s may be better still, but we should not wait. Radioactive waste is nasty but the quantity is small, especially if re-processed. Anyway, it is not the intractable problem that many suppose.

    Some might ask whether I would accept it if it were buried 100 metres under my own house? My answer would be: “Yes, why not?” More generally, we should stop running away from radiation.

    Wade Allison is a nuclear and medical physicist at the University of Oxford, the author of Radiation and Reason (2009) and Fundamental Physics for Probing and Imaging (2006).

    March 2011 Finance in Focus

    Posted on 1st March 2011 by Trevor in Finance in Focus

     

    A picture is worth a 1000 words – We will spare readers some of the more violent pictures we have seen of the resulting carnage as they truly are gruesome. But this is giving the markets a scare and will $100 oil cause the recession to resume? Too early to tell but by adding to energy costs, the effect of high oil prices is to reduce the amount of money for spending on other things, thereby undermining aggregate demand in the wider economy. Eventually a tipping point is reached where confidence collapses. Given what happened as recently as 2008, you would expect OPEC to be acting quickly to prevent any further explosive increase in prices.

    Is worldwide inflation being casued by US Fiscal Policy

    Because the US dollar is a reserve currency (approximately 60% of global transactions are denominated in dollars) and the US is printing money to finance its trade and fiscal deficits and many countries peg their currencies to the dollar, which still remains the hub of the global monetary system, US generated inflation is being exported to the rest of the world.  Reckless US monetary and fiscal policy is starting to create unrest in faraway places, as inflationary pressures intensify.

    Consider the United States’ balance sheet. The United States is rapidly approaching the Congressionally mandated debt ceiling, which was most recently raised in February 2010 to $14.2 trillion dollars (including $4.6 trillion held by Social Security and other government trust funds). Every one percentage point move in the weighted‐average cost of capital will end up costing $142 billion annually in interest alone. Assuming anything but an inverted curve, a move back to 5% short rates will increase annual US interest expense by almost $700 billion annually against current US government revenues of $2.228 trillion (CBO FY 2011 forecast). Even if US government revenues were to reach their prior peak of $2.568 trillion (FY 2007), the impact of a rise in interest rates is still staggering.

    Now think about the rest of the ring of fire.

    Japan the “big one” to go next?

    Moody’s Investors Service has Feb 21st changed the outlook on the Government of Japan’s Aa2 rating to negative from stable.

    The rating action was prompted by heightened concern that economic and fiscal policies may not prove strong enough to achieve the government’s deficit reduction target and contain the inexorable rise in debt, which already is well above levels in other advanced economies. Although a JGB funding crisis is unlikely in the near- to medium-term, pressures could build up over the longer term which should be taken into account in the rating, even at this high end of the scale.

    More specifically, factors driving the decision are:

    1. The severity and persistence of the shock that the global financial crisis imparted on Japan’s government finances and on aggravating pre-existing deflationary pressures,

    2. As a result, the current policy framework will not be capable of overcoming hurdles blocking a return to a path of fiscal deficit reduction,

    3. Increasing uncertainty over the ability of the ruling and opposition parties to fashion an effective policy reform response to the debt and growth challenges, and

    4. Vulnerability inherent in the long-time horizon of Japan’s gradual fiscal consolidation strategy to worsening domestic demographic pressures, as well as to possible, renewed shocks in a fragile and uncertain, post-crisis global economic environment.

    We maintain our positioning stance of long Gold, precious metals, TBT, Uranium and other Energy.

    And now a bit of fun coming up;

    Ireland Fund of Japan’s annual ball
    Saturday, 19th March 2011 at The Westin Hotel, Ebisu, Tokyo from 6:30 PM Till Late
    JPY 25,000

    Now in its nineteenth year, The Emerald Ball guarantees a wonderful evening of excellent food & drink, great company, superior entertainment, and of course, the Irish “craic”. All of this comes with the satisfaction of supporting our worthy causes.

    The funds raised on the night are used to promote arts, education, cultural awareness and community development programs. The Ireland Fund of Japan supports The Japan Helpline, a student exchange program, St. Patrick’s parades in Japan and homeless reestablishment assistance.

    Visit them at www.emeraldballtokyo.com Go raibh mile maith agaibh!