Friday 27 August 2010

Alternatives to NS&I Index Linked Savings Certificates? – July 2010 Update

The Retail Prices Index (RPI) is currently sitting at 4.8% while the Consumer Prices Index (CPI) is at 3.1%. It is highly likely that if you are holding any cash in bank accounts that you are therefore seeing your hard earned cash being slowly devalued. I know I am. Firstly let’s look at my chart for today. This shows that if you’re prepared to lock your money up for greater than 2 years then on average you can get around 3.7% gross. If you’re a 20% taxpayer then that means a net return of 2.96% and if you’re a 40% taxpayer then unfortunately your net return is 2.22%. Both of these values are less than both the CPI and the RPI meaning on average people’s savings are still being eroded. Provided inflation keeps tracking at these types of year on year percentages then the average rates after tax seem to be well behind the deal that was being offered by NS&I Index Linked Savings Certificates (ILSC’s). If you’re not sure how the returns were calculated on ILSC’s then have a look here.

Wednesday 25 August 2010

If this is true then the US (and the UK for that matter) is doomed

I was reading the BBC article “US existing home sales drop to 10-year low” which was discussing the 27.2% fall in US existing homes during July compared to June. Of course the government were blamed because they ended tax credits designed to boost home sales. I could today talk about why the government are even in the market trying to boost sales when it should be a free market that is not manipulated. But I won’t because I came across a couple of quotes from Carey Leahey at Decision Economics which concerned me greatly. These were "I think [the July figure] is just suggestive of an economy that is definitely slowing down" and "unfortunately, it is a situation where we can't have a meaningful recovery without a meaningful consumer recovery, and we can't have a meaningful consumer recovery without a recovery in housing."

Monday 23 August 2010

The lowest cost low cost SIPP

My employer offers a money purchase pension scheme administered through a large UK based insurance company. I have been making substantial contributions into this scheme over the last few years which now means that it makes up 31.7% of my Retirement Investing Low Charge Portfolio. In my opinion my employer is very generous with the salary sacrifice scheme they offer as they match my contributions up to a certain limit plus they also contribute the employers national insurance that they save through the salary sacrifice. In addition as a 40% tax payer I get this paid into the pension working on the principle that some day when I retire I will structure my finances so that I am a 20% (or whatever the appropriate lower tax rate is by then) taxpayer on the money that comes out of my pension. With I fair wind I might not even be in the UK having taken my pension elsewhere using the QROPS process. Of course most of you knew this as I had detailed this and more here.

Friday 20 August 2010

The Boom Continues – Australian Property Market – August 2010 Update

With the Australian Bureau of Statistics (ABS) publishing its House Price Index on the 04 August and its Average Weekly Earnings Index yesterday I can again look at affordability of Australian Property. Of course regular readers will now that I have an interest in Australia as with a fair wind 6 years from now it could be a “retirement” location for me.

Wednesday 18 August 2010

The Lost Decade – History of Severe Real S&P 500 Stock Bear Markets – August 2010 Update

At my first post on this topic, back in January 2010, looking at severe real S&P 500 bear markets I postulated whether once the governments of the world stopped stimulating their economies through borrowing and quantitative easing whether we could see a real -60% bear market from the previous high within this economic cycle. Well as I highlighted here there still seems to be life in governments (or their agencies) yet with the recent QE Lite announcement.