Reading in the recent AMPS – Association of Member Directed Pensions newsletter a fascinating angle on the Alternatively Secured Pension – ASP saga.
John Bradley, outgoing chairman states that the government created the current ASP regime, knowing that the industry would kick back at the restrictions. Effectively the government created a regime so that they could accuse the industry of abusing the ASP rules, and that the adverse publicity surrounding this would be used to going back to justify compulsory annuities.
Archive for October, 2007
Machiavellian ASP – surely not – Alternatively Secured Pension
Friday, October 26th, 2007
Technology for UK WRAP
Sunday, October 21st, 2007
Well there are a number of new entrants now in the provision of technology solutions for the WRAP market. Of course there is always the do-it yourself community and most notably there are providers of technology which have come from the Antipodes, James Hay, Standard Life and Nucleus are all users of these platforms.
UK based solutions I am sure are under development, the Blue Button technology from Ascentric for instance. In the case of our platform (Imago), we know where our core competency is. Over the years we have developed Illustration engines for a number of product wrappers. The WRAP market itself provides a further opportunity for our technology. We look forward to working with all of our peers in the provision of technology solutions for the market.
Tax cut hits pensions
Sunday, October 21st, 2007
From the Scotsman – The Budget (2007) contained a sting in the tail for millions of middle- and lower-income workers by cutting the value of their pension savings.
Gordon Brown’s decision to reduce the basic rate of income tax from 22 per cent to 20 per cent from April 2008 will hit 22 million basic-rate taxpayers. The rate of income tax directly affects the amount of money savers invest in their pensions, because pension contributions attract tax relief up front.
Currently, when a basic-rate taxpayer puts £100 into a pension, it is topped up by £28.21 in tax relief.
When the basic rate of income tax goes down to 20p, the size of the gross pension contribution will be cut from £128.21 to £125.
To maintain the same level of pension saving, employees will need to increase their own contributions by around 2.5 per cent.
Just as the tax changes tend to favour the better off at the expense of the lower paid, the reduction in the basic rate will benefit wealthier savers when they draw their pensions. They will still receive 40 per cent tax relief on their contributions but after they retire will be taxed at 20 per cent on the money coming out, assuming they become basic-rate taxpayers.
Behavioral finance
Friday, October 12th, 2007
Behavioral finance and behavioral economics are closely related fields which apply scientific research on human and social cognitive and emotional biases to better understand economic decisions.
I attended a session by Denby Bloch (of Taxbriefs) at the recent Investment-Net-Work meeting in Tring. Denby spoke about:
Heuristics: People often make decisions based on approximate rules of thumb, not strictly rational analyses.
Framing: The way a problem or decision is presented to the decision maker will affect his action.
Market inefficiencies: There are explanations for observed market outcomes that are contrary to rational expectations and market efficiency. These include mispricings, non-rational decision making, and return anomalies.
The theme of the session was all about The overwhelming advice of successful investors from Keynes to Soros is to run the winners and cut the losers. Yet most investors still fail to do this.
