View more on these topics

Investment View

Live phone-in programmes, even those on television hold no terrors for me.


The Money Channel&#39s consumer phone-in programme last week was nothing new


but it was certainly interesting, not least for the conversation I held


with Anne McMeehan of Autif in the taxi afterwards.


Anne was fresh from having gathered the latest bunch of statistics on


investment fund sales and, in particular, what percentage of the Isa


take-up flowed to Autif members. It sounded respectably high but apparently


was way down on the corresponding ratio with Peps. This suggests one of two


things, either people are investing directly in their Isas or the


Government&#39s statistics are wrong. I am more inclined to believe the


latter.


When Peps were introduced, I made the point that Peps were not really a


product. They were simply a wrapper into which you could drop other


investment products or, indeed, managed direct investments in a


tax-efficient way. Isas are no different. Much of the business conducted in


this arena by private-client stockbrokers will not involve buying


investment funds. Instead, the Isa will be an extension of a portfolio


which may include Peps and taxable funds as well. There are plenty of


sophisticated systems around allowing you to manage portfolios of this


nature on an integrated basis while still keeping the component parts


administratively isolated.


Yet Peps had rules which complicated the inclusion of some investment


funds and also allowed specific investments for part of the annual


contribution only in individual companies. For that reason, I consider it


highly unlikely that the percentage of Pep funds invested directly rather


than through collective investments, would be less than in Isas. Government


statistics do not suggest this to be the case, though.


You need to be realistic over the position of Isas in the marketplace. The


number of investors presently running portfolios directly invested in


individual shares is a minority. There are arguments suggesting that,


because of the tax advantages enjoyed within a unit trust or investment


trust, almost any domestic investor would be better off following this


route rather than picking individual stocks but that ignores some of the


cost implications and the fact that a carefully managed portfolio of


individual stocks can deliver good returns. But there is no doubt that you


need to have more money to take this approach than if you invest through


collective investment schemes. Directly invested options exist to immunise


clients against competing providers. Still, Isas would have been stillborn


if direct investment was the only distribution channel available to the


Government.


The collective investment industry has performed a great service in


marketing Isas, even though in so doing they have convinced the majority of


investors that Isas are truly separate from, say, unit trusts. You would be


amazed at how often I am asked whether a private investor should purchase


an Isa or a unit trust as if they were competing products rather than


simply different tax treatments of the same investment.


The reason to bang on about Isas reflects the way in which they seem to


have taken over financial advisers&#39 lives over recent weeks. It never


ceases to amaze me how people leave their financial planning to the last


minute? Surely the time to take out a tax-efficient investment is the


beginning of the tax year so you achieve maximum benefit.


It remains to be seen whether the end of Isa buying will hasten the


correction that seems to be taking place in technology stocks. It is


happening in a restrained way but the profit-taking (assuming you were in


early enough, of course) that has been occurring has still been enough to


drive the UK market lower, demonstrating the importance of TMT in the index


at present. I fear technology can never be far from any investment column


these days.

Recommended

CML says FSA is excessive rather than the lenders

The Council of Mortgage Lenders is contesting FSA claims that lenders arerepeating the mistakes of the late 1980s through excessive lending.In its latest survey of market trends, the CML says first-time buyers areborrowing 2.28 times their income while existing homeowners are taking outloans of 2.14 times their earnings.These are nearly a third lower than the […]

Henderson top in press stakes

Henderson Investors has topped the chart media&#39s most praised financialservices company in the latest results from PressWatch.The company scored 451 points from 93 mentions in the national press, 53of which were positive.PressWatch calculates scores on the amount of favourable and unfavourablepress coverage a company receives, according to its own ranking system.The points scored for “good” […]

Boldly going into enterprise zones

I am a barrister and my income in this tax year will exceed £500,000. Ihave used up all my pension allowances and am approaching you for furthertax planning advice. I have heard about enterprise zone property syndicatesfrom one of my colleagues and I wonder if you could explain them to me.Enterprise zone property syndicates were […]

Labour may link MPPI with benefits system

The Government&#39s Green Paper on housing is looking at integrating mortgagepayment protection insurance and the benefits system.The CML welcomes the paper but says IFAs should not take this as a signalto sell MPPI to lower-income groups. The CML says some low- incomeindividuals may have alternative protection provided by the state toprevent them falling behind on […]

Industry under fire over pension freedoms

By Jamie Clark, Business Development Manager, Royal London Recent articles in the media have raised concerns about the new pension freedoms. One perceived problem is that across the industry, trustees and providers are not necessarily allowing people to take full advantage of the pension freedoms in situ. This is backed up by a recent survey by […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment