View more on these topics

Rates can fall as well as rise

Like many commentators, following the Chancellor&#39s pre-Budget statement, Lorna Bourke has immediately concluded that interest rates will now certainly rise. She helpfully suggests that clients should switch to a fixed or capped-rate mortgage as soon as possible, apparently even if it means suffering a penalty.

Secondly, clients should defer their retirement or manage without income for two or three years while annuity rates rise.

Of course, this “thoughtful” conclusion that she has “studiously” come to may prove correc, but will probably turn out to be poor advice.

Is she not aware that globally, deflation is an increasing challenge? Once UK consumers stop spending money they don&#39t have on consumables they don&#39t need, then we may see the UK economy slipping into recession or worse.

A rapid rise in unemployment and an equally rapid fall in house prices would follow as the bubble bursts.

Close on its heels would be a debt crisis and, if these events should occur, then the Bank of England&#39s monetary policy committee will be reducing interest rates, not increasing them. Deflation will force long-term gilt yields down and take annuity rates with them.

Unfortunately, unlike financial journalists, I cannot make these soundbitelike decisions and simply move on to the next headline. I need to live and breathe the consequences of advice I offer to clients. It requires a much more comprehensive understanding of how the UK economy works and the wider global influences that apply.

She suggests that if anyone doubts that interest rates will rise, they should look at what happened to gilt prices on the day after the Chancellor&#39s statement. Why? The gilt market had already priced in an increased public sector borrowing requirement.

Well, as instructed I have had a look (a daily event in any case) and noted that, to date, (December 6) the Government Securities Index is higher than the price on November 28.

Roger Harris

Roger Harris & Company,

Oadby,Leicester

Recommended

Royal Bank of Scotland fined £750,000 for anti-money laundering failures

The Royal Bank of Scotland has been fined £750,000 for failings in its money laundering controls in the first FSA penalty levied since it acquired powers over money laundering in December 2001.The FSA found weaknesses in RBS&#39s anti-money laundering controls across its retail network, in particular in failing to obtain sufficient &#39know your customer&#39 documentation […]

Simpler pension regime set to &#39liberate&#39 advisers

The Green Paper&#39s simplification of the pension regime will liberate IFAs to return to being pension salesmen, according to Standard Life.The timeframe for selling a pension will be reduced from between seven and eight hours to between three and four hours, which will allow IFAs to advise clients with monthly contributions as low as £75, […]

Mellon – Global Emerging Markets Fund

Tuesday, 17 December 2002 Type: Oeic Aim: Growth by investing in global emerging markets Minimum investment: Lump sum, $5,000, euros 5,000 Investment split: 100% in global emerging markets Place of registration: Dublin Isa link: No Charges: Initial up to 5%, annual 2% Commission: Initial up to 4%, renewal 0.25% Tel: 0500 660000

Pensioners can pass on annuities but will pay 35% tax

Pensioners can pass on the value of their annuity to dependants upon death until age 75, according to proposals in the Government&#39s Pensions Green Paper.But before any money is passed on, it will be hit by a 35 per cent tax, a level set far too high, according to IFAs, who say the figure is […]

Five reasons for optimism in India

By Kunal Desai, Head of Indian Equities at Neptune Investment Management Following the MSCI India Index’s 26.4 per cent return in 2014, stemming from a 7.3 per cent rise in GDP, investors have recently become increasingly concerned about India’s future growth potential. What has happened to India’s reform agenda and are there any signs of […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com