The Informed Choice Personal Finance Blog

Key pension decisions in every decade

2009-11-10T10:20:00.002Z

Informed Choice chartered financial planner Martin Bamford was quoted in the Telegraph today, in an article looking at the key pension decisions you need to make in every decade of your adult life:

Start planning your retirement – even if you are just 20

Discussing people in their 40's, Martin said:

"This is when you should be putting as much as possible into your pension. Your contributions still have time to grow and the expenses of mortgage plus small children are starting to fall away."

On retirement planning for people in their 50's,

"The final decade before retirement is often the most important from an investment perspective as short-term market volatility can knock your confidence and be difficult to recover from,"

You can read the article in full here.

Getting reliable investment advice

2009-11-08T17:52:00.005Z

There are plenty of investment 'experts' out there, all ready and willing to share with you their expertise.

In addition to relevant experience and professional qualifications, an important thing to look for is their 'process'. A robust investment advice process will lead to reliable and suitable advice. That is the type of investment advice you need.

Ask your investment adviser about their process. This is equally as important when continuing to work with an existing adviser as it is when you are selecting a new one.

There are six steps they should be able to describe (with ease and in detail) - understanding your financial objectives, assessing your attitude towards investment risk, strategic asset allocation, tactical asset allocation, fund selection and ongoing reviews.

This is relatively simple stuff, but in our experience many investment 'experts' prefer to leap straight to fund or product recommendation, largely neglecting the other important steps in the advice process.

If in doubt, get a second opinion. You have plenty to lose and plenty to gain.

Market numbers: Friday 6th November 2009

2009-11-08T17:44:00.004Z

The FTSE 100 index of leading UK company shares finished the week at 5,142.72, up 17.08 points or +0.33% on the day and up 98.17 points (+1.95%) over the week.

The index has risen from 4,434.20 since the start of 2009, a rise of 708.52 points or 15.98%. Over a year the FTSE 100 has risen from 4,272.49 (870.23 points or 20.37%).

£1 is currently worth $1.6617 US or €1.1195 Euros.

Brent Crude Oil Future is currently priced at $75.91/barrel. Gold is $1,096.75/ounce and Silver is $17.52/ounce.

The UK Bank Rate is 0.5% and CPI inflation was 1.1% for the year to September 2009.

Are Premium Bonds worth it?

2009-11-08T17:42:00.001Z

Premium Bonds from National Savings & Investments are one of the most popular financial products of all time. It is estimated that nearly half of all adults in Britain have them, with over 26 million people holding at least one Premium Bond.

They are undeniably popular. Their allure comes from a combination of capital security and the chance to win tax-free prizes. Since the global financial crisis really got going last year, security of cash has become an even more important factor when deciding where to keep your money.

But are they worth it? Whilst lots of us own them, many people tell us that they have never won a prize. When compared to the most competitive interest rates available from ordinary savings accounts, the interest rate used to calculate prizes is fairly pitiful. In this article we separate fact from fiction and help you understand whether Premium Bonds are the right home for your cash.

A history lesson

Before we look at the basics, here is a brief history lesson.

Premium Bonds were launched on 1st November 1956 after Harold Macmillan announced them in his April Budget report as a method of reducing inflation and encouraging thrift. £5m worth of Premium Bonds were sold on the first day.

The first prize draw did not take place until June 1957, but by that time over £82m had been invested in Premium Bonds. Over 23,000 prizes were awarded in that first draw and the top prize was £1,000.

After this positive start, the total amount invested in Premium Bonds peaked at around £4bn in the early 1990’s before really taking off in terms of popularity. By 2008, £40bn was held in Premium Bonds.

The basics

A big attraction of Premium Bonds is the relative simplicity of their design. The rules are fairly easy to grasp even if you are usually intimidated by financial products.

Anyone who is 16 years old or over can invest. Under 16’s can also own Premium Bonds if a parent, grandparent or legal guardian buys them on their behalf.

The minimum investment is £100 and the maximum holding per person is £30,000. There is no set investment term and each month your Bonds are entered into the prize draw.

Your money invested in Premium Bonds does not attract interest each month. Instead, you stand the chance of winning a tax-free prize (more on these in a minute).

However, your capital is very secure. Money within Premium Bonds is backed by HM Treasury. This means that there should be no real concerns about default risk or having to resort to the Financial Services Compensation Scheme (FSCS) for compensation.

Meet ERNIE

ERNIE is the Electronic Random Number Indicator Equipment. Since the introduction of Premium Bonds in 1957, ‘he’ has been the one responsible for selecting prize winners. Today, National Savings & Investments is using the fourth generation of ERNIE.

His randomness is ensured by a monthly check by the Government Actuary’s Department (GAD). They then issue a certificate to confirm the randomness of the machine, which is needed before NS&I is able to pay out prizes.

The monthly prize draw includes one £1m jackpot. The other prizes range from £25 to £100,000. For October 2009 the total prize fund was £52.4m and 1,749,056 prizes were distributed in total.

The odds of winning any prize each month (which could be £25 or £1m) have been calculated at 24,000 to 1. In simple terms, this means that for every 24,000 eligible Premium Bonds there is one prize.

This can be compared to the National Lottery, where the odds of winning any prize are in the region of 54 to 1. However, this is a difficult comparison to make because with the National Lottery you lose your ’stake’ each time you enter.

The odds of winning the Premium Bond £1m jackpot each month are in the region of 40,000,000,000 to 1.

Are they worth it?

This is the one million pound question. The prize fund is calculated by reference to a notional interest rate applied to all holdings in Premium Bonds. This interest rate is tax-free and currently stands at 1.5%.

This means that, regardless of your income tax status, if you hold £100 in Premium Bonds you might expect an average annual return of £1.50. If you hold the maximum £30,000 then your average annual return would be £450. Of course many people will receive nothing and some will receive more. It’s a gamble.

Compare this to one of the most competitive instant access savings accounts at the moment; West Bromwich Building Society is offering 2.85% gross with its Branch Easy Access Saver. For a non-taxpayer with £30,000 in savings this means annual interest of £855. Basic rate taxpayers would expect £684 and higher rate taxpayers would receive £513 of net interest.

There are some key differences between Premium Bonds and savings accounts. With the savings account you would know in advance what level of interest you should expect to receive in the year. With Premium Bonds you can have an average prize expectation in a given year. Equally, you might get nothing or you might receive more.

From a capital security perspective, and because the maximum Premium Bonds holding is £30,000, the equivalent amount in savings with a UK financial institution would come under the £50,000 limit of the Financial Services Compensation Scheme (FSCS).

The inflation argument

One argument often made against Premium Bonds is, whilst your capital remains secure and invested for future prize draws, the ‘real’ value of your cash is eroded over time by price inflation. This is because a rate of interest is not physically applied to your cash but future increases to the value of your capital depend entirely on winning prizes.

In the current economic environment, this is less of a concern. The Retail Prices Index (RPI) measure of inflation was -1.4% for the twelve months to September 2009. This means that, even if your Premium Bonds did not win a prize during the past twelve months, the purchasing power of your capital would have improved.

During times of positive price inflation this would not be the case. In fact, it doesn’t get much better if your cash is in a bank or building society account earning interest. Cash is not the place for holding money longer term if you want to maintaining purchasing power and protect it from inflation erosion.

Should you buy them?

Premium Bonds have mass-market appeal. They combine a simple financial product, capital security and the chance to win tax-free cash prizes. In fact, there isn’t a huge amount not to like about them.

They might not be the right home for all of your money, but as a way to take more of an interest in your financial planning and participate in a lottery without losing your stake, they are pretty tough to beat.

Will tax becomes really taxing?

2009-11-08T17:15:00.003Z

We don't know yet when the Pre-Budget Report will happen, but a likely date is 25th November. With that in mind, the predictions have started to happen.

This article on BrilliantWithMoney sets out our own predictions:

Pre-Budget Report: five personal finance predictions

In the Sunday Times today, there were suggestions that the starting rate for the new 50% income tax band will be £100,000 rather than £150,000. They also predict a clampdown on people becoming self employed or taking their pay in shares to beat the new higher rate.

Tax rises are never good news. With the current state of the economy, it seems increasingly likely that taxes will need to rise. This could hit more people than just the highest earners.

An attack on capital gains tax, now that there is such a big gap between this at 18% and the highest rate of income tax at 50%, is a real possibility. All investors will need to watch the Pre-Budget Report closely and then ensure their own plans are structured in an efficient manner.

Here you go. Have another £25bn

2009-11-05T15:20:00.003Z

The recent assurance from Gordon Brown that Britain will enter recovery by the end of this year looks more likely to materialise, after the Bank of England extended their quantitative easing (QE) programme by a further £25bn.

They have already spent £175bn on QE, effectively printing money to buy assets and improve the flow of money within the economy.

The announcement today means they will be spending another £25bn over the next three months. This is a slower rate of spending than before and could signal a gradual reduction in this stimulus.

QE is a potentially dangerous strategy.

Spend too much and we could get thrown into hyper-inflation as the money pumped into the system pushes up the overall cost of goods and services. Spend too little and Britain could continue to fall behind other world economies, remaining in a prolonged recession.

At face value the announcement made today seems fairly balanced and could signal the beginning of the end for the QE strategy. It will be interesting to read their minutes, when published, to get a bit more detail on the various views held by the Committee.

The other news from the Bank of England today was interest rates kept on hold at 0.5%. This was widely predicted and is the eighth month in a row they have remained at this historic low.

Putting all of your pension eggs in one basket

2009-11-04T13:58:00.002Z

Diversification is an important part of investment success. Not putting all of your investment eggs in one basket is equally as relevant when looking at your pension fund.

It appears that nobody told the Church of England about this.

A report from consultant John Ralfe found that the Church of England pension scheme invested all of their assets in company shares (equities).

At face value this might look like a reasonable long term strategy. Equities are likely to deliver the best results of any investment asset class long term.

Short term, it can all turn into a bit of a nightmare.

By the end of last year the Church of England pension scheme had assets of £500m but a deficit of £360m.

In common with many other defined benefit (final salary) pension schemes, they will now have to face up to some very tough choices. The foolish investment strategy could result in them having to reduce benefits for members or increase the retirement age. It will almost certainly mean having to increase funding for the pension scheme.

The simple lesson? Diversification is good. Investing in a single asset class is (very) risky.

Another good month for house prices

2009-11-03T14:36:00.003Z

October turned out to be another good month for house prices, with a 1.2% rise reported by Halifax.

This is the fourth monthly rise in average house prices as reported by Halifax. The average price of a house now stands at £165,528. This remains 4.7% lower than October last year.

The average UK house price has risen 2.9% since the end of 2008. They are now 7.1% higher than six months ago when prices reached a low in April 2009.

It appears to be a combination of factors driving up house prices. The slightly improved availability of mortgages is working together with a lack of supply in terms of property for sale. These factors could both continue to push up house prices over the next few months.

Higher house prices are generally bad news for first time buyers, making it even more of a challenge to get a foot on the property ladder.

Rising house prices do however result in an improved 'feel good factor' for existing property owners. Our houses are often are most valuable assets, so being told that the value of that asset is increasing each month can lead to greater consumer confidence; something our fragile economy desperately needs right now.

Market numbers: Friday 30th October 2009

2009-11-01T16:28:00.002Z

The FTSE 100 index of leading UK company shares finished the week at 5,044.55, down 93.17 points or -1.81% on the day and down 198.02 points (-3.78%) over the week.

The index has risen from 4,434.20 since the start of 2009, a rise of 610.35 points or 13.77%. Over a year the FTSE 100 has risen from 4,291.60 (752.95 points or 17.55%).

£1 is currently worth $1.6447 US or €1.1164 Euros.

Brent Crude Oil Future is currently priced at $75.22/barrel. Gold is $1,040.00/ounce and Silver is $16.57/ounce.

The UK Bank Rate is 0.5% and CPI inflation was 1.1% for the year to September 2009.

Are your savings suffering in a dog fund?

2009-10-31T18:09:00.003Z

Informed Choice chartered financial planner Martin Bamford was quoted in the Independent today, in an article discussing the findings of the latest dog fund survey from discount broker Best Invest.

"The survey highlights a massive level of investor inertia," warns Martin Bamford, financial planner at Informed Choice.

"Performance is only one factor in selecting a suitable fund, but it is the easiest to measure. Fund selection can make a difference to overall returns, with the contribution it makes to a portfolio marginal compared to the importance of asset allocation. Hopefully, the research will prompt investors, and their advisers, to review existing fund holdings and ensure they remain suitable."

You can read the article in full here.

We publish our own regular survey of underperforming investment funds - the LemonAid survey. The latest version of this survey will be able within the next couple of weeks.

Catching the commercial property upswing

2009-10-30T10:11:00.003Z

When investment markets fall in value, there is a real risk that investors will leave and then fail to return in time to catch the upswing.

Equity markets, corporate bonds and gold have all rallied sharply during 2009. The Nationwide House Price Index published today even suggests that residential property might post gains this year.

For investors who moved to cash or gilts when the markets were crashing, they may have been hit twice - by falling markets and then by missing out on the rallies.

Henderson New Star published an interesting briefing note for investment advisers this week, describing the position of the commercial property asset class. This is one investment asset class which has been reluctant to participate in any upturn.

In fact, UK commercial property moved into positive territory for the first time in August, posting gains of 0.2%. This was the first monthly gain for over two years. During September, UK commercial property prices generated an average gain of 1.1% (according to the Investment Property Databank).

Do two months worth of positive data in an investment asset class signal the start of a sustained rally or are they simply a blip?

UK commercial property prices have fallen by 44% over the past two years. Any investor with exposure to this asset class in isolation within an investment or pension portfolio will be feeling a great deal of pain.

The good news for investors is that demand for UK commercial property now appears to be improving.

This is due, in part, to weaker Sterling making the asset class look attractive to foreign investors. With the pound 21% weaker against the euro, it is now possible for a eurozone investor to buy a UK property for less than half of what it would have cost in euros two years earlier.

Confidence also appears to be returning. The latest survey from the Royal Institution of Chartered Surveyors found members more upbeat in the third quarter in respect of UK lettings and investment activity.

The returns from commercial property are a combination of income (the rental yield) and capital appreciation.

Lower capital values means reasonable looking yields, particularly in comparison to low interest rates available on cash and low levels of price inflation. Yields on UK commercial property are now back to where they were in the 1990s and higher than they were in the late 1980s.

With all this positive news, some challenges remain.

Getting access to UK commercial property remains difficult, particularly with the banks continuing their restrictive lending practices. One option is to invest through collective investment funds, but investors need to pick these carefully in terms of liquidity, geographical diversification and tenants.

Should you take your pension money now?

2009-10-28T09:37:00.002Z

Informed Choice chartered financial planner Nick Bamford was quoted in an article in Money Mail yesterday, about people approaching retirement who have benefited from recent increases in investment values.

Talking about whether people near retirement should be debating further stockmarket rises, Nick said:

'The risks of markets dropping again are far greater than the risk of missing out on continued recovery.

'Ideally, these savers should have already switched into safe havens such as cash and bonds. For those still heavily exposed to the stock market, it's a no-brainer to take some of your pension now.'

You can read the article in full here.

FT New Breed Adviser Awards 2009

2009-10-28T07:48:00.004Z

We are pleased to announce that Informed Choice Chartered Financial Planner Andrew Neligan has won Best Newcomer at the FT New Breed Adviser Awards 2009.

The award ceremony took place yesterday evening at the Sheraton Park Lane Hotel in London. Andrew received his award from BBC business presenter Declan Curry.

The New Breed Adviser Awards are designed to recognise best practice, innovation and service across the advisory community in the wealth management industry. The awards programme was focused on the achievements of the 'new breed of advisers' that are helping to shape the future of retail financial services in the UK.

Andrew was named Best Newcomer; the adviser who has made considerable achievements within the first two years of joining a firm.

Please join us in congratulating Andrew on this major award.

Personal Finance Society Retail Distribution Review (RDR) webcast

2009-10-26T12:47:00.002Z

Informed Choice chief executive Nick Bamford is participating in a webcast from the Personal Finance Society (PFS) on Wednesday morning.

The webcast is one of a series exploring the different considerations for the forthcoming implementation of the Retail Distribution Review (RDR). This webcast will look specifically at the subject of Adviser Charging - the new fee-based approach to the payment for financial advice from the end of 2012.

Nick will be joined on the panel by Brett Davidson, Chief Executive, FP Advance and David Golder, Managing Director, IFA Services, Bankhall. The session will be chaired by Kevin Watkins, Director of UK Individual Business, Friends Provident.

You can find out more and register to watch the webcast live on Wednesday morning from 9am at http://www.thepfs.org/pages/memberservices/RDR/rdractionweek09.aspx.

Informed Choice responds to Retail Distribution Review (RDR) Consultation Paper

2009-10-26T10:04:00.003Z

Informed Choice, the award-winning firm of Chartered Financial Planners, has today responded to the FSA Consultation Paper CP08/19 Distribution of Retail Investments: Delivering the Retail Distribution Review.

Within this response, we are broadly supportive of the proposals.

We agree that the range of products on offer is an important measure of 'independence', but go on to suggest that equally as important are independence of outcome and independence of ownership. In fact, it is the combination of these three factors which results in true independence and impartiality.

We encourage the FSA to introduce a mandatory written and verbal disclosure statement for all firms offering 'restricted' advice under the new regime. This will be important to ensure that restricted advisers do not resort to 'weasel words' in their description of non-independent services.

We are fully supportive of the proposals for Adviser Charging, and cite our own successful experience of introducing this remuneration model. We do ask the FSA to consider a highly transparent form of industry standard factoring for regular payment plans, to help ease the transition for those adviser caught in the old commission mindset.

Rather than establish a new Professional Standards Board with its own Code of Ethics, we ask the FSA to consider making membership of an existing professional body mandatory under the new regime. This would, in our opinion, prevent the introduction of an additional layer of cost and bureaucracy.

You can download and read our response in full at http://www.box.net/shared/r1nxfv20pr.

Market numbers: Friday 23rd October 2009

2009-10-25T15:54:00.003Z

The FTSE 100 index of leading UK company shares finished the week at 5,242.57, up 35.21 points or +0.68% on the day and up 52.33 points (+1.01%) over the week.

The index has risen from 4,434.20 since the start of 2009, a rise of 808.37 points or 18.23%. Over a year the FTSE 100 has risen from 4,087.80 (1,154.77 points or 28.25%).

£1 is currently worth $1.631 US or €1.088 Euros.

Brent Crude Oil Future is currently priced at $78.13/barrel. Gold is $1,061.25/ounce and Silver is $17.55/ounce.

The UK Bank Rate is 0.5% and CPI inflation was 1.1% for the year to September 2009.

New articles on BrilliantWithMoney

2009-10-25T15:43:00.003Z

We continue to add great new content on our new personal finance information, guidance and implementation website BrilliantWithMoney.

Here are some links to the new articles we have added this week:

Getting started with Exchange Traded Funds (ETFs)

Six steps to getting the best mortgage deal

Pension rescue schemes: what you need to know

The real cost of economic recovery

Focus on: M&G Recovery

Some simple ways to save money on your energy bills

We hope you find these articles useful.

At the end of each article on BrilliantWithMoney is a comment facility, so feel free to leave a note if you enjoy a particular article or have a question.

Getting a better return on your savings

2009-10-25T15:35:00.002Z

Informed Choice chartered financial planner Martin Bamford was quoted in The Independent this weekend, in an article about getting a better return on your savings:

How to get a better return on your savings

Martin Bamford of the independent financial adviser Informed Choice says: "You have to ask yourself how much risk you are willing to take with your money. If the answer is none, you have to stay in cash. But there are still huge variances in the rates you can get, so check the market at least once a year and be prepared to switch accounts."

Mr Bamford points out that although savings rates look low, the gap between the inflation rate and the best savings rates is actually quite high. "Things aren't as bad as they seem in real terms," he says.

Talking about the opportunity to get a better yield by investing in corporate bonds:

But Martin Bamford warns investors not to get too carried away. "Although we've seen a huge move towards corporate bond funds because of their attractively high yields, the risk to capital is extraordinary if you put all your eggs in one basket – you could lose 20 to 30 per cent. We wouldn't advise more than 30 per cent of your portfolio to be in corporate bonds."

A word of warning on claims management firms

2009-10-23T08:43:00.004Z

Excessive (potentially unfair) bank charges and the mis-selling of payment protection insurance (PPI) are two drivers of an increase in the number of complaints against financial services firms.

Consumers of financial products and services have every right to complain if they feel they have been mis-sold or treated unfairly.

There is a robust and clear process in place for making these complaints. Start with a (preferably written) complaint to the firm that sold you the policy. If you are not satisfied with their response, refer your complaint to the Financial Ombudsman Service (FOS).

It's that simple.

To make life even easier, a quick search on the Internet will reveal template complaint letters on different topics - bank charges, payment protection insurance and endowments, to name but a few. If you use these, ensure that you personalise them and provide as much factual background data as possible.

What you do not need to do, in the vast majority of cases, is engage with a claims management firm to handle your complaint.

New research by the consumer organisation Which? found that a number of claims management firms broke rules set by the Ministry of Justice (MOJ) by claiming you would be better off using their company rather than claiming independently, even though an independent claim costs nothing. 10 out of the 38 firms surveyed implied this.

A further 16 firms stated they had successfully claimed back money in 90% or more of cases without properly qualifying this. Five companies were unable to say how they were regulated.

Possibly the most shocking figure in the research from Which? was that claims management companies typically charge a commission of 25% plus VAT if a claim is successful. Many also charge upfront fees.

Think very carefully before you engage with a claims management firm, particularly if they make unsubstantiated claims about their success rates, imply you will get a better deal by using their services or charge excessive commission rates and upfront charges.

Pensioners and tax

2009-10-23T08:35:00.002Z

Tax planning in retirement can often be more complex than it is during your working life.

It is not unusual for a retired person to have a minimum of three different taxable incomes - their State pension, a private or occupational pension and interest on savings or investment income.

In contrast, during our working lives it is typical to have only one - a salary from employment, which is taxed through the relatively simple Pay As You Earn (PAYE) system.

It is this more complex set of incomes in retirement which pushes many older people into the Self Assessment regime and can also lead to the underpayment or overpayment of income tax.

New figures published today by the National Audit Office suggest that 1.5 million pensioners have overpaid a total of £250 million in tax since the 2002/03 tax year. This is an average tax overpayment of £171 each.

Equally as concerning, a further 500,000 pensioners are thought to have underpaid tax by an average of £207 each.

Tax does often become more complex in retirement. The interplay of different sources of income along with higher age related personal allowances can make it tough to know if you are paying the correct amount each tax year.

It will take real change from HM Revenue & Customs along with more retired people taking a closer interest in their financial planning to bring these numbers down over the next decade.

A multi-year bull market?

2009-10-22T08:50:00.002Z

The current bull market could run and run. At least that is the opinion of Fidelity investment guru Anthony Bolton, according to the Telegraph.

Bolton said: 'The bargain phase is over but, despite the fact the market is well off lows, we expect the bull market to go one. It's a multi-year bull market,'

Since March we have seen the FTSE 100 and other leading stock market indices rise rapidly from depressed levels. Stock markets typically move ahead of the wider economy and the fear now is that future stock growth may be unsustainable.

Bolton is a great investor but there is never any guarantee that he is right.

Investors should take his views in conjunction with others. In particular, they should never put all of their eggs in one basket and rely on continued growth in a single investment asset class.

Diversification still plays a crucial role in investment decision making, even when one asset class appears to be on a good run.

Last call for the Icesave claims train

2009-10-21T13:12:00.002Z

British savers caught up in the collapse of Icesave have only got a few days left to make a claim for compensation.

Just under 1,600 savers in the failed bank have yet to put in their claim for the compensation on offer from the UK government.

The Internet branch of Icelandic bank Landsbaki collapsed in October 2008, at the height of the global banking crisis. Whilst savers were not covered by the UK Financial Services Compensation Scheme (FSCS), the UK government did step in to continue their pledge that no British saver would lose any money.

Around 400,000 savers had money with Icesave at the time it collapsed, many lured by the prospect of market leading interest rates. It is thought that many of those still to put forward their claim for compensation had very small amounts with the failed bank.

The FSCS has published a list of frequently asked questions about Icesave claims at http://www.fscs.org.uk/Download.ashx?id=9758.

Major mortgage market reforms

2009-10-19T15:47:00.003Z

The Financial Services Authority (FSA) has today proposed major reforms in the mortgage market with the publication of a discussion paper.

It's about time.

Whilst questionable practices in the mortgage sector were not the only (or even leading) cause of the global banking crisis, the easy availability of home finance has put many borrowers in a difficult or even dangerous financial position.

One of the proposals today will effectively ban self certification mortgages, so-called 'liar's loans'. These used to be particularly popular with self employed borrowers but were also used, sometimes unsuitably, by people who wanted to borrow more than they could really afford based on traditional lending multiples.

Contrary to what some are saying, the end of self certification mortgages does not mean the end of the mortgage lending to the self employed.

It will mean that all borrowers will have to evidence their earnings and also disclose more information, with supporting documentation, about their expenditure, as lenders start to assess affordability more stringently on every mortgage application.

Another substantial area of reform is the regulation of the currently unregulated buy-to-let mortgage market and forcing all mortgage advisers into the FSA approved persons regime.

Buy-to-let mortgages have remained unregulated for too long in our opinion; by treating them as commercial mortgages the FSA has left this market wide open for unscrupulous property investment 'advisers' who do not necessarily have the best interests of their customers at heart.

Here at Informed Choice we do not work in the mortgage market, instead focusing on retirement and investment planning. We do monitor developments in this area closely as they can have an impact on the wider financial planning considerations for our clients.

The proposals published today seem sensible and will hopefully be embraced by mortgage advisers wanting to demonstrate more professional standards.

Market numbers: 16th October 2009

2009-10-18T09:55:00.002Z

The FTSE 100 index of leading UK company shares finished the week at 5,190.24, down 32.71 points or -0.63% on the day and up 28.37 points (+0.55%) over the week.

The index has risen from 4,434.20 since the start of 2009, a rise of 756.04 points or 17.05%. Over a year the FTSE 100 has risen from 3,861.40 (1,328.84 points or 34.41%).

£1 is currently worth $1.636 US or €1.0977 Euros.

Brent Crude Oil Future is currently priced at $77.15/barrel. Gold is $1,047.50/ounce and Silver is $17.31/ounce.

The UK Bank Rate is 0.5% and CPI inflation was 1.1% for the year to September 2009.

In search of dividend income

2009-10-17T14:30:00.002Z

Informed Choice chartered financial planner Martin Bamford was quoted in Money Marketing this week, in an article assessing the difficulties of seeking income at a time that dividend-payers are cutting their payments.

Discussing recent sales figures from the Investment Management Association (IMA), Martin said:

“It is important to consider more than just a single month of fund sales data but this is quite a stark indication of where investor cash is going.”

But he points out that the sector itself masks a huge variation in performance over the last year. He says: “The top- performing fund over 12 months is Unicorn UK income, an equity income fund from a rather boutique asset manager. It has returned nearly 33 per cent over the last year, giving its cumulative performance statistics a real boost into first-quartile territory over the last one, three and five years. In the longer term, the discrete performance of this fund is more variable.”

At the other end of the spectrum, the worst performer in the sector during the past year has been New Star UK strategic Income.

Bamford says: “With average funds returning close to 4 per cent, this fund has lost investors nearly 5.5 per cent over the last year. It used to be an above-average performer but assets in this fund now hover around the relatively small £20m level. The manager, Paul Craig, might be overstretched as he is responsible for several New Star funds. This might get tided up somewhat as part of the Henderson rebranding due to take place soon.”

You can read the article in full here.