Considering the recent events in our country, how to begin this bulletin is something I’ve been thinking about, and decided I would comment at the end.
Fund Performance
As you know from previous bulletins, we use Embark Horizon 5 as a barometer as we’ve found it to be accurate and a good indicator.
Despite the usual propaganda being furnished by the media, although slow, the markets are recovering well.
As a guide, at the beginning of the year the Horizon 5 fund price was £1. Not unexpectedly, it took a tumble and my advice was, unless you needed the money, then stay invested. Markets will always recover history proves that – it’s only the date that we do not know. If we knew the exact date when they would return to their peak, we would all be billionaires.
Today’s price as I write this (19/09/2022) is showing that it is within 12% of the peak of 2022. So, my advice stays the same. Unless you really need the money, stay invested.
In Other News
We have a new Prime Minister and now await the outcome of her plans. Hopefully, the war in Ukraine will cease in the near future and supply chains, and associated prices, will start to return to their previous levels. It will happen and it will give us, as consumers, and also businesses, further confidence that will inspire the future. As events unfold we can begin to decide how best to progress.
Here in Yaxley on the outskirts of Peterborough, commercial units are being snapped up faster than they can be built, which is a good gauge. Another residential housing development has started with some 3000 ( yes 3000 ! ) houses being built in this area, with more planned to come on stream in Spring 2023, so again another indicator of confidence.
ISAs or OEICS, or Both?
You may be saying to yourself, ‘I know what an ISA is but what on earth are OEICs?
Well, let’s start with ISAs . Each adult is allowed to invest £20k per tax year and money paid in is generally “tax paid” i.e. from taxed earnings or similar. The big benefit of an ISA is that no matter what growth is achieved, it is absolutely tax free. Any income taken from your ISA is tax free, and any combination of income and lump sum withdrawals is tax free.
A further benefit is that any money taken out of your ISA ( including growth ) can be replaced within the SAME tax year without over subscribing, which gives you a massive flexibility if needed.
Did you know there are also Children ISAs available for youngsters. They have a limit of £9000 contribution per tax year and are excellent for family, friends and parents to contribute to any new born, or youngster, to help them in future years.
So what if you wish to invest more than £20k in one tax year?
This is when we use an OEIC, or Open Ended Investment Contract.
An OEIC is run by a fund manager, who pools £millions of investors’ money to create growth or income. It is exactly the same principle as an ISA, but instead of having the ability to be totally tax free, it is subject to the possibility of Capital Gains Tax ( CGT).
However, and it as a big however, there are some really key benefit points to be noted.
- There is no limit to the £s you can invest in an OEIC
- You can have a joint OEIC ( whereas you can’t with ISAs )
- You can use exactly the same funds as your ISA, or choose completely different ones.
- Most people don’t know it, but you have a personal Capital Gains Tax (CGT) allowance of £12,300. This is in addition to your personal tax allowance and, because the figures are very similar, they often get confused or misunderstood.
- Any gains in your OEIC are completely tax free until realised i.e. until you withdraw some money.
- Gains on your OEIC follow a complicated calculation, where money drawn is seen as part return of capital and part gain.
- The gain element is then measured against your personal CGT allowance, and if the gain does not exceed your personal CGT allowance, then no CGT is payable.
In Summary
OEICS can be incredibly useful and effective as part of your financial planning portfolio. In the last 25 years, I have only had one client pay Capital Gains Tax, because he withdrew £124,000 in one tax year.
OEIC’s are listed on your RGLP ( Platform) under the Investment Account column ( IA ), why not have a look and see if it could be useful for you.
Your RGL Investment Platform or RGLP
Over the last year there have been a number of changes with ownership and administration of the Platform, none of which have adversely affected you or had any negative impact. In the beginning, the RGLP was administered by Zurich, then, as it was known to be an effective platform, it was bought by Embark, who also own other platforms. There are now changes happening that will show the new takeover by Lloyds Banking Group, and a move to an upgraded platform, although it is still branded as Embark.
There’s no need for any concern regarding these upgrade changes, all platforms need major investment in technology and the profit margins used are very small, which are reflected in the low charges to you. So, change is positive and if you have any questions please do let me know.
So, to My Personal Comments…
HM Queen Elizabeth II
The whole country has been affected by Her Majesty’s death some more than others. The one thing that is personal to me is that The Queen always reminded of my Mum who died some years ago – so yes, I was touched by the Queen’s death.
Sprout – Our Guide Dog for the Blind
He is a very handsome chap, as you can see, and is doing very well in his training.
This is just one of the sponsorships that is very close to our hearts.
I’ll keep you up to speed with his progress.
He will be a great gift to someone with impaired vision.
And on a really personal note…
Freddie Theodore Frankland
Freddie arrived on 27th August. He is my first GREAT grandson … and I am so proud.
His parents are Michael and Emily – Michael being my eldest grandson, and son to Adam
my eldest Son ( that’s a lot of eldest’s )
There are no words I can express to convey just how proud I am to be the head of now FOUR generations of Frankland.
…and Finally
If you have any questions, or want to discuss anything about your financial planning, just let me know. Client visits are now back to normal, which is great as it gets me out of the office … and out of Joanne’s’ hair.
Kind regards
David
WARNINGS
The above is intended for information only and is not financial advice.
Investments can fall as well as rise and you may not get back all the money you have invested. Investments involve risk and your capital is not guaranteed.