DIY Investor Magazine
/
March 2016
4
Welcome to the latest edition of DIY Investor Magazine
and to ISA season in the shadow of the looming
decision regarding Britain’s relationship with Europe,
increasing austerity measures, mounting concerns over
the global economy and the ongoing struggle to find
income in the UK’s stubbornly low interest environment.
There are as many opinions as there are commentators
with regard to the likely effects of a Brexit, but one thing
for sure is that markets don’t like uncertainty and the
DIY investor may have to ride out a period of volatility
as Britain acclimatises to its new relationship with the
EU, either from within or without.
In his Budget speech on March 16th, Chancellor
George Osborne revised the UK’s 2016 economic
growth forecast to 2%, down from 2.4% in November’s
Autumn Statement; inflation is predicted to be 0.7%,
rising to 1.6% in 2017 and the outlook for the global
economy is described as ‘materially weaker’ with the
UK ‘not immune’ to slowdown elsewhere.
The fact that oil prices remain so low has not only had a
dramatic effect on markets around the world, but it has
also caused geopolitical cracks to appear as OPEC
has maintained levels of production despite a 60% fall
in the price of oil.
Chinese stock markets have been on a rollercoaster
ride over the past few months and only the most
courageous investor would try to time them; in light of
the recent downward adjustment of economic forecasts
there, speculative attention has been diverted to India
which is reported to have the potential to be the world’s
third largest economy within a decade.
Overall, the backdrop for the DIY investor could be
considered rather gloomy – it is predicted that interest
rates may dip into negative territory as banks no longer
rely upon savers to fund their lending, and dividends on
UK shares are anything other than a racing certainty as
some of the largest companies struggle in the difficult
economic climate.
By George!
CHANCELLOR DELIVERS
BUDGET BOOST TO ISAS
Companies such as Tesco, Sainsbury’s, Barclays
and Rolls-Royce have already cut their dividends, the
mining sector has been in the doldrums for some time
and it is rumoured that previously stalwart sources of
income such as HSBC and Shell are planning to follow
suit; the biggest blow to dividends since the financial
crisis.
It was rumoured that the Chancellor had tax relief on
pension contributions in his cross hairs for the Budget,
but such was the strength of feeling, not least from
Minister of State for Pensions, Baroness Altmann,
that the Treasury made a very public denial that there
were plans to introduce either a flat rate of tax relief or
to harmonise the tax treatment of ISAs and personal
pensions.
However, the DIY investor can still be permitted a
degree of chagrin when it comes to the ongoing assault
on pensions.
Few tears would have been shed when the Mr Osborne
first got his claws into those saving for retirement
in 2010, as when the lifetime allowance was pared
back from £1.8 million to £1.5 million and the annual
allowance from £255,000 to £50,000, only those
amongst the upper echelons of pension savers were
affected.
However, with the lifetime allowance set to reduce to £1
million and the annual allowance falling from £40,000
to £10,000 according to income, this has started to hit
Middle England hard, compounded by the fact that
the alternative of investing in buy to let property has
effectively been scuppered by recent changes to stamp
duty. There is little doubt that the fear of clobbering
grass root Tory voters too hard is a key reason for the
volte-face, particularly as their instincts may tend them
toward a Brexit.
THE ISA VS PENSION CONUNDRUM IS LIKELY TO
REMAIN CONTENTIOUS FOR THE DIY INVESTOR.
