In last month’s article I reported how most economists and investment managers were speculating that the General Election would result in a hung parliament or coalition. Markets held their breath and it would seem have now sighed with relief.
As far as investment markets are concerned the result of the election was an unexpected gift. The markets like nothing more that predictable, stable Governments and continuity will mean that Government plans can be seen through.
But it won’t be plain sailing. There remain systematic problems that have yet to play out. As I write Greece is due to pay around €770m in debt repayments and no one seems to know if they can afford to do this. It’s fair to say that Greece is not the only country burdened with record debts. In the run up to the General Election the Conservatives made increasingly generous promises that now have to be fulfilled. Delivering limits on tax increases while repaying our own debts will no doubt create some head scratching in Downing Street. The outcome of Euro negotiations and the referendum in 2017 will also be part of the jigsaw that forms the future financial picture of the UK.
It should be remembered that change will always be present in investment markets. We know of nervous investors who sold their investments and held cash after the debt crisis in 2008 and have since seen the FTSE double. The investment principles we adopt with our clients remains the same: Stay invested in a wide range of different assets and chase the good performers. The simple reason is that this works in delivering predictable returns over the long term.
So it’s business as usual here at Bluesky. The changes in pension legislation allowing unrestricted access to pension funds have created a wave of enquiries. Our challenge here is to determine where full fund withdrawal is appropriate and where it is not. I don’t think we are alone in turning away business where we are just not comfortable that a client’s short term objectives are beneficial to them in the long term. The Revenue’s stance on the taxation of pension fund withdrawals can also create some unintended consequences. As ever, the seemingly simple headlines are accompanied by some more complicated small print.
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Mark Penston BSc, AFPS, MEWI (Partner) – Chartered Financial Planner
Specialist in investment, pensions and financial aspects of divorce.
Mark is a Chartered Financial Planner and has spent over 20 years assisting clients with their financial planning needs. As well as his investment work with clients Mark works closely with lawyers and their divorce clients who need assistance on how pensions and other assets should be divided on divorce.