The world of individual investment is in total chaos.
The Financial Services Authority (“FSA”), soon to become the Financial Conduct Authority (“FCA”) knows best judging by the draconian and punitive regime it is imposing on its member firms (and paid for, of course, by the member firms). The current suitability testing being carried out by advisory firms is farcical. One broker has imposed on its staff a rule that no individual aged over 70 years of age can be offered AIM shares.
a) Pension investment is far less attractive following the introduction of new limits.
b) Pension returns are now often negative as trustees are restricted to gilts and bonds.
c) Worldwide equity markets are in decline as regulators impose levels of due diligence that require huge costs to be paid for by the applicant company.
d) Financial services staff are operating in a culture of fear of compliance retribution.
e) The lack of new issues means the investor has little choice.
Thus many investors will seek alternative havens often property based. The situation is mitigating against these:
a) Capital Gains Tax (“GCT”) at 28% is far too high. We have already been told that the recommendation in ‘The Drury Report’ for the re-introduction of taper relief has been rejected by the Chancellor.
b) Many British people decided to use their spare cash to buy property abroad.
c) 200,000 UK home owners in France are being hit by additional taxation. A social tax of up to 15.5% has been added to the 20% paid on rental income. When selling a CGT rate of 19% applies to which is now added another up to 6%. The top rate of 40.5%.
d) In Spain an estimated 700,000 expats are having to declare their worldwide assets to the tax authorities before the end of March or face fines of up to 150% of the amount owed.
However the problem facing many expats is the fall of the pound against the euro which reached 1.17euros this last week. The dire economic news including a 3.3% reduction in the UK economy since the 2008 peak, a 10.2% fall in mining and quarrying and a 1.8% in industrial output mean euro mortgages are soaring in cost.
Neither the FSA nor the Chancellor seem to have any answers and the plight for the British investor goes from bad to worse.
It can’t be long before the spivs re-introduce the attractions of ostrich farms. The flightless bird, when threatened, lies flat on the ground believing it is hiding.
The FSA has no reason to follow suit because there is no accountability.