Originally published 13 January 2009
Welcome to the first Private Client eBulletin of 2009
In view of the economic downturn, we have tried to bring to you
some useful tips in money saving and investment. In this edition,
we have featured:
- Cutting interest rates – It will either work, or it won't (article provided by Andrew Merricks, Skerritt Consultants Ltd)
- Top Ten Tips for Saving Energy
- Separation and Divorce: Madonna and Guy or Heather and Paul?
- Redundancy Q&A
- New Changes to Home Information Packs
- Fine Wine Investment (article provided by Matthew Cooper, Wine Buyer, Ellis of Richmond)
New Year Special Gift
We are offering a case of wine as a New Year Special Gift to our
clients. To win this prize, please send your answer (which can be
found in one of the articles) to the following question to Angela
Rook at angela.rook@dmhstallard.com before 31 January 2009. Prize
will be drawn on 1 February 2009.
Question: What is the purpose of a compromise
agreement?
I hope you find the eBulletin interesting and helpful. Please do
not hesitate to let me know if you have any suggestions about any
other information that you would like to see in the eBulletin or
any other way in which we can improve it.
Cutting interest rates - It will either work, or it won't
2008 will go down as probably the most momentous year in
financial history. 2009 will be the year that we find out whether
our World leaders have created kill or cure for our woes.
It is quite incredible that just a few months after the Bank of
England was being criticised for allowing inflation to surge above
5%, and for failing to raise interest rates quickly enough to curb
the threat that this was bringing, the expectation now is that they
will follow the Federal Reserve in the US and the Bank of Japan by
cutting rates to close to zero as a monetary defibrillator for the
faltering global heartbeat.
Putting it bluntly, the short term printing of money will either
work – or it won't. No one, at this stage,
knows.
If it works in the short term, we can expect that the inflationary
flames will have been well and truly fanned within the next couple
of years or so. At the moment investors are happy to buy Government
Bonds and yields have dropped accordingly. This could reverse very
rapidly if inflation is let out of the bag and you would not want
to be caught in the rush out of Treasuries if that happens.
If it doesn't work, then we face the daunting prospect of
having little else in the armoury to use and a prolonged
"Japanese style" period of deflation is likely to follow.
As a reminder, the Japanese stock market traded at 38,000 in 1989.
It remains around 9,000 today – testimony that what goes
down doesn't necessarily go up again.
Clearly these are testing times. With interest rates and gilt
yields at historic lows (and getting lower), and with stock markets
likely to remain volatile while the hedge fund industry continues
to shake itself out, it has rarely been so difficult to know what
to do with your money. One thing is certain though. Now is not the
time to leave your investments, wherever they are, to chance.
Flexibility, accessibility and the willingness to move quickly are
attributes that will be needed in the months ahead.
Top Ten Tips for Saving Energy
Britons are amongst the most energy wasteful people in Europe
according to a recent survey by the EST.
In total, the energy we waste as a nation each year is now growing
close to the equivalent of powering an additional 7 million
non-existent homes!
Below are some simple tips to help reduce energy wastage and
save money.
1. Turn your thermostat down. Reducing your room
temperature by 1°C could cut your heating bills by up to 10%,
saving you around £60 a year.
2. Is your water too hot? Your cylinder thermostat
should be set at 60°C/140°
3. Close your curtains at dusk to stop heat
escaping through the windows and check for draughts around windows
and doors
4. Don't leave appliances on standby and
remember not to leave mobile phones and laptops on charge
unnecessarily
5. Only boil as much water as you need
6. Fill up the washing machine, tumble dryer or
dishwasher. One full load use less energy and in one week
wastes enough hot water to fill half a bath, so fix leaking taps
and make sure they're fully turned off.
7. Use energy saving lightbulbs. They last up to
10 times longer than ordinary bulbs, and using one can save you
around £45 over the lifetime of the bulb. this saving could
be around £70 over its lifetime if you're replacing a
high wattage bulb, or one used for more than a few hours a
day.
8. Put silver foil behind radiators. This will
reflect the heat back into the room, preventing it from being
absorbed into the wall.
9. Keep your fridge and freezer full. The emptier
it is the harder it has to work to keep everything inside
cold.
10. Have showers instead of baths. Filling your
bath uses an average of 80 litres of water which is a huge waste of
both water and energy.
Separation and Divorce
Madonna and Guy or Heather and Paul?
Different approaches to dealing with the emotional rollercoaster
of relationship breakdown and divorce have been brought into sharp
focus in recent months. High profile divorces have been the fodder
of the tabloid press who delighted in picking over the lurid
details of the McCartney Mills split, culminating in Heather Mills
dowsing Sir Paul's solicitor, Fiona Shackleton, with a jug of
water in the courtroom.
Any fair-minded individual might have paused to reflect on the
impact on their daughter, Beatrice, of all this negativity,
backbiting and publicity surrounding the couple.
The Press, unsurprisingly, awaited with anticipation "round
2" following the announcement of the Madonna and Guy divorce.
However, their "quickie" divorce was recently pronounced
alongside confirmation that they have resolved the issues arising
from their divorce amicably by agreement, Guy stating that his
primary concern was to protect their children and ensure that they
spend time with each of their parents. Possibly not good press but
definitely the best outcome for the family!
Most couples are overwhelmed by conflicting emotions when their
relationships break down and it is easy to forget how to behave
towards one another and the children during this period of turmoil.
It is also not surprising that couples feel unable to deal with the
issues which must be resolved, putting responsibility on others to
make decisions, most notably the Courts. However, the Courts can
often fail to meet their expectations both in terms of outcome and
cost. In addition these couples lose sight of the bigger picture.
Where a couple have children they will be a family for life
regardless of the divorce.
How couples deal with their separation, how they treat one another
during the process and most importantly, how they talk to the
children about what is happening in a constructive and
none-blameworthy way will have a profound impact on how the
children deal with the divorce, how they develop and their lives as
adults.
Most couples understand this but need help. DMH Stallard offer
help for such couples; those who wish to maintain a positive
relationship after separation and divorce, for themselves and their
children. We can consider with you none adversarial options,
including negotiated settlements, referrals to mediation services
or collaborative process, an approach designed to achieve mutually
accepted outcomes by formally agreeing to exclude the Court process
as an option in negotiation.
Redundancy Q&A
Q: My firm has said that it will seek volunteers for
redundancy. Should I put myself forward?
A: While there is a risk that this will be seen as demonstrating a
lack of commitment to the organisation, unless you hold a truly key
position, most employers are pleased to have one less
'compulsory' to deal with. In some instances, staff are
keen to be 'on the market' sooner, particularly if the
economic situation worsens yet further.
Q: What am I entitled tot if I am accepted as a
volunteer?
A: Some employees are fortunate in that their employers offer
enhanced redundancy terms for volunteers, but strictly speaking,
there is no entitlement to an enhancement of any sort. You are
entitled to your note pay (usually those volunteering will not be
required to work all of that period), and if you have more than two
years' continuous service you will be entitled to a statutory
redundancy payment.
Q: If my employer decides to make a payment in lieu of my
notice period can I insist on its being paid to me gross and
without deduction of tax and national insurance?
A: No, generally you are only entitled to be paid your net loss
and if your employer accounts to HMRC for the normal statutory
deductions the only recourse is to claim any overpaid tax at the
end of the tax year.
Q: My employer has selected my department for savage cuts,
but I want to challenge this as there is another department which
is less profitable than we are.
A: As a generally rule an employer can decide which areas
to support and which to cut. A bad business decision will not
normally amount to unfair dismissal. However, if an employee can
show that there was some other 'discriminatory' motivation
in making the decision to make the cuts so as to target particular
groups or individuals then this might be subject to
challenge.
Q: An employee who is on maternity leave has been
'promised' a job even before the assessment of the rest of
the team has been completed. Surely this 'reverse
discrimination' is unfair?
A: The law relating to the dismissal of pregnant employees is
complex. However, as a general rule the law nowadays seeks to give
a high degree of protection to pregnant employees and recent mums.
This special protection against dismissal may lead to a job being
'earmarked' for a pregnant employee in the manner you
describe.
Q: I have been presented with a compromise agreement. Why
do I have to take independent advice?
A: The primary purpose of a compromise agreement is to ensure an
effective settlement of all employment claims by the employee,
nearly always in return for a payment of money. Parliament has
decided that because an employee will be waiving statutory
employment rights, that there must be adequate safeguards in place.
The two most important of these is that the agreement must be in
writing and that the employee must have independent legal advice as
to the impact on the individual's rights should they sign the
agreement.
New Changes to Home Information Packs
The Government has announced further changes to the Home Information Pack (HIP) regime by requiring a 'Property Information Questionnaire' (PIQ) to be included for all properties marketed for sale after 5 April 2009. The PIQ will provide basic, useful information about a property including a summary of the leasehold if any and will be contained within the HIP.
In addition, the current arrangement whereby a copy of the lease is the only additional requirement in the HIP for leasehold property sales will become a permanent requirement from 1 January 2009. The temporary 'first day marketing' exemption from having to have a HIP will also be removed from 6 April 2009.
Therefore, before selling your property you must legally provide a Home Information Pack (HIP) to prospective buyers.
Fine Wine Investment
Have you got the bottle?
I wish I had listened 15 years ago when my pension advisor, upon
retiring, suggested that I would be better off building up a cellar
of fine wine than continuing with regular pension contributions.
How right he was.
Until October of 2008, the fine wine market had enjoyed continuous
and spectacular growth for more than a decade. The market for
trading the 'blue chip' wines has been considered immune to
the fluctuating financial markets as wealthy new investors from
Eastern Europe and Asia have been clambering to secure allocations
of the World's most exclusive fine wines, price no
object.
Global recession has forced many private and corporate investors
to sell their portfolios of wines (most too young to be drunk) and
the market is now flush with young at up to 30% below their October
value. Yet older vintages, where little remains to be consumed,
have been holding their value firm.
My tip is to invest for the long term, seek good advice and
select the best vintages, from the best estates. The 21st Century
has already yielded two 'vintages of the century' 2000 and
2005 and these are readily available. The 'blue chip' wines
are produced in relatively tiny quantities (Château
Pétrus yields just 4,000 cases per year and Ausone a mere
1,500 cases) and with a potential for longevity, they make the
wisest long term investment. This means the Bordeaux first growths;
Châteaux Latour, Lafite, Margaux, Mouton Rothschild and Haut
Brion, Pétrus of Pomerol, and the elite of St Emilion;
Cheval Blanc, and Ausone.
Investment in fine Burgundy is rather more difficult. Apart from
the wines of Domaine de la Romanée Conti which always
attract a premium (even if you can afford the £100,000 per
case for Romanée Conti, only 6,000 cases are made each
year), Burgundy is a potential minefield of inconsistency and
disappointment. Perhaps more attractive is the growing trend to
invest in Vintage Champagne? Investment is limited to the prestige
Vintage cuvées of Krug, Salon, Bollinger, Dom
Pérignon and Louis Roederer Cristal. These wines are only
made in the better years and offer 10 to 20 years of maturation
potential, during which the scarcity increases the value
accordingly.
Having dusty bottles in the cellar is a more secure way of keeping
your money safe from rogue investment funds and the process of slow
maturation provides the added enjoyment of anticipation to some of
us wine anoraks. Not only could it provide your pension but the
prospect of an enjoyable tipple along the way.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
