Economic Prostitution

There has been quite some fuss over the recent visit of the Chinese President Xi Jinping receiving a state welcome from the Queen et al. In fact, you would have been forgiven for thinking there was a royal wedding given the pomp, ceremony and banquets.

 

There has been much questioning on why this President should receive such a welcome at vast cost given China’s human rights track record, stance on Tibet and their nuclear policy. Clearly these issues ruffle plenty of feathers.

 

I wrote as recently as the start of September (Who’s Buying: http://stevesmithlive.blogspot.co.uk/2015/09/whos-buying.html) that to understand our royal and political flirting, it was necessary to consider the economic love making between the UK and the various partners on offer throughout the world. And with China to overtake the US as the largest (and most powerful) economy in the world over the next decade, you start to understand why the controversial President Xi Jinping received the grandest of welcomes.

 

Here’s a few numbers that start to paint the picture further:

 

- China has more money in the bank than any other country in the world.

 

 

- 3 of the world's 10 biggest sovereign wealth funds are Chinese, with collective wealth of $1.5 trillion in assets.

 

 

- China’s overseas investments have grown from $20 billion in 2005 to $171 billion in 2014.

 

 

- China has invested nearly $30 billion in the UK since 2005.

 

 

- China is a significant investor in UK companies.

 

So is it any wonder that the Queen and Prime Minister put the UK’s morals to one side to go after Chinese treasure? You need only see the £18 billion that China has agreed to invest during this visit in the Hinkley Point Power Station to realise why the best red carpet was rolled out.

 

Economic prostitution at its best!

 

 

 

 

 

 

 

 

 

Train Station Economic Barometer

 

I have recently flicked through the book “The Old Patagonian Express – by train through the Americas”. The author, Paul Theroux, shares that you can tell a lot about the state of a country from the condition of its railway stations. And that got me thinking that perhaps there is a little in this……consider the windswept 1960’s Eastern Europeanesque offering in Darlington compared to the modern and contemporary structure that has grown at Kings Cross. I guess it's a litmus test with a difference!

 

And that got me thinking some more……perhaps these days the state of any country’s roads, airports and rail infrastructure reveals much about the priorities of Government and where they are in the economic cycle.

 

Compare Exeter Airport where shire horses taxi planes to the terminal ‘shed’ to the impressive Terminal 5 at Heathrow with its efficiency that Germany would envy, boutiques and Gordon Ramsey offerings.

 

Look at the 3 lane expansion of the A1 / M1 north of Leeds. What a difference the areas that are finished make but do not get me started on the pedestrianisation of the A1 north of Washington. My life is worth more than a 4 day expedition to bypass Gateshead!

                                                                                                                                                                                

But in all seriousness, roads, airports and rail really are a good barometer of where we are as an economy……which would suggest that we are caught right in the middle between ‘done well’ and ‘still plenty to do’.

NEVER Simple & Always A CATCH

 

There is a general rule in the pension sector……pensions are NEVER simple and there is always a CATCH with any action taken.

 

Nearly 7 million eligible Britons were today invited to top up there State Pension. In short, you can buy £1 a week of extra pension income at a cost of £890 (per £1 of income) up to a maximum of £25 per week extra pension income.

 

There is another way that seems to me to be far better which is to use your capital to defer taking your state pension.

 

So here goes……

 

You are just before age 65 and have £5,000 p.a. State Pension. You could buy an extra £25 a week / £1,300 a year for £22,250 giving a total income of £6,300 p.a.

 

However, instead of this, you apply the rule that pensions are “NEVER simple and there is always a CATCH” and you decide to postpone taking your state pension for 2 ½ years and you will end up in exactly the same position of £6,300 p.a. (plus whatever inflation increases have occurred by then).

 

All you now need to do is to provide yourself with £6,300 a year for 2 ½ years (£15,750). That brings the total cost down to £6,500 (30% cheaper).

 

You can see that this is much cheaper than buying the extra years…..something the Government hasn't exactly shouted from the rooftops about!

 

It’s a simple example to illustrate a far bigger point…… pensions are “NEVER simple and there is always a CATCH”

 

Is it any wonder there is so much confusion generated by the Government!

The Taxpayer Election Con

 

 

It is one of the best pieces of ‘conmanship’ to come out of W1 since the expenses scandal but the Pensioner Bond sting has pretty much gone unnoticed. It's actually very cleaver when you stop and think about it.

 

The story......

 

A year before the General Election, George Osbourne announced a number of giveaways aimed at the over 55’s as a sweetener for votes. The theory being that 75% of over 55’s will vote and they needed a little persuading. A kind of greasing of the election tubes. The giveaways included a massively increased tax free savings limit on ISAs, revolutionary pension freedom rules and a new Pensioner Bond.

 

Osbourne wasn’t daft……he knew there was a high proportion of over 55’s holding cash savings with banks and they were blaming the Government for the poor (abysmal) interest rates on offer. So, to “help those that need it the most”, Pensioner Bonds were offered (through NS&I – formally National Savings) with staggeringly attractive interest rates (between 2.8% and 4.0%) that were way ahead of what was available with banks (2% over the market rate).

 

It was no surprise that £13 billion was invested in these.

 

But here’s the catch……it has come at taxpayer expense as it has cost the Treasury £260 million in interest payments to date (and rising). That’s an extra £260 million that will need to be found through taxes or loss of public services.

 

Did Pensioner Bonds win the Conservatives the General Election? No. Did it help and contribute? Definitely.

 

Well done George……you fooled taxpayers yet again!

State of State Pensions

 

Most of us don’t know where to go for information on State Pensions. Most of us don’t care until into our 50 / 60’s. But apathy is costly……every year a high proportion of money due to people in retirement goes unclaimed. What a sad and desperate situation.

 

During ‘our working lives’, many people don’t do paid work for a whole load of reasons (unemployment, sickness, maternity, paternity, parents, carers, training, jury service, etc.). When they are not at paid work, most can still get national insurance credits towards their state pension entitlement. You can see what you can claim for by clicking on this link.

 

https://www.gov.uk/national-insurance-credits

 

The important think people need to know is that a lot of these credits need to be claimed……they are not dished out automatically. This is a big deal. Nobody has your back. Nobody will write to you to tell you what you are entitled to. Nobody will ‘top up’ your credits as a favour. ACTION IS NEEDED.

 

In summary, if you have had a period of no paid work……don’t be lazy……it’s your entitlement!