Adrian Garside

photo credit: respres

Petrol Prices are about £1.33 per litre.

Of that, about 59p is fuel duty and VAT is 22p and the fuel itself is 52p

In April fuel duty is due to rise by RPI +1p – Labour set this level of tax increase a few years back and happily George Osborne is thinking he can waive the 1p

Now, for a government that is saving cash by any which way, scrapping the 1p seems a luxury, so can they afford it?

Well, RPI is supposed to be near, but slightly above 2% and fuel is supposed to be below 40p per litre.

So, they expected to be putting fuel duty up by roughly 0.8p +1p so 1.8p per litre + VAT (total 2.16p)

So, with RPI at 4.8% and fuel at 52p,  fuel duty is scheduled to go up by 3.5p + VAT (total 4.2p)

So, if George Osborne  waives the 1p +VAT  on duty he’ll still be making more than he expected. (He’ll still make 3p instead of the expected 2.16p)

The Bank of England Monetary Policy Committee meet on the 1st Thursday of each month to discuss the ‘base rate’ which has been set at 0.5% for a long time.

The meeting is to discuss whether to change the base rate, and by how much, with a view to controlling inflation – inflation is bad if it is too high or too low.

Anyway, the minutes of the last meeting have been released today and they show that 2 members of the 9 person committee voted for a rate rise in January. One member asked for the opposite – another £50bn of  QE and the others all voted for a hold on rates and no extra QE.

This matches the expectations expressed by journalists over the Christmas period that rates were nearing the time when they would rise.

However, this week’s GDP figures may reduce the pressure on the B of E to raise rates and I see that Capital Economics are even suggesting that rates could be increased, with a view that they may have to go back down if the economy turns out to be weaker than expected.

I’m not so sure about that, the Bank of England would see that as ‘weak and uncertain’ and they want to be perceived as ‘strong and reliable’  so they tend to move in one direction at a time . While we are in ‘unusual times’ I suspect that if rates went up a notch, they’d stay up. Mind you, it’s a free vote and the majority wins the day so it could happen.

Myself?  I think there’s too much uncertainty around at the moment, I doubt rates will change in February or even March now,  but the minutes of those two meetings will make interesting reading. Although by ‘interesting’, I admit don’t mean it in the normal sense of the word…

Barclays have announced today that they are closing their branch based Independent Financial Advice arm, keeping just the IFA’s for the seriously rich customers.

That’s OK, it’s a business plan.

But it does raise the question of what advisers can do and it’s all to do with 2 things.

1. Are you choosing the product and taking the responsibility for the choice, or is the adviser recommending the product and taking the responsibility.
2. And, the length of the list of options. The longer the list, the better the chance of getting the best deal.

Execution only

Barclays will have an ‘execution only’ service. This is where you ask to buy a product and are specific about all the details…eg “I want a £200000 decreasing life insurance that covers me and the Mrs and has waiver of premium included for 25 years”. They will then provide you with the Barclays product that fits the bill. Short list, and you have responsibility.

Information only

An information only service is slightly more detailed in that the staff member can discuss what the product does and what is available in generic terms but the customer actually chooses what he wants. Many advisers in branches provide this service. The thing is, it can come over as advise so you should be aware of where the ‘blame’ lies for a wrong choice – the blame lies with the customer, there is no come back if things are wrong.

Again – short list and you have responsibility.

Tied advisers

Tied advisers are those that deal with just one company. They can come as ‘advisers’ but also ‘information only’ and ‘execution only’ – obviously a Halifax mortgage adviser is only going to recommend a Halifax mortgage and Halifax Insurance and a Halifax ISA.

I once investigated the option of becoming a tied adviser with Legal and General. At the time it meant getting higher commissions, at the expense of the insurances I was arranging having a 15% higher premium… you don’t need me to explain why I didn’t follow that up?

Short list, but you will be advised on the best product from that list (if it’s an advised sale)

‘Whole of market’

This is interesting – whole of market is actually means ‘panel representative of the whole market’. So, it isn’t ‘the whole market’, it just needs to be a list of providers sufficiently broad as to cover all the bases. I’ve had experience of this, shortly before I left Fox and Sons, in 2003 they adopted a ‘whole of market proposition – this was when there were upwards of 100 lenders, they had…if I remember rightly 13 if their whole of market list. They justified it by saying the ‘enhanced relationship allowed exclusive deals to be drawn up’ as if that mitigated the shortfall in choice, but it didn’t. Advisers were allowed to go off panel, so they were able to blur the distinction between ‘panel’ and ‘independent’ even further, however, as commission based advisers they were told that if they went off panel they didn’t get the commission so you can guess how often that happened!

So, Whole of market is a slightly blurry proposition and really means ‘it’s probably OK not to shop around further, but only probably’.

Also, an independent mortgage adviser could be tied or whole of market for their insurance offering…

Longer list, but you need to be pretty clued up to ask the correct questions to assess the offering.

Independent

Independent advisers work without restriction, if the Outer Mongolian bank has the best deal for you, then we can talk about about it…obviously we may not recommend them, but we could if we wanted to. My point is, we work for you with the aim of getting you the best possible deal.

That brings up the question of fees – all the above will have commission on their sales – as an IFA we need to discuss this as there are products available with a fee to the adviser and products without – if you prefer me to get paid from the product provider, that is one choice, if you want to pay my fee instead, I would have a slightly longer list to choose from.

The longest possible list and the adviser takes the responsibility for the advice.

GDP fell by 0.5% against an expected rise of 0.5%+

That is pretty shocking. Some blame is to do with the snow, but that doesn’t make up the whole story, the economy was worse in the last quarter of last year than we expected.

We need to be a bit cautious about the story though – these figures are preliminary, we won’t really know the proper figures for a month or two yet, and they could vary by 0.5% so it may not be as bad as it looks…but it won’t look good, so what does this mean for interest rates?

Well, there has been upward pressure, and press comment on this has lead to increased demand for long term fixed rates.

The upward pressure on interest rates is reduced now, the Bank of England won’t be forced into an early move this year by these figures.

So, if it were just the money markets controlling fixed rates, rates would stop rising and may settle slightly.

However, demand is another factor, and lender workload is another.

Demand – if people are demanding long term fixed rates, then lenders will put prices up to cash in on the demand.

Workload – if a lender is top of the league table, it will get swamped with business – it could just raise it’s rates to slow down the inflows, if it can’t cope.

I suspect we won’t see a great deal of change in fixed rate pricing. The upward movement will slow, but I don’t expect any serious downward movement back to, say December levels.

I will update as I learn more…

Woolwich are repricing their 5 year fixed rates today, upwards from 4.29% to 4.79%.

This is consistant with a trend since Christmas when all the press was saying ‘Now’s the time to fix’ and so there has been a bit of rush. In times of ‘rush’ the lenders reprice upwards to boost their profits.

This move takes Woolwich out of the market for the time being, there are plenty of products at 4.5% ish and one still at 4.05% if you have enough equity, however, there is a cascading effect happening and the new ‘top of the table’ lender will start to creak at the joints as every broker sends in new clients and once they are full to bursting, they’ll reprice upwards…and so on, until the higher prices dampen enthusiasm.

So, probably no point hoping that they’ll edge back down below 4%…if you want to look at long term fixed rate, it looks like now is a good time, although not as good as 6 weeks ago…

Hmm, disclaimers for the 21st century ‘it’s your fault’ culture.

1. My ‘predicting the future’ skills are just as limited as the next man, this is my ‘opinion’ not my knowledge of future fact.
2. I can’t time travel
3. I am not savant.

The ABI (Association of British Insurers) sets the manadatory definitions for Critiical Illness policies.

So, a Critical Illness policy will have 27 illnesses, all of which have a certian definition. Technically, that enables an IFA to advise on Critical Illness Insurance on a level playing field.

The problem for the insurance companies, is that if all illness definitions are the same, how do they fight for your business, other than on price.

Well, one way is for them to have a few extra illnesses – most insurers have more than just the 27 illnesses, most have over 30 and BUPA has the most at 39 (ignoring the Pru who have 100 and I’ll talk them about in a minute).

From there, I can run a list of critical illness policies, and then look for the best policy amongst the cheapest.

Another way, is to provide extra benefits – Bright Grey and AXA both have couselling services, advice services and BG even have MacMillan nurses available for cancer sufferers. So, if BG or AXA are amongst the cheapest, I’d recommend them over the cheapest ‘bog standard’ policy.

And, the latest way is the ‘ABI+’ definition. Bright Grey have just made another 3 (total of their 35 claimable illnesses ABI+ – meaning that the definition they use is easier to claim on than the ABI definition. So they say:

• Benign brain tumour – the requirement for permanent neurological deficit with persisting clinical symptoms will be waived if the benign brain tumour is surgically removed.
• Coronary artery bypass grafts – we’ve removed the requirement to use surgery to divide the breastbone.
• Heart valve replacement – we’ve removed the requirement to use surgery to divide the breastbone.

This isn’t just plain generousity, or market forces – take the last one, they hardly ever divide the breastbone these days, so removing this criteria makes sense.

So, now as an IFA, I keep an eye on the ABI+ lists…

Oh – I was going to mention the Pru – their serious illness list includes the ABI critical illness definitions, but also has 73 further illness that are claimable. In addition, many have ‘proportional payments’ so, for instance ‘total and complete blindness’ is the critical illness definition, but Pru would pay out half a claim for 1 eye being blind, or 10% claim for Tunnel Vision.

This policy is so far and away better, in my opinion, than regular critical illness insurance that I always discuss it with clients.

We all became aware of HIV/AIDS in the early 1980s and initially there were fears that it was a threat to humanity. These fears caused sufficient concern that unprecedented attention and resources were given to to looking for cures and treatments. However, as yet there is no cure for HIV/AIDS, nor any vaccine to prevent infection however there are medications which slow the progression of the infection and consequently allow infected individuals the chance to lead a more normal life.

HIV stands for Human Immunodeficiency Virus and is a virus that takes over certain immune system cells to make many copies of itself. HIV causes slow but constant damage to the immune system. The immune system is like the ‘red glow’ in the old Ready Brek adverts, protecting the body against bugs – HIV reduces the glow, eventually the glow just stops working and the immune system can no longer protect the body and at this point the person is said to have AIDS – there is a way of measuring this point when someone has a CD4 (immune cells) count of less than 200.

AIDS stands for Acquired Immune Deficiency Syndrome and makes the body vulnerable to life-threatening illnesses called opportunistic infections.

The term AIDS was first used by doctors when the exact nature of the HIV virus was not fully understood. However, the term is no longer widely used because it is too general to describe the many different conditions that can affect somebody with HIV. Specialists now prefer to use the terms advanced or late-stage HIV infection.

An opportunistic infection is an infection that would not be life-threatening to an otherwise healthy person. Often it is these infections that are the cause of illness or death in HIV-positive individuals, not the virus itself.

In the absence of any therapy, the progression from HIV to AIDS can be nine to ten years although it can be much faster. The survival time after developing AIDS varies widely between individuals, from two weeks up to 20 years.

Treatment

Although treatments for AIDS and HIV can slow the course of the disease, there is currently no vaccine or cure. Anti-HIV (also called antiretroviral) medications are used to control the reproduction of the virus and to slow or halt the progression of HIV-related disease. When used in combinations, these medications are termed Highly Active Antiretroviral Therapy (HAART). HAART combines three or more anti-HIV medications in a daily regimen, sometimes referred to as a ‘cocktail’.

These treatments can slow the progression of HIV sufficiently for life insurance to now be available to HIV sufferers, within certain limits and in common with all applications for insurance, the severity of the condition can affect the premium.

As yet, PruProtect are the only providers and they hope that their criteria will evolve as they get more experience in the area. It’s fair to say if their experience is successful, that other insurers will follow. It’s good to see progress in this area. I have detailed below the main criteria the Pru will be considering for applications, if you need help with this, please contact me, I’m on 01489 784022 or e-mail me adrian@adriangarside.co.uk

Maximum sum assured £250,000
Maximum term 10 years -
Minimum age of applicant 25
Maximum expiry age 60
Method of transmission is not through intravenous drug use
Applicant must be on HAART, which started in the UK more than six months ago
Maximum treatment duration is 5 – 10 years:

if on treatment for up to 5 years maximum policy term is 10 years
if on treatment for 6 years maximum term is 9 years.
if on treatment for 7 years maximum term is 8 years.
if on treatment for 8 years maximum term is 7 years.
if on treatment for 9 years maximum term is 6 years.
if on treatment for 10 years can offer of 5 years.

Treatment should be successful with increasing CD4 cell count and viral load should be suppressed to near undetectable level.

Must be Hepatitis B and C negative
Must have no AIDS defining illnesses eg TB, Pneumonia, Karposi sarcoma and wasting syndrome
Good adherence to treatment (as shown by monitoring of viral load, CD4 count and treatment history)

Since New Year there have been lots of interest rate changes for Fixed Rate mortgages.

Without exception, every rate change has been to put the interest rate up.

For example, Skipton have just e-mailed me – they have a 5 year fixed rate today at 3.98%.

Tomorrow it will be 4.68%

For a £100,000 mortgage – that is an extra £700pa interest, or, over 5 years an extra £3500.

Their 3 year rates are rising alot too.

If a fixed rate is what you want, act now.

Last year saw us take on the allotment at the end of spring, when the soil became unworkable and we’ve had a bit of a downer on the great allotment idea.

However, a New Year see slates cleaned and enthusiasm reinvigorated and we are back on the allotment trail invigorated with ideas and plans.

Ideas and plans is the big chnage – before, the plan was to create an allotment and grow some veg – that was the wrong way round and over Christmas I read ‘A Taste of the unexpected’ by Mark Diacono – the head gardener of River Cottage. This encouraging book gave me ideas of growing my own apricots, chillian Guava’s, Medlars and Mulberries and a dozen other exciting plans.

Now we are starting from a different place – no longer do we have a patch of weeds to clear out on order to grow some radishes and potatoes.

Now we are clearing space for a perennial crop of exciting fruits and vegetables, the likes of which aren’t found in the shops.

And, that’s the point – why put in backbreaking toil for hours on end in order to grow some potatoes, which taste identical to those found in the shops for £1 a kilo?

So, we have a plan for the design of the beds, a rough idea of how we are going to build our own shed, a loose list of plants that I would like, Di is creating a list of plants she would like and hopefully we can have them all.

Inspired, we have rotavated the allotment.

Contrary to last years experience, this year we have soft earth… really soft – too soft and quite soggy, the rotavator kept beaching itself and just wheelspinning – we’re going to have to hire it again after it’s a bit drier, which is a shame, but needs must…the hire company refunded a half day’s fees to us without us asking – very good, and we’ll be going back to them.

Oh – Rotavator – one of the 3 longest palindromes at 9 letters – the other two are Malayalam (the language of the Malay people) and redivider.