Member Info for Meconopsis

AbjectPerformer - timescale is important I'm mid-50s and will be taking income from my SIPP next year. I have no other pension except the state pension.

The following are my views and not advice. DYOR etc...

My approach is 70% in dividend paying shares, which currently generate around 180% of my target income. That allows for two things:

- a couple of the companies messing up and not paying anything for a year or two

- ongoing dividend reinvestment to cover inflationary increases in my income.

The remaining 30% of my money is in growth funds. In principle, these should grow faster than value of the dividend shares over time and I'll rebalance down to 70:30 once the growth funds exceed 40%. That will provide my "pay rises".

AND/BUT - I'm at the point where I need a degree of income certainty. You're not. So, whilst I wish I'd "discovered" dividend shares earlier, at your age you can afford to take more risk and focus much more on growth funds / shares.

At this point I'd focus on growth funds - like the ones that Zac04 has previously mentioned - over dividend shares. As a principle, the great thing about dividend shares is that you're living off natural yield and not selling down capital - but at the expense of long term growth.

If I were you then I'd allocate 20-30% of my investments to buying dividend shares, but build the money up in a money market account and wait for to buy for when there is a stock market shock.

"Pick your own stocks if you can to avoid costs and fill up your Isa before a sipp. ISA more flexible."

There's truth in here with a caveat.

In retirement, money in an ISA is generally "better" than money in a pension because you don't get taxed on income from an ISA - whereas money from a pension is taxed at your marginal rate when it's paid to you.

BUT/AND - if you get a workplace pension then you get employer contributions - often matching ones up to a level. And old employer gave 10% base contributions and matched contributions up to 25%. That's free money.

Also, if you're a higher rate tax payer then there's tax asymmetry with pensions - you get tax relief at 40% when you pay into the pension and "only" taxed at (probably) 20% on the way out.

So, you're generally best maxing out contributions into a pension up to your employer's contribution match.

If you're a higher rate tax payer then paying into the pension usually wins over an ISA if you expect to be paying only basic rate tax in "retirement".

And then maxing out your ISA.

“Stevebt thank you just thought that it would have a knock on effect ?”

The most likely outcome is positive for UK house builders, but bad for the miners.

Less demand for steel and concrete = lower commodity prices = bad for miners and good for companies that use concrete and steel.

“Evergreen is Taiwan's shipping company.”

I’d just presumed that denby is a Streisand fan…

@zac - completely correct, but excluding dividend reinvestment…

@FangKat - if you read the last annual report then this is both clearly disclosed as a risk and also flagged as something they can’t quantify until there’s a ruling.

In which case, what do they say in a trading statement other than “if you think we’ve got it bad then don’t be a Lloyds shareholder…”?

@Trouts - I agree that this isn’t PPI.

But your view isn’t the one taken by the ombudsman. The two rulings (and supporting arguments) likely set a template for how this gets imposed by the regulator.

"..tempted to top up..."

This is an interesting conundrum.

The markets have taken fright to there being a regulatory review based on two ombudsmen decisions against lenders. CBG are a big player in the space, but not the biggest and the ombudsman decisions were actually against Lloyds and Barclays. The ombudsman hasn't yet upheld a related decision against CBG.

The ombudsman finds against the lenders because they failed to disclose that they were paying discretionary commission - and the size of that commission.

The redress in both cases was to repay the consumer the difference between the rate paid and the lowest rate available to the dealer (typically around a 2% difference) plus 8% simple interest per year.

In both cases the ombudsman finds that it would not be fair to either have to repay the loan to the consumer in its entirety or to charge a zero interest rate.

The UK market for car loans is around £80bn (with Lloyds, Barclays and Santander having most of the market). CBG motor loan book at the end of July 2021 (the latest date I can find) was £2.1bn (both these numbers from Google Bard). Discretionary commission was banned in January 2021.

So, a worst case on the end 2021 loan book of £40m(ish) and this spans multiple years. Not not all of the loans will have been at discretionary rates and there's question of whether you'd need paperwork to claim.

I'd take a worst case guess at £120-140m worst case?

Anyone have a view?

Well…

There’s a correction on Alliance News that CBG were NOT due to release a trading update today.

RBC have cut their price target to 925 from 1,075 (outperform).

And meanwhile, here we are at 550!!!!

"Overall company insolvencies in December 2023 were 2% higher when compared to December 2022."

"In December 2023, there were 6,584 individual insolvencies, which was 20% lower than in December 2022."

https://www.thegazette.co.uk/insolvency/content/104217

“ old repayment book out. 35k mortgage. Payment £546.30”

Tell kids that today and they won’t believe you!!!!

Your and my mortgages were probably during the period of a proper house price crash and substantial negative equity.

Stt1 - it's the macro stuff that's the worry - I agree. But it's a reason to exit or go short of the whole market - rather than being a house builder-specific issue.

Thanks for the reply stt1.

I think you're conflating sector issues (should I be long in house builders) with macro stuff (should I be long in anything other than defence shares and gold).

Government debt is an important worry, but it's mortgage debt that drives the housing market. Mortgage arrears and repossessions were significantly up last year (https://www.ukfinance.org.uk/news-and-insight/press-release/mortgage-arrears-and-possessions-q3-2023#). That pressure will ease as rates go down.

With respect to Home REIT, I disagree that you can compare the distressed sale of an investment trust - who are very specifically invested in homes to rent in the third sector - with house builder sales. Home REIT isn't a house builder.

We certainly have house builders facing issues - as the collapse of Stewart Milne Homes and difficulties at Crest demonstrate. But Stewart Milne Homes has been for sale since December 2022 and none of the trade buyers was interested.

"Agree but the problem is for those whose with 2-5yr fixed rate mortgages, due to re remortgage, the rates are still significantly higher, double what they have been used to. "

And that's what all the mortgage stress test nonsense was about when they took those mortgages.

What has been generally missed in all the noise about mortgages is that a significant minority of mortgage holders haven't yet been touched by the rate rises. If you took out a five year fix 3-4 years ago then you'll have missed the worst of it.

People also miss that people can choose to remortgage onto a lower rate as rates drop - albeit with a penalty.

"Compared to 1990s, nowadays 2 partners take on the mortgage at 5-6x income and use a significant portion of their income on the mortgage. That doesn't leave much headroom is they run low on disposable income. They can't work any more. Previously, it used to be 1 person took on the mortgage at 3-4 x their income, so if needed a partner could look for part time work to make up the shortfall. "

Is that the 1990s when I my mortgage consumed 80% of my take home pay and I was living on toast for 2 years?

I hate to play diplomat, but both sides are right and wrong. And it's often hard to sort out who is blame for what.

For example, Nigel Lawson imposed a tax on pension fund surpluses; and then Gordon Brown drove a stake through the heart of defined benefits pension schemes and (arguably) their investment in the stock market by abolishing dividend tax relief for pension funds.

Labour left a staggering deficit, which lead to Osbourne's era of austerity, which I'd argue was horribly overdone.

The Conservatives have been in a self-defeating death spiral since Cameron made the numpty decision to call a referendum without planning for what would happen if he lost. And then, in my view, all of the parties did the country a huge disservice by focusing all of their energies on trying to reverse the decision then to get a good deal and plan for exit.

Labour, in particular, held the ridiculous view that the Government should declare its negotiating red lines in public. My flabber was utterly gasted.

And then we have Labour's self-sabbotaging swing to the far left.

I am very far from a Labour voter, but my view is that it's time for a change as the Conservative's disunity serves no-one but their tiny egos.

But I'd have to hold my nose at the ballot box for the number of U turns that Starmer has made - and continues to make. He makes Liz Truss look like a "steady as she goes" type of leader.

Ho hum ;)

Londoner - I agree with you on every point except the outturn. Both parties will support buying over renting.

Londoner

First time buyer subsidies aren’t the right thing to do. AND/BUT none of the political parties will do anything to assuage the “home ownership dream”. Labour’s emergent policy revolves around revisiting the new towns idea.

The RIGHT thing to do would be to build many more homes for rent and move to the German approach where people don’t expect to buy until their parents die and they inherit.

But that’s political suicide.

It’s a bit like inheritance tax. Few pay it, but even people who have no chance of ever paying it are against it. It’s an aspiration thing.

Thatcher sowed the idea of home ownership very deeply in the British psych. Labour aren’t stupid enough to say to the electorate that they should give up on the hope of home ownership.

First time buyer subsidies will prevail.

Afternoon Crossley. All good thanks mate.

The numbers are plucked from the air. But/and, I was responding to the “…at an eye-watering COST of £40million…”, which is grossly inaccurate.

The remediation isn’t costing anywhere close to £40m, which is the total selling price of the land. The build costs is, at most, only 20-30% of the selling price.

The 36 homes being demolished have been completed up to roof level. The other units weren’t up to roof level. None of the units had been finished internally, although the 36 homes had solar panels, which have been removed and are being reused.

£5m is a reasonable guess. £8-10m worst case.

Interestingly, if it was significant then it would have been mentioned in the full results report. I can find no mention.

The only point I’m trying to make is that one shouldn’t take badly written news reporting as “the truth”.

It’s important to unpick this…

“Bulldozers have begun the mammoth task of demolishing 88 properties on a huge new housing development on the edge of the Cambridge today after developers discovered fatal defects - just after it had been built.

…

36 homes currently at the roof stage of construction are scheduled for demolition and in addition to this, remediation will be undertaken on a further 47 plots, each at different stages of partial construction”

So, that’s 36 homes being demolished, not 88.

36 + 47 does not equal 88.

Demolishing 36 homes is far from a “mammoth” task. Unless you’re doing it by hand.

“…an eye-watering cost of £40million”

Suggests an average cost of £454k per home. That might be the selling price, but it’s far from the build cost, which will be probably closer to £80-100k per property.

In truth, if you had to underpin 47 homes then you’d be able to do that for less than £30k a property.

So, actual cost to BDEV is closer to £3.6m for the demolition and rebuild (36 x £100k) plus around £1.4m for the remediation.

Happy to have helped ash

If you transfer shares to your wife then you have two choices as to tax treatment, you can:

- make the transfer at market value, at which point you have a CGT liability - and further gains for your wife start from the transfer price

- transfer as a gift - in which case your wife's buy price for CGT purposes is your original purchase price.

You can opt to transfer some one way and some the other to minimise CGT.

This only relates to shares transferred without being sold (in specie) - if you sell and re-buy in her name then you have released any gain for CGT purposes.

IF your investment platform allows you to do in specie GIA transfers to a family member (some do, but please don't ask which) then you can do that and she can bed and ISA them in. You can also ask your investment platform to transfer out the shares to share certificates; do the transfer on paper; and then transfer into an ISA.

The question is whether the time spent is worth the money saved :)

Eccles - I did what you’re suggesting by parking £30k not immediately needed into a GIA and buying LGEN shares rather than parking it in a savings account.

Then SVB happened.

I am now back in the position I’d envisaged, but it’s taken patience.

The moral is that it’s an uncertain world - so don’t dip in and out of the market if you might need the money :)