Credit fallout leads to turmoil 

Looking ahead, investor sentiment is likely to remain fragile and bad news will likely meet with a disproportionate level of disappointment. Investors have good reason to be wary in the short term; however, stock markets tend to be driven not by logic, but by emotional factors such as fear: the key is to stay calm, think long term, and be selective. Astute long-term investors should remain objective and remember that, in the words of Franklin D Roosevelt, “the only thing we have to fear is fear itself”.

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UK bank Lloyds TSB has announced it is selling its Abbey Life insurance business for £977m to Deutsche Bank. Abbey Life is a subsidiary of Lloyds’ Scottish Widows unit and has been closed to new business since 2000.

Lloyds TSB concluded that the sale of Abbey Life was in the “best interest of the group, as well as Abbey Life’s policyholders and staff”.

As of 31 December 2006, Abbey Life managed £12bn of assets held in 1.2 million policies, do you own one of the policies? It will be interesting to see what if any benefit there will be for policyholders. If you would like us to review your Abbey Life plan in view of this announcement then please contact us.

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State pensions (particularly womens) have been given a boost with a proposed change to the rules regarding voluntary National Insurance contributions.

Currently there is a six year time limit on paying these contributions. This means that if you did not pay National Insurance in a tax year you are not entitled to any extra state pension income for that tax year, unless you pay voluntary National Insurance within the next six tax years.

Generally speaking though it is not until State Pension Age that people really look at what they are entitled to, by which time it can be long since the tax years that National Insurance was unpaid with no way of making this up. Bearing in mind what good value the State Pension is for most people, this means a lot of people are missing out on a good way to top up their retirement income.

The new Pensions Bill is going to allow people to defer the decision until their own State Pension Age and allow people to buy up to nine years. This will give everyone a great opportunity to top up this pension when they are at a time when they are more likely to have the funds to pay the voluntary contributions. The big winners will be women, currently only 25% of women have a full State Pension compared to 90% of men.

The government may try to overturn the decision but the recent defeat in the House of Lords will make this more difficult.

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For years, the UK property market has been on a phenomenal run, outstripping inflation by a significant amount. The upshot is that young people can no longer get on to the housing ladder and it is reported that average property prices now exceed five times national income. But is this a one way bet? Why are prices rising? The answer is that property prices will rise until the costs of servicing the debt consume such a proportion of income that prices can rise no further. So if interest rates are low properties seem cheap because they consume a smaller proportion of income. Interest rates are now standing at 5.75%. Within living memory of anybody over the age of about 30 interest rates have been at 12% or more and it looks like interest rates are gently moving upwards while inflation is potentially reappearing.   Much of the reason for no inflation recently has been the phenomenal growth in

The FSA’s long awaited Retail Distribution Review put the cat among the pigeons this week. By 2009, the market may be split into two camps – with only those advisers holding the Diploma in Financial Planning being allowed to practise in complex areas. Given that only about 6% of advisers are thought to hold this diploma, (which last week was classified as being a degree equivalent), we should see the market polarise in an entirely new way. Those who have bothered to study their subject rather than try to make a quick buck off what is no more than an O level will see their efforts rewarded, while the cowboys should be driven out. Interestingly this development is announced within a fortnight of the FSA’s admission that depolarising the market and forcing advance disclosure of status and costs had failed completely to eliminate commission bias or push the market towards fees. Finally the penny has dropped – consumers have little confidence in financial advisers because it’s just too easy to become one. Independent, tied, multi-tied or whole of market is irrelevant – what matters to consumers is that the adviser actually has a clue about investment strategy, tax, trusts, risk management and so on. Roll on 2009!

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