It’s time for Bunnies, Buds and Blooms – oh yes and your ISA. It’s the Spring ISA season.
It’s the Spring ISA season again. Nowadays Spring is not just daffodils and budding trees but also the hectic promotion of the seemingly national institution that is the ISA cut-off date – which, by the way, is midnight Tuesday, 5 April. Created in 1999, the new ISA was the replacement of the PEP (Personal Equity Plan) & the TESSA (Tax Exempt Special Savings Account) which were first introduced in 1987. At the time it was seen as just a rebranding of those old Conservative government savings schemes, and Labour’s answer to ‘not invented here’. However, over the years these wrappers, which are a very cost-effective tax exempt savings scheme, seem to have almost become a national obsession. Around 14 million people put money in each year.
In days gone by, these schemes were seen as being so small and almost irrelevant to longer term savers. From a very modest base of £2,400 in 1987, the PEP allowance and now the ISA allowance has grown to a far more significant £15,240. This means that had we all assiduously saved our maximum amount since 1987, we would each have put aside £242,520 into a tax free account. ISAs are now a vital component of portfolios, not only for their flexibility, but also for their relative simplicity.
Obviously it would be hoped that even with some modest investment gains, many accounts could, and would, be significantly larger. Now ISAs have moved closer to the centre stage with the Chancellor’s recent proposals for a new Lifetime ISA. This, however, may well lead to some confusion as to the need for pensions and their provision of a more assured income for retirement. The ISAs are quite likely to become more popular than pensions, which could lead to a longer term problem in the market as less money is put into the lockbox of pensions.
ISAs are now a vital component of portfolios, not only for their flexibility, but also for their relative simplicity. The fact that a couple could shelter up to £30,480 from tax is certainly not to be ignored. Using an ISA wrapper which carries a zero charge, such as 7IM, makes ISAs especially good value in my book.
My personal concern over some of the Chancellor’s ideas, is that it can be too easy to get access to those savings funds, and thus less disciplined savers may be tempted to raid the box of chocolates sooner than they should. I would far rather allow clients to borrow against the value of their ISA, rather than be tempted to attack the chocolates and lose their annual allowance. It could be an innovative way of borrowing funds, without losing the tax-free allowance.
Still, the value of these wrappers will count for little if you can't find a steady and reliable investment to put in it. So opening it is one thing, but investing it in something sensible is another thing entirely. As you would imagine, I have some ideas.
A Ugandan Pipe dream just might come true – finally. Well it has been a long time in the planning, but at last the US$4bn crude oil pipeline from Uganda’s Lake Albert oil field through to the Tanga port in Tanzania, might finally start its construction. From the first shovel of laterite to completion, could take three years, but the gains could be significant with its estimated creation for 15,000 jobs. The pipeline is expected to be 1,403 km in total, and at last provide an efficient export route for Uganda’s valuable asset.
Russian financial sanctions start to bite. The food sanctions against Russia for its aggression against Ukraine have, I suspect, been little more than an inconvenience for the Russian people. However, the financial sanctions are causing some deeper pain. With the likes of Rosneft and Gazprom unable to access the main international markets, they have been trying to turn to Mother Russia in the form of the Central Bank to provide financing of debt and similar needs. However, with a dilapidated economy based on a crushed oil price and Mr Putin enjoying his expensive adventures in Syria and Ukraine, the reserves are being run down at quite a rate.
It was interesting to see Gazprom turn to the Bank of China for a €2 billion five year facility. More, I suspect will follow as the financial sanctions start to have an effect. What will be interesting to see is the effect they might have on the President's policies especially with regards to Ukraine.
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And finally… Love at first whiff? This is the idea behind Smell Dating, a New York matchmaking service that promises to help single people sniff out their perfect match by breathing in the odours from dirty t-shirts.
Artist Tega Brain, who teaches at New York's School for Poetic Computation, and Sam Lavigne, an editor and researcher at New York University (NYU), have created Smell Dating.
Each of its first 100 clients received a t-shirt to wear for three days straight without bathing. The clients then mailed the t-shirts back to Brain and Lavigne's "Sweat Shop" at NYU, where they were cut into swatches. Smell Dating then sent batches of 10 mixed swatches to the clients to sniff. A match will be made if one client likes the scent of another and the olfactory attraction is mutual. The idea is based on the science of pheromones, the chemical signals that creatures from gerbils to giraffes send out to entice mates.
Clients, who pay a one-time fee of $25, are unaware of a potential smell-mate's age, gender or sexual orientation.
"Most normal dating services, you rely on profile pictures, assumptions that come from visual information" Brain said. "You either really like the smell of someone or you don't. It's much more innate."
Do I really have to go around sniffing peoples t-shirts to work out if I like them? No. I just want to know they wash them.
Have a good week.
Justin Urquhart Stewart
Seven Investment Management
Justin Urquhart Stewart is one of the most recognisable and trusted market commentators on television, radio and in the press. Originally trained as a lawyer he has observed the Investment industry for 30 years whilst in corporate banking and stockbroking, and has developed a unique understanding of the market’s roles and benefits for the private investor.
This article represents a personal and light-hearted view from 7IM, and is based on current financial news and events around the world. Its content should not be used for investment purposes and you should contact an independent financial adviser before making any investment or financial decision.
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