Financial Perspectives

Keeping your house and home insurance together

admin — Wed, 24 Feb 2010 16:37:16 +0000

Most people don’t consider it a big deal if their house (ie buildings) and home (ie content) insurance isn’t with the same company. After all, why not just go for the cheapest in both categories?

That sounds fine and it may well save you some money but the problem with the UK home insurance market is that insurance companies that do content insurance have a list of stuff that counts as being “content” and a different list of stuff that counts as being “buildings”. Unfortunately, these lists aren’t completely identical between the various companies so you can find some things listed as “content” by one company that will appear on the “buildings” list of another company. That discrepancy is why it’s essential to keep both policies with the same company.

Most of the time it won’t matter. After all, clearly the bricks are part of the building and clearly the furniture is part of the content. What about something like an outdoor BBQ that incorporated a seat made from bricks? It might seem a somewhat contrived example but there are lots of similar grey areas that insurance companies create through these different lists.

Don’t forget too that if, even if you’re lucky enough to have any problem that arises completely covered by two different companies, that means that you’re looking at two separate insurance excess payments which these days can mean anything up to £1000 or so.

Shopping around for corporate insurance

admin — Thu, 18 Jun 2009 14:53:37 +0000

Since the insurance needs of companies tend to be more sophisticated than those of individuals you generally don’t find the equivalent of online price comparison sites in the company insurance market that you expect in the personal insurance market.

So to get corporate insurance you will almost always need to go to a specialist insurance broker which obviously means looking at firms relatively close by your business premises.

However, it’s worse than that in that, for example, to shop insurance Glasgow, if you’re in a relatively specialised market niche you’d need to look for, say, insurance for contractors Glasgow. Well, “worse” in the sense that you may need to be more specific in your requirements of an insurance broker but if that broker is more familiar in dealing with your type of business you’ll generally save a lot of hassle in explaining what you do and won’t miss out on essential insurance that’s specific to your industry group. Not only that but the specialists will know more about the types of policy available to your industry niche too which can save quite substantial amounts of money.

Incidently, don’t be tempted to try to do the cheapo route of just using one of the personal insurance comparison sites as they usually don’t list essential items of business insurance and you could find yourself with an expensive problem should it turn out that you don’t have some legally required insurance or there’s an exemption in the insurance that you bought which means that you’re not covered for doing something that you do quite regularly. These things usually only become apparent after you need to claim on a policy which is obviously a little late in the day.

Things to think about when you’re buying or selling a property overseas

admin — Thu, 18 Jun 2009 14:39:47 +0000

Although not too many people are doing it at the moment, this is probably one of the best times to consider buying an overseas property as prices are generally rather more depressed than they normally would be. Having said that there are lots more people selling or at least trying to these days which in itself brings up similar issues.

For a start there’s the different legal system to consider. Even if you’re European and buying or selling in another European country you can still find that, although illegal, the local authorities will retain some of the proceeds of a sale in case it turns out that you owe them any taxes. It’s worth pointing out to the legal person dealing with your sale that they are legally required to treat you as though you were a national of the country and that applied even if you fully intend to take the proceeds abroad afterwards so long as it’s to another European country.

Obviously with a property investment you can be talking in terms of quite substantial amounts of money and if you’re going to be changing currencies then it’s worthwhile looking into your options to reduce the costs of exchanging the money to the other currency and also of reducing the risk to you of there being a substantial move in the exchange rate. For example, this year the pound/euro rate has moved from around 1.10 to around 1.20. Ten cents doesn’t sound like much but if you’re looking at a typical property of around the EUR 300,000 mark that’s EUR 30,000 of a difference which is enough to cover legal fees with change or think of it as the swimming pool that you quite fancied.

How do you reduce these charges and risk? If you go to your bank as most people do you are likely to be hit with the maximum charge possible although the charge can be even higher if you just use the local legal people to send you the proceeds as they’ll add charges on top of that. The best way is to go to one of the specialist money brokers who can shave 5% or more off the charges that the banks apply and can also arrange to fix the rate you’ll get months in advance which eliminates the uncertainty in the amount that you will ultimately receive. Aside from the charges from the rate fix, there are no downsides as if the exchange rate moves in your favour you can let the fix lapse and exchange the money at the current rate.

On non-financial matters don’t neglect the time delays inherent in overseas moves generally. Not only does the money take longer to arrive (unless you just take it as a suitcase full of cash which is quite legal though may raise a few eyebrows), but it’s obviously going to take longer for the removal truck to move your stuff from A to B. There aren’t any formalities required in moving your own stuff around Europe although expect checks for illegal immigrants at the ports and be sure that the lorry doors are secured with a padlock (most aren’t) to avoid a few questions along the lines of the “have you packed the case yourself” familiar to air travellers.

It’s best to plan the move more carefully than you would for a normal domestic move as you’ll appreciate from the above that there are a lot more places that complications can arise.

Taxing needn’t be so taxing…

admin — Tue, 16 Jun 2009 13:11:50 +0000

Since the economy has taken something of a dive there are a lot more people around these days who are overpaying on their taxes, typically this can happen if your income this year is a lot less than last year but there are a variety of other reasons why you can end up with a tax bill that’s lots more than you were expecting.

Sometimes the biggest surprise is in terms of back taxes. Although you’d think that these can’t be much, it’s surprising just how large a bill you can get from this quarter. For instance, often seemingly small omissions can amount to quite serious amounts of cash owed if they’re over a number of years. This tax debt can even reach such levels that you need to look into the options of paying it off in installments which at least could reduce the payments to more manageable amounts.

On the other side of the coin people can also find that there are quite substantial tax reliefs which they’ve not claimed. You might think that if you’ve an accountant that this just can’t happen to you but, in most cases, the accountant doesn’t get out to actually see what you’re getting up to and you could be pleasantly surprised if they’ve completely overlooked an ongoing tax relief. Just as in the case of underpayments, missing out on relatively small amounts of tax relief can add up to a sizeable chunk of cash when counted over a few years.

Whether it’s over or under payments that affect you, it’s best to do something about them rather than taking the head in the sand approach that many people adopt when thinking about taxes.

Would deflation be a “good thing”?

Just where should you put your money right now?

admin — Mon, 15 Jun 2009 17:32:42 +0000

Strangely enough, it might not be where you think.

Typically most people will move their money into cash savings in times like these and put those cash savings in a local savings institution on the basis that they know and trust the people in the branch. However, that’s a fatal error to make. Sure, you can trust the people in your local bank or building society branch with your cash but the problem is that they aren’t the people who’ll be investing that cash.

That’s how come Northern Rock created such a stir last year: it was very much trusted locally and indeed was well thought of generally too for that matter. However, what felled it was the way in which the financial wizards at HQ invested the money and pulled in more money to fund mortgages.

In fact, the safest place at the moment is one that’s commonly overlooked. It’s National Savings in the UK. That’s part of HM Treasury and it’s the one UK financial instution that can’t go bankrupt because they’re the people that create the money in the first place. No, interest rates with them aren’t as high as with other places but then interest rates aren’t that great at the moment anywhere and these days it’s safety that you should be looking towards.

It’s getting serious when times are tough for accountants!

admin — Mon, 15 Jun 2009 12:57:24 +0000

It’s usually taken as read that an accountancy job is a job for life but these days that’s no longer the case and that there is such a thing a specialist accountancy recruitment agency should be no surprise to anyone.

The particular difficult with accountants is that there can frequently be tie-in, no-competition and no conflict of interest terms in their employment contract. So, it’s not quite so easy to move jobs or to find a new accountancy job even in normal times as it is with “normal” jobs and, of course, these are far from normal times so it’s that much more difficult these days.

That said, if you’re searching for, say, “accountant jobs Edinburgh” you will find jobs around with some of those at quite surprisingly high levels. What you will see though, courtesy of the contract restrictions above and, of course, non-disclosure that there’s very little meat to the job descriptions and you’ll usually need to formally contact the employment agency to find out more should you be attracted to one of those on offer. In many ways that’s something of a nuisance but unfortunately it’s something that isn’t easily avoided.

So, if you fancy being a qualified accountant in Edinburgh there are definitely possibilities, just allow for needing to contact the agency rather than relying on information on the website listings.

Rumour becoming reality in dire economic times

Rumour becoming reality in dire economic times

admin — Mon, 15 Jun 2009 12:42:08 +0000

In eras of normal economic activity there are always rumours that come true. That interest rates will fall (or rise), that the chancellor is on his way out (or not) and so on. However, it’s more of a problem in times like these.

For example, the West Bromwich building society was rumoured to be about to need a rescue package back in May. In fact, that hasn’t happened and may never happen, yet I’m quite sure that more than a few depositors with the society withdrew cash whilst other potential depositors probably decided on a different building society. So far that’s been “a few” depositors or potential depositors but it could very easily become a tide and fell the society just as happened with the Northern Rock.

And yet, we also get rumours in the other direction. Thus the markets don’t seem in such dire straits lately as they were not so long ago. The flow of companies announcing bankruptcies seems to be slowing (no substantial companies for a while now) and even the housing market may be in the first stages of an upturn.

The problem isn’t the rumours as such but rather that in dire economic times the effect of such rumours tends to be much more extreme than would normally be the case. That’s, of course, why the government tend to be somewhat more reluctant to say anything as it’s extremely easy for an off the cuff comment to be perceived as negative these days. Still, we’re sure to have a new government soon, aren’t we? Or is that just a rumour too?

Just how do you invest in gold bullion?

admin — Mon, 15 Jun 2009 12:16:15 +0000

With the world economy falling apart around us this is one of those times where many people wish that they had invested in gold as, of course, with everything else falling gold is doing quite nicely as usual.

The key thing is to keep your savings and investments diversified and moreover to keep to a regular savings and investment programme. If you’re doing that, it shouldn’t really matter whether the price of gold is sitting around the $200 mark or if it’s sitting at the $900 mark since, as with all investments, it’s pretty much impossible to hit the bottom of the market when you’re buying and it’s equally difficult to hit the top when you’re selling. That said, the gold price is currently off the top achieved in May.

But if you’ve decided to buy some gold bullion for a rainy day, how do you go about it? In principle there are all kinds of investment schemes around these days which let you buy a share in a pile of gold and that’s a sensible way to go about it in that the costs are lower than they are if you some gold bars. However, that lower cost comes at a price, namely that you’re trusting that some intermediary actually has that piece of gold for you and that, should they go bankrupt, that you’ll be able to get your little piece of gold. Certainly these firms have all kinds of reassuring things to say about that but at the end of the day, to my mind, there’s nothing to beat having a lump of gold in your hand.

If you’re aiming at looking after the gold yourself it’s relatively easy to buy it these days by way of Bullion by Post who offer the usual range of investment sizes of gold bars. In terms of bars, the smallest that you can get is the one ounce bar which weighs in at around £600 these days (the price varies throughout the day) or you can get the one kilo bars that you see in photos of Fort Knox and the like for around £19000. The larger bars carry less of a premium over the spot price for gold (ie they are cheaper per ounce of gold) but unless your portfolio is really large the larger bars aren’t going to be terribly practical purchases for you.

One thing to bear in mind if you’re collecting these things in your house is the security and insurance aspect. Clearly if you are stockpiling gold in your house you’re building up a major asset and your insurance company would want to see it adequately protected. It’s possible to avoid this hassle by using a safety deposit box in your bank which will save on the insurance and you may be able to get it free too depending on your bank.

Would deflation be a “good thing”?

admin — Thu, 28 May 2009 12:25:20 +0000

We’ve lived for decades, centuries even, in an era when prices are, on the whole, expected to increase year after year for the vast majority of goods.

The only category of goods where we are familiar with the effects of deflation are electronic goods and in particular computers so it’s helpful to examine how we treat those. For these there is the expectation that each year will see computers that are a little bit better than their predecessors and additionally they’ll be cheaper. What happens therefore in our buying decision is that we wait until we actually need a new computer before buying one. Now in respect of computers “need to buy” is slightly different from normal products in that there is innovation in the software too which forces us into purchases that would otherwise be un-necessary: that would be unlikely to happen with a normal product.

On the other hand, in an inflationary environment we buy a car now rather than next year because we can be confident that the car will be more expensive and so it is with pretty much everything.

You can even see the effect yourself by considering petrol prices. Until a month or two back I filled the car as often as possible on the basis that the price was rising quite sharply and could be expected to continue doing so. Then things changed as prices started going down very sharply indeed. The approach then was to fill the car only when absolutely necessary as that would be likely to get me the lowest price overall.

In fact, deflation might be a good thing to have but the snag is the period of adjustment that would be required would be extremely painful for everyone. The change from a “buy it now” attitude that’s relevant in an inflationary environment to a “buy it later” attitude appropriate for deflationary times means that factories build up stockpiles and therefore need to cut back on production and the jobs associated with it ie unemployment jumps. At a more personal level, house prices drop dramatically both because of the increased unemployment and because people are moving to a “buy it later” mindset.

One side-effect is that innovation is forced upon many industries which is usually a good thing to happen. However, it’s not an option for a considerable number of products: when was the last time that there was a really innovative potato?

On the whole, it probably is a good thing, it’s just that the transition period would probably be far too painful for governments in general to accept that.

The rental prices start heading up in Northern Ireland

What should we do in the current economic difficulties?

admin — Mon, 01 Dec 2008 13:53:47 +0000

The current economic difficulties are pretty unusual in their severity and therefore what “we” should do is not necessarily the same as what we’d ordinarily do by ourselves.

Typically, it’s prudent to build up some reserves in the bank to tide oneself over the hard times. However, if we all do that in the moment then chances are that the downturn will go on for a great deal longer than it needs to. What’s needed is for each of us to act as though the downturn didn’t exist as much as possible.

So, for instance, the banks have basically been told to return to normal lending practices “or else”. In fact, they need to do that for their own sake as tightening up on the lending criteria as many had been doing was simply acting to stagnate the economy which is good for nobody, including the banks.

From the rest of us what’s required is that we don’t simply bank any savings that we’re making but rather that we spend them and thereby do our bit to restart the economy.

Whilst your instinct might be to increase the size of any savings reserve as much as you are able, it’s the worst thing that we could do collectively.