UK: DMH Stallard Private Client eBulletin - 13 January 2009

Last Updated: 14 February 2011
Article by Lynne Passmore

Originally published 13 January 2009

Welcome to the first Private Client eBulletin of 2009

In view of the economic downturn, we have tried to bring to you some useful tips in money saving and investment. In this edition, we have featured:

  • Cutting interest rates – It will either work, or it won't (article provided by Andrew Merricks, Skerritt Consultants Ltd)
  • Top Ten Tips for Saving Energy
  • Separation and Divorce: Madonna and Guy or Heather and Paul?
  • Redundancy Q&A
  • New Changes to Home Information Packs
  • Fine Wine Investment (article provided by Matthew Cooper, Wine Buyer, Ellis of Richmond)

New Year Special Gift

We are offering a case of wine as a New Year Special Gift to our clients. To win this prize, please send your answer (which can be found in one of the articles) to the following question to Angela Rook at before 31 January 2009. Prize will be drawn on 1 February 2009.

Question: What is the purpose of a compromise agreement?

I hope you find the eBulletin interesting and helpful. Please do not hesitate to let me know if you have any suggestions about any other information that you would like to see in the eBulletin or any other way in which we can improve it.

Cutting interest rates - It will either work, or it won't

2008 will go down as probably the most momentous year in financial history. 2009 will be the year that we find out whether our World leaders have created kill or cure for our woes.

It is quite incredible that just a few months after the Bank of England was being criticised for allowing inflation to surge above 5%, and for failing to raise interest rates quickly enough to curb the threat that this was bringing, the expectation now is that they will follow the Federal Reserve in the US and the Bank of Japan by cutting rates to close to zero as a monetary defibrillator for the faltering global heartbeat.

Putting it bluntly, the short term printing of money will either work – or it won't. No one, at this stage, knows.

If it works in the short term, we can expect that the inflationary flames will have been well and truly fanned within the next couple of years or so. At the moment investors are happy to buy Government Bonds and yields have dropped accordingly. This could reverse very rapidly if inflation is let out of the bag and you would not want to be caught in the rush out of Treasuries if that happens.

If it doesn't work, then we face the daunting prospect of having little else in the armoury to use and a prolonged "Japanese style" period of deflation is likely to follow. As a reminder, the Japanese stock market traded at 38,000 in 1989. It remains around 9,000 today – testimony that what goes down doesn't necessarily go up again.

Clearly these are testing times. With interest rates and gilt yields at historic lows (and getting lower), and with stock markets likely to remain volatile while the hedge fund industry continues to shake itself out, it has rarely been so difficult to know what to do with your money. One thing is certain though. Now is not the time to leave your investments, wherever they are, to chance. Flexibility, accessibility and the willingness to move quickly are attributes that will be needed in the months ahead.

Top Ten Tips for Saving Energy

Britons are amongst the most energy wasteful people in Europe according to a recent survey by the EST.
In total, the energy we waste as a nation each year is now growing close to the equivalent of powering an additional 7 million non-existent homes!

Below are some simple tips to help reduce energy wastage and save money.

1. Turn your thermostat down. Reducing your room temperature by 1°C could cut your heating bills by up to 10%, saving you around £60 a year.
2. Is your water too hot? Your cylinder thermostat should be set at 60°C/140°
3. Close your curtains at dusk to stop heat escaping through the windows and check for draughts around windows and doors
4. Don't leave appliances on standby and remember not to leave mobile phones and laptops on charge unnecessarily
5. Only boil as much water as you need
6. Fill up the washing machine, tumble dryer or dishwasher. One full load use less energy and in one week wastes enough hot water to fill half a bath, so fix leaking taps and make sure they're fully turned off.
7. Use energy saving lightbulbs. They last up to 10 times longer than ordinary bulbs, and using one can save you around £45 over the lifetime of the bulb. this saving could be around £70 over its lifetime if you're replacing a high wattage bulb, or one used for more than a few hours a day.
8. Put silver foil behind radiators. This will reflect the heat back into the room, preventing it from being absorbed into the wall.
9. Keep your fridge and freezer full. The emptier it is the harder it has to work to keep everything inside cold.
10. Have showers instead of baths. Filling your bath uses an average of 80 litres of water which is a huge waste of both water and energy.

Separation and Divorce

Madonna and Guy or Heather and Paul?

Different approaches to dealing with the emotional rollercoaster of relationship breakdown and divorce have been brought into sharp focus in recent months. High profile divorces have been the fodder of the tabloid press who delighted in picking over the lurid details of the McCartney Mills split, culminating in Heather Mills dowsing Sir Paul's solicitor, Fiona Shackleton, with a jug of water in the courtroom.

Any fair-minded individual might have paused to reflect on the impact on their daughter, Beatrice, of all this negativity, backbiting and publicity surrounding the couple.

The Press, unsurprisingly, awaited with anticipation "round 2" following the announcement of the Madonna and Guy divorce. However, their "quickie" divorce was recently pronounced alongside confirmation that they have resolved the issues arising from their divorce amicably by agreement, Guy stating that his primary concern was to protect their children and ensure that they spend time with each of their parents. Possibly not good press but definitely the best outcome for the family!

Most couples are overwhelmed by conflicting emotions when their relationships break down and it is easy to forget how to behave towards one another and the children during this period of turmoil. It is also not surprising that couples feel unable to deal with the issues which must be resolved, putting responsibility on others to make decisions, most notably the Courts. However, the Courts can often fail to meet their expectations both in terms of outcome and cost. In addition these couples lose sight of the bigger picture. Where a couple have children they will be a family for life regardless of the divorce.

How couples deal with their separation, how they treat one another during the process and most importantly, how they talk to the children about what is happening in a constructive and none-blameworthy way will have a profound impact on how the children deal with the divorce, how they develop and their lives as adults.

Most couples understand this but need help. DMH Stallard offer help for such couples; those who wish to maintain a positive relationship after separation and divorce, for themselves and their children. We can consider with you none adversarial options, including negotiated settlements, referrals to mediation services or collaborative process, an approach designed to achieve mutually accepted outcomes by formally agreeing to exclude the Court process as an option in negotiation.

Redundancy Q&A

Q: My firm has said that it will seek volunteers for redundancy. Should I put myself forward?

A: While there is a risk that this will be seen as demonstrating a lack of commitment to the organisation, unless you hold a truly key position, most employers are pleased to have one less 'compulsory' to deal with. In some instances, staff are keen to be 'on the market' sooner, particularly if the economic situation worsens yet further.

Q: What am I entitled tot if I am accepted as a volunteer?

A: Some employees are fortunate in that their employers offer enhanced redundancy terms for volunteers, but strictly speaking, there is no entitlement to an enhancement of any sort. You are entitled to your note pay (usually those volunteering will not be required to work all of that period), and if you have more than two years' continuous service you will be entitled to a statutory redundancy payment.

Q: If my employer decides to make a payment in lieu of my notice period can I insist on its being paid to me gross and without deduction of tax and national insurance?

A: No, generally you are only entitled to be paid your net loss and if your employer accounts to HMRC for the normal statutory deductions the only recourse is to claim any overpaid tax at the end of the tax year.

Q: My employer has selected my department for savage cuts, but I want to challenge this as there is another department which is less profitable than we are.

A: As a generally rule an employer can decide which areas to support and which to cut. A bad business decision will not normally amount to unfair dismissal. However, if an employee can show that there was some other 'discriminatory' motivation in making the decision to make the cuts so as to target particular groups or individuals then this might be subject to challenge.

Q: An employee who is on maternity leave has been 'promised' a job even before the assessment of the rest of the team has been completed. Surely this 'reverse discrimination' is unfair?

A: The law relating to the dismissal of pregnant employees is complex. However, as a general rule the law nowadays seeks to give a high degree of protection to pregnant employees and recent mums. This special protection against dismissal may lead to a job being 'earmarked' for a pregnant employee in the manner you describe.

Q: I have been presented with a compromise agreement. Why do I have to take independent advice?

A: The primary purpose of a compromise agreement is to ensure an effective settlement of all employment claims by the employee, nearly always in return for a payment of money. Parliament has decided that because an employee will be waiving statutory employment rights, that there must be adequate safeguards in place. The two most important of these is that the agreement must be in writing and that the employee must have independent legal advice as to the impact on the individual's rights should they sign the agreement.

New Changes to Home Information Packs

The Government has announced further changes to the Home Information Pack (HIP) regime by requiring a 'Property Information Questionnaire' (PIQ) to be included for all properties marketed for sale after 5 April 2009. The PIQ will provide basic, useful information about a property including a summary of the leasehold if any and will be contained within the HIP.

In addition, the current arrangement whereby a copy of the lease is the only additional requirement in the HIP for leasehold property sales will become a permanent requirement from 1 January 2009. The temporary 'first day marketing' exemption from having to have a HIP will also be removed from 6 April 2009.

Therefore, before selling your property you must legally provide a Home Information Pack (HIP) to prospective buyers.

Fine Wine Investment

Have you got the bottle?

I wish I had listened 15 years ago when my pension advisor, upon retiring, suggested that I would be better off building up a cellar of fine wine than continuing with regular pension contributions. How right he was.

Until October of 2008, the fine wine market had enjoyed continuous and spectacular growth for more than a decade. The market for trading the 'blue chip' wines has been considered immune to the fluctuating financial markets as wealthy new investors from Eastern Europe and Asia have been clambering to secure allocations of the World's most exclusive fine wines, price no object.

Global recession has forced many private and corporate investors to sell their portfolios of wines (most too young to be drunk) and the market is now flush with young at up to 30% below their October value. Yet older vintages, where little remains to be consumed, have been holding their value firm.

My tip is to invest for the long term, seek good advice and select the best vintages, from the best estates. The 21st Century has already yielded two 'vintages of the century' 2000 and 2005 and these are readily available. The 'blue chip' wines are produced in relatively tiny quantities (Château Pétrus yields just 4,000 cases per year and Ausone a mere 1,500 cases) and with a potential for longevity, they make the wisest long term investment. This means the Bordeaux first growths; Châteaux Latour, Lafite, Margaux, Mouton Rothschild and Haut Brion, Pétrus of Pomerol, and the elite of St Emilion; Cheval Blanc, and Ausone.

Investment in fine Burgundy is rather more difficult. Apart from the wines of Domaine de la Romanée Conti which always attract a premium (even if you can afford the £100,000 per case for Romanée Conti, only 6,000 cases are made each year), Burgundy is a potential minefield of inconsistency and disappointment. Perhaps more attractive is the growing trend to invest in Vintage Champagne? Investment is limited to the prestige Vintage cuvées of Krug, Salon, Bollinger, Dom Pérignon and Louis Roederer Cristal. These wines are only made in the better years and offer 10 to 20 years of maturation potential, during which the scarcity increases the value accordingly.

Having dusty bottles in the cellar is a more secure way of keeping your money safe from rogue investment funds and the process of slow maturation provides the added enjoyment of anticipation to some of us wine anoraks. Not only could it provide your pension but the prospect of an enjoyable tipple along the way.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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