Sterling or euro?
My monthly articles appear principally in the Flyer and on the Spectrum website, although I have seen them crop up in all sorts on unlikely places on the internet. Thankfully, they create a steady stream of calls or emails from readers who have many and varied financial issues to address. Quite often these issues can be well beyond my capabilities as a financial adviser to address, but I will always try to help as much as I can. I do hope for example that my assertion that French motorway petrol stations open on Christmas day was correct; and I would love to know whether the gentleman planning to start selling ice cream from a van outside the Old Cité gates in Carcassonne succeeded in his venture. I also felt truly sorry that I was unable to lend one gentleman €30,000 to buy a plot of land to enable him to fish from the river Aude.
Last month I ended my article with the following paragraph: Clients who have Sterling assets do not need to convert them to Euro to make use of the products available to them outside the UK. Those clients who have transferred their assets in Sterling are most probably quite pleased that they did not convert, but what about now? What if we hit 1.40, or 1.45? For my money the only way is down from there, back to my preferred levels. If we do get to 1.40, I will certainly be looking long and hard at my Sterling funds, with my finger hovering over the deal button.
Well, it did indeed happen, and as I write this sterling is worth over 1.40 Euro. Did my finger hover over the ‘deal’ button? Yes it did. Did I press that button? No I didn’t. I need to make two things perfectly clear here. Firstly, what I’m about to type must not be regarded as advice. I’m just telling you what thought process I went through. Secondly, we’re not talking mega bucks (or pounds) here, certainly not for the meagre amount that is lurking in our one and only UK bank account anyway.
It’s quite difficult to express the reason for not changing that sterling into Euro, but I’ll give it a go, at the risk of sounding somewhat deranged. Every one of my pounds somehow feels to me to be worth more than €1.40. That is of course irrational. Anyone who thinks the true rate should be in the region of 1.25 should bite the hand off anyone who offers him 1.40 or better. Yet I didn’t want to do it; I just couldn’t bring myself to sell my shiny £1 coins in exchange for what looks like a bunch of supermarket trolley tokens. Immediate apologies to ‘le Tresorie’ at this point. I suspect that part of me is being a bit greedy looking for a Euro collapse, but would that necessarily persuade me? Potentially not. The weaker a currency becomes, the less inclined I might be to buy it. In essence, I think I’m more likely to buy Euros at 1.40 when the rate is on its way down than when it’s on the way up. I did tell you that I used to be a foreign exchange dealer; funny bunch they are.
The other hot topic at the moment is of course pensions. I know that there is a risk that you might be getting fed up of hearing this, but I am largely opposed to the ‘pension freedom’ that is just around the corner for the UK pension market. I am opposed to virtually all kinds of tax grabs, and I see this as just another example, albeit dressed up as a fabulous opportunity for the over 55’s Or maybe that opportunity is for anyone who can take advantage of the over 55’s, including conmen, salesmen, and taxmen.
For me, the writing is on the wall regarding UK based pensions. They are ‘in play’. Shedding all access restrictions is designed to provide a huge tax income boost for the UK coffers. If it doesn’t work, they will look for another way to get their hands on our savings. Even if it does work there will come a time when more cash is needed to bale out the UK economy. Pensions will then come under more fire, and more ways will be found to raid the coffers.
I will not be a part of either process. My pension funds are safely housed away from the UK jurisdiction. They will be used as pension funds should be used; to provide an income when I retire, whenever that might be. Hopefully that won’t be any time too soon as I’m enjoying myself too much to stop, but when the time comes I won’t be relying on a UK state pension alone. That would not be an attractive proposition.
QROPS is an extremely welcome result of the European freedom of movement of capital. We should all grasp the concept and use it to ring-fence our future incomes.