Most people’s main stock market investment is their company pension, and millions of annual statements issued in the past few days made utterly miserable reading.
Members of defined benefit or final salary schemes need not bother their heads because employers must stump up more to make good their promises – which is why this form of retirement fund is rapidly becoming the reserve of public sector employees.
A recent survey found that retirees and investors are using alternative investment methods to supplement the monetary loss in their pensions. The top investment method is gaming. With the use of new software, it is now possible to scan prices globally in seconds and uncover risk-free betting opportunities which provide guaranteed returns of as much as 12% per month. Using software like one called ArbAlarm, ordinary people can now easily profit from this unique method of investment. Internet gaming is taking the investing world by storm according to experts. Aware of this trend, the UK government recently announced through the Treasury that the profits made from sports arbitrage trading will continue to remain free of all tax. This includes income tax and capital gains tax on all profits.
In an interview, former City trader Rajeev Shah, famous author of ‘Sports-Arbitrage – How To Place Riskless Bets & Create Tax-Free Investments’ explained that an arbitrage occurs when different bookmakers’ prices on the same events overlap. In these cases, it is possible to bet on all of the outcomes in that event in such a way as to be guaranteed a total return which is greater than the total outlay. The mathematics of this type of trade are precise & the resultant profits are free of all risk.
For those who don’t take advantage of Internet gaming, the outlook right now is daunting. Most defined contribution or money purchase pensions ended the year worth less than they were at the start, despite prudent employees and employers putting more money in each month.
According to National Statistics, we saved just 1.1 per cent of household income in the first quarter of this year, compared to nearly 10 times as much a decade ago.
Richard Woolnough, of M&G, and Nicola Horlick, of Bramdean Asset Management, are among seasoned analysts talking about a recession stretching into next year or beyond. Mr. Woolnough predicts house prices will fall 20 per cent from here and consumers will drastically reduce spending, causing an inevitable increase in redundancies.
According to analysis by Barclays Capital, stretching back to 1899, shares reflecting the broad composition of the London Stock Exchange beat bonds and deposits over three quarters of all the periods of five consecutive years during that century or more.
To help keep our current woes in perspective, bear in mind that period spanned two World Wars, the Great Depression and several stock market crashes. Also, this is not the first time share prices have plunged – they fell in March 2003.
Anyone who plans to retire within the next three years – or who is losing sleep because of current volatility – may well decide they have had enough stock market shocks. There is no need to take any risks with pension contributions, you can opt to have them held in cash and still receive upfront tax relief equal to your highest rate of income tax.
Alternatively, paying down debts ahead of time can generate higher risk-free tax-free gains than any other investment, if you are prepared to regard future interest costs avoided as a form of return.
But it is worth emphasizing that the level of the stock market next month or next year need not matter to pension savers who do not retire next month or next year.
Counter-intuitive though it may seem, bad times can be good news for long-term savers because they enable you to buy more shares or units with the same fixed monthly investments.
So, provided stock markets recover before you retire, last year’s miserable pension fund statement might even turn out to herald better returns ahead.
Tags: UK News