Daily Archives: April 5, 2010

A better year (on virtual paper)

Today is the last day of the UK financial year, so I’m taking a snapshot overview of my finances.  How have I fared?

Firstly on our ever-rising taxes.  Last year I made some considerable efforts to reduce my tax liability.  This year I’ve used the same three tax-saving vehicles as last year, but taken it further by investing considerably more in Venture Capital, to offset close to 100% (excluding, alas, the portion of the tax that can’t be offset).  This strategy is based on the premise that, while I’d like in principle to buy a house, our housing market is too buggered up by government meddling and bubble credit to get into for some time, and either buying a house or staying in cash is a sure way to lose very large sums.

The biggest investment is the SIPP.  Last year I reported that it was 65% up or 1% down, depending on whether we include the tax breaks or just the investment performance.  This year I’m happy to report it’s much improved: the corresponding figures over two years are 112% up (in total) or 27% up (investment performance alone).  A substantial majority of it is in non-sterling-denominated assets around the world, with an emphasis on emerging areas with the best prospects of delivering growth between now and my drawing a pension.

The venture capital is hard to value due to liquidity issues, but since all VCTs are listed on the stock exchange I can get a notional value.  Based on that I have a capital gain of 27% net of the tax breaks, plus £540 over the year in tax-free dividends.  The investment is locked up for a minimum of five years (else I lose the tax breaks plus illiquidity premium and make a stonking loss), but the income should rise in future years as more investments mature.

Finally, the Stocks-and-shares ISA is 24% up, despite being the most conservatively-invested (mostly in bond funds).  As against that, the cash ISA (which is larger because I’ve been saving longer) is losing heavily in real terms.  The only reason to keep it in cash is with a view to using it in a future mortgage offset account.

I’m trying to base all investment on what I believe in.  So a proportion of the money is invested positively in things I support, notably clean energy, and companies that I’ve judged as more efficient than their sector peers (“light green”).  The dark greens are performing rather badly, but the light greens are among the best!  The remainder is mixed, but avoids sectors I can’t support such as the military, fossil fuels, animal abuse of any kind, or tobacco.  And of course our government: not so much point keeping the tax from them but then just lending it to them!

Other things being equal, will I do the same next year?  It’s too early to say.  I expect a correction to the housing market may happen after the election.  I don’t think it’s very likely I’ll buy within a year, but I’m not ruling it out.  If I do buy, it comes at the expense of no longer having the funds to invest as I have done of late.

Follow

Get every new post delivered to your Inbox.

Join 32 other followers