ETS:
Conor:
ones like Nest, People’s Pension etc involve the pension fund holding stocks, shares and bonds from all over the world and those are ringfenced from the rest of the company so if the pension company goes belly up the core assets are still there and the Financial Services Ombudsman will appoint another company to take over the pensions, those stocks, shares and bonds being transferred over. Pensions are already taxed when you draw them down. The income from a pension is classed as taxable income taxed the same as income from wages.
It is also completely impossible for the UK government to be broke as we have a sovereign currency meaning we can simply print money if it came to it unlike countries like Greece who don’t have their own currency but use someone else’s, in their case the Euro.
Ehh…what happens if the value of stocks/shares held by the fund go down and/or the bonds aren’t repaid? Who’s to guarantee a 5% yearly increase+fees? What if there’s a bad year with only 1% or -2% growth? You still pay the fee. Real inflation numbers are higher than official stats (look at your groceries receipts from 12 months ago and your fuel bills). Printing money is fine as long as you’re among the first people/companies to get it, after this it’s worth much less. I also doubt they’d print hundreds of billions or more if things get really bad in a hurry. The FSCS is a nice idea, let’s remember 2008 how that went…
The 1% management fees - are charged on the entire consideration (all the money invested with all assets marked-to-market) It isn’t just 1% on othe “Profits” meaning they don’t get paid on years the fund loses value - more’s the pity…
Printing Money only works when you’d have DEflation where if you don’t do it - like in the 1930’s, when there was a banking moratorium which did more to aggrevate the 1930’s slump than the stock market crash of 1929.
We had QE in 2008 to allow “good” banks to take over the “about to go bust” banks, such as Merril Lynch being swallowed by Bank of America for example… The most solid bank in America was Wells Fargo, as their assets were diversified over actual assets with positive intrinsic values, such as factories, mines, and premium (as opposed to ‘sub-prime’) properties.
The Far Eastern Banks - lost a lot of money when the commodity bubble burst some time later.
The EU banks got sharply marked down to market after the referendum result, and the ECB has been effectively bailing out Deutsche Bank in partiular - for some time since the referendum.
The banks were forced to liquidate their bond holdings in 2008 to raise capital, with the Bank of England acting as market maker for all those bonds being sold back at once. QE money was used BY the Bank of England to purchase these bonds. Those banks who were then able to re-float - did so, and those banks like Lehman Brothers - left holding all the defaulted mortgage security paper (NOT purchased by the Bank of England, and other national banks around the world) - FAILED. It is somewhat misleading to tell the public that the QE money was loaned to the Banks being bailed out. As such, they sold assets to bail out THEMSELVES, which WITHOUT the QE - Interest rates would have risen sharply, which would have precipitated another round of bank crashes - but THIS time of High Street Mortgage Banks, some of whom were rather over-exposed to the FIXED rate mortgage market - where rates rising sharply - causes them huge losses via the derivatives market upon which these “collaterized debt obligation swaps” were traded. Think of it like being a bookmaker who heavily lays a 1000-1 horse - that then romps home… That bookie probably never bothered to hedge, because “hedging” costs money off your top line for the year. WITHOUT the hedge - ALL payouts come the “Black Swan Event” of the No Hoper coming in - and all the money has to be paid out of that bookmaker’s pocket - to an unlimited extent, in the case of the Banks such as Lehmans.
“Derivatives” are indeed “Investments of Mass Destruction” as portrayed by Warren Buffet.
Other banks to have now gone include Kleinwort Benson, where I was working in 1986-7 for a while, Bear Sterns, Babcock & Brown, Wachovia Securities, and of course Halifax Bank of Scotland - which was the only “High Street” outfit listed there. Whilst Lehmans failed outright, the other fallen angels from 2008-9 - were fire-sold to other stronger banks such as Wells Fargo and Bank of America, already mentioned.
Our banks - are a powerful instrument IF controlled by our country, rather than our world rivals, especially in peace time.
Tony Benn - was Correct, and so was Thomas Jefferson of course…
