Saying what needs to be said?

Solomons-financial-advisor-wimbledon-blogger

Saying what needs to be said?

I’m told that to appeal to potential new clients, I need to differentiate myself from every other financial adviser out there. So I was wondering if I’m saying what needs to be said? I’m aware that our culture often appears to be one of noise rather than content. I imagine that most of you will know the names of several media hungry pop stars, but probably have never bought any of their music (or could identify it). This we are told is all well and good as we aren’t the target audience.

OK. Like everyone else, I’m acutely aware that reading the entire contents of my inbox would be more than enough to see out my lifetime, probably more than once! So attempting to get your attention (or mine) is an increasingly difficult task. It seems that saying anything is better than saying nothing, but saying something inflammatory will get attention – depending on the reception, sometimes excused as “being ironic”.

In a nutshell…

However, what we at Solomons offer is simple to explain. We help people to think about the future that they want and try to help make it happen, by helping you to understand what it takes and then to build financial architecture around your specific, individual, unique plan. We coach, encourage, educate, implement, review, check and learn. It’s a partnership into the unknown with a great deal of uncertainty. We cannot work miracles, have no magic powers and make a stack of assumptions based upon experience and data from the past. Being human, we will probably make mistakes, but none deliberately. We will try to correct those that we make.

So, just to check we’re on the same page… is that what you are looking for? If not, what do you need to hear? (so that I can figure out if it’s something that I am not saying loudly enough).

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Saying what needs to be said?Dominic2025-01-28T14:35:48+00:00

Creed: Fighting Talk

Creed: Fighting Talk?

There is a sense in which the new film “Creed” is simply another film about boxing and fighting talk. Given the latter films of the Rocky franchise, anyone could be forgiven for thinking it was likely to be both propaganda for American capitalism and selling a soundtrack for exercise. Yet I wonder if this is a fair reflection.

The movie opens into the harsh world of institutional care for young boys and unfolds with our main character coming to terms (or not) with the death of his mother and then learning that his fatherless existence was due to infidelity and untimely death. His lucky break comes in the form of adoption by the woman originally jilted. The unnerving reality is that despite being afforded acceptance, financial security and a surname with punch, there is a gnawing sense that he simply doesn’t “fit”. He turns to the most compelling and certain traits of his makeup – that of rage and a desperate search for purpose.

Now perhaps I’m reading too much into things, but despite appearances, the Rocky franchise has always exposed an uncomfortable relationship with wealth and how it changes lives and relationships, invariably not for the better.

Shadow Boxing

As we all know, America has all manner of racial problems, perhaps there is more than a passing nod to the two areas of life where black Americans are “allowed” to flourish – sport and music, where fame and riches catapult often humble backgrounds into the limelight of the elite. In the film, the protagonist, Adonis meets several sparring partners, but Bianca is the one that offers the prospect of a real connection and possibility of going the distance.

Growth through loss

Our story touches on the loss of loved ones and the continued search for significance, the battles that many face, irrespective of wealth, physical or mental ability. These are of course issues that face us all as we age (even Rocky) and like him we have greater exposure to the limitations that money can supply, but perhaps more costly is the sense of lost purpose, which can make us spectators of our own lives. Rocky rekindles his by reconnecting with the younger man within and without, a mentor, a trainer.

Like every prizefighter, we all come to a point of realization where money cannot buy peace of mind… something that the American dream and capitalism conveniently ignore. That is not to suggest that money cannot help – of course it can, but as we witness all too often, an identity crisis is not solved by cash.

In your corner

Some think a financial adviser is going to work magic, providing enormous payoff without significant effort. I see it rather differently, my role as a financial planner is more akin to the trainer, encouraging, helping to keep you on track, focused and with a strategy for the success you are seeking.

Our fight is more like shadow boxing, where our greatest opponent is ourselves. Our own minds and bodies can turn against us, something that becomes a more relevant nagging reality with each passing year….. So however many we have left ahead, we ought to make the most of this one; a theme that I seem to be returning to with regularity.

Ultimately, we are not remembered for our incomes or our assets, but how we spent our time, how we lived our lives. This is the fight that I am interested in, how we figure out what is indeed enough given an uncertain future and a history of mixed experience…. So I guess, this may come down to our own creed.

Here’s the trailer for Creed, which has a supporting actor OSCAR nomination for Sylvester Stallone. For some, this will be just another Stallone boxing movie, but may I suggest that perhaps it punches considerably above its weight.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Creed: Fighting TalkDominic2025-01-28T14:35:48+00:00

War and Peace

I suspect that you will have seen the promotion for the BBC1 Sunday night drama – Tolstoy’s “War and Peace”. The story, one of the longest written, but still “short” at 1,440 pages and 561,093 words when compared against the 10 volumes of “Artamène ou le Grand Cyrus” and a massive 1,954,300 words for which the certainty of the author is questionable.

One of the many criticisms of the financial services industry has of itself is the amount of information that “needs” to be provided to investors. The prospect of reading a report containing jargon and frankly often dull, uninspiring information is… well….uninspiring.

Improvements for 2016

We have worked hard over the years to reduce our versions of “War and Peace” generally by providing a summary letter together with an Appendices. The information is helpful, to some extent important, but often hard to produce in any succinct manner. There are other agendas to consider too – the regulator wants to be assured that investors are given sufficient facts and risk warnings, whilst the professional indemnity insurers want to ensure that every possible loophole is addressed to avoid any grounds for complaint.

Of course getting documents right is important, as highlighted in the BBC’s opening episode, which concerns the Will and beneficiaries of Count Bezukhov, as often is the case… where there’s a Will, there’s a crowd..

So for those of you that have received reports over the last couple of years or so, I wonder if you have any comments or thoughts about how we might continue to make some improvements – after all we are attempting to explain how we propose you handle your money. I welcome your feedback.

The BBC have condensed the novel into 6 episodes on Sunday evenings at 9pm. Click here for further information and the BBC i-player.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

War and PeaceDominic2025-01-28T14:35:49+00:00

Dawn French 30 Million Minutes

I recently saw Dawn French perform 30 million minutes at London’s Vaudeville theatre. Most will know Dawn as something of a national treasure from her portrayal as the wonderful Vicar of Dibley which continues to be repeated on television. She is of course part of the double-act French and Saunders and has been one of the leading people behind Comic Relief (who are 30 this Christmas).

30 Million Minutes

The new show called 30 Million Minutes is essentially her story so far. The 30 million minutes being roughly how long she has been alive (there are 524,160 minutes in a 365 day year) the 30 million point passed once 57 years 85 days and 8 hours old, Dawn turned 58 in October. Like most of our stories, hers contains both wonderful moments, some hilarious and some plainly deeply painful. However most of us do not have our stories splattered across mainstream media, neither, thankfully, do we suffer the abuse about our appearance.

Confessions of a Comic?

This is a personal and revealing performance, exposing her self-confessed need for attention and affirmation, which seems to be insatiable. Tremendous credit for her bravery and self-exposure, however I am left to wonder quite why she would revisit this each night in her performances, perhaps therapy through retelling or partly confessional. Her story is moving, and at times desperately sad, whilst being littered with familiar and familial references.

Quite how revealing the story is can only be judged by those that know her best, but clearly the impact of a life in the media has a high price with some very personal attacks, however I was left with the nagging feeling that whilst to some extent the performance is akin to a story between friends, something deeper was missing in the nightly retelling… such as her motivation for becoming the consummate clown.

Despite valiant efforts to convince both herself and audiences in all formats that being comfortable in your own skin and acceptance of body image, I wonder how many are sufficiently convinced within a culture of appearance is all.

Perhaps obviously, but I don’t know Dawn but like most of the population I have a very warm place in my consciousness for her, the new show has merely built upon this. We are reminded that time is fleeting and for a financial planning angle? …. well, reflect on your own story and where you’d like to take it.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Dawn French 30 Million MinutesDominic2025-01-28T14:35:49+00:00

Experience of a Lifetime

Experience of a lifetime

Well, here we are in December. The world remains in a state of anxiety about a plethora of challenges and even here in Britain, many are suffering from the weather conditions which make for a difficult Christmas.

Christmas reminds me of many things, the nagging feeling that Christmas seems to have arrived quickly and that time is moving along all too rapidly. Whilst many are struggling simply to find shelter this Christmas, much like the central characters in the nativity story, I am reminded how harsh life can be for many people and how quickly circumstances can change. 2015 has certainly had more than its share of crisis and disaster.

Whilst our media and deep mid-Winter are full of bleakness, I remain thankful that I live in the relative safety of Britain, despite all our problems. Yet I am also reminded that life is indeed short and there are still many places that I’d like to see and things I wish to “witness”. Apart from the usual trappings, the Christmas break is also an opportunity to reflect on the coming year, for many this will include planning your next holiday, perhaps one from your bucket list?

Trip of a Lifetime

One of my clients runs a boutique travel business and it occurred to me that there are a number of similarities in what we do. There are certainly lots of questions about where you want to go and importantly an independent mindset that is able to put together suitable great experience. What I had not appreciated was that it actually costs the same amount whether you use the expertise or not. I have certainly used the web to book holidays in the past, spending hours, trawling through endless options, but simply had not appreciated that someone else could do this for me, an expert, and it wouldn’t cost any more!

Mercator Travel have several brands which they use to focus their expertise on specific regions of the world. For example, south or central America is currently a great destination for those seeking something memorable and rather different. If you are anything like me, I have forgotten what I gave and received last Christmas, yet I never forget holiday experiences.

As a boutique business, they place great emphasis on creating a wonderful experience and getting all the little details right. Apart from ensuring that your trip is planned perfectly, the business is built around providing a top drawer service, with the aim, like every good business of creating a great reputation and clients that return. So if you are considering a great trip in 2016 may I suggest that you check out a couple of their websites.

Just in case you think there’s something in it for me – there isn’t. I am interested in helping all of our clients, profiling those that run small independent businesses and of course those wishing to get more from life with a lot less hassle. Do give them a call on 01932 424252.

Postcards from the Edge…

Financial planning isn’t meant to be dull, its about your life and helping you to figure out what you want from it. This is often difficult for most people to verbalise, there’s something within our British-ness that makes most of us reluctant to express this. How you spend and give your money is one of our freedoms and invariably for the vast majority there is often an unspoken connection of shared experiences and a sense of purpose just beneath the surface. There is little point in building up wealth if you don’t get to use it.

One of my peers shared an idea with me that he finds works well with his clients. He asks them to send him a postcard from wherever they have been. He displays these in a book in his reception. The idea being that there is a huge variety of clients and the places they visit yet all share the freedom to enjoy some of the money that they have worked hard to save. He gets lots saying “enjoying spending the inheritance… pension” or whatever. The point being that financial planning when done well brings the freedom to make empowered financial decisions – many of them are a lot of fun. So perhaps I will ask you to do this in 2016 as well.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Experience of a LifetimeDominic2025-01-28T14:35:49+00:00

Divorce

Understandably, divorce is a sensitive topic. Yet it is a reality for many people. The subject of divorce rates is open to interpretation. Some will see this as failed relationships, others will see it as ending misery, of course each has its own context and trauma (or not).

Statistics are interesting, but as I have said on countless occasions, they are merely data that can be manipulated to assist argument. So with that in mind, the ONS (Office for National Statistics…. yes it does sound rather like something from 1984) released data this week revealing that divorce rates fell 2.9% in 2013, when compared with 2012. Factually, 2013 saw 114,720 couples in England and Wales granted a legal divorce. The bulk of which were people aged 40-49, however notably it would appear that more younger women divorce than men.

Anecdotal experience would tend to suggest that generally wives are a bit younger than their husbands… emphasis on generally. In addition divorce rates at older ages are likely to be lower due to the fact that marriages also end when people die and there are very few divorces amongst those under 25. So there’s a degree to which one might ask… isn’t this simply stating the obvious? One might also suggest that fewer marriages take place, so it follows that fewer divorces do.

when-a-man-loves-a-woman-movie-poster-19941

Chance of divorce

I’m being a little inaccurate with interpretation here, rather than the chance of divorce, a better and more accurate statement would be the percentage of marriages that end in divorce. According to the ONS, the percentage of marriages ending in divorce has generally increased for those marrying between the late 1960s and the late 1990s. For those married in 1968 20% had divorced within 15 years. Thirty years later, of those married in 1998 32% were divorced before a 15th anniversary. The current median duration of a marriage that ends in divorce was 11.7 years in 2013.

The ONS note that compared to data from 2005 the percentage of marriages that end in divorce reduced from 45% to 42%…. so a minor reduction. They suggest a couple of possible factors for this.

1. The age at first marriage has been increasing, data suggests those that marry at older ages tend to have a lower risk of divorce.

2. Cohabitation has increased, which acts as a filter for those contemplating marriage, so arguably fewer marriages then end divorce.

OK, so this is all well and good, but so what? Well…. the uncomfortable truth is that something like 4/10 marriages end in divorce. So it would seem logical to reflect on this when it comes to your financial planning, by ensuring that both parties in a couple are engaged in financial decisions, both are building and protecting wealth. I have only ever seen one painless divorce (which in reality I do not know much about) most are very painful. Your financial planning can be arranged to reduce such pain, should it occur.

To generalise again, women under the age of 35 are far more likely to divorce than men. Men over the age of 50 are more likely to divorce than women.

Christmas Stress

If you are experiencing a divorce or think you may be about to. Christmas and summer holidays are the time when most people decide to divorce. Understanding your finances, what you have and what you need is vital and I am constantly surprised at how few divorce lawyers every suggest some proper cashflow modelling to reveal what is possible.

Divorce or relationship struggles often make good drama. Here is the trailer for the film “The Story of Us” starring Michelle Pfeiffer and Bruce Willis.

and for some dvd’s on the theme…

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

DivorceDominic2025-01-28T14:35:50+00:00

Pensioners set to run out of cash

The Social Market Foundation released a report yesterday called “The Golden Years – What freedom and choice will mean for pensioners“. This explores the new pension freedoms that were introduced and considers the experience of other nations where this has already happened to see what we might learn.

It will come as little surprise to anyone, that given the opportunity to take money from a pension, many people struggle to make it last for the remainder of their lifetime, yet this is precisely what underpins the point of a pension.

The report points to experience in Australia and the US where similar pension freedoms have been enjoyed. They note three main types of behaviour and problems.

Cautious Australians – who withdraw less than 1% of their pension fund
Quick spending Australians – one in 4 clear out their pension fund by 75
Typical Americans – who withdraw 8% a year

Overspending and pessimism

I’m not going to pretend that this is an easy problem. As a financial planner I have to make lots of assumptions about the future and I typically advise clients that few of them will be accurate, but they are all reasonable, but just as importantly, they are reviewed.

In simple terms, financial planning attempts to ensure that you don’t run out of money. Great financial planning attempts to ensure that you get and keep the lifestyle you want. There are numerous assumptions that I have to make, not least of which is your life expectancy. Most people under estimate this. Pause for a moment. At the risk of boring you… as I say this to clients… if we take a conservative approach to your life expectancy and assume you live until you are 100, your money has to last longer and thus work harder… if we assume you live to say 80, then it doesn’t need to last as long or work as hard… but if you invite me to your 80th birthday party, I’m the least popular person in the room, because once we’ve had a drink, the cake and a bit of a dance, I turn the lights off. That’s it.

OK, you may have other sources of income (State Pension etc) which would continue, but the point is merely to help you grasp the significance of this assumption… which I find seems to work. Importantly we review this (its an educated guess)… the day you die isn’t something that we can easily predict, but we can at least build scenarios into your plan.

The Destitute Pensioner

There’e a new film out which I plan to see as it stars the rather wonderful Maggie Smith. Its called “Lady in the Van” and is on general release on 13th November. Its based on a true story. I’m not sure if this was a lifestyle choice or something that was forced upon her, but it makes for a good script. Without proper financial planning advice, many pensioners are going to run out of money, the only way to properly engage with this prospect is to provide a proper financial plan which includes cash-flow forecasts, without it (as many advisers still appear to be) you are up the creek with the proverbial paddle. Here’s the trailer.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Pensioners set to run out of cashDominic2025-01-28T14:35:50+00:00

Where does the time go?

Where does all the time go?

It’s the holiday season. All being well in a couple of days I will be poolside, reflecting on the year so far and what I still need to do, (being a couple of things that readily come to mind) and no doubt I will wonder, yet again “where does all the time go?”

Holidays are a little like landmarks in time. My daughters often use holidays as a reminder for helping us recall when other things happened, for example, a recent question about our aging cat (who went to move in with the neighbours when the dog arrived) was answered by recalling where we were and what else was going on when we picked him up… all referenced by our family holiday of that year.

So this week I will be reflecting on the a small milestone. It will be 16 years since I formally received permission from the regulator to open the doors at Solomons. Sixteen years. It seems that I have endured rather longer than the regulator, which is in its third revision or Doctor Who like regeneration in the same period.

Taking Stock

I hope that this doesn’t sound twee, but I really enjoy helping my clients. I love real stories and helping clients plot new ones – or rather the life that they want in the future. Of course I don’t make it happen – they (you) do that. However I have the opportunity to prompt thought, vision and help clarify it, occasionally acting as a type of permission-giver due to being able to demonstrate what would happen if…

That’s what I love about financial planning. Like most people, I find financial products rather dull and invariably remain sceptical and suspicious of the wider workings of the financial services industry, which resulted in the formation of the company and the business model of transparent charges and a “level playing-field” approach.

It is with some degree of surprise that I read my trade press suggesting a further 22% of advisers will close within the next year because more changes to commission are coming or feared. The change being that it will be turned off…. yet this is what we did 16 years ago.

Woodstock …. or out in the Wilderness

At the weekend I attended “Wilderness” a festival held in Oxfordshire. It was my first visit (its fifth year) and having been to quite a number of different festivals over the years, it was interesting to experience the evidently more affluent middle-class approach. I was struck by the irony of it being located near Woodstock and connotations with the east-coast American hippy counter-culture festival started in 1969 of the same name. What was once counter-cultural has become both “fashionable” and highly commoditized over the last 46 years. Sadly I missed the V&A museum’s take on this observation, which is true of many, if not all festivals, not simply Wilderness, who have by far the best on-site food (I admit to indulging in a superb banquet fit for a King at the Hix on-site restaurant and the odd glass of champagne at the Lauren-Perrier orangery) all of which you won’t find at your typical summer festival. Nobody dared mention the phrase champagne socialism too loudly.

Anyway, one of the talks/seminars I attended was called “State of the Nation” hosted by Jolyon Rubinstein which raised questions about business, stock markets and economics. Despite festival attire, many of those attending are probably the sort of people (of all ages) that seek out financial advice, yet few seemed to really appreciate how much financial services eeks out of their wealth in charges…. something that I hope is evidently clear to our clients and why I set out 16 years ago to be transparent and use low-cost investing techniques. I guess it is good that finally others are waking up to better understanding of economics, wealth and planning. As many festival revellers seemed to come from the London area, perhaps rethinking or dare I say even re-imagining financial planning resides within striking distance of Wimbledon…. and we’ve been walking the talk – living it for some time.

What Wilderness has done is to break into the imagination of those more right of centre, higher earners, who are also desperately aware of the unfairness of the “system” and have found some comfort in various, albeit expensive forms of alternative…. a sure sign for hope.

Do share this with your friends..

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Where does the time go?Dominic2025-01-28T14:35:50+00:00

Being Open – The Honesty Box

Perhaps you are a keen golfer? there are many pearls of wisdom that golf offers up as general advice for life. The Open finally finished yesterday, having been delayed by poor weather, something that I’m sure the English cricket team wished for.

Anyway it reminded me of a family holiday many years ago, which included playing at St Andrews and Gleneagles. My folks took my brothers and I to Perthshire to feed our growing interest in golf – mine has since faded into irrelevance over the years, although both brothers continue to play.

Scotland is full of lots of small beautiful courses, at the time “juniors” weren’t terribly welcome at English clubs, whereas the Scots seemed to positively encourage them. One of the things that struck me was the “honesty box”. I don’t know if they still exist, but back then, this acted as a place to make your payment for your green fees (the cost of playing a round of golf). I was impressed by the sense of trust and goodwill that this created and the impression stayed with me.

Marketing, Spam and Other Ills

As a small business, we have an advantage that we can adapt quickly. I have been working hard on many aspects of the business, one of them being the marketing. I’m of the opinion that this blog serves to provide relevant information, in a format that is hopefully engaging, enlightening and on occasion personally revealing. Ultimately I figure I want to work with people who I like and who like me enough to meet regularly and trust me with their life savings…. So it makes sense to me that this blog should give you a bit more insight into who I am, some of my values and what sort of person I am, rather than just glossy marketing.

It is possible that a round of golf could achieve the same thing, (but I know that golf isnt everyone’s cup of tea…). It has been said that much can be learned about someone over a game lasting 4-5 hours, that is partly competitive, but largely about competing with yourself… exposing strengths and weaknesses, but importantly, whether someone plays by the rules (and spirit) of the game.

Fore: What We Are Doing…

So in the interests of honest feedback we will be providing short weekly emails, providing useful information (I hope) to our clients (and those that are interested in what we do). I’m looking for your input into our honesty box – feedback that will make this blog more useful and more relevant. Ultimately I’d like to help as many people as I can, our financial planning clients have a highly involved service, but many can also be helped along their way with some useful information.

We won’t spam you, we never sell data to anyone else. However our information isn’t perfect and all databases need a regular clean up to ensure that the right people get the right information. So I will apologise in advance if we send now send you something that you don’t want. We have provided an opt-out (and it works). I guess that this is where you have to decide what you do about the honesty box… there’s no payment, but I’d certainly value feedback and help with getting the message out there, by sharing things you find helpful.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Being Open – The Honesty BoxDominic2025-01-28T14:35:51+00:00

Budget 2015: Students

Budget 2015 – Students

I’m going to attempt to be non-political by explaining how the current student loan system works. This relates to “Type 2” loans, which started in September 2012. Having watched mainstream media coverage of the Budget, I was alarmed at the degree to which little was known about the cost of a prospective Degree… by both media pundits and potential students.

Your Starter for Ten

Being a student involves many things, but financially these are the basics – the cost of the course, the cost of the accommodation and the cost of living. Over the last 30 years the number of students has increased enormously, fuelled by the belief that higher qualifications result in better choices, better income, better national prosperity. As you will know Colleges and Polytechnics became Universities some time ago, for no other reason (I think) than appearing less elitist.

Anyhow, the cost of a University course varies relatively little, most are £9,000. Those not living at home, need accommodation, which realistically costs between £3,500 – £6,000 a year, depending on location and type. Once through the first year most are left to house share within the private sector. Then there is the cost of living… food, drink, books (depending on the course) and the occasional fun night out. I think its possible for most students to live on £80 a week for this.

Loans and Grants

That’s it. Those are the costs. You can pay yourself or you can apply for a tuition loan to cover the cost of the course and a living maintenance “grant” (also a loan) for the living part. Those from families with low incomes can also apply for a further grant, some of which can be a loan, some is a grant, never to be repaid. The Chancellor announced on 8th July that this bit is changing – so that its all wrapped up as a loan. Nothing gratis.

Student Debt

The debt clock starts once the 3 year course ends. Interest is added and so the debt increases, but the amount of interest added depends on income (RPI for those earning less than £21,000 and RPI up to 3% for those earning £21,000-£41,000, above that its RPI+3%).

Repayments are made via salary if you are employed, or via self-assessment returns if self-employed. No payments are made if income drops below £21,000. Leaving the UK means that the loan is repaid directly to the Student Loan Company… failing to notify them will result in penalties. The loan lasts for 30 years and then cancelled, whatever the balance.

So let’s suppose you have three years of tuition loans (£18,000) and 3 years of maintenance loans (say £15,000), a total debt of £33,000. In theory if you never work or earn more than £21,000 you will not repay a penny. Hopefully University was inspiring enough and helped to obtain a career in something that is rather better paid than £21,000 a year over time… so most will pay something.

The Repayments

This is where it seems that most of the misunderstanding occurs. Loans, however large are only payable if income is over £21,000. If income falls below this, payments stop, interest continues to accrue. In essence then the mechanics of this are more like an extra tax than a loan.

Gross Income	Annual Payment	Monthly Payment
£21,000	£0	£0
£22,000	£90	£7
£25,000	£360	£30
£35,000	£1260	£105

Perhaps you could think of a mobile phone contract… £30 a month seems pretty “normal” for a phone. So I fail to see how £30 a month is not affordable for a Degree. Of course many graduates would hope and expect to earn much more than £35,000. As they do so, their repayments rise. In fact repayments are calculated at 9% of pre-tax income over £21,000. So a graduate earning £150,000 would pay £11,610 a year or £967 a month (the monthly payments are always rounded down). Of course by that point one would expect the loan to have been repaid anyway.

The Politics

Frankly I would need to be persuaded (and open to being so) that going to University isn’t affordable under the current terms. However this misses the wider and more substantive political point. Do we want a well-educated society that one day will be “running the country”. Do we view higher education costs as an investment in our own population or not? The argument that better educated people get better paid jobs and therefore pay more income tax applies whichever side of the debate you stand.

It would appear that given the increase in courses and students, most believe that a Degree must provide better choices. In 1920 only 4,357 first Degrees (as in a Degree not a Masters) were awarded, by 1950 the number had increased to 17,337 and by 1970 51,189. 1990 saw 77,163 Degrees awarded and in 2000 this rose to 243,246. In 2011 the number stood at 350,800. This level of growth is pretty dramatic isn’t it. Since 1980 the number of graduates each year has increased five-fold or eighty-fold since 1920. [source: House of Commons Library, SN/SG/4252 27 November 2012]

Naturally a “free” University system is open to abuse, (every system is) the current one is too – its possible that a graduate could avoid repaying the loan by keeping income below £21,000 a year for 30 years… but I imagine that would be rather difficult, when allowing for real life and inflation.

Happy to be challenged, but let’s ensure the facts are right. The notion of starting adult life with a large debt isn’t pleasant, but in practice it isn’t a bad solution to help more people improve their education.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Budget 2015: StudentsDominic2025-01-28T14:35:51+00:00