Credit deflation and the reflation cycle to come (part 2)

[sancho panza]

[M S E Refugee]

2 hours ago, Democorruptcy said:

RMG workers happy.

 

I can assure you they won't be, you have never met a group of spoilt and self entitled lazy so and so's.

[JMD]

7 hours ago, MrXxxx said:

Can I extend this in to the two pension types (DB and DC), and give my thoughts.

DB - This 'bail in' to government bonds holds two threats depending on where you are age wise in the pension cycle. For those about to start or already drawing their DB pension its not going to be an issue until inflation rates go above 10%; the usual ceiling where they 'stop out'. For the younger members it is going to be a big issue, as to guarantee the payments of pensioners due to lower rates of return, their % of salary pension contributions will rise; I am thinking non-public here. In addition, if things get really bad and the scheme collapses before they start their pensions they will only be eligible to a 90% protection, whereas those already drawing get 100% protection. Finally there is the 'spectre' that if enough schemes collapsed the government might move the 'goalposts' and reduce the amount of protection or make it means tested on other pension provision you might have....makes you wonder if taking a % early retirement cost may actually be better/there may be a 'sweet spot' where its make financial sense to retire a few years early rather than 'ploughing' in the extra years higher contributions?

DC - Once again as for DB above this will depend on where you sit in the pension cycle. If you are over 50 you can start drawdown, here once again it may be worth starting drawdown early rather than waiting for SRA as you will be able to decide where to reinvest (although outside a tax wrapper unless via ISA) i.e. shares/commods/physical PMs, rather than being compelled to be partly invested in low yield government bonds.

NOTE, DYOR as I am not sure if this understanding is correct (it seems it to me), but as always I am sure people will correct if not.

Thanks MrXxx.                                                                                                                                                              Is this other people's understanding? Ie. Once a sipp is put into drawdown, does this prevent government 'interference' into the sipp, such as forcing % of a sipp to invest in government bonds, etc?                                                          Durhamborn, I recall you posting recently your 'pension plan', unfortunately I can't now find that post, but was it to mitigate against future burdensome government regulation/financial repression? I am beginning to think about such things more and more because I do expect stealth raids by gov. on my investments this decade or even in the near future. 

[wherebee]

4 hours ago, Harley said:

If I was rich, I'd go to one of those swanky advisors and be sunning myself in the Caribbean like the rest.  But a friend used some guy for a property purchase and got well HRMC roasted.  That's the problem not having the right address book!  I post hoping for answers!  The best I can do for this and other reasons is to spend some on things to reduce my future cost of living.  I could buy a woodland or something but I need income and that means divs.  One hope is higher rates so an annuity becomes feasible again.  I may be being paranoic but apart from a cough, loss of taste, etc this time last year(!), who would have expected us to be where we are now?  And initial dimwittery or not, they will no let this opportunity go and without that their behaviour is, IMO, completely insane/stupid/etc. 

I think the UK will be a long time before a wealth tax is brought in, due to the 1% having so much tied up in hard assets such as property and antiques/art.

So -if I was in the UK I'd look for hard assets which are not registered, such as PM's, high quality tools, high quality antiques, etc.  Basically anything you could sell later in life for cash, and which will increase in value in an inflationary world.  Note they generate no income whilst holding, so something you get pleasure from is a bonus.

[DurhamBorn]

8 hours ago, sancho panza said:

Question to both of you regarding Candian oil exposure.Is there a big oilie/s for less experienced punters to have a look at.I now from previous discussions that it's a risky area.

Or would you be covered by the big international oilies ?

as above CP?

I see Enbridge as a great play on Canadian oil.Ok it wont be doubling any time soon etc,but i can see that already high dividend cranking higher over the cycle,and then getting a little parabolic run at some point towards the end.Shell are doing a lot of work on LNG from Canada putting in some new LNG trains.Repsol have also been signing deals for heavy Canadian crude,they understand South American as good as anyone so that would say they know Mexico etc is going to go in reverse,so they are securing Canadian deals.So however strange Repsol are a bit of a play on Canada as well,through the back door.

[Democorruptcy]

2 hours ago, DurhamBorn said:

I see Enbridge as a great play on Canadian oil.Ok it wont be doubling any time soon etc,but i can see that already high dividend cranking higher over the cycle,and then getting a little parabolic run at some point towards the end.Shell are doing a lot of work on LNG from Canada putting in some new LNG trains.Repsol have also been signing deals for heavy Canadian crude,they understand South American as good as anyone so that would say they know Mexico etc is going to go in reverse,so they are securing Canadian deals.So however strange Repsol are a bit of a play on Canada as well,through the back door.

I see they have managed to have 26 consecutive dividend increases, impressive when our oil majors have cut. 50 billion long term debt?

[Barnsey]

 

[Sugarlips]

I know, it’s ZH but..

OCEAN FREIGHT COSTS …

The Real Cost Of Ocean Freight Out Of Asia Is Hitting “Unbelievable” Heights … Mike Wackett of The Loadstar / Zerohedge

https://www.zerohedge.com/economics/real-cost-ocean-freight-out-asia-hitting-unbelievable-heights

Notwithstanding further rate spikes this week, the Shanghai Containerized Freight Index (SCFI) is still understating the prices shippers are paying carriers, according to a senior analyst. “It should be noted that the market is at a point where the SCFI is, in some cases, significantly underestimating actual rates paid,” said SeaIntelligence’s Lars Jensen.

However, the SCFI’s comprehensive index, reading 2,411.82, is 167% higher than a year ago, reflecting huge spot rate increases across all export trades from Asia. For example, rates to the South American east coast are recorded at some 200% higher than 12 months ago, while intra-Asia spots are 450% more expensive. … read more via hyperlink above …

[Democorruptcy]

13 hours ago, JMD said:

Thanks MrXxx.                                                                                                                                                              Is this other people's understanding? Ie. Once a sipp is put into drawdown, does this prevent government 'interference' into the sipp, such as forcing % of a sipp to invest in government bonds, etc?                                                          Durhamborn, I recall you posting recently your 'pension plan', unfortunately I can't now find that post, but was it to mitigate against future burdensome government regulation/financial repression? I am beginning to think about such things more and more because I do expect stealth raids by gov. on my investments this decade or even in the near future. 

SIPP = Self Invested Personal Plan.

The clue is in "Self" you can invest it in what you want, whether it's in drawdown or not.

[Harley]

3 hours ago, Barnsey said:

 

Indeed, the Hong Kong market has not been good to me.  Maybe political tensions?  Move to Singapore?  Japan has been doing better. 

[Harley]

5 hours ago, Democorruptcy said:

I see they have managed to have 26 consecutive dividend increases, impressive when our oil majors have cut. 50 billion long term debt?

Passed my screener way back with good cash flow (DYOR, may have now changed).  Bought an initial tranche (one third) but like most they've run ahead so can only dream of a pullback, which I do.

[Harley]

22 minutes ago, Democorruptcy said:

SIPP = Self Invested Personal Plan.

The clue is in "Self" you can invest it in what you want, whether it's in drawdown or not.

The government can do whatever it likes - they've shown that this last year.  Probably more to follow?  I know someone who took the 25% but did not take any income as they were told they could still contribute until that moment.  Next problem was what to do with the 25% but at least they have choices.  Pensionwise(?) for advice if you are old enough.

[Democorruptcy]

6 minutes ago, Harley said:

The government can do whatever it likes - they've shown that this last year.  Probably more to follow?  I know someone who took the 25% but did not take any income as they were told they could still contribute until that moment.  Next problem was what to do with the 25% but at least they have choices.  Pensionwise(?) for advice if you are old enough.

Well yeah.... no rules are written in stone and I agree the governbankment can change them in the future to do a bit more thieving. No point in going into drawdown in a SIPP yet though, to stop someone buying you bonds when the buying decisions are yours!

[JMD]

1 hour ago, Democorruptcy said:

Well yeah.... no rules are written in stone and I agree the governbankment can change them in the future to do a bit more thieving. No point in going into drawdown in a SIPP yet though, to stop someone buying you bonds when the buying decisions are yours!

Its just about having a plan b. Democorruptcy, i cashed in my defined-benefit pension this year (thanks again for your offline help). The thing is that was my decision and i feel good about the choice i made, but i do admit that this year's covid-control events, MMT effectively being rolled out without discussion, etc, make me fearful/exposed to future government wealth taxes, bond bail-ins in the case of pensions, etc. I'm thinking (hoping) pensions in draw-down may be treated as defined-benefit schemes and left alone. Won't do this prematurely, but just want a list of possible options just in case. 

[Democorruptcy]

26 minutes ago, JMD said:

Its just about having a plan b. Democorruptcy, i cashed in my defined-benefit pension this year (thanks again for your offline help). The thing is that was my decision and i feel good about the choice i made, but i do admit that this year's covid-control events, MMT effectively being rolled out without discussion, etc, make me fearful/exposed to future government wealth taxes, bond bail-ins in the case of pensions, etc. I'm thinking (hoping) pensions in draw-down may be treated as defined-benefit schemes and left alone. Won't do this prematurely, but just want a list of possible options just in case. 

I think you are right to be concerned about what they might do next to rob you, it's their job. I moved my company pension to a SIPP to try avoid the firm being forced to put it into something I may not choose. Re your idea that Drawdown might protect it, maybe it could later but what if they go the other way and tax withdrawals more now than later? Whether you intend to add to your pension later is also a factor to bear in mind when considering Drawdown. Re your suggestion about them forcing SIPP money into Bonds, the FTSE would have a lot of sellers, so wouldn't they have to give notice to stagger it to avoid a crash?

[DurhamBorn]

8 hours ago, Democorruptcy said:

I see they have managed to have 26 consecutive dividend increases, impressive when our oil majors have cut. 50 billion long term debt?

25% fo US energy goes through them,they fund the divi and $3 billion of investment every year from free cash flow now.I expect they could pay down debt quickly if they stopped investing and rising prices would go straight to the bottom line as well.As always id refer no debt,but in an inflation cycle others wont be able to borrow to build at cheap rates,same as telcos.Bond holders funding equity holders returns.

[MrXxxx]

2 hours ago, Democorruptcy said:

Well yeah.... no rules are written in stone and I agree the governbankment can change them in the future to do a bit more thieving. No point in going into drawdown in a SIPP yet though, to stop someone buying you bonds when the buying decisions are yours!

But if you are close to early retirement maybe worth taking early whilst you still can and putting it into an isa each year I.e before they raise the access age/drop the 25% tf, and then finding yourself at SRA with so much undrawn capital you end up paying tax on it?

[DurhamBorn]

Government doesnt need a wealth tax,it has the best one ever thought of,the ones always used,and the one about to be used again.Inflation.The only big thing on top will be merging NI and tax to whack pensioners and unearned income.For that reason im structured for £16,600 a year from SIPPs thats the magic tax free amount including 25% tax free element,the rest from ISAs.

[DurhamBorn]

1 minute ago, MrXxxx said:

But if you are close to early retirement maybe worth taking early whilst you still can and putting it into an isa each year I.e before they raise the access age/drop the 25% tf, and then finding yourself at SRA with so much undrawn capital you end up paying tax on it?

Im going to take Uncrystalised lump sum withdrawals from 55 until 67,then go into drawdown 1 year before state pension.I dont think they will change the 25% tax free,no point.More likely to remove tax relief on the way in and merge NI with income tax.25% lump sum also helps final salary pension schemes as people take it even though it wipes out a big amount of monthly pension.

[MrXxxx]

6 minutes ago, DurhamBorn said:

Im going to take Uncrystalised lump sum withdrawals from 55 until 67,then go into drawdown 1 year before state pension.I dont think they will change the 25% tax free,no point.More likely to remove tax relief on the way in and merge NI with income tax.25% lump sum also helps final salary pension schemes as people take it even though it wipes out a big amount of monthly pension.

Agree, that's along the lines my post was written...so from 55-67 will you vary the UCLS to fit with part-time employment to keep under tax code?...also when you start taking these are your pension contributions (£2880? Max pa) limited by the recycling rule?

Lastly, taking the 25% tf the way you're doing is better, as any increases in pension sum profits I.e. divis/capital are also getting 25% tf above the capital sum at 67.

[Errol]

[Democorruptcy]

2 hours ago, MrXxxx said:

But if you are close to early retirement maybe worth taking early whilst you still can and putting it into an isa each year I.e before they raise the access age/drop the 25% tf, and then finding yourself at SRA with so much undrawn capital you end up paying tax on it?

It's a minefield! What if you draw your pension down to avoid a bad pension rule and then they cap the tax free part of an ISA? Each person's circumstances will be different and it's up to them what number they put their money on our roulette table. I could drawdown the money I transferred into my SIPP last year but have left it completely untouched and decided to wait and see what happens for now.

[The_Doc]

3 hours ago, DurhamBorn said:

Im going to take Uncrystalised lump sum withdrawals from 55 until 67,then go into drawdown 1 year before state pension.I dont think they will change the 25% tax free,no point.More likely to remove tax relief on the way in and merge NI with income tax.25% lump sum also helps final salary pension schemes as people take it even though it wipes out a big amount of monthly pension.

Be aware that taking an UFPLS will trigger the MPAA (money purchase annual allowance) so you could only put a maximum of £4000 per year into a pension going forward. As you know, pension contributions are the most tax efficient vehicle, so it may be wise to keep that option open to the max.

If you crystallise portions, take the 25% tax free lump sum and leave the rest invested (i.e not actually drawn down), then you don't trigger the MPAA and you can still put an amount into a pension up to your earning limit for that year (or more if you use carry over).

[MrXxxx]

2 hours ago, The_Doc said:

Be aware that taking an UFPLS will trigger the MPAA (money purchase annual allowance) so you could only put a maximum of £4000 per year into a pension going forward. As you know, pension contributions are the most tax efficient vehicle, so it may be wise to keep that option open to the max.

If you crystallise portions, take the 25% tax free lump sum and leave the rest invested (i.e not actually drawn down), then you don't trigger the MPAA and you can still put an amount into a pension up to your earning limit for that year (or more if you use carry over).

Thanks @The_Doc, this is what I was thinking of in my last post, just didn't have the details right.

[DurhamBorn]

3 hours ago, The_Doc said:

Be aware that taking an UFPLS will trigger the MPAA (money purchase annual allowance) so you could only put a maximum of £4000 per year into a pension going forward. As you know, pension contributions are the most tax efficient vehicle, so it may be wise to keep that option open to the max.

If you crystallise portions, take the 25% tax free lump sum and leave the rest invested (i.e not actually drawn down), then you don't trigger the MPAA and you can still put an amount into a pension up to your earning limit for that year (or more if you use carry over).

Very true,but for myself there is zero chance il be working or paying anything into a pension from 55,iv structured things to take the £16,600 tax free from then.