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Credit deflation and the reflation cycle to come.


DurhamBorn

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Run something past you all for opinion.A family member has no wife and hasnt always been in the best of health.He works and i already look after around £100k of investments of his.He has a small final salary pension from an ex blue chip employer for £2600 a year at 65 RPI linked up to 12%.He has been offered £101k in transfer value.He already has a small SIPP,so easy to transfer into and it looks like they are offering 40 times annual pension.Given his health (hes 49),lack of anyone to leave a spouse pension too ,he has kids so could leave anything in SIPP to them under 75 years old etc it looks like an insane good deal.Ok he loses £50 a week at 65 for life,but it means he would have around £200k at 55 if he would like to retire then,or semi retire and given he needs around £12k a year and has full state pension credits already.

What do you all think.If it was you would you take £50 a week at 65 or £100k into your SIPP you can access in 6 years.?

 

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I see several advantages of transferring to his SIPP : He's got the £101K ,  he will have access to  £5K per year for 20 years even if he doesn't invest it….could spend some earlier to enjoy when he is able to or  if needed  it will help bridge a gap to 65 . Alternatively £2.6K per year in 16 years won't buy that many cruises...

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2 hours ago, DurhamBorn said:

Run something past you all for opinion.A family member has no wife and hasnt always been in the best of health.He works and i already look after around £100k of investments of his.He has a small final salary pension from an ex blue chip employer for £2600 a year at 65 RPI linked up to 12%.He has been offered £101k in transfer value.He already has a small SIPP,so easy to transfer into and it looks like they are offering 40 times annual pension.Given his health (hes 49),lack of anyone to leave a spouse pension too ,he has kids so could leave anything in SIPP to them under 75 years old etc it looks like an insane good deal.Ok he loses £50 a week at 65 for life,but it means he would have around £200k at 55 if he would like to retire then,or semi retire and given he needs around £12k a year and has full state pension credits already.

What do you all think.If it was you would you take £50 a week at 65 or £100k into your SIPP you can access in 6 years.?

 

Just a few things to consider:

- Is £2600 already fixed at 65 or is there any revaluation between now and 65?

- Spouse's benefit could form a large large chunk of that value I see the point about this individual not requiring any spouses pension.  However, 49 is not that old.  What if there is a dependant /spouse in a few years?  Although that depends on the terms of the pension scheme

- if transfer value is requested in a few years time, it could still have allowance for spouse's benefits and should still be higher than what one would expect with just single life benefits

- Transfer value on defined benefits is often much lower than a cost of securing the same benefits with an insurance company

- I would be very surprised if one could take £101k and buy an annuity with similar terms, in particular with (almost, as 12% is unusually high limit) unlimited RPI increases

- I assume turning £100k into £200k in 6 years is not guaranteed?

- In case he decides not to take it straight away, just a few rules of thumb:  transfer value likely to increase with inflation (only future expectation of increases in this case if it is fixed at 65), increase as you get closer to retirement, decrease as interest rates rise

- For me this really boils down to whether health is an issue, does he expect to live to 60? 70? 80?  

- If health is a serious issue, does the pension scheme offer ill-health early retirement?  And what are the terms?  Could such query trigger lowering of the transfer value?  (shouldn't but I have no idea).

- I have no idea what the market is like for impaired life annuities but potentially some insurers could also offer slightly better terms than just buying on standard terms

 

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11 minutes ago, Bear Hug said:

Just a few things to consider:

- Is £2600 already fixed at 65 or is there any revaluation between now and 65?

- Spouse's benefit could form a large large chunk of that value I see the point about this individual not requiring any spouses pension.  However, 49 is not that old.  What if there is a dependant /spouse in a few years?  Although that depends on the terms of the pension scheme

- if transfer value is requested in a few years time, it could still have allowance for spouse's benefits and should still be higher than what one would expect with just single life benefits

- Transfer value on defined benefits is often much lower than a cost of securing the same benefits with an insurance company

- I would be very surprised if one could take £101k and buy an annuity with similar terms, in particular with (almost, as 12% is unusually high limit) unlimited RPI increases

- I assume turning £100k into £200k in 6 years is not guaranteed?

- In case he decides not to take it straight away, just a few rules of thumb:  transfer value likely to increase with inflation (only future expectation of increases in this case if it is fixed at 65), increase as you get closer to retirement, decrease as interest rates rise

- For me this really boils down to whether health is an issue, does he expect to live to 60? 70? 80?  

- If health is a serious issue, does the pension scheme offer ill-health early retirement?  And what are the terms?  Could such query trigger lowering of the transfer value?  (shouldn't but I have no idea).

- I have no idea what the market is like for impaired life annuities but potentially some insurers could also offer slightly better terms than just buying on standard terms

 

Its RPI linked now and in payment up to 12%.He would take it at 55 though where there is a 40% cut in value (4% per year early),so he would get around £1600 a year at 55 RPI linked.Like you i saw the key issue as the fact he doesnt need a spouse pension.He has a partner,but he will never marry her and she has big pension provision in the public sector and doesnt need a small spouses pension from him.

I guess im looking at this from a point that interest rates will increase and doubt a 40x transfer value will ever be offered again.

Health is hard to say for longitude,but he isnt healthy and he would prefer access to money early and quickly if needed.

 

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Talking Monkey
4 hours ago, DurhamBorn said:

Run something past you all for opinion.A family member has no wife and hasnt always been in the best of health.He works and i already look after around £100k of investments of his.He has a small final salary pension from an ex blue chip employer for £2600 a year at 65 RPI linked up to 12%.He has been offered £101k in transfer value.He already has a small SIPP,so easy to transfer into and it looks like they are offering 40 times annual pension.Given his health (hes 49),lack of anyone to leave a spouse pension too ,he has kids so could leave anything in SIPP to them under 75 years old etc it looks like an insane good deal.Ok he loses £50 a week at 65 for life,but it means he would have around £200k at 55 if he would like to retire then,or semi retire and given he needs around £12k a year and has full state pension credits already.

What do you all think.If it was you would you take £50 a week at 65 or £100k into your SIPP you can access in 6 years.?

 

100K into a SIPP I'd say DB, seems the sensible thing to do

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3 hours ago, DurhamBorn said:

Its RPI linked now and in payment up to 12%.He would take it at 55 though where there is a 40% cut in value (4% per year early),so he would get around £1600 a year at 55 RPI linked.Like you i saw the key issue as the fact he doesnt need a spouse pension.He has a partner,but he will never marry her and she has big pension provision in the public sector and doesnt need a small spouses pension from him.

I guess im looking at this from a point that interest rates will increase and doubt a 40x transfer value will ever be offered again.

Health is hard to say for longitude,but he isnt healthy and he would prefer access to money early and quickly if needed.

 

One doesn't necessarily need to be married to the  dependant for that dependant to qualify for the pension on death.  But all depends on actual scheme rules.

If the amount is RPI-linked before retirement, is £2600 the amount at date of leaving the scheme, or does that include revaluations to now?  Could the actual amount revalued to now be higher?

Other than contingent spouse's benefits, the reason for high multiple is likely to be a combination of assumptions implying that investment returns will be actually be lower than the (RPI) inflation.  I guess any projection of £100k investment should also consider whether it can outperform inflation.

As for pro-SIPP points:

- RPI max 12% increases and RPI-linked revaluation are quite generous these days and if trustees/company can lower them, they may try to

- Look at funding level, employer. Can they afford to fund the scheme, is there much risk of going to PPF?

But my main point stands: transfer value may look generous, but if you tried to buy the same annuity with that money, you are very unlikely to be able to.

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2 minutes ago, Bear Hug said:

One doesn't necessarily need to be married to the  dependant for that dependant to qualify for the pension on death.  But all depends on actual scheme rules.

If the amount is RPI-linked before retirement, is £2600 the amount at date of leaving the scheme, or does that include revaluations to now?  Could the actual amount revalued to now be higher?

Other than contingent spouse's benefits, the reason for high multiple is likely to be a combination of assumptions implying that investment returns will be actually be lower than the (RPI) inflation.  I guess any projection of £100k investment should also consider whether it can outperform inflation.

As for pro-SIPP points:

- RPI max 12% increases and RPI-linked revaluation are quite generous these days and if trustees/company can lower them, they may try to

- Look at funding level, employer. Can they afford to fund the scheme, is there much risk of going to PPF?

But my main point stands: transfer value may look generous, but if you tried to buy the same annuity with that money, you are very unlikely to be able to.

The £2600 is now and its RPI linked up to 12% now and once in payment.Employer should be able to fund the pension (Top 10 FTSE 100 company).I think the key question for me is the value at 55.It will reduce by 40% as he will take it early so really its a £1600 RPI linked pension from 55 or £100k.I could buy him £1k in each FTSE 100 company and get £4.9k from day 1.(of course those divis could be slashed).

I think your right that the trustees are offering 40x as they think inflation will run higher than interest rates/returns and that a big risk is they might lower this to 5% or even CPI as the government has talked about already.

He said he wants his money to run out by 75 as if he was still alive then he wants to sell his house and go in a council bungalow (doesnt want repair hastle) and then run that capital down as well so beating inflation isnt really the main thought.

 

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11 minutes ago, DurhamBorn said:

The £2600 is now and its RPI linked up to 12% now and once in payment.Employer should be able to fund the pension (Top 10 FTSE 100 company).I think the key question for me is the value at 55.It will reduce by 40% as he will take it early so really its a £1600 RPI linked pension from 55 or £100k.I could buy him £1k in each FTSE 100 company and get £4.9k from day 1.(of course those divis could be slashed).

I think your right that the trustees are offering 40x as they think inflation will run higher than interest rates/returns and that a big risk is they might lower this to 5% or even CPI as the government has talked about already.

He said he wants his money to run out by 75 as if he was still alive then he wants to sell his house and go in a council bungalow (doesnt want repair hastle) and then run that capital down as well so beating inflation isnt really the main thought.

 

The option to transfer out will still be around all these years, including when he gets to 55.  So (unless trustees do manage to cut increases on benefits), the question in that decision is mainly whether FTSE100 investment returns will outperform trustees' / actuary's gloomy views.

Also for the point about running benefits down by 75: there will be an option to commute some pension for cash sum at retirement, although terms are normally not that great

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11 minutes ago, Bear Hug said:

The option to transfer out will still be around all these years, including when he gets to 55.  So (unless trustees do manage to cut increases on benefits), the question in that decision is mainly whether FTSE100 investment returns will outperform trustees' / actuary's gloomy views.

Also for the point about running benefits down by 75: there will be an option to commute some pension for cash sum at retirement, although terms are normally not that great

Good point,it might be worth the risk the transfer value falls to wait until 54.That way we will know there havent been any government changes and also the level of his other investments then.(or if his health goes downhill then take action then asap).

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Democorruptcy
52 minutes ago, DurhamBorn said:

The £2600 is now and its RPI linked up to 12% now and once in payment.Employer should be able to fund the pension (Top 10 FTSE 100 company).I think the key question for me is the value at 55.It will reduce by 40% as he will take it early so really its a £1600 RPI linked pension from 55 or £100k.I could buy him £1k in each FTSE 100 company and get £4.9k from day 1.(of course those divis could be slashed).

I think your right that the trustees are offering 40x as they think inflation will run higher than interest rates/returns and that a big risk is they might lower this to 5% or even CPI as the government has talked about already.

He said he wants his money to run out by 75 as if he was still alive then he wants to sell his house and go in a council bungalow (doesnt want repair hastle) and then run that capital down as well so beating inflation isnt really the main thought.

 

I wondered if low gilt yields are inflating transfer values? Per £1k of promised annual pension, at 1% it needs a £100k pot, at 5% it only needs a £20k pot. Isn't that why so many firms have huge pension deficits? People haven't physically saved these pension pot transfer values, they are just amounts required to pay the promised pensions? If gilt yields rise could pension pot transfer values fall because it doesn't need as much pot to generate the returns to pay the pension? Though if a pension is RPI linked if gilt yields are rising because inflation is rising, the pension payment increases, so the pot value may not fall as much?  

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3 minutes ago, Democorruptcy said:

I wondered if low gilt yields are inflating transfer values? Per £1k of promised annual pension, at 1% it needs a £100k pot, at 5% it only needs a £20k pot. Isn't that why so many firms have huge pension deficits? People haven't physically saved these pension pot transfer values, they are just amounts required to pay the promised pensions? If gilt yields rise could pension pot transfer values fall because it doesn't need as much pot to generate the returns to pay the pension? Though if a pension is RPI linked if gilt yields are rising because inflation is rising, the pension payment increases, so the pot value may not fall as much?  

Exactly.  Although the assumption for discounting pension liabilities is not always based on gilts.

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So last trading day of 2018 has closed for the FTSE, worst year since 2008, and China PMI weakest Dec since 2008. Things really are falling into place. Attention in immediate weeks turns to the rumoured progress on US/China trade talks (possibly inspiring the last hurrah), meaningful vote on Brexit starting 14th Jan, and then on Valentine's Day we see if Germany is confirmed to have entered recession should Q4 figure be negative.

Not so sure it's going to be a particularly Happy New Year, worth reminding ourselves that if the U.S. continues to grow until June, that'll make this the longest expansion in history, naturally QE may have distorted things a little but nevertheless a frightening statistic. Things are very rarely "different this time", so realistically we're a few months away at most now, although U.S. recessions are usually confirmed 6-12 months after commencing.

Wishing you all a successful and prosperous 2019, armed with the ongoing invaluable knowledge shared on this fantastic forum :Beer:

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hehehe ego showing @$2.90 on msn feed. Thats 394% up, as if.

image.png.ae2b503032871af2bc0f697136913a1a.png

ah, theyve just consolidated;

image.png.5436d9a2b7a4a84ef62120543f1cac9a.png

so your not actually worth anymore, probably less by the time theyve finished battering it some more.

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2 hours ago, leonardratso said:

hehehe ego showing @$2.90 on msn feed. Thats 394% up, as if.

image.png.ae2b503032871af2bc0f697136913a1a.png

ah, theyve just consolidated;

image.png.5436d9a2b7a4a84ef62120543f1cac9a.png

so your not actually worth anymore, probably less by the time theyve finished battering it some more.

Even if they are down, you are having more success with this than I am.  My cheap online broker Degiro just lost all my Eldorado holding this morning!!!

I checked transactions, they did sell old ones and bought more expensive new ones at midnight.  However, the new ones are not showing in my account!

I called them earlier and they confirmed the transaction has happened and there is a problem but they have not fixed it yet.  I don't think it's just my account, as searching for Eldorado results in new consolidated shares (and it does shows my holding in that search) but all prices are shown as zero, so it does not feed into overall portfolio display in my account.

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1 minute ago, Bear Hug said:

Even if they are down, you are having more success with this than I am.  My cheap online broker Degiro just lost all my Eldorado holding this morning!!!

I checked transactions, they did sell old ones and bought more expensive new ones at midnight.  However, the new ones are not showing in my account!

I called them earlier and they confirmed the transaction has happened and there is a problem but they have not fixed it yet.  I don't think it's just my account, as searching for Eldorado results in new consolidated shares (and it does shows my holding in that search) but all prices are shown as zero, so it does not feed into overall portfolio display in my account.

dont worry, your not missing much, its still a piece of shit;

image.png.7425c1fc5c79faf61e8688d62c20761c.png

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looks like theyve done 5:1 consolidation, ive now got 19.20% of the number of shares i had, which wasnt a lot anyway. I dont really trust this third world rubbish, but ill stick a bit in in case they blow off.

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18 minutes ago, leonardratso said:

looks like theyve done 5:1 consolidation, ive now got 19.20% of the number of shares i had, which wasnt a lot anyway. I dont really trust this third world rubbish, but ill stick a bit in in case they blow off.

New Gold appear to be in a similar boat today (as in, going down while gold is going up).  I have also followed some UK listed miners today; prices were going down just as PM prices were going up.  So I bought some Hochschild

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7 minutes ago, Bear Hug said:

New Gold appear to be in a similar boat today (as in, going down while gold is going up).  I have also followed some UK listed miners today; prices were going down just as PM prices were going up.  So I bought some Hochschild

Might have been influenced by Canadian tax-loss selling deadline (27th of Dec). Considering it's fallen over 75% year to date, it only makes sense to book this loss for tax purposes. 

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6 minutes ago, kibuc said:

Might have been influenced by Canadian tax-loss selling deadline (27th of Dec). Considering it's fallen over 75% year to date, it only makes sense to book this loss for tax purposes. 

Sorry but today is 31st?!  Isn't it too late then?

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11 minutes ago, kibuc said:

Might have been influenced by Canadian tax-loss selling deadline (27th of Dec). Considering it's fallen over 75% year to date, it only makes sense to book this loss for tax purposes. 

I guess there could be some continuing over-reaction to selling which occurred on 27th?

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31 minutes ago, Bear Hug said:

Sorry but today is 31st?!  Isn't it too late then?

I was referring to the price action over the last three weeks, where gold was going up while NGD was heading down. I wouldn't read too much into today's movements, for me it's a trading day in name only. Real action and volumes should return on Thursday and really get going on Friday, which is going to be very data-rich. Eurozone CPI, US mortgages, employment and payrolls, UK lending, you name it.

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Apologies for spamming today but this may be of interest for some of you here as well (if you hold any Tahoe).  I just received the email below and have a couple of questions as a result. I have also added overall details of deal below the email.

Question 1: What is the difference between tendered (Option 2) and held (Option 3)?  Does Tendered mean that shares will be sold at deadline (02/01/2019 12:00 CET)? Or does "tendered" apply to contingent value rights only? What would happen to contingent value rights if they are Tendered?

Question 2 (this could be a particularly stupid one): My Tahoe shares are in USA, not Canada.  I can see Tahoe under New York Stock Exchange in Degiro app. But Pan American is under NASDAQ.  Is there likely to be any issues with that?  Degiro didn't mention anything

Quote

TAHOE RESOURCES INC. has announced the details of the following corporate action.

Terms and conditions 

You have the following options regarding the merger with elections offer of TAHOE RESOURCES INC:

Option 1 : Cash Consideration (subject to proration), to receive USD 3.40 and 1 Contingent Value Right (‘CVR’) for each share of TAHOE RESOURCES INC. tendered.

Option 2 : Share Consideration (subject to proration), receive 0.2403 shares OF PAN AMERICAN SILVER CORP. and 1 Contingent Value Right (‘CVR’) per 1 share of TAHOE RESOURCES INC. TENDERED.

Option 3 : Share Consideration (default option) receive 0.2403 shares OF PAN AMERICAN SILVER CORP. and 1 Contingent Value Right (‘CVR’) per 1 share of TAHOE RESOURCES INC. HELD.

..

 

IMPORTANT

If you choose to tender your shares, the tendered shares will block from trading one day after the internal deadline. On the payment date the blocked shares will be exchanged for the tender price per share.

 

Quote

VANCOUVER — Pan American Silver Corp. has signed a deal to acquire Tahoe Resources Inc. in a stock-and-cash deal it valued at more than US$1 billion.

Under the friendly agreement, Tahoe shareholders will receive US$3.40 in cash or 0.2403 Pan American shares for each Tahoe share. The maximum cash available under the offer is US$275 million and there are 56 million Pan American shares available.

Tahoe shareholders will also receive contingent value rights that will be exchanged for 0.0497 Pan American shares for each Tahoe share, payable on the first commercial shipment of concentrate following the restart of operations at the Escobal mine in Guatemala.

Tahoe shares closed C$2.90 on the Toronto Stock Exchange on Tuesday, while Pan American shares closed at C$18.71.

The deal, which is expected to close in the first quarter of 2019, requires approval by both the Tahoe and Pan American shareholders.

Tahoe shareholders will hold about a 27 per cent stake in the combined company at the closing of the deal. The contingent value rights will increase that to 32 per cent, based on the number of Pan American shares outstanding following the closing of the deal.

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My Dalradian shares were paid off to me a few months back. They were bought by a US mining finance company with only full share value payout available.

I wonder what else is going to be gobbled up ahead of a potential bull run.

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Yellow_Reduced_Sticker
Hello all, haven't posted in a while, cos not much to add also haven't been that well, though i do read this thread when i can...
 
We are all here because we want to protect our savings & be financially secure, however the MOST important thing in the grand scheme of things is our HEALTH ...so for the New Year I would like to share something that we ALL need for ourselves and loved ones...
 
I came across a chap by the name of: Raymond Francis, specifically his work/book...
 
"Never Be Sick Again - Health Is a Choice Learn How to Choose It"
 
I've known a little about what he talks about, however Raymond Francis takes it to another level.
 
Check out this video:
 
 
I have his book and i have uploaded the PDF version to share with everybody here, you can down-load at the mediafire link below:
 
mediafire.com/file/klm5metpaop80r3/
 
For those that are paranoid that this PDF file has some 'virus' like... syphilis, gonorrhea, chlamydia, genital herpes etc, etc, etc...!:oxD
 
Let me put your mind at rest, Here's a virustotal scan: 100% CLEAN!
 
https://www.virustotal.com/#/file/bb2bca834d1d4b88df2c16e5d05f88f181aa36fd50061604ee0defe10ebcce99/detection
 
I concur with what Barnsey says above with just a small edit...
 
Wishing you all a HEALTHY successful and prosperous 2019, armed with the ongoing invaluable knowledge shared on this fantastic forum
 
MASSIVE thanks go out to @DurhamBorn for starting this thread AND all the contributors here, CHEERS!
 
 
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