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We MUST get Boris a majority and unleash a boom in Brexit Britain, says City titan Michael Spencer

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There’s Chez,’ Michael Spencer beams, proudly brandishing a photograph of himself with pop star Cheryl Tweedy. ‘My chum Chezza!’

If there’s one thing this self-made billionaire has perfected over 40 years in the City, it’s the art of networking – and he clearly wants visitors to his Knightsbridge office to know it.

Photo frames showing the 64-year-old meeting Barack and Michelle Obama; the Duke and Duchess of Cambridge; and David and Samantha Cameron all sit proudly alongside his snap with the former Girls Aloud singer.

Billionaire: Michael Spencer has used his vast wealth to be a key Tory donor

Billionaire: Michael Spencer has used his vast wealth to be a key Tory donor

Billionaire: Michael Spencer has used his vast wealth to be a key Tory donor

Spencer’s enviable collection of acquaintances – fellow billionaire and Democrat Presidential candidate Michael Bloomberg included – has been built up over a stellar business career that saw him grow a four-man operation called Icap into a £4billion business with 5,000 employees.

Last year, Spencer took a major step back from the City, selling his business – best known for hosting ‘Chezza’, Prince Harry and others at its festive charity days – and, as he himself points out with disarming frankness, solidifying his status as a billionaire.

Now an ever-growing portion of his attention is being directed towards Westminster and his beloved Conservative Party. Over four decades in the City, Spencer has used his vast wealth to establish himself as one of the Tories’ biggest donors. 

The tally stood at more than £5million before this Election campaign, and Spencer – who served as the party’s treasurer between 2006 and 2010 – says he has been ‘even more generous’ than usual ahead of Thursday’s vote, though he declines to say exactly how much he has donated.

‘It is an absolutely critical Election,’ says Spencer, sitting at the large table in his glass-walled office and smartly dressed in a waist jacket and tieless shirt. ‘I know that’s a cliché – every Election is critical. But I think this is particularly critical.

If Boris doesn’t win, we will have stasis in this country for another year 

‘If Boris does not win this with an overall majority, we are going to have stasis in this country for another year at least while he fumbles along with a minority Government that can’t do anything. Or Corbyn fumbles along with a minority Government trying to negotiate another deal with the Europeans – which he won’t succeed in doing, in my opinion – and then has another referendum. God knows when that will be.’

With General Election day looming, Spencer fears it is ‘not inconceivable’ that – with help from other parties – Labour’s Jeremy Corbyn could become Prime Minister on Friday, which would be ‘really quite severely bad’.

‘New investment in the UK will shrivel,’ says Spencer. ‘Why on earth would you invest money in the UK if you know you’re going to have ten per cent of your company taken away from you by a Labour Government with no compensation and where, if you have a public company, it might be nationalised?’

Exchange controls would soon follow to prevent an otherwise ‘unstoppable’ capital flight, he predicts.

Spencer sold his business Icap – best known for hosting pop star Cheryl (pictured), Prince Harry and others at its festive charity days

Spencer sold his business Icap – best known for hosting pop star Cheryl (pictured), Prince Harry and others at its festive charity days

Spencer sold his business Icap – best known for hosting pop star Cheryl (pictured), Prince Harry and others at its festive charity days

What are Spencer’s plans? ‘I’m not going to share with you my contingency plans,’ he says after a pause, and in a manner surely used many times in business to signify a conversational cul-de-sac. So he does have ‘contingency plans’? ‘Yes. I can share with you the fact that I know very, very many people with contingency plans. And the tragedy is that the Leftists will say, “Good riddance to the lot of you,” ’ he adds.

‘Let’s not beat around the bush, I’m a self-made billionaire. But by becoming a self-made billionaire I’ve built a business. So I made a billion quid out of it, but other investors made £6billion out of it.’

Spencer points out that his business has paid around £2.5billion of tax in this country. In addition, Icap’s well-publicised charity days have raised £150million and he’s in the process of setting up a charitable foundation with his wife Sarah that will hand about £10million a year to good causes.

That aside, he has a shared conservation plot in Kenya with 200 rhinos – ‘probably the biggest concentration of rhinos anywhere’ – protected by 160 armed guards. ‘The Left seems to think that anyone who has made a lot of money has done so by thieving from the community as opposed to maybe because they built businesses that have created wealth for the benefit of the whole nation.’

Corbyn has made clear Labour will not be good for billionaires.

‘It deeply saddens me,’ says Spencer. ‘There have been bad people in business who have behaved dishonourably. But, by the way, there are bad people in every walk of life – there are bad people in the priesthood, there are bad people in the military, there are bad people in Parliament, dare I say it. The misconduct of a small minority should not tarnish the vast majority.’

Asked if there is anything he likes about Labour’s manifesto, Spencer erupts into laughter perhaps more at the idea that he might promote the competition rather than the content. 

Corbyn has made clear Labour will not be good for billionaires

Corbyn has made clear Labour will not be good for billionaires

Corbyn has made clear Labour will not be good for billionaires

‘In fairness,’ he adds, after gathering himself, ‘I can’t say I’ve been through every line of their manifesto. I’ve no doubt they’ve said something somewhere that I might well agree with. Do I believe that we should have a cleaner, greener country? Yeah, of course I do. Do I believe that we should look after the poor? Of course I do.’

If Corbyn fails and Johnson wins a workable majority, Spencer is confident ‘a psychological and commercial cloud will lift’ across the country.

‘I think capital inflow will return to the UK and, by the way, a load of stuff has been held up,’ he says.

There is still the small matter of Brexit, but Spencer – who reluctantly voted Remain in 2016 but would back Leave in the event of a second referendum – is confident Johnson is the right man to implement a plan.

Hidden away at the back of his office is a dining room walled with dozens of bottles of fine wine and featuring four Second World War Enigma machines.

Spencer calls it ‘a rare bastion’ of the dying tradition of the long City lunch – for which he himself is famous.

He pines for a return to the City of yesteryear in other ways, too. Assuming Johnson does get the keys to No 10, Spencer wants the Government to set its sights on scrapping some of the red tape that has bound firms in recent years.

His ideas for reform are likely to raise eyebrows: the suggestion that banker bonus caps – introduced across the EU in the aftermath of the financial crisis – should be lifted, for example.

If Corbyn fails and Johnson wins a workable majority, Spencer is confident ‘a psychological and commercial cloud will lift’ across the country.

If Corbyn fails and Johnson wins a workable majority, Spencer is confident ‘a psychological and commercial cloud will lift’ across the country.

If Corbyn fails and Johnson wins a workable majority, Spencer is confident ‘a psychological and commercial cloud will lift’ across the country.

Along with many others in the City, Spencer believes bonus restrictions have forced banks to inflate standard salaries or driven talented individuals away.

‘The bonus caps are ridiculous,’ he says. ‘That was a classic case of “Let’s do something populist” that achieves nothing – actually achieves damage. And, of course, it should be rescinded.’ Spencer also believes the Vickers Report – which forced banks to ‘ringfence’ their retail and investment banks – should be reconsidered, saying this has forced up financial services costs in the Square Mile.

Spencer’s ideas sound politically tricky to implement – but they cannot be dismissed given his influence within the party. Will Johnson consider them? ‘I hope so,’ says Spencer. ‘I think there is widespread acceptance that there needs to be a review but they’re not a priority on anyone’s Election manifesto.’

Spencer, whose father was a civil servant, grew up in parts of what was then still the Empire, including Sudan where he would ride to school on a donkey.

Boarding school in England was followed by physics at Oxford before graduating into the City in the 1970s.

In 1986 – using £50,000 of his own money – Spencer set up Icap, and then, following the sale of its telephone broking business in 2016, it was renamed NEX Group. 

Spencer believes bonus restrictions have forced banks to inflate standard salaries or driven talented individuals away

Spencer believes bonus restrictions have forced banks to inflate standard salaries or driven talented individuals away

Spencer believes bonus restrictions have forced banks to inflate standard salaries or driven talented individuals away

Last year, after building his trading firm up into a FTSE 100-listed global powerhouse, Spencer crystalised his status as a self-made billionaire by selling NEX to US financial giant CME Group for around £4billion – receiving cash and shares in CME for his own stake.

Spencer now sits on the board of CME as its largest individual shareholder with around three million shares worth around $200 each.

He’s busy managing his personal investments through IPGL, with stakes in betting firm Tote; investment giant AJ Bell; wine company Chapel Down; and Elvie, a so-called ‘femtech’ firm best known for making wearable breast pumps.

His career could have gone down a significantly different path. It had been his intention to work in the City until his 40s and then move into politics as a Conservative MP. But in his late 30s, as Icap was growing into a global firm, ‘I just thought, crikey, do I give up work? And I decided I was enjoying my career too much.’

In 2016, Spencer appeared to be on the verge of having his cake – a long and successful City career – and eating it, by entering the House of Lords as a Tory peer.

But David Cameron’s efforts to insert him into the Lords were thwarted. It is believed Spencer was turned down because of a 2013 fine imposed on Icap for allegedly playing a part in manipulating Libor interest rates. Three Icap employees were charged by the Serious Fraud Office but acquitted at trial.

‘I was, to be honest with you, astonished…I was genuinely astonished that I was rejected,’ says Spencer, apparently still crestfallen by the affair.

‘It appears that it was something related to Libor. Since our staff have now been acquitted over Libor, and indeed the Libor investigations have been terminated, I can’t see how that in any way can mean that my reputation has been somehow irrecoverably damaged.

‘I had hoped, obviously under Cameron’s tenure, to have been a peer for the Conservative Party in the House of Lords and I would have been happy to have done it. I do feel like I have something to add in terms of my expertise in certain areas of enterprise and business.’

Despite his 2016 snub, Spencer remains an influential figure within the party, as well as a major donor. Could he yet be welcomed into the Lords?

‘To be honest with you, it’s the Prime Minister’s choice. So who knows.

‘But it’s not the most important thing in my life or anything like that. Life’s too short to get stressed about things like that.

‘And do you know, I’ve had a phenomenally lucky career anyway.’

Michael Spencer, 64: Aston Martin-driving wine lover 

Family: Wife Sarah and three children – including two sons who Spencer feels might make a career in politics – and two step children.

Lives: Homes in Kensington, New York and Kenya.

Hobbies: Collecting fine wine (Clos des Papes from the Rhone is ‘not in a silly price bracket but is a really lovely wine’) and wildlife conservation. Favourite book: Churchill by Andrew Roberts.

Film: Dirty Rotten Scoundrels.

Music: Dire Straits.

Breakfast: Coffee.

Car: Aston Martin DB4. (On order).

 

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Is your fund manager gambling your cash on companies he doesn’t understand? 

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Shake-up: artik Kumar manager of an investment trust called Artemis Alpha

Shake-up: artik Kumar manager of an investment trust called Artemis Alpha

Shake-up: Kartik Kumar, manager of investment trust Artemis Alpha

Over the years, I’ve spoken to hundreds of investment managers and quizzed them about the funds and investment trusts they run. 

For the most part, it’s been both enjoyable and educational. Most have been pleasant, some impressively eloquent, a few ferociously intelligent.

But some have been either downright arrogant or seriously underwhelming – more like Tom Hanks’ self-regarding financier in the hit film The Bonfire Of The Vanities where he sees himself as one of the ‘masters of the universe’.

Their views have formed the basis for many an informative article – and along the way helped readers enhance their wealth (that’s what we’re here to do).

Yet these conversations with some of the leading investment experts in the country are not always easy. Invariably, it’s not just them I am interviewing because they usually come with their own marketing people and public relations advisers in tow, or patched into the phone call. People with corporate agendas to pursue – namely to ensure that the fund manager and investment house come across in the best possible light.

As soon as the manager goes a little off-piste by saying something controversial – maybe about a rival manager, the funds industry, or the heady state of the stock market – they are instantly reined in and the conversation suddenly either stops or goes ‘off the record’ (I can’t report it).

At the end of the day, investment management groups are in business to make profits for themselves. That means an emphasis on sales and marketing – not on necessarily telling the total truth.

But sometimes, this gloss does not get painted. An investment manager comes along who is prepared to speak his mind. It’s wonderfully refreshing when it happens – as it did last week when I was given the opportunity to speak to Kartik Kumar, lead manager of an investment trust called Artemis Alpha.

In a nutshell, his view is that most mainstream investment houses – none more so than his own – should stick to what they are good at, which is running equity portfolios on behalf of investors. 

They should not be dabbling in specialist investment areas such as unquoted companies that are more complicated to analyse and require an altogether different skill set. These specialisms, he said, should be left to investment houses set up to invest specifically in private equity.

He said: ‘At the end of the day, Artemis has built a reputation for being an equity investor. That’s what it should do and how it should move forward.’ 

Fund boss Kartik Kumar is very different from 'masters of the universe' in the hit film starring Tom Hanks, Melanie Griffiths and Bruce Willis (pictured)

Fund boss Kartik Kumar is very different from 'masters of the universe' in the hit film starring Tom Hanks, Melanie Griffiths and Bruce Willis (pictured)

Fund boss Kartik Kumar is very different from ‘masters of the universe’ in the hit film starring Tom Hanks, Melanie Griffiths and Bruce Willis (pictured)

Kumar has just spent the past 20 months unravelling a big unquoted position in Artemis Alpha that he inherited when he was asked to manage the trust in April 2018. A holding at odds with everything Artemis stands for.

His thoughts are apposite because they come as investment house Schroders gets to grips with sorting out the mess that was Woodford Patient Capital.

This is an investment trust that was launched by Neil Woodford in June 2015 to provide funding for early-stage companies, most based in the UK and unquoted (private businesses, rather than public and listed on the UK stock market). 

At the time, all rather meritorious and enthusiastically welcomed by investors. Some £800million poured into the trust, making it the biggest ever launch of an investment trust (since usurped by Terry Smith’s Smithson Investment Trust that raised £822million).

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But today, Patient Capital’s share price is a third of what it was it at launch, it’s got a new name (Schroder UK Public Private) and Woodford is nowhere near it. Woodford failed quite spectacularly. Why? Because for all his success at Invesco in the 2000s, he didn’t have the skill set to manage a portfolio of unquoted investments.

As Katie Potts, veteran manager of Herald Investment Trust, told me last week in between meetings in New York, running an unquoted portfolio is ‘a completely different proposition’ to managing a fund investing in companies listed on the stock market. She said: ‘With shares, the market determines the price you can buy and sell them at and the skill is buying low and then selling high.

‘But with an investment in an unquoted company, it’s about assessing how much to invest and at what price, then closely managing the investment on an ongoing basis without having a share price to follow, and understanding that you can’t necessarily get out when you want to. This all requires tremendous resource.’

For the record, the £1billion Herald invests in smaller quoted companies – it doesn’t dabble in unquoteds. Woodford Patient Capital, she said, was more about ‘marketing a brand’ than providing investors with access to investment expertise in unquoted companies. In other words, it was doomed from the word go. Back to 29-year-old Kumar who joined Artemis eight years ago – an investment house with £28billion of assets under management whose strapline is the ‘profit hunter’.

The trust's exposure to large cap stocks ¿ like Sports Direct, Tesco and Barclays ¿ has tripled

The trust's exposure to large cap stocks ¿ like Sports Direct, Tesco and Barclays ¿ has tripled

The trust’s exposure to large cap stocks – like Sports Direct, Tesco and Barclays – has tripled

Last week, I had a long chat with him about his key role in overhauling the portfolio of Artemis Alpha, a £135million investment trust primarily invested in the UK stock market. A reconstruction that has resulted in the trust disposing of most of its unquoted holdings – down from a quarter of assets in April 2018 to 7.5 per cent today. This percentage will come down further as a ‘tail’ of unwanted unquoted holdings is disposed of. He’s a confident young man, keen on doing his own research into companies, and probably destined to go far in fund management.

Eton educated Kumar was asked to undertake the strategic review in early 2018. This followed a period of sustained underperformance for the trust against its peers and its benchmark, the FTSE All-Share Index. In the five years to April 2018, Alpha Trust’s share price had risen by just under 10 per cent, compared to an increase in its benchmark of nearly 38 per cent.

The trusts that can be worth risk 

There are 20 stock market-listed investment trusts currently set up to invest in unquoted companies. Falling under the collective label of ‘private equity’, key details on all 20 can be found on the website of the Association of Investment Companies at: theaic.co.uk.

Moira O’Neill, head of personal finance at Interactive Investor, says such trusts ‘remain the best way for investors who want to access the higher risk, higher reward world of unquoteds’. She adds: ‘Private equity managers will often take a seat at the board table of the companies they invest in. This is active management at its most hands on.’

One trust she likes is Pantheon International that invests in a mix of unquoted companies and funds run by other private equity specialists. ‘With a global portfolio,’ she says, ‘it gives exposure to some of the best private equity managers in the world’.

It’s also a trust liked by Jason Hollands of wealth manager Tilney who also recommends Oakley Capital and BMO Private Equity.

An alternative approach, says AJ Bell’s Laura Suter, is to invest in the country’s biggest investment trust, Scottish Mortgage. Part of the FTSE100 Index, this £8.7billion trust – managed by Baillie Gifford – has some 21 per cent of its assets in unlisted companies.

London Stock Exchange identification numbers: Oakley Capital (B23DL39) Pantheon International (0414850); Scottish Mortgage (BLDYK61).

 

Kumar was not backward in coming forward. He proposed that the trust’s portfolio be revamped – with the number of individual company holdings reduced. He also stated the trust should be less focused on smaller companies and unquoteds, while having the opportunity to invest some of its assets overseas. His reward for being so bold was to be appointed co-manager of the trust and implement the strategy he had recommended.

‘Artemis is renowned for being an equity investor,’ he told me. ‘Artemis Alpha didn’t properly reflect that expertise. It had gone too far with its illiquid, unquoted holdings. Indeed, outside of the trust, Artemis had no exposure to unquoteds, so it made sense to reduce the holdings.

‘The result is a portfolio that is far more liquid, making it easier for me to make portfolio changes. It is also more diversified in terms of its exposure across the market, embracing large and mid-cap stocks as well as smaller companies.’

Today, the trust has 44 holdings instead of the 86 it had in April 2018, while its exposure to large cap stocks – the likes of Sports Direct, Tesco and Barclays – has tripled. 

The biggest overseas holding is German food delivery company Delivery Hero, a top ten position. He now runs the trust with oversight from John Dodd, one of Artemis’s four founding partners and a big personal investor in the fund.

Reducing the unquoted holdings, said Kumar, involved some ‘tough medicine’, resulting in the value of the trust’s assets taking a big hit in 2018. But the medicine seems to have worked. In the past year, the trust has outperformed both the FTSE All-Share Index and the average return recorded by its immediate peer group. He is confident the trust’s future is a lot brighter than it was some three years ago.

A few days ago, broker Numis issued an interesting paper on the lessons to be learnt from the collapse of brand Woodford. Among the many points it made was one on the vast resources required to run effective portfolios investing in unquoted companies. 

It said: ‘Investing in unquoted businesses is more complicated than quoted equities and requires significant resources for due diligence, transaction execution and monitoring.’ Exactly the point Herald’s Potts made in her phone call from New York.

Woodford didn’t have the required resources although he never once let on. It remains to be seen whether Schroders (and its private equity subsidiary Adveq) can now resurrect the fortunes of UK Public Private (Patient Capital).

Artemis doesn’t either which is exactly why Kumar has taken the steps he has with Artemis Alpha. It is now what it should have been all along – a profit hunter. 

 

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TONY HETHERINGTON: I smell a rat in this tale of a criminal tenant

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Tony Hetherington is Financial Mail on Sunday’s ace investigator, fighting readers corners, revealing the truth that lies behind closed doors and winning victories for those who have been left out-of-pocket. Find out how to contact him below. 

Ms L.F. writes: To supplement my pension, I decided to rent out my late mother’s house. I chose Howards Estate Agents to find a suitable tenant in full time employment, but it later became apparent they were not and defaulted on the rent. 

Howards used a separate firm called Letsure to make checks, and it had accepted a single email as proof of the tenant’s employment. He had breached two suspended prison sentences, was convicted of drug offences, and was under a three-month curfew when he and his partner moved in. However, the Property Ombudsman says Howards has no responsibility for Letsure, and Letsure will not communicate with me as its contract is with Howards. Tenancy references in these circumstances are meaningless.

Our reader had issues with a tenant, who claimed to be working as a pest controller

Our reader had issues with a tenant, who claimed to be working as a pest controller

Our reader had issues with a tenant, who claimed to be working as a pest controller

Your complaints against Howards, and the Ombudsman’s enquiries, went on for a long time, but the crucial period is in the summer of 2014 when you were looking for tenants for the property near Norwich, in Norfolk.

Howards asked the Letsure checking agency to look into the would-be tenants, and Letsure recommended their acceptance. The couple were not on any public record such as the electoral register at their existing address, but they explained they were staying with friends.

The crucial information from Letsure was that the man was in full time work as a pest controller, earning £35,000 a year. This was odd. You see, almost three months earlier, in June 2014, the same man was arrested at his then home when police found he was growing cannabis plants under heat lamps in his garage.

When he appeared in court, he turned up in a wheelchair. His defence was that he had a chronic medical condition, was disabled, and that he grew cannabis for medicinal use. He escaped a prison sentence, despite previous convictions.

So while he was presenting himself as disabled to the police and court in Hull, he was also claiming to be a full time pest controller with a care home company 165 miles away in Hertfordshire. The care home company that emailed confirmation has since closed down so cannot be questioned.

The court appearance in the wheelchair was several weeks after Letsure wrote its approving report, so Letsure can hardly be blamed for failing to predict it. But I found that in September 2013, the tenant was given a ten-week suspended sentence for drink driving, driving without a proper licence, driving without insurance, and breaching a conditional discharge for an earlier offence. And in April 2014, the same man was given a ten-month suspended prison sentence for conspiracy to steal.

If I found all this, why didn’t Letsure? It told me: ‘At the time of the reference in 2014, Letsure provided set information on the prospective tenants. We have completed a full and independent investigation into the reference process undertaken for this particular tenancy; we have found this to be compliant with the contracted delivery service.’

This appears to mean that Letsure carried out a tick-box check, and none of the boxes obliged it to see whether the tenant was lying or had a lengthy criminal record.

Oh, and the ‘full and independent investigation’? That was carried out by Letsure itself. Howards repeated that ‘all procedures relating to referencing were followed correctly’, and so did the Property Ombudsman who decided it was not reasonable to expect Letsure to go further than accepting the employer’s email at face value, even though you suspect it came from a friend of the tenants.

In fact, Howards went further, telling me all was well until 2017, when the tenants stopped paying rent. Howards say this was because of delays in carrying out certain repairs, and because you wanted a rent increase. You have denied this, and it was Howards themselves who suggested an increase, the first in three years.

Despite this unpleasant hint from Howards that you were a bad property owner, a senior figure at Spicerhaart Group – the company behind Howards – wrote: ‘I sympathise with you and the situation you find yourself in, because it is through no fault of your own. It is because of the tenant’s actions and behaviour.’

Howards declined to answer some questions on the grounds that the relevant staff member had left, and it kept no written records of whatever advice they might have given. They denounced some of the information you gave me as mere hearsay, because of the absence of their own records.

There is no happy ending to all this. I understand the tenants have left, leaving you heavily out of pocket. You relied on Howards to find good tenants. They relied on Letsure to vet them. But you, the customer, have been the loser.

Switch from Barclays – and you won’t starve

Ms T.F. writes: I opened my bank account with Barclays 15 years ago. I told the bank I was self employed, and that I would get large sums from the taxman as refunds for my clients. I would then deduct my fee and transfer the balance to the client. The bank told me I did not need a separate business account, and this was great for 15 years until suddenly my debit card stopped working while I was out shopping. Barclays had frozen my account.

Barclays froze our reader's account

Barclays froze our reader's account

Barclays froze our reader’s account

You prepare business accounts for sole traders, and at the moment Barclays froze your account it held £8,000, of which half was tax refunds that you were to pass on to clients. The bank told you your branch had discretion to let you draw benefits and wages to live on, but as you are self employed, you had neither of these so you were left without cash for you and your son to live on.

Barclays told you its investigations would taken ten days, but even after this, your account was still frozen. Every time you called the bank, you were told an email would be sent to the official who froze your account, but repeated promises to call you back were broken. Finally, after three weeks without money, you broke down and cried over the phone. This time, the bank did ring you back. The speaker said he had ‘pressed a button and sorted it’. Your account was open again, but with no explanation.

The bank told me: ‘Barclays is complying with its legal and regulatory obligations. Due to the nature of these obligations, we are unable to share any further information.’ This is the standard answer banks give when they freeze an account because they suspect their customer is laundering the proceeds of crime. You are guilty until proven innocent. And yes, it is all legal. I believe Barclays has advised you to open a separate account for your business. I would add, open a separate account at a different bank. Then if one is frozen, you and your son will not starve.

If you believe you are the victim of financial wrongdoing, write to Tony Hetherington at Financial Mail, 2 Derry Street, London W8 5TS or email tony.hetherington@mailonsunday.co.uk.

Because of the high volume of enquiries, personal replies cannot be given. Please send only copies of original documents, which we regret cannot be returned.

No mistake, your accident cover has been dropped 

J.C. writes: I have been told by Saga that it is dropping my personal accident insurance policy. I have paid premiums for ten years and Saga is abandoning me. It was a policy covering up to age 90, and I am 81. Do you think the policy is being withdrawn because I am now a greater risk?

It would be ironic if Saga, of all organisations, were to withdraw insurance because of your advancing years. But this is not what has happened. Saga’s accidental death policy is – or was – a stand-alone scheme which customers could cancel without penalty. 

Everyone paid £5 per month for cover of £25,000 for a single person or £12,500 each for a couple, in the event of dying in an accident. 

Saga told me: ‘Following a strategic business review, we decided we could not longer afford accidental death benefit as a stand-alone policy and that we would close this product line for all customers.’ Staff at Saga say they know this will disappoint you, but they assure me this is no reflection on you or your age.

 

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JEFF PRESTRIDGE: Get radical, Chancellor, and kill off the death tax 

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I know I am stating the bloomin’ obvious – and I know I’ve said it before – but with a Budget fast approaching I can’t help saying it one more time.

So here goes. Some of the taxes we currently pay and a number of the tax breaks we are given to encourage us to save for old age are either too onerous or far too complicated.

Yes, it is time for a radical overhaul and Chancellor Sajid Javid has the perfect opportunity to be radical when he presents this Government’s first Budget on March 11.

Inheritance tax and tax relief on pension contributions are both ripe for a good dose of radicalism from Chancellor Sajid Javid, says Jeff Prestridge

Inheritance tax and tax relief on pension contributions are both ripe for a good dose of radicalism from Chancellor Sajid Javid, says Jeff Prestridge

Inheritance tax and tax relief on pension contributions are both ripe for a good dose of radicalism from Chancellor Sajid Javid, says Jeff Prestridge

For Javid, there are none of the tricky parliamentary obstacles to navigate that faced his predecessor Philip Hammond, hamstrung as part of a minority government.

With at least five years of Conservative government ahead of him and Labour in disarray – ridiculously waiting until April 4 before unveiling its successor to the politically bankrupt Jeremy Corbyn – there can be no better time for Javid to show his mettle as a transformative Chancellor. 

A Minister who is even prepared to unravel some of the complicated tax changes that his Tory predecessors (namely George Osborne) introduced.

Inheritance tax and tax relief on pension contributions are both ripe for a good dose of radicalism from the Chancellor.

Dealing with inheritance tax often resembles a minefield for those appointed to sort out the estates of loved ones. This is primarily – but not exclusively – a result of Osborne’s decision in 2015 to make the tax even more difficult to understand with the phased introduction from April 2017 of the ‘residence nil rate band’. 

This is a £150,000 top-up to the existing nil-rate threshold of £325,000, meaning that £475,000 of an estate can now escape 40 per cent inheritance tax – provided the family home is passed on to a child, grandchild, great-grandchild or stepchild. It jumps to £800,000 if the deceased had previously absorbed their partner’s £325,000 nil-rate band.

As my colleague Marc Shoffman reports, Revenue & Customs has failed to adapt its various inheritance tax forms to accommodate this new residence nil-rate band. It means thousands of executors are unnecessarily filling in complicated forms they should be nowhere near. 

The Office of Tax Simplification, set up nearly ten years ago to advise the Treasury on how the system could be made less perplexing, has already called for inheritance tax to be simplified. But its recommendations have concentrated on overhauling the various gifts that can be made in someone’s lifetime to mitigate the tax.

Javid may well just act on these OTS proposals, but he could be bolder – by either scrapping inheritance tax altogether (tres radical) or doing away with the residence nil-rate band in favour of a bumped up nil-rate band (radical and sensible).

Inheritance tax is a form of double taxation. Corbyn would have expanded its net because he despises inherited wealth. Even more reason for Javid to be a radical.

On pensions, the rules governing tax relief on contributions are screaming out for reform. None more so than the rule, introduced by Osborne, that restricts the tax relief available to high earners – those earning more than £110,000 a year.

Javid could be bolder by either scrapping inheritance tax altogether or doing away with the residence nil-rate band in favour of a bumped up nil-rate band, says Prestridge

Javid could be bolder by either scrapping inheritance tax altogether or doing away with the residence nil-rate band in favour of a bumped up nil-rate band, says Prestridge

Javid could be bolder by either scrapping inheritance tax altogether or doing away with the residence nil-rate band in favour of a bumped up nil-rate band, says Prestridge

This is done through something called the tapered annual allowance that means the amount high earners can put into their pension – while benefiting from tax relief – drops in stages from £40,000 down to £10,000 a year (these sums include any employer contributions). The more you earn over £110,000, the smaller the annual allowance becomes.

While Corbynites may rejoice at this measure, it has resulted in many high earners – doctors foremost among them – receiving unexpected (and big) tax bills for unintentionally exceeding their reduced annual pension allowance.

It appears the Government is keen to address this issue by pushing up the threshold at which the tapered annual allowance kicks in – from £110,000 to £150,000. Fine, but Javid should be more radical. 

The allowance should be scrapped altogether as part of a radical overhaul of the pension system that currently disincentivises, rather than encourages, long term saving.

 

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