Labour propose confiscating 10% uk equities - pension planning response?

zagfles

I'm just glad I've taken a UK-phobic attitude to my investments over the last few years - Brexit, the plummet in the pound, and now this nonsense...

k6chris

...still, their policy proposal on the reintroduction of unicorns is great news....

Paul_Herring

http://visar.csustan.edu/aaba/LabourCorpGovReview2018.pdf

CHAPTER 4
A DEMOCRATIC REGIME FOR LARGE CORPORATIONS

The essential starting point for reform of corporate governance is the recognition that large corporations are not the private property of their shareholders and should not be controlled only by executives and directors in the sole or primary interest of shareholders.

This review was commissioned by the Shadow Business Secretary Rebecca LongBailey MP and Shadow Chancellor of the Exchequer, John McDonnell MP,

marlot

It seems to me that Chief Exec and other board salaries have been rising significantly over the last few years, whilst other workers received very little. I suspect that we've reached a tipping point where there will be lots of votes in a 'bash the bosses' election.


Many of us will lose out as a result though.

michaels

marlot wrote: »

It seems to me that Chief Exec and other board salaries have been rising significantly over the last few years, whilst other workers received very little. I suspect that we've reached a tipping point where there will be lots of votes in a 'bash the bosses' election.


Many of us will lose out as a result though.

Of course the proposal will do nothing to take money away from managers - indeed as employees they will also be given free shares!

It is owners - ie pension savers who will lose out as their assets are confiscated.

Triumph13

marlot wrote: »

It seems to me that Chief Exec and other board salaries have been rising significantly over the last few years, whilst other workers received very little. I suspect that we've reached a tipping point where there will be lots of votes in a 'bash the bosses' election.


Many of us will lose out as a result though.

In the long term all of us will lose out, but the important thing is that we'll all be much more equally poor.

ffacoffipawb

Triumph13 wrote: »

In the long term all of us will lose out, but the important thing is that we'll all be much more equally poor.

That is what socialism is all about. The equal sharing of misery.

Triumph13

ffacoffipawb wrote: »

That is what socialism is all about. The equal sharing of misery.

That's what extreme socialism is about. My contempt for people who don't care about the consequences for the economy, just so long as they improve equality, is similar to my contempt for those who think inequality doesn't matter at all just so long as the economy does well.
There is a huge spectrum of sensible options to debate in the centre ground between those viewpoints and any country does best when its politicians are having sensible and nuanced arguments about the tradeoffs between growth and equality. When it degenerates to eat the rich vs loadsamoney is where we end up with one side or other doing serious damage that can take a generation to unpick.

EdSwippet

michaels wrote: »

It is owners - ie pension savers who will lose out as their assets are confiscated.

It's worth trying to put some numbers on this proposal. Here's my attempt.

Stocks produce on average 7% nominal annual returns. Inflation runs at 3%, so real return is 4%. Labour's proposal will lop 1% off this for a decade.

For an ISA investor, that's a straightforward 25% reduction in real returns. For a SIPP investor at 20% tax on withdrawals they see annual after-tax nominal return drop from 5.6% to 4.8%, but they are subject to the full 3% inflation, so their real return falls from 2.6% to 1.8%. That's a 31% reduction in real return. Both represent a hell of a headwind for UK markets in comparison with others around the globe.

It's exactly the same as if you hold a unit trust or OEIC that suddenly raises its annual management charge from 0.25% to 1.25%. Compounded up, the effect of this on investors in the long term will be huge -- there are any number of online calculators that show the ravaging effects of 1% charges over time. It is inconceivable that investors will not take action to mitigate it, for example simply investing in non-UK rather than UK companies.

My guess is that if implemented, this policy will erode the very source of revenue it aims to tap. Bonkers.

michaels

EdSwippet wrote: »

It's worth trying to put some numbers on this proposal. Here's my attempt.

Stocks produce on average 7% nominal annual returns. Inflation runs at 3%, so real return is 4%. Labour's proposal will lop 1% off this for a decade.

For an ISA investor, that's a straightforward 25% reduction in real returns. For a SIPP investor at 20% tax on withdrawals they see annual after-tax nominal return drop from 5.6% to 4.8%, but they are subject to the full 3% inflation, so their real return falls from 2.6% to 1.8%. That's a 31% reduction in real return. Both represent a hell of a headwind for UK markets in comparison with others around the globe.

It's exactly the same as if you hold a unit trust or OEIC that suddenly raises its annual management charge from 0.25% to 1.25%. Compounded up, the effect of this on investors in the long term will be huge -- there are any number of online calculators that show the ravaging effects of 1% charges over time. It is inconceivable that investors will not take action to mitigate it, for example simply investing in non-UK rather than UK companies.

My guess is that if implemented, this policy will erode the very source of revenue it aims to tap. Bonkers.

That is also only the 'first order effect' - won't there also be an impact on capital values as a result of the lower rate of return (second order)

And an additional effect on capital values due to the increased risk of an asset that the govt has demonstrated it is happy to confiscate without compensation? (third order)

And finally an impact on the economy as a whole as investment is curtailed and liquid assets are taken abroad. - shall we call this one the Venezuela effect?!