Mark Radcliffe on The Music of The Monkees

More grey matter - something extra for many UK people planning to retire soon.

Quite why my brain is presenting such strangely grey matters instead of suggesting that I sit back and just watch The Jonathan Ross Show I do not know but another 'too good to miss' thing springs to mind. This is for the older folk...

UK tax legislation currently permits contributions to an occupational pension scheme to be deducted from gross pay before tax is assessed. So placing £1000 in your pension scheme will actually only cost you £800, possibly a lot less but let's keep the sums simple for now.

Now that is sort of OK if you're several years away from retirement but becomes really quite wonderful if you're retiring in a year's time. Even if your fund achieves 0% growth over the last year you get 25% on your investment. And you should be able to take a cash sum on retirement so you do actually get to take the £1000 in readies and that's tax free. At least 25%, in most cases substantially more. Tax free.

Yes, there are all sorts of limits, both to the proportion of your earnings that you can contribute and in the amount that can taken as cash but it's easy enough to get the figures that apply in your own case and there's bound to be some opportunity that someone expecting to retire soon can take advantage of.

Individual pension arrangement contributions can also be particularly attractive investments in that last year or so - the rules are a little different but have similar effect at the end of the day. Even if you don't have a bundle of cash to throw in to the scheme it could well be the case that it's well worth borrowing (at modest bank lending rates) as much as you can extract later.

There have been dark whispers of some taxation advantages being removed so, as with the stamps, I have to say that things may change or not work out so attractively in the future. This has, though, been the case for nearly 40 years and is pretty darned unlikely to disappear soon, unless Chancellor George Osborne loses his mind completely. You do also need to get good advice, especially if you're thinking of really maximising this beyond what most HR or Finance department staff should be able to deal with as normal practice.

Collecting stamps just got very interesting

It looks like postage rates are about to increase really quite substantially, with 2nd Class rumoured to go from 36p to 55p and 1st Class from 46p to goodness knows what. A similar percentage increase would take it to around 70p.

This got me thinking. For over 20 years now it's been possible to buy stamps with a 1st or 2nd indicator rather than a specific stated value figure. In 1990 you could have bought a 1st Class stamp for 20p. If you still had it, it could be used to pay the current 46p First Class rate. That's something like a 4% pa increase. In other words, you would have had to get 4% interest each year on a 20p investment to have 46p now.

That's neither one thing nor another, I suppose, and, in fact, quite a few of those 1990 20p stamps could be worth considerably more - more like £5 if you have a certain type that wasn't particularly uncommon and lots more if you happened to have one of the rarer types. But that's another story. Let's look at what's happened more recently: you may have bought one for 30p in 2005. Now that has increased in value by a more respectable 7½% pa.

Even more recently, a 2008 1st Class would have cost you 36p and that has increased by a quite decent 9% pa. Not many investments that could be guaranteed not to lose their value, and have a reasonable market for actually selling in, have done that over this period.

"But I used the ones I bought", you say, reasonably enough, "So what's the point?" 


Well, if you buy a 1st Class stamp now for 46p and in a month or so you can use it for 70p's worth of postage then you could get an absolutely massive return on your money. Even if you don't see people rushing to buy stamps from you in a few weeks at 70p, they might be more interested in ordering a few if you charged, say, 60p. Now that's a fine 14% discount for them and an even finer 35% or so return for you. In a few weeks!

OK, we don't know for sure that the rate hike will be that big and there is, I suppose, a chance that Royal Mail might decide not to permit old NVI stamps (No Value Indicators) to be used after the date of the increase. That would be surprising and go against the whole concept of the NVIs issued to date and it would also require the issue of a brand new different stamp that we could use. I don't see that happening - at least not in the short term.

So, go buy £1000 worth of 1st or 2nd Class stamps. If you're likely to use them anyway over the next year you'll be getting £1500's worth on my estimates. If you only use one or two at Christmas and people's birthdays then sell them to someone who does use lots. Or hang on for an even greater return! But be quick - although, as the chart illustrates, prices have risen faster than RPI inflation generally, so they may just represent a pretty decent longer term investment too.

I guess I have to conclude by saying that I have no knowledge of what the new price may be, or even whether it will go up at all. It may even go down. It's just a thought. Quite a good one, possibly.