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UK tax brackets and personal allowances

Updated by The Investor on June 2, 2026

Know your tax bracket and personal allowance to learn what income is yours to keep

Hey, do you know your tax brackets? I’m talking about the bands that determine whether you’re a basic (20%), higher (40%), or additional-rate (45%) taxpayer.

Everyone knows their height and their shoe size. An occasional show-off can even tell you their inside leg measurement.

But many of us have no idea where the various tax brackets start and end – nor where our income falls within these bands.

True, the ongoing – and increasingly controversial – freezing of personal tax allowances and income tax thresholds has made people more aware.

Yet too many people still don’t know how much of their salary they get to keep, or even how to work it out.

Let’s address this with some concrete numbers. We’ll then see what your tax bracket means for your take home pay.

2026/2027 UK tax brackets

The rate of tax you pay depends on your total income from all sources. This includes salary, interest, dividends, pensions, property letting, and so on. ¹

You add up all this income to get your total income figure.

You then subtract your personal allowance from the total to see which tax bracket you fit into. More on that in a moment.

For England, Wales, and Northern Ireland, the income bands after allowances are currently:

Income Tax Rate	2025/2026	2026/2027
Starting rate for savings: 0%	£0-£5,000	£0- £5,000
Basic rate: 20%	£0- £37,700	£0- £37,700
Higher rate: 40%	£37,701-£125,140	£37,701-£125,140
Additional 45% rate	£125,141 and above	£125,141 and above

Source: HMRC

Note: If your non-savings taxable income is above the starting rate limit, then the starting savings rate does not apply to your savings income.

Scotland has its own (similar) tax rates. Refer to the Scottish Government for the gory details.

If you prefer to think in terms of tax bands – that is, before deducting the personal allowance – then for England, Wales, and Northern Ireland these are:

Personal allowance at 0%: £12,570
Basic rate 20% – £12,571 to £50,270
Higher rate 40% – £50,271 to £125,140
Additional rate 45% – £125,141 to the moon

The freeze on the personal allowance and higher-rate thresholds has been extended until April 2031. This means fiscal drag will continue to pull more people into higher tax bands as wages rise.

Complicating factor alert! If you earn over £100,000 you’ll pay a marginal rate of 60% on some of your income. What joy! More below.

2026/2027 personal allowance

The tax year runs from 6 April to 5 April the next year.

All of us have a basic level of income – whether we’re employed or self-employed – that we can earn during the tax year before we pay income tax.

But once your allowance is used up, the government starts to take its cut via income tax.

Everyone starts with the same personal allowance:

For 2026/27, this personal allowance is £12,570

Your personal allowance may be bigger if you qualify for Married Couple’s Allowance or Blind Person’s Allowance. It’s reduced if your income is over £100,000. We’ll get to that in a minute.

Note the £12,570 personal allowance is the same as it was in 2021/22, and it’s currently frozen until April 2031. This fiscal drag strategy has generated extra government revenue by pulling ever more income into taxation over time.

As your salary rises, proportionally less is covered by the tax-free personal allowance. You’ll therefore lose a greater share of your income to tax.

Pensioned off

Another consequence of freezing the personal allowance is that very soon it will be insufficient to fully cover the state pension.

Following a 4.8% hike in April, the state pension for this tax year is £241.30 a week, or £12,547.60 a year – just under the £12,570 personal allowance.

But if the pension continues to rise while the personal allowance stays frozen, then over the next few years millions will pay tax on their state pension. That seems a clumsy way to shuffle money between the state and its pensioners.

Even today, it only requires a small amount of additional taxable income from other taxable sources to take a pensioner over the personal allowance.

Blind Person’s and Married Couple’s allowance

There are two other personal allowances you might qualify for:

Blind Person’s Allowance – £3,250
Married Couple’s Allowance – £1,260

These are added to the standard personal allowance, if you qualify. They can give you or your spouse a slightly higher personal allowance.

MoneySavingExpert has a good guide to the Married Couple’s Allowance.

The 60% tax trap for those earning £100,000 or more

If you’re on a six-figure salary then I’ve got some unpleasant numbers for you.

Anyone with an income of over £100,000 sees their personal allowance reduced by £1 for every £2 of income above the £100,000 threshold.

This effectively pushes up the marginal rate of tax you pay on income between £100,000 and £125,140 to 60%.

On earnings above £125,140, the 45% additional tax rate applies.

Ironically, you’re taxed at a lower rate on your income above £125,140 than on what you earn between £100,000 and £125,140. That’s because your personal allowance has been totally whittled away by this point.

The effective 60% marginal rate you’ll pay on the £25,140 chunk of income between £100,000 and £125,140 is far higher than official tax rates indicate.

Apparently it is the second highest marginal tax rate in Europe, beaten only by a small village called Munkdeal in Sweden with a 70% marginal rate.

Note: there are extra complications to consider if your family is eligible for Child Benefit or support for free childcare. See below.

Take cover!

If your income falls within the £100,000 tax trap band, there’s a strong case for increasing your pension contributions by enough to reduce your taxable income to below £100,000.

Rather than paying 60% tax on your income above £100,000 to HMRC, you’ll instead get generous tax relief on your extra pension savings.

Remember: you can put up to £60,000 into a pension every tax year.

The child benefit booby-trap

Got kids? There’s a similar effective hike in the marginal tax rate when either parent earns over £60,000 a year.

Child benefit is available to parents of children under 20. But this benefit is progressively withdrawn above the £60,000 threshold, via a fiddly High Income Child Benefit Charge that sees you repay 1% of your child benefit for every £200 you earn above the threshold.

The High Income Child Benefit Charge starts at £60,000 and fully removes child benefit at £80,000.

For example, if you earn £70,000 – that is, £10,000 above the income threshold – then you would need to repay 50% of the full child benefit amount. (Because £10,000/£200 = 50).

At £80,000 you’ll pay it all back. (£20,000/£200 = 100).

Depending on how many kids you have – and hence how much child benefit you’ll be repaying – this could equate to an effective tax rate of as much as 56% on earnings between £60,000 to £80,000 with three qualifying children.

Again, you might consider increasing your pension contributions to keep your child benefit whilst improving your financial future.

How tax brackets determine the tax you pay

Let’s run through a couple of examples to see how this all works.

Basic-rate tax payer

Let’s say you will earn £45,000 in 2026/27 from all sources. Your taxable income is £45,000 minus your personal allowance of £12,570.

So £32,430.

This means all your income is in the 20% tax bracket, as it’s less than £37,701 in the first table above.

In practice you’ll pay no tax on the first £12,570 you earn, and 20% on the remaining £32,430.

You’ll therefore pay £6,486 in tax on your income.

Higher-rate payer

Now let’s imagine your total income adds up to £60,000.

By the same method (£60,000 minus £12,570) your taxable income is £47,430.

The first £37,700 of this will be taxed at 20%.

The rest – £9,730 – is taxed at 40%.

You’ll pay:

Basic rate tax of £7,540
Higher rate tax of £3,892
Total tax paid is £11,432

In nearly all cases you’ll also pay additional and hefty National Insurance contributions.

National Insurance

National Insurance works separately from income tax. But in practice it’s just an extra tax you pay on your earnings.

The rates come with their own fiddly rules – and in recent years the Government has been prone to messing with them.

National Insurance rates

Currently, most employees pay employee National Insurance at 8% on earnings between a ‘primary threshold’ and an ‘upper earnings limit’, and 2% above that.

In terms of your salary, these so-called Class 1 contributions are charged at:

Your salary	6 April 2026 to 5 January 2027
£242 to £967 a week (£1,048 to £4,189 a month)	8%
Over £967 a week (£4,189 a month)	2%

Source: HMRC

Your employer also pays National Insurance contributions, based on your salary. This leads to the technique known as salary sacrifice.

With salary sacrifice you give up some pay in return for another benefit – usually extra pension contributions. You get the benefit, and you and your employer also pay less National Insurance.

However the government is planning to restrict salary sacrifice from 2029. Act now if you want to make the most of the existing opportunity.

Self-employed people make different National Insurance contributions, depending on profits. These are worked out via a self-assessment tax return.

National pastime

Most people find it even harder to keep track of what they’re paying in National Insurance than income tax. National Insurance rates are therefore less politically contentious than income tax rates when raising extra revenue.

Hence the National Insurance rates and thresholds have been repeatedly moved around over the last few years.

For example, you may remember there was a hike in employer National Insurance contributions (NICs) in the October 2024 Budget. The net result was a higher ‘tax on jobs’, as the tabloids and opposition MPs put it.

You don’t directly pay employer’s NICs. The company does. But the odds that employers absorbed all the cost of these hikes without a hit to wages or job creation seems remote to me.

Anything else we could write about National Insurance will not be exhaustive enough to stop someone saying “what about X?” in the comments.

Don’t blame us! Blame the labyrinthine UK tax system.

In a sensible world we’d merge National Insurance with income tax. This doesn’t happen because (a) supposedly the money raised is set aside for state pensions and other welfare funding (it’s not) and (b) no UK government wants to be seen setting an income tax rate that’s explicitly above 50%.

You’re a masochist? The government has more on National Insurance.

Your tax bracket determines your take home pay

Like many students, I was philosophically a left-wing tax-and-spender.

It was a pretty low-stress position to hold when I paid no taxes…

…but then I got a job.

Suddenly I saw how much money was taken out of the meagre pay I received for ramming my head into the coalface for 40 hours a week. Economically speaking, I turned more to the right. ²

As my dad used to say, quoting someone else:

If you’re not a socialist at 20 you haven’t got a heart.

If you’re not a capitalist at 30 you haven’t got a head.

I’d add: if you don’t know your tax bracket then you haven’t got a clue.

Most of us care about what we get to keep, after tax. We’re not so preoccupied with how our taxes help to fund the NHS or to pay interest on the UK’s national debt – vital though all that may be.

So when we start working – and start paying taxes – we’re shocked by how our pay shrinks on the way to our bank accounts.

Beyond the sticker shock

Knowing your tax bracket is about more than just stopping you from fainting when you see your take home pay, though.

Armed with your knowledge of tax brackets, you can be more strategic about adding money to ISAs and pensions.

As we’ve seen above, the tax system gets progressively more punishing as your salary passes through various thresholds. You might therefore prefer to put more of your higher-taxed earnings into a pension, for example.

Thanks to pension tax relief, you’ll sacrifice less of a share of your post-tax disposable income, while you’re also building up a bigger retirement pot.

A fiscal drag

The tax take from British workers has been rising for over a decade.

This was partly achieved by ‘fiscal drag’.

Fiscal drag sees rising salaries pulling more workers into the higher-rate tax bands, because the tax band thresholds and allowances are frozen or only raised by a bit – despite high inflation.

After the financial crisis of 2008/2009, the threshold for higher-rate tax was actually explicitly lowered, despite inflation running above target. That move dragged millions more people into the higher-rate tax bracket.

National Insurance rates also rose for higher-rate tax payers. And the wheeze that cut the personal allowance on incomes above £100,000 was introduced.

True, the additional rate of income tax was reduced from a short-lived 50% to 45% in 2013. And eventually both the personal allowance and the higher-rate tax thresholds were lifted.

But as we’ve seen above, they were later frozen – a freeze lately extended to April 2031.

In short, if you remember the arcade game Frogger, that’s a good analogy for the ever-changing UK’s income tax landscape.

Bring me higher (tax) love

Some may quibble with my simplified narrative. But it’s directionally correct.

See this graph from the IFS, and pay particular attention to the yellow line:

Source: IFS

You can see that the numbers paying higher rates of tax (yellow line) has hugely increased since 2009 – let alone 1990.

Perhaps that’s fine. You might even argue the rise in higher-rate taxpayers is a reflection of rising income inequality as much as frozen tax bands.

We can debate that another day. I’m just pointing out how things have been going – and what might happen next.

We just lived through a period of historically high inflation. After peaking in double-digits in 2022, inflation was still an above-target 3.5% as recently as March 2026.

Yet the personal allowance and the higher-rate tax thresholds remain frozen.

Unless the government changes course, as many as one in four workers will be paying higher-rate and additional-rate taxes by 2031.

A higher calling

If you’re a higher earner wondering why you’re not feeling as wealthy as you thought you would, higher taxes will have something to do with it.

Okay, and higher mortgage rates and energy and food bills since 2022.

(Not to mention hedonic adaption! But let’s stay on-topic.)

The reality is being a higher-rate taxpayer no longer means you’re wealthy.

Yes, I’m aware that the gross median annual earnings in the UK for full-time employees is still under £40,000 – and so well below the higher-rate bracket. Nobody needs to get on a soap box to shout at me.

But the point stands. Paying higher-rate tax no longer makes you Bertie Wooster.

Resistance is tax-efficient

I’m all for taxing, spending, and the UK offering a decent welfare safety net.

But I’m not going to leave a tip.

I’m a law-abiding citizen. However there are sensible and legal steps you can take to mitigate your total tax bill.

Use your ISA allowance and/or a pension to shelter your savings as much as possible.
Take steps to manage capital gains tax.
You could also consider VCTs and EIS schemes if you’re up for the research, extra costs, and greater risks.

Higher-rate taxpayers should consider making maximal contributions into their pension. Most people are allowed to pay up to £60,000 into a pension in a year without any tax penalties ³, so there’s lots of headroom.

If you can cut your spending to allow for very big pension contributions, then you might be able to get the higher-rate tax you’d otherwise pay entirely wiped out by tax relief. Depending on how much you earn, of course.

Bigger pension contributions accelerate the growth of your retirement pot. Just remember you’ll almost certainly have to pay some tax when you drawdown your pension income later.

The bottom line? Taxes are continuing to rise. Take cover, or take the pain.

Note: This article was updated in June 2026 with the latest figures for UK tax brackets, personal allowances, NICs, median pay, and more. Comments below may refer to old numbers. Please check the dates if unsure.

There exist allowances and reliefs for some of these income sources, such as dividends and savings. These can reduce how much of that income is taxable.[↩]
To be clear, I’ve no problem with a reasonable level of taxation, public spending, and redistribution. But back then I had no idea what was already being taxed and spent![↩]
Or 100% of income, whichever is lower.[↩]

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Weekend reading: will the SpaceX, OpenAI, and Anthropic floats sink index funds?

by The Investor on May 30, 2026

What caught my eye this week.

Over the next few months, three ginormous companies – SpaceX, OpenAI, and Anthropic – are set to float on the US stock markets.

Weekend Reading – featuring the week’s best money and investing articles from around the web – can be read by any logged-in Monevator member. Alternatively please subscribe to our free email newsletter to get future editions direct to your inbox.

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The 60/40 portfolio’s glaring weakness

by The Accumulator on May 27, 2026

The 60/40 portfolio is the default solution for millions of people who don’t want to spend time agonising over their investments.

The portfolio’s strong track record, simplicity, and appealing balance of attack and defence has convinced a broad swathe of the public that they can dip their toe into the stock market without getting their leg bitten off.

The problem is the 60/40’s track record conceals a major weakness.

While its long-term returns are good, those numbers are the average of different eras.

Decompose the 60/40’s returns by these divergent periods, and the industry standard portfolio looks more like a car that cruises along in fair weather, but struggles to start on cold mornings.

Here’s the break down in inflation-adjusted annualised returns (GBP):

Period	60/40 annual return (%)
1900-2025	4
1947-1974	1.7
1975-2025	6.1
1947-2025	4.5

The 60/40 portfolio is 60% World equities and 40% All Stocks gilts – rebalanced annually. Data from JST Macrohistory ¹, The Big Bang ², Before the Cult of Equity ³, A Century of UK Economic Trends ⁴, St. Petersburg Stock Exchange Project ⁵, World Financial Markets ⁶, MSCI, FTSE Russell, Millennium of Macroeconomic Data for the UK, ⁷ and ONS. May 2026. All returns quoted in this article are inflation-adjusted total returns (GBP).

The long-term average return since 1900 is absolutely fine. Achieving 4% annualised is a decent result.

But that average conceals a 27-year period of gross underperformance from 1947-74. The 1.7% annualised return earned during that era is 60% worse than the 4% long-run trend.

Experiencing that kind of outcome could mean delaying your retirement dreams, or you having to pour in more money to stay on-track.

Then again, the 60/40 has been in rude health ever since. It notched up a mighty fine 6.1% annualised from 1975 to the end of 2025. ⁸

Era checking

Unfortunately, those years from 1947 to 1974 weren’t uniquely blighted. It wasn’t a problem with all the vacuum tubes they used or something.

Rather, the record shows a repeating pattern of sub-par performance by the defensive component of portfolios when solely reliant on bonds. (And cash doesn’t look good either).

UK government bonds lost 76.4% from 1947 to 1974.
Cash lost 28% in this era, too.

And you wouldn’t have meaningfully staunched the losses by switching to some other bond type. We’re dealing with an intrinsic vulnerability of fixed income assets (bonds, bills, and cash) that was glossed over while the 60/40 was firing on all cylinders from 1975 to 2020.

No super subs

All would be well if I could just point you to a simple upgrade for the defensive part of your portfolio. Or if you could just swap in one of the many multi-asset funds that populate the 60/40 investment space like rows of slightly different shampoos in the supermarket.

I will come up with some suggestions by the end of this two-part series. But in truth the alternatives mostly come with the enough baggage to get you thrown off a Ryan Air flight.

At the very least, the solutions introduce complexities that are liable to prove unpalatable to the very people who most need a 60/40 type product.

Consequently, I think I should start by laying out as clearly as possible what ails the 60/40 portfolio, if you happen to rely upon it at the wrong time.

Rising rate eras: bonds on the blink

Bond prices typically drop when market interest rates ⁹ rise.

If interest rates trend up for years then we’re living in a rising rate era, typified by increasing bond yields, falling bond prices, and bad times for bond holders.

The dynamic works in reverse, too. Long periods of declining bond yields are associated with rising bond prices and impressive returns on your bonds – a falling interest rate era.

1947-74 was the textbook rising rate era, while 1975-2020 was a dream falling rate era.

The next chart shows the four interest rate eras that prevailed over the past century and a quarter.

Data from JST Macrohistory ¹⁰, Millennium of Macroeconomic Data for the UK, ¹¹ and Bank of England. May 2026.

The differing path for interest rates in these eras have a clear impact on bond returns:

The chart starts from 1900, though the left-hand rising rate era began in 1898.
(See the table below and the next chart.)

Here’s the cumulative bond returns per era:

Period	All Stocks gilts return (%)	Interest rate era
1898-1920	-71.9	Rising
1921-1946	421.4	Falling
1947-1974	-76.4	Rising
1975-2020	1067.4	Falling
2021-2025	-40.3	Rising so far

The mechanism is straightforward enough. An interest rate rise forces down the price of existing bonds. That price drop means a capital loss for bond holders.

Why bond prices fall when rates rise

As an analogy, think about your situation if you put £100 into a five-year fixed rate savings account at 3%. And then imagine the next day an identical five-year product hits the market with a 4% interest rate.

Now you’re stuck in an uncompetitive savings account for the next five years. FML.

But what if you could sell your 3% savings account including your £100 deposit?

No-one would give you £100 for it, that’s for sure.

They would give you about £95.56 for it though. ¹² At that price, the buyer would still trouser a 4% yield if they held your weedier 3%-returning savings account until maturity.

The point: that 4% yield is the same as the 4% interest rate they’d earn by popping £100 into the shiny new 4% 5-year Cash Grabber+ saver account that just shot straight to the top of the Best Buy tables.

That’s the basic background.

When rates only rise

The upshot is that rising rates inflict capital losses onto existing bond owners.

That’s okay. The price will swing in the opposite direction as and when rates fall again. Or you’ll eventually make good the loss over time by reinvesting the proceeds of your bonds into new higher yield issues.

But what if the market keeps demanding higher and higher interest rates for holding bonds?

And you own a portfolio full of 10 to 20 year maturities?

Then the capital losses keep mounting up for your musty old bonds with weeny interest rates long since superseded.

That’s the root of the terrible nominal bond returns in rising rate eras.

The same clockwork unwinds in reverse during falling rate eras. Now your long bond is a must-have collector’s item. Market interest rates keep dropping, so buyers are prepared to pay you top dollar (or pound) for a 10-year gilt bearing a fat coupon rate ¹³ from the good old days.

Again, if you held a 6% five-year savings account in 2009 when interest rates were evaporating, then you held onto it for dear life.

Are we in a rising rate era?

I can’t help but notice that rising rate eras generally follow on from falling ones in the yield chart above.

There have been sideways eras. But not since – um – the 18th Century.

Moreover, the shortest era in the table above was 23 years long. These trends seem to persist once they take hold.

It doesn’t help the case for the 60/40 portfolio that ten-year gilt yields have climbed like Spider-man since they bottomed out in 2020.

None of which is to pronounce that bonds are doomed. But the historical record does counsel caution.

There are still reasons to own bonds, but perhaps shorter duration ones than has traditionally been the case for mainstream British investors.

You might also want to think twice about holding a default 60/40-type fund if it’s full of conventional bonds, and doesn’t tilt towards the shortish end of the market.

Do two rising rate regimes make a pattern?

You may not need any further convincing but I hate to waste a good chart. Here’s how the regime change switcheroo has played out since 1703:

This pattern has form – including an idyllic century of moderate yield decline from 1798 to 1897.

It’s also intriguing that the April 2026 All Stocks gilt yield of 5.3% sits just north of the long-term average of 4.4%.

So you could argue that falling gilt returns since 2020 are the consequence of a normal yield reasserting itself.

One plausible scenario then, is that gilts now represent reasonable value, and no longer expose their owners to the risks compressed into the anomalously low interest rates of 2020.

Plus, there’s enough wiggle room in the chart above to disbelieve the notion that we’re condemned to some Kondratiev-style cycle of bond boom and bust.

But for me, this isn’t about trying to predict the future.

It’s about pointing out the gaping holes in the 60/40 portfolio risk story that appear when you don’t skip over the awkward parts of investment history.

How do bonds perform during the worst stock market crashes?

A critical role for bonds is reducing portfolio losses when equities implode.

So do they really? Including during rising rate eras?

The next chart shows how bonds performed during every World equities bear market of the past 126 years:

Data from MSCI, Before the Cult of Equity ¹⁴, A Century of UK Economic Trends ¹⁵, Robert Shiller, The Big Bang ¹⁶, Bank of England, Millennium of Macroeconomic Data for the UK, ¹⁷, Alan Stocker ¹⁸, British Government Securities Database ¹⁹, FTSE Russell, and ONS. May 2026. Pre-1970 World monthly returns are market-cap weighted UK and US equities returns (GBP).

And yes: UK government bonds only worsened the situation once – during the disaster of World War One.

The table below summarises the action above:

World equities bear markets	Nine
Bonds increased losses	Once
Bonds reduced losses	Eight times
Positive bond return	Five times
Better negative return	Three times

Better negative returns means that bonds weren’t as bad as equities. That reduced portfolio losses during the bear market.

That’s not unusual. Often it’s the best our defensive diversifiers can do.

Rise and fall

If we zero in on the three rising rate era bear markets then bonds did badly and exacerbated the situation once (WW1), responded positively once (Flash Crash ’62), and were just less bad than equities once (1970s). Whup.

By contrast, during falling rate eras bonds always improved 60/40 portfolio returns during a shock, responded positively four times, and were the lesser of two evils twice.

On this evidence, it looks like bonds’ ability to hedge equity losses is impaired during rising rate eras. Though it’s worth noting that six out of nine bears pitched up during falling rate periods. ²⁰

On the defensive

I’d like more to go on, so let’s see how bonds perform as a diversifier when we examine every world equities’ drawdown from 1900:

When the gilt 12-month return line (ice blue) is above zero, it’s actively countervailing equity losses with positive returns.

When the blue line drops below the red stain, bonds are making things worse.

If the blue line is below zero, but doesn’t penetrate beyond the red, then bonds are losing money but less so than equities. At least that means they’d have hedged portfolio losses, though we might not thank them for it.

What I like about this chart is you can tell at a glance that the government bonds’ flight-to-quality story mostly holds up in falling rate eras.

But it’s much flimsier (though not non-existent) during rising rate regimes.

Notice, too, how gilts suffered a bear market loss in 2022 while equities did not.

Rising rate era corrections and bears

If I redo the diversification score card for the rising rate eras (including 2021-2025), and include every equity market correction beyond a 10% drop, then the picture becomes clearer:

World equities corrections and bears	Ten
Bonds increased losses	Two times
Bonds reduced losses	Eight times
Positive bond return	Once
Better negative return	Seven times

Bonds still mostly reduce losses when equities retreat, it’s true. But sometimes bonds aggravate your losses.

Mostly gilts are positively correlated with equity declines. Both assets sink together, but bonds don’t fall as far.

More to the point, bonds lost 5% on average per year during the rising rate eras of 1898-1920 and 1947-74.

That’s a steep price to pay for the leaky defence offered during those years.

Where does that leave us?

What fuels rising interest rates? Pick your favourites: ²¹

Heightened fear of inflation
Deteriorating public finances
Mounting debt and fading belief in the capacity of the authorities to manage the burden
Increasing risk of sovereign default

Hmm, nothing to worry about there then!

Actually my argument isn’t that bonds are broken, or bonds are fine, or that we must be in the grip of a new rising rate era.

My argument is that over-reliance on any single asset is setting yourself up for a fall because they can all fail to deliver for decades.

Though I’ve yet to discover a period when they all failed at once.

Multi problems

Multi-asset funds present a particular problem because while they may look diversified, they’re typically chock full of highly-correlated nominal bonds.

This means that a traditional 60/40-adjacent product will probably do just fine if rates fall again or even drift sideways. But it’s likely to disappoint if rates trend interminably upward as they have in the past.

In that scenario, standard-issue multi-asset funds are woefully under-strength in the assets that tend to compensate for nominal bond failings: specifically gold, commodities, and individual index-linked gilts.

For that reason, I can no longer cheerfully recommend all-in-one fund-of-funds to my friends and family who don’t give two hoots about investing but still need a pension.

The best answer is maximum diversification customised to your particular circumstances.

But I get that’s a heavy lift for most of my nearest and dearest – plus many visitors to Monevator.

So in the next episode I’ll do my best to come up with a minimal viable alternative to the current 60/40 default.

Take it steady,

The Accumulator

Jordà O, Knoll K, Kuvshinov D, Schularick M, Taylor AM. 2019. “The Rate of Return on Everything, 1870–2015.” Quarterly Journal of Economics, 134(3), 1225-1298.[↩]
Kuvshinov D, Zimmermann K. 2021. “The
Big Bang: Stock Market Capitalization in the Long Run.” Journal of Financial Economics,
Forthcoming.[↩]
Campbell G, Grossman R, Turner JD. 2021. “Before the cult of equity: the British stock market, 1829–1929.” European Review of Economic History. 25. 10.1093/ereh/heab003.[↩]
Chadha J, Rincon-Aznar A, Srinivasan S, Thomas R. “A Century of UK Economic Trends.” ESCoE, NIESR and Bank of England.[↩]
Radchenko P. “St. Petersburg Stock Exchange Project.” Yale School of Management, International Center for Finance.[↩]
Moore L. “World Financial Markets, 1900–25.” Working paper.[↩]
Thomas R, Dimsdale N. 2017. “A Millennium of Macroeconomic Data for the UK.” Bank of England.[↩]
The only reason I’ve cut off the study at the end of 2025 is because I haven’t updated my spreadsheet for 2026 yet. But 2026’s numbers don’t make any material difference to the point of this article.[↩]
i.e. The prevailing rate of interest demanded by the market in exchange for holding a particular bond. This is influenced by, but not to be confused with, central bank interest rates.[↩]
Jordà O, Knoll K, Kuvshinov D, Schularick M, Taylor AM. 2019. “The Rate of Return on Everything, 1870–2015.” Quarterly Journal of Economics, 134(3), 1225-1298.[↩]
Thomas R, Dimsdale N. 2017. “A Millennium of Macroeconomic Data for the UK.” Bank of England.[↩]
Dial-in face value ‘100’. Coupon rate ‘3’. Market rate ‘4’. Years to maturity ‘5’. Days since payout ‘1’. Coupon frequency: annual.[↩]
Coupon rate is just bond talk for the fixed interest rate paid on a bond.[↩]
Campbell G, Grossman R, Turner JD. 2021. “Before the cult of equity: the British stock market, 1829–1929.” European Review of Economic History. 25. 10.1093/ereh/heab003.[↩]
Chadha J, Rincon-Aznar A, Srinivasan S, Thomas R. “A Century of UK Economic Trends.” ESCoE, NIESR and Bank of England.[↩]
Kuvshinov D, Zimmermann K. 2021. “The Big Bang: Stock Market Capitalization in the Long Run.” Journal of Financial Economics, Forthcoming.[↩]
Thomas R, Dimsdale N. 2017. “A Millennium of Macroeconomic Data for the UK.” Bank of England.[↩]
Stocker AJ. 2024. “Total Returns for UK Gilt Sectors of Different Maturities from 1870 Onwards.”[↩]
Cairns A, Wilkie D, ESCoE Historical Data Repository. “Heriot-Watt / Institute and Faculty of Actuaries / ESCoE British Government Securities Database.” ESCoE.[↩]
As you’d expect. Rates normally plummet when economic demand collapses.[↩]
Not intended as a comprehensive list.[↩]

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That’s what makes a market [Members]

For MOGULS by The Investor on May 25, 2026

The year was 2010 or early 2011. A pub in Clapham. I was having a debate with the girlfriend of an investment banker pal of mine. She was more scornful than he was of my hobby of picking stocks.

He had just told me all of his money was in gilts. Given that he’d go on to be paid seven figures a year, that calculus was probably rational, although I thought he was crazy.

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