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Weekend reading: if you could take one asset class into the shower

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What caught my eye this week.

Morning all. I’ve got to admit that after writing 5,788 words for this month’s member post for Moguls – trust me, I counted them – I’m out of puff for the week.

(While I do aim to go into depth with these reports, I agree that 5,788 words is not sustainable! Perhaps not even for busy members. Must cut harder…)

So before the links I’ll just point you to this chart that was highlighted to me by Monevator member Mark:

Source: Trustnet

The chart is taken from this year’s Credit Suisse Equity Yearbook. It was flagged up in the Trustnet article I’ve linked to by Martin Currie’s chief investment officer, who describes it as the most helpful guide to investing he’s come across in his career.

What does it tell us? Nothing more – but also nothing less – than that since 1900, equities have beaten bonds for returns in all economic environments except when lower growth coincides with lower inflation.

And even then, there’s only a whisker in it.

It’s simply a reminder that for all the good reasons we have for diversifying our portfolios, shares should be the engine. At least until you’re getting ready to start spending. Even then you should almost certainly keep a decent-sized wodge in them.

Not a revelation to many Monevator readers perhaps. But tell it to the millions with collectively £1.5 trillion sitting in cash savings accounts.

(Yes, having some cash is great. But cash won’t be a driver of wealth).

Eat up your house deposit

Oh, before I go here’s a menu entry shared by a Monevator reader holidaying in Amsterdam:

Very droll. If you’d like to pay homage to these personal finance ironists on your next visit, the restaurant is called Box Sociaal.

Have a great weekend!

From Monevator

How to create your own financial independence plan – Monevator

And now for something completely different – Monevator [Mogul members]

From the archive-ator: Keep it simple, stupid – Monevator


Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.

Nationwide: UK house prices falling at fastest rate since 2009 – Guardian

UK economy surpassed pre-Covid size in late 2021, new data shows – Reuters

Aberdeen named the most affordable city to own a home – This Is Money

Octopus Energy gains two million new customers in Shell deal – Sky

Bank of Mum and Dad contributes to 47% of under-55 home purchases – This is Money

A well-off retirement now requires a pension pot of £600,000 – This Is Money

Court hands Grayscale Bitcoin trust victory against SEC… – The Block

…The SEC failed to prove that dog wags tail, court rules [Search result]FT

FWIW, the market is saying the low-rate era is over [Search result]FT

Products and services

NS&I launches one-year saving bond paying 6.2% – NS&I

HSBC to offer 40-year mortgage term to cut bills – This Is Money

Open a SIPP with Interactive Investor and claim £100 to £3,000 in cashback. Terms apply – Interactive Investor

Would an annuity work for you? [Search result]FT

London’s ULEZ expansion: facts and fiction – Be Clever With Your Cash

Open an account with low-cost platform InvestEngine via our link and get £25 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine

A reminder of how the “Hi mum!” WhatsApp scam works – This Is Money

Cheapest destinations for a last-minute holiday this September – Which

Are you a victim of ‘dogflation’? – This Is Money

English homes for sale within walking distance of school, in pictures – Guardian

Comment and opinion

Frugal vs cheap – White Coat Investor

Should we move the 2% inflation goalposts? – David Smith

Win big, lose big: range of outcomes thinking – Mr Stingy

Mind the behaviour gap – The Big Picture

Boomers: the luckiest generation – A Wealth of Common Sense

Why we glorify overwork and refuse to rest – Harvard Business Review

S&P 500 calculator, with dividends [Tool]Of Dollars and Data

Don’t have a cow – Humble Dollar

Scared to death of running out of money in retirement – Wall Street Journal [h/t A.R.]

The reality of retirement beyond the numbers [Podcast] – Best Interest via Apple

Naughty corner: Active antics

15 ideas, frameworks, and lessons from 15 years – Flirting with Models

Optimising position sizing for better returns – Flyover Stocks

Neglected aspects of investing – Investment Talk

Lessons from David Herro’s holding on to Credit Suisse – Morningstar

Is illiquidity a feature or a bug? – Savant Wealth

Warren Buffett’s canvas – Rational Walk

Sizing up startup rocket ships – Axios

Kindle book bargains

Freakonomics by Steven D. Levitt – £1.99 on Kindle

Creativity Inc. by Ed Catmull – £0.99 on Kindle

Way of the Wolf by Jordan Belfort – £0.99 on Kindle

No Rules Rules: Netflix and the Culture of Reinvention by Reed Hastings – £1.99 on Kindle

Environmental factors

The behavioural shift in how we think about climate change – Vox

UK must label showers and toilets to cut water usage, experts say – Guardian

RSPB boss apologises after charity calls ministers ‘liars’ over sewage issue – BBC

Burning Man’s climate protestors have a point – Vox

Iceland to allow whaling to resume – Guardian

A new bio-leaf solar power design improves efficiency – Imperial College

Robot overlord roundup

Money is pouring into A.I., skeptics call it a ‘grift shift’ – Institutional Investor

Generative AI and intellectual property – Benedict Evans

ChatGPT versus a real financial advisor: who wins? – Fortune

‘Blue zone’ mini-special

Why ‘blue zones’ may hold the key to a longer, healthier life – ABC News

10 healthy home tips from the world’s longest-lived people – Mbglifestyle

Live to 100 Netflix doc names Singapore world’s sixth blue zone – Green Queen

Costa Rica’s longevity blue zone predicted to fade in 20 years – Next Avenue

Off our beat

I, exponential – Not Boring

Covid infection risk rises the longer you are exposed, study confirms – Nature

Why isn’t Ukraine a superpower? – Uncharted Territories

Workers are quietly quitting, and only employers can stop it – BBC

Chuck Palahniuk is not who you think he is – Esquire

Results – Indeedably

“She’s totally lost it”: a year on from the ‘Trusterfuck’ – Guardian

How Google made the world go viral – The Verge

1930s slang terms – Mental Floss

And finally…

“Spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t.”
– Ramit Sethi, I Will Teach You To Be Rich

Like these links? Subscribe to get them every Friday. Note this article includes affiliate links, such as from Amazon and Interactive Investor.

{ 60 comments… add one }
  • 1 Atom September 2, 2023, 11:54 am

    So in 2021, not only did the economy recover from the pandemic disruption in 2020 but it also pushed aside the first full year impact of Brexit to be even larger than 2019

    Another nail in the coffin of project fear. Oh wait, no, middle class folks now have trouble staying in their 2nd homes in France and can no longer get cheap live in babysitters

  • 2 The Investor September 2, 2023, 12:09 pm

    @Atom — I agree the revision is material, and a bit embarrassing to those of us who have seen a different narrative play out.

    That was exactly why I included it in the links. 🙂

    However to still be supporting benefit-free Brexit in 2023 is rather quixotic, to my mind. Not definitively crashing the economy coming out of the gates is a low bar.

    As always, I reiterate that I expect Brexit’s economic impact not to be a bang but a whimper; a slow puncture of 0.25-0.5% loss of GDP indefinitely. I am 100% certain we’d be doing better in the counterfactual without it.

    Culturally/politically of course it absolutely was a bang. Didn’t have to wait to see the full results of ‘taking back control’ play out when the arsonists got into Number 10.

  • 3 PC September 2, 2023, 12:25 pm

    “A well-off retirement now requires a pension pot of £600,000 – This Is Money”
    I know everyone’s different but .. 3 weeks of European holiday, changing a 2 yr old car every 5 years and redoing a kitchen every 10 years seems well over the top to me.
    I’m working in a well paid job and I don’t do that now.
    Oh .. just saw the final comment
    ““Spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t.””
    exactly, in my case that’s food and wine ..

  • 4 JABA September 2, 2023, 12:53 pm

    The 10y10y chart is interesting, looks like the market is expecting long rates to move to about 5%. Which then makes me puzzled about current equity valuations. As a naughty active sort, not sure what the earnings/FCF yield on the S&P500 (or other index) is, however most high quality businesses are trading at earnings/FCF yields far below 5%. Guess that implies that the market expects significant earnings growth to create the equity risk premium. Else the equally interesting Trustnet chart might prove the epitome of the caveat that past results tell you little about the future.

  • 5 Al Cam September 2, 2023, 3:09 pm

    @JABA (#4):
    Or, that we are heading for a period of low growth with low inflation.
    Who knows?

  • 6 xxd09 September 2, 2023, 5:04 pm

    Seven years since the Brexit vote and economic life goes on as well if not better than anywhere else including the EU
    Perhaps it’s time to move on -losers consent is important to make a democracy work
    People can keep their Remainer hopes alive of course but perhaps on the back burner for now
    All hands on deck will be needed to make the country work and progress-we can ill afford not to present a united front to the rest of the world in these troubled but exciting times

  • 7 Neverland September 2, 2023, 5:17 pm


    Delusional. Inflation in the eurozone is literally half of the uks and their base rate is about 3.5%

    Politicians are paralysed by fear of overseas bond holder masters

  • 8 dearieme September 2, 2023, 5:23 pm

    “Results day” – when was this vile habit introduced and why?

  • 9 CJ September 2, 2023, 9:58 pm

    @atom@xxdo9. Economy surpassed pre-Covid size in late 2021. Oh great, the utility companies can now remove all the s**t they dumped on our beached and rivers. The NHS waiting lists can be cut. Michelle Mone will sail up the Thames in her yacht and give back all the money she stole. No need now for food banks. It’s all ok now.

  • 10 Time like infinity September 2, 2023, 10:22 pm

    @Atom#1, @TI#2, @xxd09#6, @Neverland #7: Reuters (risking the comment grenade that is Brexit): neither ‘side’ (how awful we should be divided into sides) should have tried to score any points out of the emergency situation with the economy during the pandemic. To the extent, as an ardent, otherwise unapologetic remainer (and rejoiner) that I may have done so, then I apologise. I still think that it’s a fair point to make though that the economic effects of Brexit from March 2020 through to the end of 2021 (whether good, bad or indifferent) are very likely to have been swamped by the probably significantly greater adverse impacts from the multiple ‘lock downs’ and other pandemic related phenomenon.

    Excellent links as always, but under “Off our Beat” link to “I, exponential” post on “Not boring” blog: whilst it’s well written and an engaging piece, have to take issue with its naive extrapolation. Wright’s, Moore’s, Nielsen’s and Swanson’s ‘laws’ aren’t the laws of nature, and they will all yield to the real ones. No doubt about it. As Scotty put it, ‘Ye cannae change the laws of physics’. There will always be a final computational ceiling (Landauer’s limit of finite-time processes), even if it might be a fair way off (see Seth Lloyd, Ultimate physical limits on computation. Nature 406, pp. 1047-1054 (2000)). One can’t just wish science away with a series of log plot best fit graphs.

    @JABA#4, @Al Cam#5 and the excellent FT piece: it could be the most important chart in finance, economics & investment; but doubt anyone really has a clue what it actually means for the future. I certainly don’t. It’s a bit like pronouncements of the oracle of Delphi. Good luck with making sense of it.

  • 11 BillD September 3, 2023, 1:30 am

    The This Is Money retirement article – predicted annual spending on clothing and footwear £791 for moderate retirement and £1500 for comfortable – where do they get these numbers from? I’d be hard pushed to spend this much on clothing every year, even the £580 for the minimum retirement. I just replace stuff when it wears out, more often walking shoes or boots. Do folks replace most of their wardrobe every year?

  • 12 Aaron September 3, 2023, 3:44 am

    Thanks for the link The Investor!

    Really appreciate you having me!

  • 13 ZXSpectrum48k September 3, 2023, 8:22 am

    @JABA. Using bonds is a flawed way of looking at forward rates. Government bonds are not homogeneous. If you look at the swap market then in Libor terms 10y10y is 4%; in OIS terms, closer to 3.70%. Yes, these yields have risen substantially but with inflation and policy rates where they are, it would be rather hard to get people to lend 10y10y at 2%. Plus, if you want to make a comment about r*, surely you look at real, not nominal, yields?

    Economists know that asking a 1000 people where they think policy rates will be in 5y or 10y will result in blank stares, so they use a market rate. The market rate, though, is more an output than an input. It’s not as though forward rates have much predictive power. It’s just a trajectory of zero P&L.

  • 14 Time like infinity September 3, 2023, 9:28 am

    @ZX#12: way beyond my paygrade/circle of competence, but the Fed agrees with you on real -v- nominal significance: “what matters most for the economy is the real, or inflation-adjusted, interest rate (the market, or nominal, interest rate minus the inflation rate). The real interest rate is most relevant for capital investment decisions, for example. The Fed’s ability to affect real rates of return, especially longer-term real rates, is transitory and limited. Except in the short run, real interest rates are determined by a wide range of economic factors, including prospects for economic growth—not by the Fed” – Bernanke, 30/3/2015.

    10y10y may or may not tell us something useful but, whilst maps of the future will never exist, people will always want and try to come up with them.

  • 15 Neverland September 3, 2023, 10:02 am


    But all of the eu had Covid lockdowns more similar to ours than different too – in France you even needed a piece of paper to be outside

    But factually our inflation rate is nearly double the eu average and interest rates are c 50% higher

    As for bond rates we now pay a c 15% premium to Greece to borrow for ten years – hardly a badge of market confidence

  • 16 Time like infinity September 3, 2023, 10:31 am

    @Neverland #14: all true factually and, as a rejoiner, I’m personally not going to draw different conclusions from those facts than what you have here, but – on reflection – I think it suspect ethically and questionable in terms of tactical efficacy to point score off what happened in 2020-21. They were wholly exceptional times. Unprecedented (at least since 1918-20), as everyone said at the time. Rejoining will require persuading people who currently hold a different view, or are agnostic, to change their minds. I’m doubtful that using the questionable benchmark of the upheavals of 2020-21 is going to help that.

  • 17 mr_jetlag September 3, 2023, 12:41 pm

    re. This Is Money – “Aberdeen named the most affordable city to own a home”

    Slightly surprised by that; in my journeyman consulting days it was a fairly well-to-do and pricey city to live in due to the oil majors having a major presence there.

    On a tangentially related segue I highly recommend the Map Men episode on what makes a “City” designed as such in the UK. (It isn’t a cathedral…) Available from your local Youtube screen.

  • 18 Kraggash September 3, 2023, 12:49 pm

    If we were still a member of the EU (and had not had a referendum), I think the UK would still have had conciderable problems following the pandemic. These problems, and the current increase in small boat crossings, would have been blamed on our membership, and the clamour to leave would demanded a referendum, resulting in a higher leave majority.

    So maybe it is better we had one when we did, allowing an easier rejoin.

  • 19 Neverland September 3, 2023, 1:25 pm


    We were dragged kicking and screaming into the eu because of our relative poor economic performance in the 60s and 70s. This time will be no different

    Don’t believe me on how far behind we already are? Do you trust Tim Hartford?


  • 20 xxd09 September 3, 2023, 4:45 pm

    I am always impressed how financial info outlets like Bloomberg and the FT manage to run making money and preach left wing views simultaneously-rather analogous to North London Corbynistas in their one to two million pound houses telling the rest of us how live -I am sure there is a name for this particular human condition but I couldn’t possibly say !
    Public don’t seem to buy it if they get a chance to vote

  • 21 Neverland September 3, 2023, 5:27 pm


    So Bloomberg is owned by the billionaire Michael Bloomberg and the FT is owned by Nikkei which is admittedly an employee owned company. However since both Nikkei and the FT have stock market indexes named after them … I think we can safely say its a pro-capitalist organisation

    Basically if you think they are left wing you have a reality perception problem

  • 22 The Weasel September 3, 2023, 5:34 pm

    “HSBC to offer 40 year mortgages to make more profit”

    The longer the term or the higher the interest, the more mortgages become closer to renting.

  • 23 Factor September 3, 2023, 5:39 pm

    @dearieme #8

    “vile” or good, and like it or not, in myriad different ways life continuously sorts the wheat from the chaff; it always has and it always will. For me, it is evolution in progress.

  • 24 xxd09 September 3, 2023, 5:57 pm

    Neverland -interesting …..
    I just have the notion that my perceptions are currently much more in tune with the populace
    It’s always been difficult to discuss amassing cash alongside preaching left wing socialist views -“camel through the eye of a needle” comes to mind
    It’s a perennial conundrum!
    Frankly I am happier with the clever luckier wealthier paying more via tax for the rest of us poorer devils as happens in our country(ie top earners pay most of the income tax receipts)
    -seems a much more honest upfront open way of dealing with the human condition

  • 25 Dragon September 3, 2023, 10:32 pm

    @Neverland (#21)

    Dragged in kicking and screaming were we? Would that be before, or after, then French president de Gaulle had vetoed our entry into the then EEC on two successive occasions?

    We were trying to get in. He kept saying “Non!”. Doesn’t sound like we were needing to be dragged in to me …

    And dragged in by whom exactly? Would it have been by Ted “No Loss of Sovereignty” Heath? (That’s classic is up there with Harold Wilson’s line about devaluation “not affecting the pound in your pocket”) Technically, he snuck us in by the back door. The referendum in 1975 was, of course, not a referendum about joining the EEC, but about whether to *stay* in what we had already been taken in to some years previously.

    If only the approach of our mendacious politicians and the chattering classes could be more like that of TLI. I suspect that approach would be far more likely to have a “Heineken effect” on the agnostics and “soft leavers” – reaching the parts that other beers can’t! 🙂

  • 26 Bill G September 4, 2023, 11:22 am

    To make a rare criticism of this fabulous website is it necessary or desirable to advertise the offerings of Jordan Belfort? The Way of the Wolf on Kindle.
    Belfort has been associated with the Traders Domain ponzi scheme in the last year and was also linked to Omega Pro.
    Other than being a cautionary tale of what to avoid he has nothing to offer.

  • 27 FIREstarter September 4, 2023, 1:39 pm

    Is anyone else getting increasingly tempted to take their Stocks & Shares ISA (current pot £120k) and transfer it into a Cash ISA with current rates fixed at 5.25% for 5 years?

    All my FIRE calcs are based around 5% annual gains (albeit not real and considering inflation) with an end date of 2028, it therefore feels like a guaranteed 5.25% tax free is too good to be true?

    Most likely I’d stick the £120k in the Cash ISA, which would return £155k in 5 years with zero risk. In parallel, build up another £115k (5y * £20k * 5% PA growth) in a Stocks & Shares ISA, then semi retire with a £270k ISA portfolio. In the worst case scenario with a huge market drawdown at some point in the next 5 years, my Cash ISA would still return £155k, but perhaps my Stocks & Shares ISA would return less or even be a bit underwater.

    It sounds too simple, removing a lot of risk whilst still making decent gains and adding further diversification, is there some flaws in my thought process? I’m almost certain I won’t need the money in the next 5 years but worst case scenario all that happens is I forfeit 365 days of interest (£7k) to access the cash.

  • 28 ZXSpectrum48k September 4, 2023, 5:56 pm

    @xxd09. “Frankly I am happier with the clever luckier wealthier paying more via tax for the rest of us poorer devils as happens in our country.”

    If I was paying more to support the single moms, those with disabilities or asylum seekers, I wouldn’t mind. Genuine “poorer devils”. But I’m not. I’m paying more to support those who are often perfectly capable of paying for themselves. The unfairness of the triple lock means I’m paying for rich retired boomers to get another 8%+ pay rise next year after the 10% this year. I’m paying for their gold-plated DB pensions. I’m paying for their bloody NHS. Another free hip or knee operation, just so they can shuffle round their big houses (that they will never pay any tax on).

    The UK’s fiscal hole isn’t where is it due to immigration, benefit fraud or some mythical lack of sovereignty. It’s simply demographics. The luckiest generation ever in financial terms (as noted in one of this week’s links), the boomers, never paid in anything like enough tax. Despite that, they vote again and again to heap more of their burden on to those younger than them. And yes, that includes paying for their decision on Brexit.

  • 29 Time like infinity September 4, 2023, 6:46 pm

    @ZX #27: Although I don’t necessarily agree with you (especially re the NHS), I do sort of think that I understand where you are coming from generally here. I’d point out though that, for DB pensions, these were typically offered in an era of high growth and high real rates. If we’re now transitioning away from that globally due to really impactful innovation being harder (less low hanging fruit to pick), underinvestment and bad demographics; then no new starters in any organisation should be offered DBs on joining, but the people in the schemes already (sometimes for decades) have accrued, contractual rights. If the contract said that you got the benefit of DB for as long as you were employed then that may well have turned out to be a better deal for one party than for the other, but in law it still falls to be honoured, just like any other agreement. Put it this way, if you accepted the offer of a guaranteed bonus to join and then the employing hedge fund effed up on their end and turned round and said ‘sorry ZX, but we ain’t got the money to pay up what we owe you’ then you’d sue them (more accurately, you’d apply for a court order for specific performance of the hedge fund’s obligations to you under the agreed terms of the contract). I agree though the state pension triple lock is unaffordable. There is rather less excuse for that. It was introduced by Cameron in 2010 when both real rates and growth were already established on downward trajectories. Fairness can be achieved by keeping it for state pensions in payment and moving to a less generous arrangement for those that aren’t.

  • 30 Boltt September 4, 2023, 10:19 pm

    @ TLI

    I’ve worked for many companies where contractual pension benefits change – employment contracts changed too.

    My NRA was changed, others had their FS scheme end, and change to DB for future service.

    Historical benefits are “banked” but I’m not aware guarantees are make for full careers without any change.

    Allowing existing pensioners to keep triple lock for ever but not current workers doesn’t meet everyone’s definition of fairness.

  • 31 Time like infinity September 4, 2023, 10:54 pm

    Agreed @Boltt #29: that, in practice, terms can, and often do, change for DB schemes. It depends though upon individual contracts and what the scheme terms provide. Similar to you/your colleagues, I’ve been switched prospectively from a FS (now closed, with accrued benefits banked) to a CARES, and from an NRA at 60 in former, to one at 66 in latter. But it’s a fraught area legally. Some contracts have terms that don’t provide for them to be changed without the express consent of all parties. Recall Guaranteed Annuity Rate policy holders with Equitable Life, who won their case all the way to the Judicial Committee of the House of Lords; or, for that matter, check out lucky Max-Hervé George in France:



  • 32 Lee Briggs September 4, 2023, 11:14 pm

    @ZX Spectrum (27)

    Nail on the head!

    Well said.

  • 33 Gizzard September 5, 2023, 8:51 am

    Regarding gold plated DB pensions. I was fortunate enough to have one for ten years of my 42 year career. I transferred it out as cash in 2016. I think the gold plated aspect refers to the situation where the employer takes the risk rather than the employee. It doesn’t necessarily mean that you get a better pension though. I’d be interested to know whether there is any research as to whether a DB or a DC scheme is likely to provide a better outcome. After transferring out of my DB scheme, I spent a few years in their DC scheme where I payed in 9% and my employer 18% (generous I know, but that was the result of closing the DB scheme to new entrants).

  • 34 CJ September 5, 2023, 9:26 am

    @Firestarter. If your calculations are worked out on 5% over 5 years. Then a 5 year fixed rate cash ISA giving you above 5% is the cast iron way to do it providing you put a max of £85k per provider. I am availing of the cash rates on offer ,as the gilts in my Sipp mature I am taking them out of the SIPP and putting the money into cash isas.

  • 35 xxd09 September 5, 2023, 9:29 am

    ZX- you may be right but as a baby boomer I don’t buy it
    All generations have their time in the sun-they have to cope with their own current crises-I remember the 3 minute actual atomic bomb warnings -rather more immediately stressful than climate change and DIE
    Looking backwards and then casting blame is probably not a solution to our current problems
    History doesn’t repeat but it does rhyme so learning from previous successes (and mistakes) would surely be a more useful outlook to have
    The ball is in your generations court now -taking some personal responsibility for outcomes and then being competent at what you do seems to me a better way forward
    It seemed to work for the boomers

  • 36 Boltt September 5, 2023, 9:42 am


    All DB pensions are great, but govt backed ones with full index linking (no cap) are solid gold – especially in todays economic climate

  • 37 Gizzard September 5, 2023, 9:49 am

    @Boltt (36)
    If I hadn’t transferred out of my DB pension, I’d still be working, rather than 2.5 years retired. I got £460k for ten years service. If I’d taken the pension instead (at age 58), I’d have got £8.5k per year. I know the transfer values have fallen back, but at the time (and even more so subsequently), those figures made the decision a no-brainer (the mandatory IFA took a bit of convincing though).

  • 38 Grumpy Tortoise September 5, 2023, 10:06 am

    DB pensions are one of the main reasons why people like myself joined the public sector. Having had 34 years in the NHS I will enjoy my 34/40s of my final salary but it comes at a cost to me – 13.5% of my current salary. Without this perk there is little or no reason to join the public sector given that our salaries have been suppressed for so long. In terms of affordability – according to the latest set of accounts in 2021-22 the NHS Pension Scheme had a Net Cash Requirement of £4.34 bn i.e. income exceeded pension benefits so £4.35 bn was returned to the Treasury during 2022-23. Source: NHS Pension Scheme – Annual Report and Accounts 2021-22

  • 39 Boltt September 5, 2023, 10:12 am

    @ I used to fantasise about cetv multiples of 50. Do you know why yours was so generous?

    My current commutation factors are around 23x – haven’t asked for cetv for a while (2020) and it was about 28x

  • 40 Boltt September 5, 2023, 12:53 pm

    @Grumpy Tortoise

    You don’t see many 40th schemes.

    m&s had a 40th scheme but some terrible rules about deducting a propr state pension – my sister had 27 years and she has no idea how will be deducted. And to make things worse i think the deduction starts before her state pension. Scheme rules are scheme rules – the fact that the state pension went out 6-7 years doesn’t change the rules.

    My dad’s FS pension also makes a deduction for state pension.

    If anyone knows a good source for M&s pensions pls let me know

  • 41 Time like infinity September 5, 2023, 1:28 pm

    @Grumpy Tortoise #38: if I may ask, is your scheme NRA 60 years or instead linked to the state pension age? There’s a few 43rds & 47ths schemes with NRAs that are linked to the state pension age. Can work out rather less advantageous than the 60ths schemes with NRAs at 60.

    @Gizzard #37: fantastic timing on the transfer out value. Over 50x !! 2020 must have been the all time peak, perhaps never to be seen again. Wish I could have transferred out, but not it’s permitted for either the one that I’m in now nor the legacy one I was in.

  • 42 The Investor September 5, 2023, 3:40 pm

    @all — Thanks for another great bunch of value-adding comments, and for keeping even the Brexit-y ones pretty civil. 🙂 A few pick-ups…

    @Bill G — Hmm, well I think Mr Belfort can probably teach us all something about salesmanship? But having had a bit of a Google about the things you mention, it does seem a bit murky. I’m all for giving reformed characters a chance but I haven’t got the time/inclination to deep dive an opinion on this chap, so I’m going to assume you have and bow to your comment — I’ll replace the Kindle link with someone else in the next Weekend Reading. Thanks for the kind comments about the (rest of the) blog!

    @PC @BillD — I’m not sure it seems “well over the top” though I accept as we both do that things are different for everyone. Also I’d not take their spend categories 100% literally. E.g. Maybe you don’t need to replace your kitchen every 10 years, but perhaps one of your kitchen *or* bathroom would need a makeover? Maybe not three weeks of European holidays, but maybe one this year and two weeks in the Maldives next year. And so on…

    @JABA @ZXSpectrum48K — Indeed, just looking back through the years and extrapolating forward tells us it’s not the greatest forecasting chart! 😉 But I suspect it does indicate broad market consensus that the move off the near-zero level will not be transitory, at least.

    @Neverland — In a busy weekend I didn’t get a chance to delete your comments on-sight as promised, will try harder next weekend. In the meantime, while I broadly agree with you on the EU and your points here, please can we all at least try not to call other readers “delusional”. (We can of course say a particular argument or case is… i.e. Play the ball not the man!) Yes I occasionally slip too, of course.

    @TLI — Nobody can point to any economic benefits from Brexit (yet) and we can all point to plenty of localized dis-benefits. But yes, this graph does imply that Brexit itself wasn’t quite a double-whammy on top of Covid to the extent supposed/feared by some including me. I continue to expect, as I said above, just a slow tedious drag indefinitely from an economic perspective. Of course we’ll still have booms and busts in between. Just with less high peaks. Nobody could persuade me otherwise short of the UK “doing a Singapore” (i.e. deregulation / removal of certain rights / trashing environment at least for a while etc) which has now been roundly rejected by the electorate (and would be by me too).

    @Aaron — You’re welcome, keep up the good work! 🙂

    @mr_jetlag — Aberdeen has been in decline / lower house prices for many years now in concert with the end of the North Sea boom, as I understand it. But I expect wages of incumbents are still a bit higher for those legacy reasons, which equates overall to greater affordability?

    @xxd09 — If you think the FT is left-wing from an economic perspective (I’d agree it is socially) then that perhaps is telling you something about yourself in terms of where you sit on the left/right spectrum… But I’d be careful not to conflate social/economic ‘wings’. I was a classic New Labour type in that I was at ease with money making and pro capitalism but a believer in regulation, state support, and redistribution, as well as minority rights etc championed more by the left than the right as a generalization. Of course now such centralist views are deeply out of political fashion, albeit perhaps a bit less so with the broad masses.

    @FIREStarter — Well you seem to be asking several questions at once there, and very specific ones (so I doubt anyone else plans to do exactly what you will do! 😉 ) However as I read it you seem to be saying you plan to FIRE in 2028? In that case you’re well into ‘sequence of returns risk’ territory if that’s a hard date, and so might normally be expecting to de-risk your portfolio in case of deep market drawdowns accordingly…

    @ZXSpectrum48K — As so often agree much more than disagree. I’m fully for a state safety net and for targeted re-distribution that helps pull up those who lack resources from elsewhere (i.e. parents / great school / genes). I’m not for bungs to the wealthy ageing electorate, simply on the grounds that they happen to vote the most.

    @Boltt and @others — These DB pension schemes are a bit of a black hole on this site, for the simply reason that me and @TA have never had even a sniff of one. Fascinating to read the discussion. Cheers!

  • 43 ZXSpectrum48k September 5, 2023, 5:27 pm

    @GrumpyTortoise. The numbers you quote are using the “discretionary cost SCAPE” methodology where they use CPI+ a real growth assumption as the discount factor, rather than the internationally recognised IAS19 methodology that uses market discount factors and is used to calculate the “official cost” in the government’s WGA accounts.
    https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1171941/Whole_of_Government_Accounts_2020-21_Final_Version_for_laying_and_publishing.pdf. In those accounts, public sector pension liabilities were over £2.3 trillion in 20/21. That’s excluding state pension liabilities. 50% large than the national debt. The SCAPE rate was CPI+2.4%. The IAS rate used on the WGA accounts was CPI – 0.5%.

    You can see what a nonsense the SCAPE methodology produces for the NHS pension scheme. In 20/21, total contributions calculated via SCAPE were 30.4% of salary (employees 9.8%; employers 20.6% of salary). The current service cost for the NHS pensions were 62.2% of salaries! The gap between incoming payments and outgoing obligations was over £17bn.

    Look at your own pension. You will get 85% of salary. How is that being paid for by you contributing 13.5% and the government contributing 20.6%? There is no ‘fund’ being invested in the S&P500 to generate that multiple of almost 3.

    You simply cannot provide people with 50%+ of their salary as a pension, with contributions at 30%. The difference is just being paid by future taxpayers. Demographics are not constant. As the ratio of pensioners to workers rises over the next 20 years this will be an unsustainable burden on younger workers.

    I fully accept your point re: salary. It may well be the case that salaries need to rise. At least that, however, would be transparent and paid for upfront. Unfunded DB pensions though need to go. They shift costs into the future, they are vulnerable to volatile demographics, and can be hidden via dubious accounting measures.

  • 44 Time like infinity September 5, 2023, 6:15 pm

    @ZX #43: Doesn’t matter whether IAS, UK GAAP or any other accounting measures used. 800 lb gorilla that’s the international bond market cares only about what really matters economically, namely the actual current and future annual percentage of GDP shortfalls in funding. Whilst £17 bn p.a. sounds lots, it’s presently just 0.7% of £2.5 tn annual national output, so same as the cost of Cameron’s foreign aid target; and this to give decent pensions to all of our health sector workers. In any event, the real cost is less, as without the current DB pension arrangements many more of the lowest paid public sector workers would end up on means tested benefits in retirement. So, there’s some swings and roundabouts trade offs going on here. It’s really a question of priorities, and not one of affordability per se, at least for the moment. Back in the early 50s we spent 10% of GDP on the armed forces whilst the country was still on rationing. Life continued. Now, if the percentage burden of such pensions should soar in future, then it will become a real problem; and that’s why it might well become necessary to close these schemes to all new entrants and to increase base pay somewhat.

  • 45 ZXSpectrum48k September 5, 2023, 9:31 pm

    @TLI. Hang on in earlier threads you wanted a wealth tax that raised only £10bn. Now a £17bn gap is not huge. Why the inconsistency? You work for the NHS!

    The bottom line is pension contributions need to rise from the current 30% to over 60% to fund NHS pensions. For the total public sector the funding mismatch is over £50bn per annum. That is not trivial and the demographics aren’t even bad yet.

    Highly paid public sector workers getting 60, 70, 85% of their salary is profligate. Do doctors on six figure compensation packages really need massive DB pensions in addition? If they are worth that much then let’s pay them more. Don’t create an unknown and unfunded future liability just because it means you can pay less now and swerve the accounts.

    You admit you and Mrs TLI will be getting a £90k/annum DB pension by 60. Do you really think you need to be given that sort of guaranteed income paid out of a future unknown tax base? I don’t like DB pensions at all, but I can see an argument for smaller ones, but once you have built up £10k/20k per annum of DB pension, I can’t see why people shouldn’t be switched to a funded DC pension.

    Or why not means-test state pensions? Places like Australia, have both asset and income tests. Once assets are above around £500k or £20k/annum, you get nothing and it starts tapering well before that.

    The state is there to provide a safety net for those who are really down on their luck. That’s vital. It’s not there to redistribute from the very rich to the rich or the rich to the comfortably well off. For that we have a little thing called capitalism.

  • 46 Time like infinity September 5, 2023, 10:29 pm

    @ZX #45: £10bn v £17bn is apples (tax) to oranges (spending) comparison. I’d back a wealth tax & means tested state pension. Both would disbenefit Mrs TFI & I. Those with greatest means to pay more should do so. However, the UK’s future liabilities are neither unknown, nor unfunded. There’s no mismatch in the sense implied. They will be funded as they’ve always been, directly by public expenditure. In a state, the ‘fund’ of the government is the whole economy, national territory, it’s people and resources. A fully sovereign state will control (de facto or de jure) the currency, the central bank, and the sole right to tax. As to its capability, as Keynes said, if we can do it, then we can afford to do it. The question is, will the state still be able to provide the promised standard of living for all future retirees? At £50 bn p.a. for 5mm public sector workers then clearly yes, for that group currently. It’s just 2% of GDP. But if the bill grows in future to multiples of that %, of course there’s then going to start to be problems. If in the 70s & 80s we had been smarter we’d have diversified at little, instead of spending and investing the hydrocarbon revenues within the UK, and would have set up a SWF to invest in overseas income producing assets. But we’re not bankrupt yet. We’ve just got to scale our future liabilities for providing public goods (inc. pensions) and services to the likely productive potential (and tax base) of the economy at that time. That may involve some difficult decisions.

  • 47 Grumpy Tortoise September 6, 2023, 6:39 am

    I fear I made a small but very important typo in my previous post #38. My claim of 34/40ths for my NHS pension should have read 34/80ths. As most people working in the NHS will know, the 1995 Section NHS Pension is based on each contributory year being an 80th of ones final salary, up to a total of 40 years. The maximum pension ever achievable under this DB scheme is 50%. Given that the majority (77%) in the service are women who most probably will have had a career break and are more likely to work part time the idea of even getting close to 40 years service is fanciful. I believe the average membership on payout is around 25 years (i.e. < a third of one’s final salary).

    I'm sorry if that bursts the bubble on peoples' perceptions that "we're all retiring on 60, 70, 85% of our final salaries" but such figures are pure fantasy peddled by the likes of the Daily Mail and other such rags to serve their own politically-biased agenda and are not based on evidence. If this was such as good deal how is it that we’ve got a recruitment crisis across much of the public sector and people are leaving in droves?

  • 48 Boltt September 6, 2023, 8:11 am

    @ Grumpy Tortoise

    Thanks, I thought the 40 was probably a mistype of 60.

    IIRC the tax free lump sum of the 1995 scheme (3x pension) was built to make the 80th scheme equivalent to the a 60th scheme – changes in interest/annuity/gilt yields/commutation etc mean it’s it not quite worth that much.

    Eg I have a 60th scheme but after TFLS I lose 20% of the pension – so akin to 75th scheme + TFLS (~5-6x pension)

    I agree most NHS /civil services (and indeed all DB pensions) are much smaller than the general population think.

    2 of my children are in the 2015 scheme (a 54th scheme with each years earnings revalued at CPI + 1.5%) – they are both thinking of leaving. I don’t know what’s it’s like for them working in the hospital but I listen to their minor rants. I do know they have no idea how valuable the pension is, nor how hard the private sector can be (I’ve tried explaining many times).

    People simply don’t believe the pension cost to the employer is 30-60% of salary (I don’t know what the actual NHS one is) – we should give people the option to take DC pension and pay rise (10-20%), pensions were never costed or expected to be the amount they are now.

  • 49 Time like infinity September 6, 2023, 8:26 am

    @Grumpy tortoise, Boltt #47, 48: do the 1995 and 2015 NHS schemes have NRAs at SP age (66 and increasing)? I ask, as +1.5% for inflation protection in 2015 CARES scheme sounds quite generous, but the 54ths accrual is not for a 66 years NRA. CARES I’m in (as ex-FS now closed) uses CPI only + the SP equivalent for the NRA with 5% p.a. reductions for taking early.

  • 50 Grumpy Tortoise September 6, 2023, 8:43 am

    The 1995 Scheme has an NRA of 60 and is based on 80ths whereas the 2015 CARE Scheme, based on 54ths, has its NPA tied to the State Retirement Pension Age i.e. currently 66 but soon to be 67 and then whatever the government then decides. The CARE scheme is revaluated at CPI+1.5%. The insidious thing about the CARE scheme is that each time the government adds another year to the SRPA then it becomes an additional year that you are seen to retire early and so has an actuarially reduced amount.

  • 51 Boltt September 6, 2023, 8:48 am


    This is quite handy:


    NRA seems to be 60/65/SPA for the1996/2008/2015 schemes.

    The cpi+1.5% does seem generous – unless their wages increase at this level then past services becomes more valuable that current service at pensionable age. Could it be better than FS for some? – I’m not going there….

    I believe most schemes have variable early retirement discount factors rather than fixed ones – the GAD seem to publish figures (there’s a click through from “full table of monthly factors”)


  • 52 Grumpy Tortoise September 6, 2023, 9:52 am

    @Boltt / TLI – each scheme has its own early retirement factors – see here for approximate values:


    Someone like me who hopes to retire at 57 will have an actuarial reduction in the 1995 Scheme of 12.8% to their pension and 6.9% to their PCLS.

  • 53 ZXSpectrum48k September 6, 2023, 11:30 am

    @TLI. You can’t wait until the problem is front and centre. The OADR will deteriorate by around 25-30% over the next 20 years. That’s not sustainable without something pretty radical. Yes, big economic growth or robot overlords might rescue us, but we shouldn’t bet the ranch on either. These sorts of changes take decades to be implemented. We need to start now.

    So it’s a clear difference of opinion. I don’t want pensions funded by future generations. It was just a bad idea that happened to work in the late 20th century because the demographics were favourable. I want each generation to fund itself. In 20/21, the NHS pension accrual rate needed to be 62.4% but was just 30.4%. So it’s simply not paying for itself. It’s just lies. Rather than pay more now, the govt is simply shifting the liability into the future and hoping it will go away or will be somebody else’s problem.

  • 54 Nebilon September 6, 2023, 1:21 pm

    @Boltt. You said “ unless their wages increase at this level then past services becomes more valuable that current service at pensionable age. Could it be better than FS for some? – I’m not going there….”
    That is absolutely correct- I worked in the public sector for the last 5 years of my working life before I retired last year. I’m in the PCSPS Alpha section, also a CARE scheme. It revalues at CPI- and my pay rises (when we got any, which wasn’t every year) were capped at 1%. Over the 5 years my pay increased by 4.4% overall, an average of 0.8% per annum. I definitely did better from CARE than I would from a FS pension.
    Sadly I do have to wait for state pension age- for me at present that is 67, another 8 years, subject to any more goal post moving.

  • 55 Alan S September 6, 2023, 3:11 pm

    @ Gizzard (33).

    While there is a fair bit of research in the US comparing DC and DB pensions – most of the DB pensions in that work were level or had severe inflation caps. More recent (not peer reviewed) work for the UK (see https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4473093) suggests that
    “The income from DB pensions that were fully inflation protected was, assuming generally achievable contribution rates and annuity payout rates, unlikely to be exceeded by that of a DC pension. However, where the DB pension was revalued with an inflation cap of 2.5%, provided stock allocations of 100% were held for most of the accumulation period, contribution rates of at least 8% and 16% of salary were required before the income from the DC pension exceeded that of the DB pension in 50% and 90% of historical cases, respectively. For the lower stock allocations more typically seen in target date funds, the contribution rates required at the 50% and 90% levels were 12% and 18%.”

  • 56 Nebilon September 7, 2023, 7:05 pm

    The conversation above (or at least the bits about spending in retirement) prompted me to get on with pulling together details of what I actually spent in the first 12 months of retirement 1/7/22 to 30/06/23. It took forever, but I now have a nice spreadsheet separated into categories.
    I followed my intention of not worrying about spending at all for this first year. It makes interesting reading. Groceries are high as I knew, but I’d always comforted myself by saying we don’t get takeaways (true) or eat out much (apparently not so true..). we spent £16k on travel, of which to be fair £3500 was for the holiday in July this year, technically outside the period but paid for in period. (2 week holiday in France, 2 ski trips, fancy spa weekend in uk, weekend in Amsterdam, 3 weeks in US and Canada visiting relatives…. It adds up). Even with the new boiler and some rewiring /replastering work which won’t be repeated it all feels affordable to me, although was a shock to my husband!
    Definitely an exercise worth doing (I’m a lawyer, so not as ready with a spreadsheet as other readers, who probably did or are doing all this before retiring…)

  • 57 Al Cam September 8, 2023, 1:32 am

    Are you familiar with the United Nations COICOP (The Classification of Individual Consumption According to Purpose)? I ask as using this categorisation of your spending (rather than a “home-brewed” set of groups) could give you some advantages if you wish to compare your spending with national or indeed international statistics including inflation , etc.
    IMO COICOP is a bit clunky and takes a while to get used to, but seeing as you are new to this type of tracking it could be beneficial. The ONS for example defines their inflation shopping basket in COICOP terms at: https://www.ons.gov.uk/economy/inflationandpriceindices/articles/ukconsumerpriceinflationbasketofgoodsandservices/2023
    The detailed COICOP breakdown is given in the excel spreadsheet accessible from section 4.

  • 58 Time like infinity November 16, 2023, 8:29 pm

    On the question of equities as an asset class versus everything else, there’s an excellent paper out this week in the Financial Analysts Journal by Edward F McQuarrie entitled: “Stocks for the Long Run? Sometimes Yes, Sometimes No”. The link’s below:


  • 59 Time like infinity December 12, 2023, 9:26 am

    Klement’s just covered why it’s so hard to profitably time market falls with tail risk strategies:


    Basically, just stay put in equities rather than buy puts on equities. The maths makes sense, and underpins B&H wisdom.

  • 60 Time like infinity December 28, 2023, 3:57 pm

    Tom Lee @Fundstrat just noted that ex US versus US and large v small caps now at greatest divergence in P/E ratios since 1999; whilst financials relative to the rest of the S&P 500 are now at their greatest discount on record, excluding 2008/9 (data back to 1950s).

    As for FTSE 100, it’s total market cap slipped below two of the Magnificent 7, with both Apple and Microsoft each worth more individually at points in 2023 than all of the hundred largest UK listed stocks.

    We live in extraordinary times.

    Forecasts for the year end 2024 FTSE 100 level are, as always, all over the shop at anywhere from as low as 6,550 from Bank of America to as high as 8,160 from UBS.

    I can remember back in December 1999 when the FTSE 100 closed the year at 6,930 that the papers then predicted a year end 2000 price of as high as 8,800 (a ~25% rise year on year).

    In the event, it took until 2015 for the index to get back over 7,000; and it has not managed over 8,000 yet, nearly a quarter of a century on.

    In the meantime the index has traded as low as 3,300 in March 2003, 3,500 in March 2009 and it fell below 5,000 as recently as March 2020.

    March seems to be a dangerous month for the Footsie – perhaps it’s the new October 😉

    As the saying goes, the stock market exists to make fools of as many people as possible.

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