What caught my eye this week.

There have been several times over the past couple of years when I’ve had to admit to myself I miss the pandemic.

Not, it goes without saying, the horrible deaths.

Nor the vaguely wartime spirit and the disaster movie nightly briefings.

Not even the pretty good go of it that Monevator readers and myself made of talking – and constructively disagreeing with – each other through the early uncertainty, science, and economics of those first few weeks (before the debate metastasised into just another of the bifurcations that everything resolves to now). Though I do have fond memories of those conversations.

No – I mean the feeling of being completely off the hook.

Of not berating myself for declining to YOLO through some particular evening but preferring to stay in with a book.

Or of not feeling that I had to see a certain few people who to be honest I now haven’t seen since Covid. (They probably felt the same way.)

The quiet peace for large stretches of time of simply being alone.

You’ve got to fight for your right

Perhaps it’s unsurprising I found myself taking the other side of an essay this week in The New Humanist urging us all to finally shake off the pandemic and to get out more.

In The Introverts Are Winning, author Marie Le Conte laments how:

In the years after restrictions were lifted, many naturally outgoing people – this writer included – have found it that bit harder to get their friends out of the house.

Plans somehow require more effort than ever to get made, and are always at risk of getting cancelled at the last minute. A spontaneous pub trip, once a cornerstone of British social life, now takes work to organise.

All true of me. Indeed if you defined me by my social life, I went into the pandemic a slightly grumpy 35-year old and came out a young-ish 50-something.

And these days, when it comes to going ‘out out’, as my girlfriend would say (over WhatsApp, of course, where much of our relationship happens) I very often cba.

Le Conte quotes French philosopher Pascal Bruckner – author of The Triumph of the Slippers – who believes:

“A new anthropological type is emerging: the shrivelled, hyperconnected being who no longer needs others or the outside world. All of today’s technologies encourage incarceration under the guise of openness.”

Which… seems a tad harsh?

Nobody goes there anymore. It’s too crowded

But I don’t know. Maybe Bruckner’s right.

Because when the author of The Introverts of Winning in The New Humanist makes her case for visiting the outside world, it sounds to me like little more than a charity drive for my local newsagent.

Le Conte does not paint a compelling picture of that realm of strangers, awkwardness, intolerance, and rage.

Indeed compared to the joy of staying in – where everything is predictable, and most of human culture is at the end of a finger tap or the click of a remote control – choosing to have a spontaneous meeting with some other zombies who’ve stumbled blinking into messy and literally unfiltered reality sounds about as appealing as letting a drunk carol-singing rugby team in one by one to use your downstair’s loo.

Mushroom for a funghi

Don’t get me wrong, I’m not a social recluse. Not even a wallflower.

For years The Accumulator thought I was an outright hedonist, until he knew me better.

I enjoy social stuff on my terms and my schedule. It’s all the unwanted stuff that does me in.

But I do find it easy to be alone.

I once did a work-related psychometric test, and the chap who conducted it (who for various reasons I knew independently of this test) raised an eyebrow when he gave me the result and told me he almost never saw people like me in testing – because they never made it to an office job.

I watch news stories about intrepid explorers living alone for two months with a shrug. So easy!

Coop me up in the International Space Station with a couple of others though and I’d be out the waste disposal chute long before my time was up.

I’m a high-functioning ultra-introvert in what was– until the pandemic – always an extrovert’s world.

Let’s all not meet up in the year 2000

Add it all up and even I know that I would hate to go back to prescribed global lockdowns.

My bout of Covid I mentioned before that started a few weeks ago has given way to what my GP calls a resilient ‘rebound infection’ and I’m now on antibiotics – plus rest and more rest.

As a result, I’ve spent most of the actual sunny bit of this summer canceling engagements.

It’d be nice to see my friends. It’s all a bit more 2020 than I’d prefer.

But, on the other hand, to go back to 2019?

Or even to the early 2010s – the last time that I commuted daily back and forth on a crowded tube to an office in the rush hour – with all that entailed?

Or to feel like I had to stay out in some pub, front room, club or garden party for an extra hour and then another hour because someday I’d be 30/40/50-years old and I’d regret leaving?

Well someday has come and I don’t regret the times I did leave.

I have other regrets! But overdoing it just to keep up with the extroverts is not one of them.

Not going out to work, either

Incidentally and on an investing note, this is all what’s kept me from piling into commercial property.

A favourite old real estate stock I follow is yielding 9%, has all its offices in ring-fenced special purpose vehicles so shouldn’t collapse in a realistic worst-case scenario – and as I wrote a few weeks ago I believe interest rates are coming down anyway.

But maybe the return-to-work bounce has peaked too?

That’s not something we had to consider before when judging the commercial real estate cycle. What went down may no longer come back up.

The world is different. Bruckner is right.

He’s got the whole world in his hands

Maybe you’re an outgoing party-mainlining extrovert and if so good for you.

If these difficult years we’re living through have excelled at anything, it’s making more room for self-identification. Let the party crowd party harder I say.

Even I will see you at some future party. But I’m not sure which – and I won’t be at the one after that.

Not now – not after the pandemic. It broke that compulsion. Now there’s simply too much good stuff to stream on Netflix and Spotify instead. And all those specialist aquarium videos to watch on YouTube that didn’t exist five years ago, let alone when I was a fish nerd of a kid.

If enjoying so much good stuff makes me a ‘shrivelled, hyperconnected being’ then all I can say is shrivel me more.

At home alone

I know some of my carelessness about hitting my social step count nowadays must be an age thing too – my 35-to-55 transformation notwithstanding.

But still I wonder – worry even – whether future generations of introverts will enjoy the same get out of jail card on their tendencies that I now do, whatever Bruckner thinks.

Because awareness of that card was what the isolation of the pandemic gave us. A rare gift.

Future introverts may well have everything they need in their living room – or on a quiet walk in gloriously deserted countryside. (With everything else they need summonable on their phones, of course).

But I suspect they’ll be made to feel guilty about it.

What about you? Do you miss the greatest excuse for not going to a wedding since WW2? Or have you been revenge socialising since the moment the last curfew ended?

Let us know in the comments below. Especially if you can tease out an investing-related angle.

And have a great weekend whoever you’re with – or without.

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The Monzo Pension has launched more softly than a marshmallow rocket lofted on a cotton wool plume.

And so far Monzo’s new offering looks strangely unambitious and feature-free, while simultaneously being quite innovative with its focus on solving customer problems such as: “How on Earth do I get a grip on my pensions without knowing much about pensions?”

Dive in for our thoughts on the Monzo Pension, how it works, and – crucially – how its key features stack up against comparable products on the market.

How does the Monzo Pension work?

Unlike any other pension scheme we know about, the Monzo Pension doesn’t want your money. At least not the new money you may be paying into a workplace pension or SIPP every month.

For now at least, Monzo’s pension is aimed squarely at sweeping up the trail of old pensions that many of us leave behind as we move from employer to employer.

It’s not easy to remember everyone you worked for. (Sometimes it’s preferable to forget.) One or two changes of address later and your annual statement from the pension providers of WeLikeEmYoung&Cheap PLC disappears into the void, never to be seen or thought of again.

Which is exactly how millions of people in the UK get detached from the Infinity Stones of pension power scattered around their own personal cinematic universe.

Monzo’s innovation is to offer itself as the superhero that will reunite these pension shards for you.

Actually, this isn’t really a difficult quest. Indeed Monzo outsources the task to its pension tracing partner, Raindrop.

Other pension providers use Raindrop too. You just need to tell the pension detectives who you worked for and when, while ponying up your National Insurance number.

Yet tracking down old pension pots is one of those things that’s hard to get around to if you have a life. (Note to self: get a life.)

So kudos to Monzo for nudging its customers into action.

What investments does the Monzo Pension offer?

Once your cash ker-chings into your new Monzo SIPP account it will be funnelled directly into your choice of investment fund.

And you can have any investment fund you like so long as it’s BlackRock.

Specifically a BlackRock LifePath Target Date Fund.

Is that it? I have a choice of… one fund?

Yep.

Monzo is big on keeping it simple.

Still, if it’s only going to offer one fund then Monzo has made a pretty good decision:

• BlackRock is a leading global fund provider. We’re completely happy to use its products ourselves.
• A Target Date fund is a very sensible, hands-off, multi-asset fund that’s ideal for anyone who is investing for their retirement.

There are actually nine Target Date funds – but they vary only as much as trains following the same route do. The difference lies in the time they leave the station, not in their quality of service or final destination.

The relevance of each fund is signified by its target year. For example, the BlackRock LifePath Target Date Fund 2055 is intended for people who want to retire sometime in 2053 to 2057.

Want to retire in 2052? Then it’s the BlackRock LifePath Target Date Fund 2050 for you.

Monzo simply drops your cash into the Target Date Fund that’s closest to the date you wish to retire.

How Target Date funds work

Target Date funds are designed to automate most of the investing decisions you have to make en route to retirement.

You get a diversified portfolio as standard. But your mix of equities and bonds shifts as you approach your target / retirement date.

At the beginning of the journey you’re likely to be hurtling along: pedal to the metal in a portfolio dominated by high-risk, (hopefully) high-reward equities.

By journey’s end though, your Target Date fund is easing off the gas like a fully-autonomous vehicle. As you glide into retirement, the fund will be mostly invested in low-ish risk, low-ish reward bonds.

How a Target Date fund derisks its assets over time. Source: BlackRock.

Essentially, a Target Date Fund prioritises wealth building when you’re decades away from retirement. It then gradually transitions to preserving what you’ve got, the closer you come to needing the money.

This is an orthodox and perfectly respectable retirement path designed to guard against an untimely stock market crash wrecking your plans.

However the Target Date approach is not guaranteed to work – because nothing is.

Target date profile

One weakness of Target Date funds, in our view, is that they’re light on inflation-hedging assets.

A greater concern though is psychological.

Automation creates the impression that you can take your hands off the wheel completely and everything will be okay.

In reality, you still need to periodically check your investment progress and decide whether you’re setting enough aside to support the retirement you want.

With that said, we’re still big fans of target date funds precisely because they simplify the pension-saving process for people who don’t want to handle the intricacies themselves.

Moreover, there’s no evidence that you’ll do any worse for ceding control versus adopting a flashier strategy.

Keep it simple, soldier

Don’t fall for the spiel that a simple investing approach won’t cut it.

The investing arena is a cesspit of FOMO. Like Instagram, investment propaganda is flooded with snapshots of people doing spectacularly well. Or rather people who look like they are doing well – possibly because they or their paymasters have something to sell.

A Target Date fund is the investing equivalent of someone the Instagram algorithm would never promote. An unassuming person you wouldn’t look twice at. Someone who isn’t perfect and has their ups and downs. But someone who nonetheless leads a good life because they focus on what truly matters.

They’re balanced and content and don’t fret about those with a better story to tell.

Are the Lifepath Target Date funds ethical?

You can check out the Lifepath Target Date funds page for yourself. It’s a masterwork of fluffy corporate accessibility unburdened by details.

There’s much talk about ‘considering’ sustainability but no firm commitment. The other key documents similarly neglect to make specific ethical promises.

That said, many of the investments held by the fund are labelled ESG-friendly.

‘Environmental, Social, and Governance’ is the supposedly ethical trifecta of buzzwords touted by financial services nowadays.

In theory the badge indicates your investment is being measured against some kind of ethical standard.

The trouble is working out what that actually means.

You should not assume that an ESG designation means your investments are aligned to your own values.

And don’t presume that your ESG investment incentivises companies to stop manufacturing arms, or to cease polluting the environment, or to refrain from exploiting their workforces.

In short, if you’re serious about ethical investing then the ESG label isn’t enough. You’d need drill into the detail and find out what your fund is investing in and whether that allows your conscience to rest easy.

Another way of putting this: there are no easy answers.

How much does the Monzo Pension cost?

You’ll pay annual investment fees of 0.45% to Monzo and an additional 0.18% to BlackRock.

If you’re a Monzo Plus, Premium, Perks, or Max customer then Monzo only takes 0.35%.

In pounds and pence those fees mean:

• For every £100 your investment is worth, BlackRock snaffles 18p and Monzo 45p.

Even when your pension pot reaches £10,000, BlackRock would still only take £14 and Monzo £45 per year.

That sounds like buttons and indeed BlackRock’s charge is very competitive versus equivalent products.

But Monzo becomes a very expensive platform if your pension sits north of £50,000.

In fact, when your pension balance reaches £100,000 Monzo will be charging you £450 per year, based on the fee schedule that’s been laid out at launch.

In contrast you can easily find pension providers who will bill you only around £200 for a SIPP that size. Go have a look at our broker comparison table.

Fast-forward a few decades and, with a fair wind, you could plausibly end up with £1 million or more in pension wealth.

Monzo would deduct £4,500 a year for that. Whereas a cheaper fixed-fee pension provider would still only tap you for £200.

Ballers beware

Monzo’s charges are fine if you’re starting out and you want everything in one place alongside your other Monzo services.

But you’ll pay through the nose for the Monzo Pension privilege if (/when) you’ve socked away some serious wealth.

Remember that high costs rob you of investment performance, leeching away pounds that should instead be compounding on your behalf.

Imagine two ghost cars driven by different versions of your future self. One carries too much weight and loses a second per lap, then two seconds, then three, then… you get the picture.

Are my investments safe with Monzo Pension?

Monzo’s Pension scheme is covered by the UK Financial Conduct Authority’s Financial Services Compensation Scheme (FSCS).

The scheme is designed to pay up to £85,000 per person if your FCA authorised investment platform cannot meet its financial obligations to you.

£85,000 is the maximum compensation you can claim for both your Monzo Pension and your Monzo Investments accounts. You aren’t entitled to £85,000 per account.

The same limit applies if BlackRock collapsed. Again £85,000 is the maximum amount you can claim for all your BlackRock investments.

Read up on the rules if you’re particularly concerned about FSCS investment protection.

And do note that the scheme doesn’t cover you if your investments fall in value.

Anything else I need to know about the Monzo Pension?

Although you can’t contribute new money to your Monzo Pension yet, Monzo is planning to switch on this fundamentally basic feature sometime.

Meanwhile, if you want to retire on your Monzo Pension then the options are currently poor. You’d either have to:

• Buy an annuity with the bulk of it
• Or take the whole amount as a lump sum – potentially exposing yourself to a large tax hit

The most popular and flexible retirement option – pension drawdown – is not available.

Perhaps drawdown will be enabled in the future. Or maybe there’s no rush because the majority of Monzo’s customer base is far from retirement.

Either way, it’s only a minor inconvenience because you can always transfer your pension to another provider later to access a full range of retirement options.

Happily, Monzo does not charge exit fees if you switch.

Is pension consolidation worth doing?

Not intrinsically. Merging your pensions doesn’t make them worth any more.

There’s no economy of scale you’re capitalising upon, it doesn’t mean they’ll be better managed, and the whole is not greater than the sum of its parts.

Consolidation is good if:

• Gathering all your pensions together in one place makes things simpler. Paperwork hassle is slashed and you can see how you’re doing at a glance.
• Consolidation makes sense if your new provider is more cost-effective or offers benefits you weren’t getting elsewhere.
• That’s about it.

But consolidation isn’t so good if:

• Your old scheme offers benefits that won’t be honoured by your new provider. Double-check before moving any pension. Ask your old administrator if your pension comes with safeguarded benefits.
• Your new provider goes bust and your account exceeds the FSCS compensation limit.
• Your new provider goes bust, you’re retired, but you can’t draw an income until the whole mess is sorted out which takes over a year. (The Monevator house view is that all retirees should diversify across at least two pension platforms to avoid this scenario. It’s very rare but it happens.)
• Your new provider is more expensive or offers worse investing options than your old provider.

Finally, as Monzo to its credit points out: you should keep paying into any workplace pension you can access, at least up to the limit of the employer contribution.

You can’t beat free money!

A capital idea

As weird as it is that you can’t pay new money into the Monzo Pension (yet), we still think Monzo’s entry into the market is a good thing.

Putting the emphasis on rounding-up old pensions is a truly innovative move that will help a lot of people.

Moreover, the sheer lack of fund choice is incredibly daring in an era where choice is fetishised.

Choice overload is a massive problem in investing. So it is wonderful to see a provider who understands its customers well enough to say: “Do you know what? This will do ya.”

And for many potential users we don’t disagree.

Take it steady,

The Accumulator

What caught my eye this week

I developed Covid on my long-awaited holiday at the end of June, its symptoms lingered for nearly four weeks, and I’m now a week into some kind of chesty-cough cold that smuggled itself in through the back door during the kerfuffle.

So maybe it was all the cough medicine and lack of sleep playing tricks with me… but wasn’t that Olympics opening ceremony in Paris last night completely bonkers?

Audacious, inexplicable, tedious, striking, cringe, and unhealthy for the rain-sodden elite athletes – and usually all at once. Probably the most French thing I’ve seen since Luc Besson’s The Fifth Element did Star Wars in haute couture.

(Well, not counting the date I had with a French girl in my early 20s who I met on a work trip who traveled from Paris to see me, greeted me with a compilation tape which turned out to be mainly women wailing against the sound of church bells, declared all the food at the trendy yet affordable restaurant I’d gingerly selected to be inedible, and who then watched me eat three courses over three untouched plates of her own food because no, it wasn’t ‘inedible’, and I wasn’t going to go without pudding.)

I have no investing angle on this to torture into shape. Life can’t be all cold rational numbers you know.

Just ask whoever did the accounts for last night’s bonkers extravaganza.

Taxing matters

One quick errata: we overlooked the revised rate of capital gains tax for higher-rate payers on property disposals in our update yesterday. It is now 24%, down from 28%, as our ever-alert readers spotted. Thank you!

Although as another reader wryly observed: who knows how long anything in the current regime will survive contact with Rachel Reeves, anyway?

Something in the tax and pension system will change with Labour’s Budget in the Autumn, that’s for sure.

However I wanted to update these articles ASAP on account of all the emails and comments I’m getting that referred to the old capital gains allowance.

Much more than, say, a year ago.

To me that points to more people contemplating evasive action – shooting first, and planning to read all those The Autumn Budget And Your Finances summaries later.

Which I’ve mixed feelings about.

I took a big tax hit in 2021 on disposing of a six-figure position that had more than ten-bagged for me – just about the last of my legacy unsheltered holdings.

I feared a capital gains tax hike that never came.

But then tech stocks crashed and I felt tentatively smug as the very same shares I sold would have halved in value.

I was right to be tentative though. The stock – which I never repurchased in anything like the same size – recently hit a magnificent all-time high.

The point is that absent a crystal ball, it’s impossible to know what exactly to do.

For example, you could sell a big position like I did to take the tax hit upfront and aim to use the proceeds to fuel your ISAs for a few years – but perhaps the annual ISA allowance will be cut.

Or one of a hundred other permutations.

This is why strategy always trumps tactics. Fill your ISAs and max out your pensions where possible then move to paying down your mortgage. If after all that you still have problems, maybe best to be grateful compared to poorer households still reeling from much higher prices and mortgage costs?

Well, be grateful but continue to hunt for an optimal solution I guess, but with a smile. Because the tax hit on investing returns is very real.

Have a great weekend!

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