What caught my eye this week.
Data from MoneySuperMarket on household disposable income was presented by This Is Money this week as a regional ranking of which city’s citizens have the most spending power:
Disposable income is defined here as what you have left to spend after paying some 31 kinds of outgoings – from rent to council tax to car fuel.
Hence why London is fourth on the list. Higher earnings are countered by higher bills, especially for housing.
Of course, many Monevator readers will look at disposable income not as money to be spent but to be saved.
That snowball won’t just roll itself you know.
Geo whiz
We probably haven’t sufficiently discussed this end of geo-arbitrage – that is, living somewhere cheap to save more – on Monevator.
We did see the post-FIRE angle in Jake’s FIRE-side chat. And Squirrel highlighted the financial benefits of living in her rather rundown Northern town in her interview, too.
But we’ve never, say, cranked hard numbers on pursuing FIRE in Cardiff versus Clapham.
Then again, how could we? Where you live is a pretty personal decision, and everyone’s numbers will be different. Especially as any impact of moving could quickly be overwhelming by upgrading or downsizing at your new destination.
Food for thought anyway – and comments welcome.
That Amundi ETF: ISA update
Finally, a bit of good news on Amundi’s pesky former favourite global tracker ETF, which we wrote about delisting from the LSE a few weeks ago.
Developments!
Firstly, a comment a few days ago from The Accumulator:
We’ve received word from an industry contact that the distributing version of the Amundi Prime Global ETF is now ISA eligible, and an LSE-listed version could be tradeable by the end of January.
The ETF is currently listed on the German exchange (Xetra) and trades in GBP.
The product has now received approval under the UK’s Overseas Fund Regime (OFR). Once Amundi receives the nod from the LSE then there should be a version on the London Stock Exchange.
The ISIN for the distributing version of Amundi Prime Global is IE000QIF5N15. Xetra ticker: MWOZ.
The pre-merger ISIN was LU1931974692.
The ETF is still listed by Amundi as ISA ineligible on their website but watch this space:
We don’t have any information on the status of the Acc / Capitalising version (Old ISIN: LU2089238203, new ISIN: IE0009DRDY20).
And it now seems – via the link above – that the ‘IE000QIF5N15’ ETF is indeed ISA eligible. At least that’s what this factsheet says, so show it to your platform if you need to.
Hopefully good news for some of you.
Have a great weekend!
From Monevator
How gold is taxed – Monevator
An alternative to the myth of early retirement – Monevator
From the archive-ator: Tax relief upfront is the same as tax relief later – Monevator
News
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.
Average house price hits record high of £298,083 – BBC
Number caught by 60% ‘tax trap’ up 45% in two years – International Accounting
UK interest rates forecast to be higher for longer due to Budget – BBC
Bitcoin hits $100,000 – Ars Technica
Revolut crowdfunders in line for a 400x return on investment…- City AM
…indeed UK startups broadly are punching above their weight – City AM
Bitcoin miner sues over £600m ‘lost in tip’ – BBC
The top 30 happiest places to live in the UK… – Guardian
…and the unhappiest – This Is Money
M&S given go ahead to knock down beautiful building and replace it with generic ‘meh’ [I may be over-editorialising] – BBC
Chinese bond market grapples with ‘Japanification’ – FT
Why London’s property market is stagnating [Search result] – FT
Products and services
NS&I cuts savings rates with new fixed-rate products – This Is Money
Seven ways to save on Christmas postage costs – Which
Should you pay more for parking if you have a big car? – BBC
Open an account with low-cost platform InvestEngine via our link and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
The best Christmas mince pies reviewed and revealed – Which
Changed your mind? Your refund rights – Be Clever With Your Cash
Alternatives to Starling Bank as it scraps interest on current accounts – Which
How to give preloved items as Christmas gifts – Guardian
Comment and opinion
Bet on low costs – Humble Dollar
Scene from an office meeting, with two years to FIRE – 3652 Days
Do we need more bubbles? – A Wealth of Common Sense
“Follow your passion” is terrible advice – Hot Takes
Torsten Bell: why we should invest in more tax collectors – Guardian
Remembering Bretton Woods [Podcast] – A Long Time In Finance
Could the UK state pension end up being means-tested? – This Is Money
Thinking about jobs – Seth Godin
Yet another US market valuation mini-special
How value stocks can strengthen a US portfolio – Morningstar
The US market is the mother of all bubbles – FT
Why our best ideas for 2025 are outside the US – Morningstar
Naughty corner: Active antics
The ins and outs of venture capital trusts – This Is Money
Are investment trusts still relevant? [Search result] – FT
Leverage it or leave it? Making sense of turbo-charged ETFs – Elm
Memecoins will go away once we stop paying attention to them – FT
Kindle book bargains
Antifragile: Things that Gain from Disorder by Nassim Taleb – £0.99 on Kindle
The Big Con [On the Consulting Industry] by Mariana Mazzucato – £0.99 on Kindle
Nudge: The Final Edition by Richard Thaler and Cass Sunstein – £0.99 on Kindle
How Westminster Works…and Why It Doesn’t by Ian Dunt – £0.99 on Kindle
EVs in the driving seat in UK mini-special
UK’s electric vehicle market is doing better than you might think… – Sky
…as Auto Trader forecasts ‘seismic shift’ to EVs in Britain – Guardian
Only 3% of EV owners would go back to a fossil fuel car – This Is Money
Environmental factors
Why Christmas trees might be good for the environment – BBC
Protection deal for Amazon rainforest in peril – Guardian
Sewage pipelines planned for unprotected UK rivers – BBC
Robot overlord roundup
ChatGPT hits 300m weekly users – The Verge
DeepMind’s Genie 2 can generate interactive worlds that look like games – TechCrunch
Building LLMs is probably not going to be a brilliant business – Cal Paterson
Off our beat
The next generation of great strategists are playing Magic: The Gathering – Sherwood
Bovaer: what is the cattle feed additive and why are [misinformed] shoppers pouring milk down the toilet? – Sky
How it seems versus how it is – Raptitude
And finally…
“It’s clear that owning a bit of everything helps – but as there’s no definitive ‘right answer’ lurking out there if you look hard enough, it’s not worth stressing about the details too much. In fact, in playing around with historical data since the year 2000, I’ve struggled to produce more than a 1% difference in average annual performance.”
– Rob Dix, Seven Myths About Money
Like these links? Subscribe to get them every Friday. Note this article includes affiliate links, such as from Amazon and Interactive Investor.
On products/platforms: I noticed that Fidelity launched a new cashback offer this week. Might be of interest to some for an ISA or SIPP. Though it could be worth waiting to see if other platforms match it.
Thank you for the great links roundup, as usual.
60% trap won’t go away anytime soon – it’s too lucrative. I carefully manage my income to £160k pa (£60k into pension) to keep just shy of £100k because of this. If I work more, my “day rate” of take home pay drops. Work more, get paid less. I don’t need the money and choose to have more of a life instead. So why bother?
But I am a weirdo, so don’t read too much in it.
Changing what a pensioner is expected to receive in retirement should not be allowed. It takes decades to save for retirement. I say this at 45 (and receiving my pension due to ill health). While it may not be practical for governments to have to wait so long, it’s not practical for the people whom have planned their retirement savings based on what they were told they would be entitled to.
@Carl (#3):
The new state pension is IMO already means tested! It is a flat rate pension but your contributions are related* to your earnings – so, the more you earn the more you pay!
*bar any salary sacrifice / self-employed / voluntary contributions wheezes
@John “If I work more, my “day rate” of take home pay drops”
That shouldn’t happen. Tapering of the personal allowance results in a marginal rate of 60%, not more than 100%!
Not that a marginal rate of 60% is good of course.
@TI:
Re the Morningstar value stocks post:
ERNs [somewhat contradictory] take on this – posted a few days ago – may be of some interest.
That table of cities is somewhat counter-intuitive, who would have thought say Cardiff or Newcastle would be so different from Liverpool or Sheffield. I’m in the top half, not that I’ve noticed any particularly obvious benefits.
Oh and no fantasy househunt- always my favourite link!
Thanks for the links. The FT investment trusts article seems to be one of several in a collection entitled “Investment Trusts Special 2024”, this link might work: https://www.google.com/search?q=site%3Aft.com+Investment+trusts+special+2024
Also the Investment Trusts Handbook 2025 has come up on Kindle as a free to pre-order item coming out in a few days: https://www.amazon.co.uk/Investment-Trusts-Handbook-2025-essentials-ebook/dp/B0DLBJ8VLZ/
Apologies if you already posted these!
Well I looked at that link to Magic The Gathering. Read the reviews on Amazon. Result ? I haven’t got the faintest idea what they are talking about.
Only other comment , means testing the state pension ? It’s inevitable and will bring French-like civil friction as it won’t be possible to limit eg civil service or train driver pensions the same way, so two tier pensions.
Oh, my Magic The Gathering decks (probably got a few hundred cards) might finally be worth something!
The state pension is means tested right now. If your private pension is over £12.5k then your state pension is reduced by 20% and if you are lucky to have a really generous private pension then your state pension is reduced by 40%.
@GF It’s not means tested. You may think of it that way but it’s not true. But it contributes towards taxable income and that can go over the tax free allowance. Means tested would mean (!) that if you had over a certain level of assets, you wouldn’t get a state pension, or it’s tapered.
Personally I think that would be a very good thing because I regard the state pension as being a backstop for people who cannot be provided for by themselves nor their employers. That’s easy for me to say because I already sit on a decent private pension. So take this with a fist of salt.
Rather like the winter fuel allowance, I think pensioners already into the higher rate tax bracket still are over average earnings, and not working. And perhaps sitting on many hundreds of thousands of pounds (or more) of assets, primary residence etc. This is already means tested if you need residential care for health reasons. It still remains available for those who need it but the state shouldn’t be topping up people when they can already provide for themselves. Nobody likes paying out or losing cash but there’s a difference between being able to and not at all – and that is the point personally I think the state should be stepping in – not just because the Daily Mail crowd are up in arms at having to pay for themselves and putting a dent in little Tarquin’s inheritance.
Unfortunately many people are hypocritical. On the one hand, they’ll happily berate those on benefits as scroungers while at the same time expecting a state handout that they may not even need. Or one that takes them from “okay” to “decent.” But who is going to turn down free money? And after all, you paid your taxes all those years so you’re entitled, right?
If you have a £50k private pension, losing your state pension is a much smaller lifestyle drop than someone with an £18k pension. But then again I think the state pension should be a backstop not a God-given right. YMMV
@Naeclue I could never make the numbers work. 4 days a week at £160k beat 5 days at £200k whichever way I cut it once I factored in holidays etc. Maybe it’s me but I don’t miss it and doubt I’m worse off .
@larsen – I know, right! It’s not up on the guardian website, so there’s only so much Our Esteemed Editor can do. Let me instead suggest https://www.outta.town/ for the fantasy escapism!
@John Charity Spring #12 What is means testing if not a very high marginal tax rate?
If you’re arguing we should increase the 45% or 47% (Scotland) marginal rate of tax over £125k per year, that’s a reasonable stance to take. If you’re arguing that at £50k pensioners should face a 1,000,000% marginal tax rate (state pension withdrawn in full, rounding the state pension down to £10k for simplicity), that seems insane. And if you do it with a taper, you have additional complexity. Let’s not add more complexity to the system, as it results in nonsensical tax rates in places you don’t think about.
I think moving the 45%/47% additional tax rate threshold down to £100k and getting rid of the personal allowance tapers would result in a simpler tax system, while raising similar revenue. Not sure it would be enough to destroy that cliff, but making people pay more tax between £100k and £125k than above £125k makes no sense and people are clearly aware.
Problem is the mismatch between pension planning time horizons and gov/political time horizons. They’re off by about 30 years.
I’d say that there is a social contract between gov and proletariat saying if you pay your NI for 35 years you get a state pension. That messaging is pretty unambiguous. To change that for someone who has just made their final NI contribution, well I can see they’d feel a bit aggrieved despite any other financially prudent steps they may have taken over their lifetime. (I’d be mad as hell).
This is why I think pension legislation should be ring fenced from politics.
Changing the rules for those new to NI payments, say 16 year olds and onwards, that’s a different argument.
@ Al Cam (#6) – Thank you for mentioning ERN’s post on small caps value. I usually like his posts. This post has the usual quite rigorous analysis expected from ERN. OTOH the argument he is disproving in this post comes across as a sort of strawman. The results of his analysis are not surprising at all.
Over the last two decades and a bit, US large caps have performed better than all the rest. Moreover, the exceptionally very low interest rates period after the GFC made growth stocks the best game in town.
Can this outperformance of US large cap and growth stocks continue for much longer with interest rates back to their normal levels? The underperformance of small cap and value compared to large cap and growth over the last two decades and a half has kept their valuations at more reasonable levels than those of large cap and specially of large cap growth US stocks.
@TBDW (#16):
FWIW, I think there is probably more to come (from both sides) in the debate.
If nothing else, ERN has raised a dissenting voice re the current SCV “flavor of the month” as he called it.
I cant see how means testing of SP could work – how do you compare someone with, say, £1m (value fluctuating of course) in pensions who doesnt draw very much as they have a small DB pension that gives then £20,000 per year and decide they dont need more, with someone who annuitised all their £1m pot and has a much higher income, say £50000. How do you decide who should have their SP withdrawn and by how much etc? Of course pensions are now subject to IHT so that makes it even more complex.
@Al Cam – thank you very much for highlighting the ERN post which was not so much food for thought as a ten-course meal.
@Tom-Baker – While I understand where you’re coming from, I thought the evidence ERN presented was more challenging for value investors (which I have been / am).
Partly it was because his evidence was presented from a retail investor’s perspective. Whereas a value investing proponent like Larry Swedroe, would often quote the value premium in its purest form i.e. as a long/short portfolio without fees.
In other words, ERN’s numbers specifically target investible value. While pro-value commentators tend to present a rosier picture without truly confronting the hard realities faced by everyday investors. Note, I’m not saying that other commentators don’t mention the issues, but they rarely dwell on them either.
I think ERN did us a major service by showing how long it’s been since value delivered a significant advantage. That along with the danger the premium has been arbitraged away, and the cost hurdle, is causing me to seriously rethink.
I’ve not seen anyone run the numbers before on the diversification argument either.
Re happiest places to live
I live about 5 miles from Woodbridge and have thought about downsizing there in the next few years. It’s very pleasant with enough going on bars, restaurants, cinema, sports centre, community centre etc (tai chi there is excellent). A few too many pensioners though…
Also lived in another 2 in the top 15 – if only the weather was better up north.
On means testing the SP – we all know it’s not currently means tested, but it feels fair to say “it sort of is means tested” – if some get 100% others between 55-80%
Perhaps from a given year of birth we move to the Australian system, or a sliding scale over time.
Also some interesting articles in the paper about the pernicious effects of rising Min Wage on the low earners in “tougher” jobs, ie May as well work in Tesco, and uni was a con…
James Howell’s hunt for his Bitcoin wallet deserves the Tolkien treatment. Setting aside the legal ownership issues (it was thrown away, in his trash) there are the physical limitations. In the extremely unlikely event that he finds his drive will it be undamaged? Assuming that he can power it up, will his passkey be accepted?
I spent my hashed bitcoin on pizza, a colleague had more patience and took his family to Paris Disney Land. The opportunity passed us by. For all that is sacred, show some dignity and walk away!
#2 John Charity Spring.
I’ve been greater than 100k tax trap the lovely Darling put in place in 2009 (nod to Blackadder).
It’s really 62% due to NI. But I then pay 16% further on child maintenance, so 78%.
I buy holiday off the company, turned down a VP-ship, max my pension contributions (so the AA to 60k helps) all to avoid it. It truly is for me the turning point of not wanting to work past that line. I really don’t see the point. They say tax should bring in the max without people changing their habits. This one has gone too far for too long.
Looking at the disposable income it seems a lot to me, especially as it seems to include travel costs. Wonder how they account for credit card debt. With that much surplus how is it a high proportion don’t clear their cards every month ?
@TA (#19):
No worries!
Interesting that nobody seemed to pick up on that ERN post when I linked it explicitly last week, see: https://monevator.com/weekend-reading-50-years-of-higher-house-prices/#comment-1848804
Time and a place or something similar, I guess.
Looks like zero commission SIPP accounts are on the way:
* InvestEngine: https://www.reddit.com/r/UKPersonalFinance/comments/1h7efqy/investengine_to_launch_free_sipp_from_9th_of/
* Trading212 have also said this on their forums (but I can’t now find the link)
I’ve never had enough income to face the 62% tax band at £100,000 p.a.
I have, though, had the delight of teaching a youngster in my extended family how to avoid it – for a couple of years anyway. When the whole thing became too onerous the young couple finally pissed off abroad.
There was vague talk of returning one day but it seems less likely with each passing year.
If anyone is after a bit of additional weekend reading over and above Monevator you could try the Marginalian, by Maria Popova. Recent commentary chat on hinterland, meaning and purpose prompted me to share..
If you’re interested in marginal effective tax rates, 62% is nothing compared to what happens with Universal Credit withdrawal:
* 70% marginal rate for single parent with one child: https://commonslibrary.parliament.uk/reducing-the-universal-credit-taper-rate-and-the-effect-on-incomes/ (was 75% pre-2021)
* 102% marginal rate in some cases (due to high rates of LHA, you can get hit by a combination of child benefit clawback + UC clawback) https://policyinpractice.co.uk/spring-budget-2024-marginal-tax-rates-improved-for-low-earners-and-families-but-more-to-do/
And, don’t forget, if you’re on Universal Credit, you aren’t earning £100k+
@Ben
Incentives are everything – but surely we should reserve the term “marginal rate of tax” for earned income. Or at least income that comes from some form of economic activity.
If you want to point to mad marginal rates of income loss why not compare someone on Pension Credit with someone who has an income bigger by £1 per annum and who thereby doesn’t qualify for Pension Credit?
£1 costs her thousands of pounds? Oof!
@dearieme (30)
I don’t think that’s quite right. As you say, someone £1 above the threshold will get nothing. But someone £1 below the threshold will only get £1 in Pension Credit, won’t they? Where the real loss occurs is of the other benefits for which Pension Credit is a gateway, e.g. Winter Fuel Payment, Cold Weather Payment, Housing Benefit and Council Tax Benefit. I doubt these add up to thousands, though.