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Weekend reading: 75 not out*

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What caught my eye this week.

Just when you thought pensions had been rehabilitated with the freedom to spend your savings how you like in retirement – and the laudable success of auto-enrollment nudging you there – along comes a conservative think tank ready to bugger them up again.

Not content with his faction bringing us the thermo-nuclear bungle that is Brexit, former Tory ‘leader’ Iain Duncan Smith’s Centre for Social Justice suggest the government withhold the state pension until 75:

The SPA [State Pension Age] should better reflect the longer life expectancies that we now enjoy and be used to support the fiscal balance of the nation.

The SPA in the UK is set to rise to 66 by 2020 (Pensions Act 2011), to 67 between 2026 and 2028 (State Pension Act 2014) and to 68 between 2044 and 2046 (State Pension Act 2007).

We propose accelerating the SPA increase to 70 by 2028 and then 75 by 2035.

There’s a lot to be written about this. For one thing, my co-blogger The Accumulator might have to revisit his fear-de-mongering article on why your pension won’t be plundered.

(Oops! Lucky it’s a Bank Holiday @TA!)

More seriously, the CSJ report shows its workings, and it’s hard to come away from it without thinking Something Must Be Done. I also personally happen to like the idea of working indefinitely, in some capacity, professional damp squib to the FIRE brigade that I am. I believe it’s probably healthier for most of us.

However I’d certainly expect to be easing up into my 60s. Perhaps a day or two a week by 70. I’d want to have options. I wouldn’t want politicians forever moving the goalposts away from me like some demented version of football devised by the Greek philosopher Zeno.

More darkly, as The Guardian points out there are pockets of the country such as Glasgow where male life expectancy doesn’t even hit the 75-year old mark. And life expectancy isn’t the same as healthy life expectancy, anyway.

An additional fear for the likes of us is that the age when we could access private pensions could also leap.

It’s already set to rise to 57 by 2028. Perhaps you’d be barred until 65 under the CSJ’s regime?

The alternative – wealthy types retiring in their 50s en masse to be served lattes on weekday afternoons by bitter septuagenarians – sounds almost worse.

Existential diversification

Of course this is only a proposal. It carries exactly zilch formal weight. Even Duncan Smith has said it’s not his policy, and he’s a Magneto for nonsense.

But I do think it’s a reminder that the rules of the game can and will change again and again.

In just the life of this blog we’ve seen it with everything from the pension lifetime allowance to the taxation of dividends to those who came here from the EU in good faith and lived here for decades being ordered to pay up for the right to stay.

Change is constant, which is why I’m as bemused when I hear people explain their entire strategy is 100% based on pensions as I was when old-time investors told me they eschewed using ISAs because their dividends were tax-free.

Political risk is hard to avoid unless you’re ready and able to move (and let’s not mention expats again this week, eh? 😉 )

But there are pragmatic approaches you can take, such as using various investment vehicles together (ISAs and pensions, at a minimum, and probably also property), keeping your hand in at earning to preserve your human capital, and trying to stay healthy for as long as possible.

As someone should have trademarked: Not everything that can be modeled to two decimal places on a FIRE spreadsheet matters. And not everything that matters can be modeled.

*If only Joe Root could say the same.

From Monevator

How to invest as an expat – Monevator [Controversial, several comments add a lot of value]

From the archive-ator: Is your cash safe in the bank? – Monevator


Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1

Trump “orders” US companies to look for alternatives to China trade partners – BBC

Britain’s most expensive cities are becoming [slightly] more affordable… – ThisIsMoney

…while under-pressure sellers drop prices leading to a pre-Brexit summer sales spike – ThisIsMoney

Small investors in Kevin McCloud’s property mini bonds stand to lose up to 97% – Guardian

More people than ever want to work in asset management, CFA data shows – Institutional Investor

Most of the rest of the world’s stock markets look cheaper than the US – MSN

Products and services

The deadline for PPI claims is August 29 at 11:59pm [*KLAXON*]ThisIsMoney

Payday come early: Monzo allows you to receive BACS payments eight hours sooner – ThisIsMoney

Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year Ratesetter

Aunts, uncles, godparents, and family friends can now gift premium bonds to kids – ThisIsMoney

Homes with extra space to let [Gallery]Guardian

Comment and opinion

The top four portfolios to recession-proof your investments – Portfolio Charts

Financial struggle and the human instinct – The Simple Dollar

If you’re a young investor you should hope for a stock market crash – The Irrelevant Investor

How to make a thousand bucks an hour – Mr Money Mustache

Don’t wait for a life-changing event to change jobs – Fast Company

Monzo, metal credit cards, and bullet journals – Simple Living in Somerset

Which countries have the greatest per capita wealth? – Visual Capitalist

Why you should keep playing offence into early retirement – MarketWatch

Writing wrongs – Humble Dollar

If you’re good with money, don’t get married [IMHO]Business Insider

Naughty corner: Active antics

Warren Buffett is the greatest investor of all-time – A Wealth of Common Sense

A deep dive into the WeWork IPO – Stratechery

John Hempton on bank stocks and other active nerdery [Podcast]Odd Lots

Is US market outperformance a result of its sizeable tech sector? – Elm Funds

The downside of discounted cashflow analysis – Albert Bridge Capital

Trend investing protects the downside, but at a cost – Movement Capital

The ‘beach money’ threat to early stage investors – Institutional Investor

Kindle book bargains

The Winning Formula: Leadership, Strategy and Motivation The F1 Way by David Coulthard – £1.99 on Kindle

Essentialism: The Disciplined Pursuit of Less by Greg Mckeown – £1.99 on Kindle

The Miracle Morning: The 6 Habits that Will Transform your Life before 8AM by Hal Elrod – £0.99 on Kindle

The Asshole Survival Guide: How to Deal with People Who Treat You Like Dirt by Robert Sutton – £1.99 on Kindle

Off our beat

Amazon fires: Brazil threatened over EU trade deal – BBC

Diversify your identity – Ozan Varol [via Abnormal Returns]

Will Morrison’s 30p plastic bags end our habit for good? – Guardian

The Athletic keeps on signing subs. An antidote to clickbait media? – Bloomberg

Research suggests too much exposure to bad TV as a child can lead to populism – Guardian

And finally…

“The psychologist Gerd Gigerenzer has a simple heuristic. Never ask the doctor what you should do. Ask him what he would do if he were in your place. You would be surprised at the difference”
– Nassim Nicholas Taleb, Anti-fragile: Things that Gain from Disorder

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{ 60 comments… add one }
  • 51 Mr Optimistic August 25, 2019, 8:25 pm

    I think it’s all noise and chatter: wouldn’t honour it with my attention. Fine to think and plan for the future but don’t stress and worry about it. If anything nasty is going to happen to you, and it probably won’t, you won’t see it coming. If 20 and 30 year olds are worrying about their old age pensions to the extent that it is impacting the enjoyment of their lives now, then something is wrong with the national psyche.

  • 52 ZXSpectrum48k August 25, 2019, 9:35 pm

    @MrOptimistic. This doesn’t just impact 20-30 year olds. It’s impacts heavily those in their mid 40s like myself. Frankly, these type of ideas stink. The CSJ’s recommendation is just another example intergenerational bias. GenX and Y would be picking up the tab for current retirees and boomers. The boomers would be largely immune to these changes despite having extracted 20-25% more in benefits that they have injected in tax revenues.

    I doubt the CSJ, however, really gives a fig about this. What it cares about in it’s conclusion: “The SPA should … be used to support the fiscal balance of the nation.” For the right-wing think tanks, it’s always about reducing fiscal expenditure. Partially, this is because they are macroeconomically in a rut: they simply can’t move on from the inflation scare and downturn of the 70s/early 80s that was caused by the end of the Bretton-Woods system. They continue to fight a battle long since won. They don’t accept that the enemy weak aggregate demand, stemming from exactly the demographic aging issues that this report highlights. Much more, however, this is ideological rather than economic. These people are wrapped up in a ideology that the state is bad, in all scenarios. If follows that all government spending is bad.

    The most pathetic thing about these so-called think tanks is their total inability to think. The government currently has an opportunity to fund long-term liabilities, like pensions, at a positive NPV by issuing long-term Gilts and investing the proceeds into infrastructure assets, but these types just won’t consider it. I’d understand not wanting more debt if Gilt yields were 10%+ like in the 80s but when you can issue 50-year inflation linked Gilts at a -2.10% real yield, it’s not just cheap, you’re actually making money issuing debt. Their lack of price sensitivity is moronic.

  • 53 dearieme August 25, 2019, 11:58 pm

    “you’re actually making money issuing debt”: not if you blew it on HS2 you don’t.

  • 54 Ste August 26, 2019, 12:05 am

    Thanks for the article. True, there is currently no way to reliably track which EU Citizens are inside or outside the country. I think it’s a bit too risky for me to pretend I meet the requirements when I don’t. First because it could get me in trouble further down the line, secondly I know of a few cases where people were asked to submit additional evidence like bank statements to prove time spent in the UK.
    This will all probably become quite a mess in any case. The Home Office currently seems to be fairly quick in granting pre-settled status with fewer guarantees than settled status, but appears to demand a lot more evidence for full settled status. This will likely result in a backlog of cases with both valid and lapsed pre-settled status, and I could imagine it won’t be easy to conclusively determine who will eventually meet the criteria for conversion to full settled status and who not.

    Thanks for the tip, and seconded: The3million provide great support for EU Citizens in the UK. If that’s OK I’d also like to mention “British in Europe” here – the equivalent group supporting UK Citizens in the EU27.

  • 55 Vanguardfan August 26, 2019, 8:02 am

    It would be madness for anyone to knowingly lie in an immigration application – if ever found out that would be it. In fact you don’t even need to knowingly make mistakes – people have been refused visas for minor mistakes on tax returns.
    These things can very easily wreck lives, no one who has any experience of the system, still less whose way of life depended on it, would suggest such a casual approach. That’s the real loss of freedom of movement – the loss of the security.

  • 56 Mr Optimistic August 26, 2019, 10:25 am

    @ZXS. Yep. All down to the Grocer’s Daughter’s model of fiscal management. People of my generation and most of the previous one benefited from the growth in prosperity after WW2. It’s not a case of a inter-generational theft, though imposing measures to reverse it would be! It’s easier to blame others than to accept, manage and strive.

  • 57 Grislybear August 26, 2019, 4:02 pm

    The CSJ report states that spending on pensions is going to consume a larger proportion of GDP going forward. Well they must have no taken much notice of what IDS had been saying, that the UK economy is going to boom after Brexit. If they had factored in IDS views then everyone can retire on a bigger state pension when they are 60, due to future riches the economy is going to make after Brexit. This report contradicts IDS predictions. Someone is telling porkies.

  • 58 Kel August 27, 2019, 10:23 pm

    @Ten more years

    It hasn’t been finalised, according to https://www.gov.uk/government/news/proposed-new-timetable-for-state-pension-age-increases

    I must admit I’d thought it had already been approved. Obviously I’d been normalised to it. I’m now wondering since it hasn’t been approved yet, if the proposal about retiring at 75 hasn’t been put out in order to soften the blow of this being approved in short order? Cynical, moi?

  • 59 Vanguardfan August 28, 2019, 7:46 am

    @kel – not yet finalised, but sufficiently official to be mentioned on the government’s state pension age calculator, if you put in an appropriate age it will say that there are plans for your state pension age to be 68. I suppose that’s so that they can say people have been ‘informed’.

  • 60 Ten more years August 30, 2019, 6:33 pm

    Thanks @kel and @tim for the replies, but I am specifically referring to the plan to peg the private pension age (55 currently) to move to 57 by 2028 and then being pegged to 10 years behind the state pension age. It’s repeated as fact in lots of places but I can’t see that the government have confirmed it.

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