What caught my eye this week.
A big week for news. A Spring Budget that shifted the retirement savings goalposts like a giant tossing cabers, alongside a banking crisis still threatening to drag down US – and possibly European – banks, like giants gasping for air.
On pensions, do read the cracking comments to our article on Wednesday. We’re lucky to have informed readers who mostly take the time to flesh out their thinking when they post. You’ll learn as much from that thread as from any media article. Especially when many financial journalists seem confused as to how the Lifetime Allowance really works.
There’s no doubt this ceaseless pension meddling is a pain though – from how the Lifetime Allowance has been reduced over the years to Hunt going back on a pledge made just last autumn to freeze it until 2026 (making this week’s reversal potentially bitter and costly to anyone who had acted accordingly) to Labour’s response that they’ll – you guessed it – reverse the reversal.
I believe the Lifetime Allowance is bad regulation. But changing the pension rules every few years is even worse. Pensions require people to plan for several decades away. Yet we can’t be confident the rules will even outlast an election.
Those who can should probably take advantage of this latest pivot. But do your research carefully – and don’t dawdle!
Here today, gone tomorrow
As for the banking crisis, that story is changing daily. I just deleted a huge bunch of relevant links I collected over the week. Most of them – while admirable takes – have been overtaken by events.
The most interesting of these discussed how the failure of Silicon Valley bank is a sign of a wider shift in the venture capital ecosystem. But that’s pretty esoteric stuff from a mainstream perspective when a European bank like Credit Suisse is listing.
Now money can be moved in seconds online, bank runs seem to be just a Twitter panic away.
Perhaps my main takeaway therefore is US regulators seem to be deciding they can’t risk any deposit losses – because that risk even existing can drive deposit flight – and so they will in time legislate towards either full insurance of deposits or at least limits in the several millions.
Existing insurance schemes work by protecting enough small deposits to satisfy most of a bank’s customers that their money is safe. This gives the larger deposits a sort of free ride.
The theory is that protecting the little guys means a bank run won’t happen. But Silicon Valley Bank’s failure showed that model has limits.
Banks are still not boring enough
If we do see all cash deposits protected that would surely change the business of banking, both in the US and abroad (if only due to regulatory arbitrage).
Banks would become quasi-national utilities if the Government explicitly stood behind their balance sheets. And they’d be regulated as such.
On the other hand smaller banks (of which the US still has thousands, some of whom fail ever year) might get a leg-up. Larger banks wouldn’t benefit from Too Big To Fail status if, thanks to universal insurance and regulatory scrutiny, no bank could fail.
For what it’s worth I still think the drama is containable – not least because it has to be. The authorities can do what it takes, albeit we might be cleaning up the consequences for years to come.
As the Motley Fool said this week in a tongue-in-cheek letter to lawmakers:
[Imagine] how well your sensitive, musical instrument-playing children would fare in post-capitalist Mad Max wasteland.
Then add a zero to every number in your rescue package.
Have a great weekend!
Our updated guide to finding the best online broker – Monevator
Lifetime Allowance for Pensions abolished and annual allowance raised – Monevator
From the archive-ator: Gagadom and the Grim Reaper: suppose they come early? – 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.
Spring Budget: key points at-a-glance – BBC
Spring Budget: changes to pensions, childcare, and energy support – Which
Spring Budget: how will your income change? [Calculator] – Guardian
Labour pledges to reverse abolishing of Lifetime Allowance – Pension Age
Jeremy Hunt’s R&D shake-up divides UK small businesses [Search result] – FT
UK house prices to fall 10% from peak, says OBR – Yahoo Finance
Barclays could save £200m by pausing payments to staff pension scheme – Guardian
Oil price falls to lowest level since Russia invaded Ukraine – Axios
Scottish Mortgage removes non-executive director after boardroom clash [Search result] – FT
Argentinian inflation soars over the 100% mark – BBC
Seems like the Covid ‘She-cession’ was a ‘He-cession’ after all… – Axios
…but there’s still plenty to debate in the latest UK gender pay gap figures – ONS
Why the UK economy has grown so slowly [Search result] – FT
Frozen thresholds impact mini-special
The impact of frozen or reduced tax thresholds on personal incomes – OBR
Frozen tax thresholds to cost higher-rate households £1,000 a year, says IFS – This Is Money
Products and services
How the government energy cap U-turn will affect your bills – Which
Open an account with InvestEngine via our link and get £25 when you invest at least £100 – and an additional £100 if you invest at least £10,000 into an ISA before 2 May (T&Cs apply. Capital at risk) – InvestEngine
£4.5bn is lying in lost accounts. Could some of it belong to you? – Which
Eight energy-saving fixes from a hands-on energy-saving expert – This Is Money
Halifax is offering a time-limited £175 bank switching bonus – This Is Money
Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor
Homes for sale in former pubs, in pictures – Guardian
Comment and opinion
Why the higher paid should work longer than the rest [Search result] – FT
Gradually, then suddenly – Fortunes & Frictions
Investor behaviour during market shocks – Behavioural Investment
No, it wasn’t pension funds that killed the UK stock market – Real Returns
The rules of the money game [Podcast] – Morgan Housel via Apple Podcasts
Stabilizing – Retirement Investing Today
Staying invested – Spilled Coffee
Market expectations for US interest rate hikes are yo-yoing – The Irrelevant Investor
Don’t waste your emotional capital investing out of spite – Abnormal Returns
Will ChatGPT improve financial literacy? – Morningstar
Market timing mini-special
Don’t chase the past – Bilello
Why you always sell stocks at the bottom – Darius Foroux
Naughty corner: Active antics
A tracker and a slug of cash replicates the average multi-factor hedge fund – Finominal
Statistically speaking, you are the patsy – Neckar Substack
Crisis alpha versus panic alpha – Random Roger
Can the value spread expand forever? – Alpha Architect
Kindle book bargains
Banking On It: How I Disrupted an Industry by Anne Boden – £0.99 on Kindle
Bank of Dave by Dave Fishwick – £0.99 on Kindle
Never Go Broke by Lee Boyce and Jesse McClure – £0.99 on Kindle
Green Living Made Easy: Hacks to Save Time and Money by Nancy Birtwhistle – £0.99 on Kindle
Germany gives green light to €49 a month public transport ticket – Guardian
How the fossil fuel industry plays dirty in the “fight for its life” – Semafor
Banking on the seaweed rush – Hakai
Joe Biden just broke a big climate promise in Alaska – Vox
Off our beat
Michael Heseltine: “The adults are back in charge” [Search result] – FT
Is Facebook’s Metaverse turning into a ghost town? – The Honest Broker
Six useful prompts to make better use of ChatGPT – via Twitter
Our reality may be the sum of all possible realities – Nautilus
Meta productivity – Dror Poleg
How Ted Lasso became a multi-million dollar business – Huddle Up
An interview with futurist Kevin Kelly – Noahpinion
“No doubt all commodities have politics. But money and credit and the structure of finance piled on them are constituted by political power, social convention, and law in a way that sneakers, smartphones, and barrels of oil are not.”
– Adam Tooze, Crashed: How a Decade of Financial Crises Changed the World