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Weekend reading: earning learning

Weekend reading: earning learning post image

What caught my eye this week.

The results are in from last week’s poll (now closed) and in news that will shock no one, it turns out that the readers of a personal and investing website are in general earning much more than the average UK citizen.

Over 2,000 of you voted – thanks! Your votes confirmed that a majority of Monevator readers pay higher-rate taxes:

Indeed going by the poll results, more than a fifth of you pay additional-rate taxes.

That high score does slightly surprise me. The figure nationally is around 1% of the adult population.

Perhaps higher-earners are more likely to want to tell us about it in polls?

And maybe I should cajole Finumus into writing more mundane stuff about household accounts for the very wealthy among you?

Or maybe not: he’d have you putting the family home into an offshore vehicle that you securitise on the Moldavian Stock Exchange by teatime…

How much?

I’m often surprised by how much some people earn. Blame my long years of Bohemian living like a graduate student – plus my multi-decade avoidance of the office.

In a standout example, I learned this week that an old friend took home £600,000 last year.

I knew he was world-class at his job, and that his employer is the best in the field. But that field is not financial services – nor money-laundering, racketeering, or producing hip-hop records.

And my friend is a wage slave (still 15-hour days in his late 40s, he claims, at times) not an entrepreneur.

A bit more interrogation revealed 2022 was an outlier thanks to some massive bonuses, but still.

We were talking about general investing, and as my friends tend to he’d asked for some thoughts about something. In the subsequent conversation I’d guessed his salary – I thought generously – at about £150,000.

He looked at me without saying anything for a moment. Not unkindly.

Everyday high earners

Are you feeling hard done by? Remember my friend is an extreme outlier. Nearly everyone earns a lot less.

An annual salary of just over £60,000 a year puts you in the top 10% of wage earners:

Source: Statista

At least I think it does. Unfortunately Statista restricts access to the source for this data to subscribers; I presume it’s from the ONS.

Note that if you randomly Google around, most reports discuss ‘household income’. That includes all sorts of non-salary income – and in many cases the earnings of multiple people.

Cheap cuts

It was my friend’s turn to be shocked when I said I’d only paid higher-rate taxes in a handful of years. Even after I explained I’d used SIPP contributions to mitigate the impact.

My friend has been prudent with saving and investing, and is no spendy oligarch. Lots squirreled away, mostly lives in a two-bed flat – though there is a holiday home and buy-to-lets – and one where the kitchen has been unusable for a year (another story).

Nevertheless, we were speaking a totally different language on income. I was in mild shock for the rest of the evening; I think he was in turn unsettled by my earnings profile, too.

He’s now looking to downshift his family’s life or even to retire – our conversation was basically about ‘the number’ – and is mulling doing a couple of years in a less pressured and more enjoyable role as an off-ramp.

A big salary cut, obviously. He reckons to about £150,000 a year.

You can know the statistics but it’s always different with revelations from friends. Whatever you tell yourself in the cold light of day, or from a soap box in the comments on a blog. (Anticipating? Moi?)

I walked the long way home, wondering for a bit if I’d done something wrong with my life. I decided I hadn’t – I couldn’t hack his work-life for a week – but it did make me think.

No bad thing. Just not too often!

Have a great weekend.

p.s. A couple of readers who have signed-up for membership were confused when they couldn’t access yesterday’s article on the site. Remember we have two tiers – essentially passive and active, though it’ll be a bit cloudier in practice. If you’ve joined the lower-priced Mavens cohort (thank you!) then you can’t read the naughty Mogul stuff. High-rolling Moguls can read everything. I’ll look for a way to make the paywall clearer.

From Monevator

FIRE update: second year anniversary – Monevator

Ego as a catalyst [Mogul members]Monevator

From the archive-ator: The UK stock market’s worst-ever crash – 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.

BoE set to raise rates above 5% as UK inflation disappoints… – Guardian

…causing mortgage lenders to hike rates and pull products – This Is Money

…meanwhile households have lost £5,455 to inflation in two years – Yahoo Finance

Which? wins campaign to protect free access to cash – Which

All-time low of 31% of Britons think it was right to leave EU – Sky News

The Londoner who lives amongst billionaires for £200 a week – Guardian

Switching to the best savings account annually tripled your interest since 2008 – This Is Money

Products and services

Shawbrook Bank’s new best buy one-year bond pays 5.06% – This Is Money

Borrowers told to brace for 5%-plus mortgage rates – Guardian

Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor

Is Help To Buy coming back? – Which

Lenders are pulling ten-year fixed-rate mortgage deals – This Is Money

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

Netflix starts charging UK password sharers – Be Clever With Your Cash

Which shops offer the best value on lunchtime meal deals? – Which

Stylish new-build homes for sale, in pictures – Guardian

Comment and opinion

The market usually goes up (but sometimes it goes down) – A.W.O.C.S.

The Renters Reform Bill explained [Video] – Property Hub via YouTube

What if you run out of life? – 1500 Days

How some people get away with doing nothing at work – Vox

Long cycles – Humble Dollar

The City of London needs an intervention [Search result]FT

Why investment clients are attracted to complexity – Advisor Perspectives

The best time of my life – Humble Dollar

The Good Enough Job: reclaiming life from work – Next Big Idea Club

Gold isn’t a convincing core asset for Larry Swedroe – Alpha Architect

A high tax primal scream – Simple Living in Somerset

Naughty corner: Active antics

Investment junk food – Behavioural Investment

Private equity trust discounts widen [Search result]FT

Long-term buy-and-hold of yesterday’s winners is risky – Morningstar

Trend following in equities – Finominal

Optimal duration – Verdad

Great investors see things differently – Neckar

I don’t know – Ted Seides

Crypto o’ crypto

Valuing Bitcoin by addressable market size and network effects – Morningstar

Kindle book bargains

Too Big To Jail: The Greatest Banking Scandal of the Century by Chris Blackhurst – £0.99 on Kindle

Amazon Unbound by Brad Stone – £0.99 on Kindle

200 Years of Muddling Through: The British Economy by Duncan Weldon – £0.99 on Kindle

The Moneyless Man: A Year of Freeconomic Living by Mark Boyle – £0.99 on Kindle

Environmental factors

How melting icecaps and glaciers affect everyone [Graphic rich]NPR

Weird, rare, and everywhere – Hakai

Full-year results from Tridos’ Thrive Renewables – DIY Investor

The scientists coaxing back nature with sound – BBC

All the arguments against EVs are wrong – Noahpinion

UK farm curbs greenhouse gases by making sheep burp less – Semafor

Robot overlord roundup

The man who put Microsoft in the lead on AI – Semafor

Vanguard CEO says AI will revolutionise asset management – PI Online

AI and the offline moat – Dror Poleg

Government to tighten AI rules amid fears of existential risk – Guardian

AI fake photo of Pentagon blast goes viral, spooks stocks – Yahoo Finance

Off our beat

The liabilities of success – Of Dollars and Data

How you brain tells the difference between reality and imagination – Quanta

Digital culture is literally reshaping women’s faces – Wired

The psychedelic renaissance is missing the bigger picture – Vox

Why are large companies so dominant? – Klement on Investing

What do adults owe their parents? – Fatherly [h/t Abnormal Returns]

Brexit has wrecked the UK car industry, but so has the government – Guardian

Sudden death – Slate

And finally…

“True security lies in the unrestrained embrace of insecurity – in the recognition that we never really stand on solid ground, and never can.”
– Oliver Burkeman, Four Thousand Weeks

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

{ 38 comments… add one }
  • 1 tetromino May 27, 2023, 11:43 am

    “At least I think it does”

    Your top 10% statement looks about right, compared to the HMRC figures published here:


  • 2 Something else May 27, 2023, 12:05 pm

    I am highly skeptical of upper income statistics due to tax minimisation strategies. A high percentage of business owners earning more than 50k will structure their compensation away from income tax. I suspect the 1% threshold is more like 5-10%.

  • 3 Maj May 27, 2023, 12:20 pm

    Interesting article, thanks.
    Note that there will be some who are non taxpayers for the simple reason that they have saved for a very long time into tax free wrappers; eg ISAs and, before them, PEPs.
    So irrespective of total income, there is no income tax to pay if it all comes from these sources.

  • 4 Time like infinity May 27, 2023, 12:33 pm

    You don’t need a fortune to be happy or secure, and comparing your situation to those with, or earning, more is both futile and a sure route to avoidable unhappiness and frustration.

    Billionaires should be happy, if money can buy happiness in and of itself (as opposed to simply giving access to more and more easily accessible options). But look at the divorce rates, family feuding and at times bizarre behaviours that they exhibit as a group. Buffet’s well-rounded and well-grounded persona is very much an exception I fear.

    A billion should be enough for anyone to quit for the beach, but billionaires resent deca-billionaires for having more than them, just as deca-billionaires resent centi-billionaires.

    Some people (unfortunately I fall into this category) might feel that they need more than they both have and that they actually need in order to be secure and not feel wholly owned by “The Man”.

    Ultimately though, that’s a form of scarcity anxiety rather, I hope, than status anxiety.

    But the joy of walking in the countryside and breathing in clear, fresh air with an unimpeded view of nature is at once free and yet priceless.

    Also, in this world, it may be easier if you want to raise your material standard of living to move to a cheaper region of the UK or to move (as a digital nomad or as a retiree) to a cheaper country than it would be to try and outcompete and outwork your current peers in a battle for promotion or better paid roles in other firms. Even though Sterling has been royally handicapped by Brexit, there are still many countries where the pound buys far more at purchasing power parity than the official exchange rate suggests.

  • 5 Seeking Fire May 27, 2023, 12:52 pm

    The renters reform bill feels like the last straw for me regarding buy-to-lets. I’ve got three, never raised the rent unless a new tenant moves in, never asked a tenant to leave, had one tenant who couldn’t pay – I agreed he could leave no questions asked, flats are now rented £200 pcm below market value, had one tenant for going on 10 years, fix major problems within a day or so etc etc.

    But this is just taking the mickey. As I understand it, a tenant can move in, a week later, bring in an army of dogs & cats, refuse to the pay the rent and then theoretically 6 months later, I’ll be able to evict them if I can get a court hearing. And I’ve got no protection beyond six weeks rent? Don’t think so.

    The EPC reforms were drivel enough but was more of inconvenience rather than risking the actual capital value.

    I’ll put them up for sale and stick the dosh in the equity markets. Now the obvious riposte here is good news you blood sucker, those flats will be available for those tenants to buy. mmm maybe but the tenants I have, I know, have got less than a few months savings and the flats are roughly 6/7x their earnings. I can’t seem them being able to buy them even if prices halve. Which if there’s 600k other people now looking for a home this year doesn’t seem that likely to me.

    So those tenants are going to be homeless. If I look on RMV there’s very little for rent in the area they live, certainly nothing that’s not 20% higher than I’m charging them. Their work is local so kicking them out is going to seriously uproot and disrupt their lives.

    The alternative is if the risk reward profile has increased, then landlords should all things being equal demand a higher rent for the increased risk. So I could increase the rent by minimum of £200 pcm. imho rents are set by market pricing and where I rent flats they are shooting up.

    It sort of feels as if this is dog whistle politics….we don’t want you to look here, you know the multi-decade policy across all parties of under-building the necessary homes but we do want you to take note of how we’re dealing with these pesky landlords some of whom are clearly pita but most of whom don’t appear to be from what I can see.

    More dishonestly from govt’s as they know the electorate wants to be lied to.

  • 6 Andrew May 27, 2023, 12:52 pm

    I’m often shocked how _little_ people earn in London and completely baffled why they bother coming here or how they plan to lead a full life.

    A coworker of mine, who has an 11 year old daughter, is now approaching 50 (the eldest on our team). He was telling me just yesterday that he has paid more on childcare during the last decade than he has on his mortgage. He lives in a 2 bed zone 2 flat bought in 2005, and to make numbers stack up he still had to switch his flat to an interest only mortgage when he had his daughter. His salary is now north of £200K/yr and he claims “his pensions need work”.

    I’m 37 and my partner is 32 and a half. We have managed to buy a 3 bed in zone 4 with a garden, but making the idea of finding money to have kids, get married and still have a decent retirement is daunting. Obviously the biological clock is ticking, and I fully expect our mortgage to go up by £1000/mo come 2027. This will bring the total to north of 50% or my take-home. My partner is basic rate, so her career will go on pause when we have kids… paying for childcare will cost more than she makes.

    Another friend of mine is earning close to £300K/yr, renting, and somehow, he still claims to be struggling …although he is putting 2 kids through private school. That’s at least £80K/yr of pretax income gone right there.

    Everyone I know earning closer to £100K is living in a rented room / house share.

    None of us trying to make a go of a family life are leading particularly lavish lifestyles. Perhaps we eat out a little _too much_, but nobody is buying fancy cars or holidaying in the Carribbean 3 times a year.

  • 7 JimJim May 27, 2023, 1:01 pm

    @Tetromino and @ Somthing else
    Anecdotally, I bumped into a self employed ex student of mine last week who had been offered a guaranteed full years work at a large local firm with as much overtime as he wanted at a rate of £63 / hour.
    Working that back and assuming 30 days of holiday and a flat 40 hour week, gives a before tax income of circa £116,000. Or the 97 -98 centile. on the government chart.
    Now I doubt he would show that all as income if he had a good accountant so perhaps, this would skew figures.
    His skill set, builder/carpenter.
    He turned it down.

  • 8 Time like infinity May 27, 2023, 1:26 pm

    @JimJim £63 p.h. seems a very good rate for the self-employed ex student builder/carpenter to turn down.

    Round here (rural North) the tariff for experienced tradesmen (plumbers, electricians, builders, roofers, plasters, joiners, carpenters and gardeners for project work) is typically £21 p.h. + VAT, so about £25 p.h. all in. We’re generally talking about people with 20 – 30 + years experience and very good local reputations to safeguard for their quality, reliability and hard work.

  • 9 ermine May 27, 2023, 1:28 pm

    > Is Help To Buy coming back?

    OMG, please, don’t. FFS, I have never been rich enough to buy a new-build home, because guess what, like most other things in life second-hand is cheaper, and unlike cars, phones or IT equipment houses don’t depreciate that quickly over time. So stitching up first-time buyers to buy their new houses from the Tories’ mates the housebuilders is deliberately eating the young, as well as inflating house prices. Because guess what places the upper ceiling on house prices? Buyers dropping out of the market because they can’t afford it.

    I am shocked, shocked I tell you, that the readership of the leading UK personal finance site earn rather more than the average screw. Who’d a thunk it 😉

  • 10 tetromino May 27, 2023, 1:43 pm

    Completely agree with everyone’s comments about the data being unreliable for various reasons – just thought it was useful to have a confirmed source, given TI’s comment about Statista.

  • 11 G May 27, 2023, 2:05 pm

    @seeking fire – your tenants need not be homeless, simply wait until they move out before you sell. If they are causing you no trouble now, they are unlikely to do so when new regs come in.

    On trades, we had a log burner fitted last year and the install cost did not seem too bad until they claimed they’d spent 1.5 days more than expected, and wanted to charge that at £800/day ie essentially nearly £100/hour (and this is in rural N. Wales). Admittedly they had an apprentice in tow, but I find it difficult to believe that they were being paid more than minimum wage. Thankfully, I disputed it semi-successfully as they “forgot” they’d only worked a few extra hours rather than a day and half.

  • 12 The Rhino May 27, 2023, 2:09 pm

    Arghhh, my phone has seen fit to log me out just as I’m off on holiday with no access to passwords. Only pleb articles for me until I’m back in blighty. How very, very, extremely irritating. The obvious other sibling article to the previous income survey is the net worth survey. I think I’d fare better in that one.

  • 13 JimJim May 27, 2023, 2:46 pm

    @Time like infinity, We are also in the rural north, the firm in question offering the rate was an international defence manufacturer (if that narrows it down) 🙂
    He must have been getting nearly that from his current self employment to turn it down I feel.

  • 14 xeny May 27, 2023, 3:00 pm

    @Rhino – another survey I’d be curious to see is the ratio between net worth and income.

  • 15 ZXSpectrum48k May 27, 2023, 3:17 pm

    You have to be very careful with these sorts of income stats. In the US, to be in the top 1% in 2020, I can find surveys showing anything from $350k to $820k. It not only depends on how well those at the top are measured but also on the definition of the total sample. When you drop out those working part-time or infrequently, younger workers etc, the sample drops and the top 1% roofs it.

    Wealth is even worse. How you calculate capitalized values of DB pensions is bad enough but then add on top all the trust structures etc and it becomes impossible. Never mind market moves.

  • 16 The Investor May 27, 2023, 3:34 pm

    @The Rhino — If you mean Monevator membership articles, you can request a ‘magic’ email sign-in link from the log-in (top right corner of site on desktop) and using the email address that you’re registered under. 🙂

  • 17 Rhino May 27, 2023, 6:28 pm

    Thanks TI. For some reason though I now seen to have been logged back in auto magically! Phones, they are smarter than me..

  • 18 Time like infinity May 27, 2023, 8:52 pm

    Excellent first two Guardian articles in the links, but surprisingly no mention in either of the biggest inflation elephant in the room, namely the rise in core inflation (sticking inflation) from 6.2% to 6.8%, which is potentially a bigger issue than the smaller than hoped for fall in CPI from 10.1% to 8.7% (rather than to the 8.4% expectation).

    From 1985 to 2008 base rate averaged 2.5% over core inflation. So, if core inflation eased to, say, 4.5% to 5.5% (a fair reduction from now, bearing in mind the nature of this measure and what’s excluded from it) then the pre-GFC regime would suggest that BEBR would need to be around 7% to 8% to get core inflation back to where it was is 2017-21, when it averaged 1.85%.

    With his £575,000 package, I hope that Andrew Bailey is alert to the risks of sticking inflation, and looking beyond the headline CPI and RPI data.

  • 19 Mikhael May 27, 2023, 10:43 pm

    Have you ever thought that you may have readers/ followers from Moldova?

    Perhaps I might have been even more astonished than yourself (compared to when you learned your friend made £0.6m last year),when you mentioned “Moldavian stock exchange”.

  • 20 Marco May 28, 2023, 8:54 am

    Re ZXSpectrum

    You have commented on DB pensions a few times. I am aware that you are very financially literate but DB pensions are so complicated they will vex even those such as you. If you wish to educate yourself regarding them I suggest following dr Tony Goldstone ( a uk radiologist) who is basically an unqualified expert in the matter. He pretty much single handedly grinded down the government to change AA and LTA because of the gross unfairness towards senior NHS staff who were penalties by inflexible scheme. Don’t forget, the DB pension also dies with the holder and can’t be passed tax free onto their dependants.

  • 21 tetromino May 28, 2023, 9:28 am

    @ Marco and ZX

    Any thoughts on how a typical employee can be expected to compare job offers if one comes with a generous DB scheme and the other a basic DC?

    As you say, all very complicated, which makes me wonder how an ordinary employee can weigh up two different salaries if the pension benefits are miles apart.

  • 22 ZXSpectrum48k May 28, 2023, 12:08 pm

    @Marco. I’m not the right person right now to try to elicit sympathy for senior NHS staff.

    I don’t want to go down the pension rabbit hole. The whole system is so stupid (gold DB vs DC, mental gymnastics on LTAs, AA, commutation factors etc). I don’t support DB pensions in any format. My broad view is the only DB pension that should exist is the state pension (but just linked to earnings not CPI). In fact, both DB and DC pensions should go and be replaced by a “Pension ISA”. About the only idea Osborne had that I liked.

  • 23 Time like infinity May 28, 2023, 12:11 pm

    Further to earlier comment #18, Larry Elliott in this morning’s (Sunday, 28/5) Guardian now mentioning Wednesday’s unexpected core inflation increase. To misquote Bette Davis’ character Margo Channing in All About Eve ‘fasten your seatbelts, it’s going to be a bumpy ride!’

  • 24 SemiPassive May 28, 2023, 9:29 pm

    The stats are interesting, but maybe Monevator readers are even wealthier than the poll suggests, because how many of those polling as basic rate or higher tax payers are salary sacrificing/contributing into their pension significant amounts to take them down from the income tax band above?
    I know for this tax year I am going to make sure I don’t pay a penny at 40%.

  • 25 ermine May 29, 2023, 8:06 am

    > how a typical employee can be expected to compare job offers if one comes with a generous DB scheme and the other a basic DC?

    A DB pension is an annuity, so you can get a rough qualification by establishing comparable open market annuity rates based on the accrual, ie you buy the annuity in bits year by year. The calculation also needs to take into account the scheme’s normal retirement age, though there is a tendency to drift that higher to reduce liabilities. Most DB pensions are CARE revalued rather than final salary dependent nowadays, which makes it easier to qualify dependent on your expectations of career path.

  • 26 Jim McG May 29, 2023, 8:34 am

    When you hear of a friend’s (higher) salary than your own, I’m reminded of the Chinese proverb, “Happiness is seeing a good friend fall off a roof”. I think I was well paid once, but I always was taking pay rises and bonuses and stuffing them into investments and pensions instead of spending them. These days, retired at 57 on pretty much the same income as I was when I was a “high earner”, I thank my lucky stars, The UK Motley Fool and Monevator, that I did!

  • 27 Calculus May 29, 2023, 9:18 am

    Interesting that we now have relatively high bond yields and an upswing in the US indexes. 4.5% at almost any gilt duration is food for thought though.

  • 28 Time like infinity May 29, 2023, 10:27 am

    @Marco (#20), tetromino (#21), @ZXSpectrum48k (#22) & @ermine (#25):
    Based on the info. that I can find, for a couple of example DB schemes, and for salaries in range circa £60k-£90k:
    – At 60ths accrual and scheme retirement age (SRA) of 60, the actuarial equivalent in a DB of the employee contribution for a DC would be about 31%, assuming a 3.5% employee contribution.
    – At 43rds accrual, and an SRA at 66 or at state pension age (if later by retirement), and at just over 7% employee contribution, the actuarial value for a DB of the equivalent employee contribution for DC would be about 27%.
    However, the numbers depend on the assumptions going into the actuarial valuation. Economically, depending upon the rates and annuities offered at the time of eventual retirement, the effective employee contribution to a DB could be more or less than these numbers.

  • 29 Time like infinity May 29, 2023, 10:30 am

    Typos due to autocorrect being overzealous: the references to employee contribution should of course be to employer contribution re both the 31% and the 27% figure. Hope my comment above makes sense now.

  • 30 tetromino May 29, 2023, 10:45 am

    Thanks ermine and Time like infinity.

    I see that the annuity comparisons work for valuations at or close to retirement – seems simple enough for everyone to understand.

    But if someone is 20 years from retirement, it’s quite a stretch for them to get their head around the various risks and differences. Can’t expect an ordinary employee to basically come up with their own personal discount rate.

    The only ‘shortcut’ I’ve found useful is that there must be greater-than-actuarial value in having a bit of each type of scheme. Someone with existing DB credit would probably value the extra flexibility that comes with a small DC pot, and someone with an existing DC pot would probably benefit from a bit more ‘floor’ income via a small DB entitlement.

  • 31 ZXSpectrum48k May 29, 2023, 11:02 am

    @tertromino. I agree. For someone who is close to retirement then capitalizing the DB income cashflow assumption using annuity rates is fairly easy and will give you an solid approximation. The problem even with that though is annuity rates are a function of 15y+ Gilt yields and these are moving around substantially. Annuity rates have almost doubled in 3 years, effectively reducing the capitalized value of a DB pension hugely.

    For someone is their 20s or early 30s, the situation is even worse. Plus you may find the DB pension has CPI caps above say 3% or some other rinkydink features . You can model all of this but there are so many input assumptions. Add on top of that the government changing pension rules at every budget.

    It’s sort of why I don’t like DB or even DC pensions. Surely simpler to pay tax on your income and then stick it in a larger ISA wrapper which is tax free. Simples.

  • 32 ermine May 29, 2023, 1:51 pm

    > But if someone is 20 years from retirement, it’s quite a stretch for them to get their head around the various risks and differences.

    That’s true, though some of this is because their future career (and outside work) trajectory is inherently more variable, so the fan chart spread amplifies. It’s inherently less knowable.

    You’re also not comparing like with like in other ways. Some people prefer a DC pension because if they are rich enough to not draw it all they can leave it to their children outside inheritance tax – a pension is a special case of a trust and therefore outside IHT.

    There’s more flexibility with a DC pension because you can control your income, whereas once you have drawn a DB pension that income is fixed (subject to inflation changes). A DC pension holder is at liberty to buy an annuity on the open market and can compare providers. That can provide some floor ncome. A DB holder can sometimes sell the entitlement for a CETV, but they get to do this at a rate of the provider’s choosing.

    ZXSpectrum48k’s advocacy for paying tax on the entire income and using a (larger) ISA allowance is fine for higher earners but perhaps a disadvantage for lower earners, where the difference in tax rates when earning compared to when retired is usually favourable

    > Someone with existing DB credit would probably value the extra flexibility that comes with a small DC pot

    Indeed, although I am trying to burn my DC pot down to the ground before I reach SPA it served me well in the post 55 but earning hardly anything period, it beat the hell out of paying HRT on the amount, and I took some stock market gain from the post-GFC runout. So yes, a mix has a lot of value – the DB part stiffens the spine of ordinary sorts not used to investment volatility, and DC gives you opportunities to featherbed your children, and if you see intermittent work in your post-FI future it has the great advantage of being able to switch your income on and off inversely to your earnings in that tax year.

    Trying to equivalise DB and DC is hard in many ways, because it depends on your wider setting and other dependants. DB usually covers your spouse to some extent, but leaves your kids to twist in the wind, because the assumption in the days DB pensions were created was that adult children become self-sufficient when they come of age

  • 33 ZXSpectrum48k May 29, 2023, 2:55 pm

    @ermine “perhaps a disadvantage for lower earners, where the difference in tax rates when earning compared to when retired is usually favourable”.

    I’ve always been somewhat heterodox on the whole idea that tax rates will be lower when you retire since you are earning less. When I first started working 25 years ago, I realized my early retirement years (55-70) would coincide with major deterioration in the tax dependency ratio.

    The tax burden will rise from the current 33% (sort of normal) to 38% by 2028 (post war high). Everything else equal it then deteriorates by another third or so by 2040-45. Let’s say 50%. There is no way the basic rate is 20% at that point. Nor any way for so many to pay no tax at all via generous personal allowances. That model will be totally broken. So I quite like the idea of paying my tax now and having it in a wrapper that I can liquidate rapidly if I need to exit left. Not tied up for decades.

    Of course we can square that circle by spending less (bye bye NHS, triple lock etc). Or hope that the AI revolution results in a massive increase in productivity and a whole new generation of highly paid jobs (rather than the alternative scenario of a horde of T1000s massacring us). Fun times!

  • 34 Time like infinity May 29, 2023, 4:10 pm

    @ZXSpectrum48k and @ermine (#31 to #33): Wealth taxes inevitable come the 2040s?

    1%/2%/3%/4%/5% p.a. thresholds at £10 mm/£30 mm/£50 mm/£100 mm/£350 mm might perhaps be likely, even with substantial wealth flight and attempted avoidance, to raise more than punitive rises to BR, charging retirement income to NI, raising the state pension age, slashing NHS provision or restricting relief on employee and self invested pension contributions to BR.

    I can’t see the public wearing more big cuts to services, a steep rise in BR or a substantial putting back of the state pension age.

    Borrowing much more than planned based upon the kindness of strangers might also be harder than expected with Sterling now viewed internationally, after Brexit et al, a bit like an EM currency.

    (NB: Significance of the £350 mm threshold based upon wealth tax campaigners very recently utilising it based, I think, on the Sunday Times’ Rich List’s top-350 entry level cut off).

  • 35 ermine May 29, 2023, 5:56 pm

    @Time like infinity

    One should never say never, but I had assumed the UK is an outlier in not having a wealth tax, but it’s not particularly unusual in Europe

    The UK would have serious problems with taxing land wealth, since about 15% of land in aristocratic or dynastic hands for decades is unregistered. Compared to the cadastral records in any modern European state, the UK is in banana republic territory.

    We permit anonymous beneficial holding of companies. The ruling class in the UK is quite happy for the little people not to discover how much they have.

    Wealth taxes tend to go with taxation on worldwide assets – Uncle Sam is the best known example of that. US-born Boris Johnson abjured his US citizenship in 2016 on having to pay Uncle Sam tax on the sale of his North London home 😉

    I’m not saying it won’t happen, but a lot of ducks are going to need to be lined up beforehand.

  • 36 Grumpy Tortoise May 30, 2023, 7:13 am

    @ Marco – the NHS DB pension scheme does not ‘die with the holder’. Under the 1995 scheme dependents receive 50% of the members pension, under the 2008 scheme 37.5% and under the 2015 scheme 33.75%.

  • 37 Time like infinity May 30, 2023, 8:26 am

    Thanks @ermine. Brilliant piece BTW on your own blog, as linked above, on high tax primal scream. The decision to leave London for cheaper and greener vistas points North was my second best in life after choosing Mrs Time Like Infinity. Never looked back. When future Mrs TlI started working in the smoke (just before me) East End and South of the River one to two bed flats were 50k and when we left they were heading towards 500k, all from mid 90s to mid 2010s. Absolute nuts. It’s a millionaire’s city now, not designed for the needs of the public.

    The financial position of UK plc looks terrible. Stagnant sales growth (flat lining GDP and productivity), increased competition (Europe, US and others doing manufacturing and now financial services and insurance better), lost market share (no unfettered access to EU and EFTA), over leverage (unfunded commitments, and levels of both private and public debts), workforce issues (fewer youngsters joining the employment pool, more early retirements, rise of the precaritariat, loss of EU workers, and decline of decent secure jobs with long term training and career development) and issues with plant and equipment (rail infrastructure and health services falling apart, natural environment being ruined). It’s no wonder that the shareholders, staff and customers alike are fed up with UK plc and wondering if the management know what they’re doing, or even what the problems are?

  • 38 TheFIJourney June 5, 2023, 8:46 am

    Hey TI, thanks for the article.

    I myself am currently just about in the 20% bracket but I will be lucky to transition to 40% from next May after I go to the top of my banding.

    I feel like I have a fairly good salary for my location and sector, I could get more money from the private sector but I love the benefits, pension and more easy going public sector myself so I’ll happily take the annual cut.


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