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Weekend reading: Is cash kaput post-Covid-19?

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What caught my eye this week.

I have mentioned before my group of friends on an email list who’ve been debating Covid-19 since January.

Well, this same group of friends was previously preoccupied by arguing the future of cash.

I think cash use is doomed to dwindle in the West, probably fast. Most of them think that would be terrible.

Now it seems the streams are crossing. It’s becoming clear from the data that cash use has crashed in the Covid-19 era and the knock-on lockdown.

You can’t touch this

I have shares in a bunch of listed and unlisted fintechs and payment companies that have seen their prospects skyrocket since physically touching anything except a bar of soap became oh so 2019.

Some are seeing higher volumes, such as the automated savings app Chip.

Others are taking a short-term hit to their ‘take’ because overall spending is down – but they are seeing more users turn to their products, which bodes very well for the future. Square and Visa are examples here.

The trend is their friend. Just this week I received another press release suggesting UK consumers are increasingly shunning cash.

The release – from a technology and branding company called Toluna – states:

  • The use of ATMs has reduced by 36% during the pandemic, mostly because of people not being out and about much but also the [perceived] higher transmission risk of the virus when handling cash.
  • Online banking or use of mobile apps and payment methods has increased by 33%.
  • Phone banking is down by 5%.
  • Those visiting their bank in person is also a lot less now than it was before the pandemic, with branch banking experiencing a 34% decrease.

Rather like the feasibility of working from home seems to have astonished half of UK PLC, the infrastructure for the cashless society was already pretty much in place before many people decided to finally try it.

Fintech to the rescue

I agree with my friends that some marginalized – particularly elderly – communities may not be super-comfortable using the latest fintech app to monitor their finances, or to wave their mobile phone to buy a pint of milk.

But where I disagree is the claim that this is an insurmountable problem.

A determined effort by the government and the private sector could create some kind of universal digital option for those still living pre-2005.

Just a State-issued contactless card and monthly paper statements in the post would do in a pinch.

But of course I’d rather everyone got more ambitious. Because where I really disagree with my friends is when they claim that ditching cash is disempowering from a budgeting perspective.

The power of apps like Money Dashboard1 leaves counting out coins from a jam jar in the dust.

Indeed even the most humdrum mobile bank accounts are beginning to boast features that were the cutting-edge from whizzy start-ups in East London just a few years ago.

Three valid fears

I do agree with my chums in three respects, however.

Firstly, the cashless digital society is in need of a back-up plan when, metaphorically, the battery runs out.

This could be because I forgot to charge my phone or because a financial service provider is hacked, crashed, or forgot to charge its phones (/servers).

I can think of various ways around this – solutions using biometrics, cryptocurrencies, and short-term (invisible?) peer-to-peer lending.

But until they exist, the case for keeping a wodge of tenners as an option is strong.

Secondly, digital payments are far more friction-free. And it’s true this could encourage more thoughtless spending. However that’s nothing new. We’ve had credit cards for decades. As I say, at least with digital payments you have the potential to build in all kinds of automated checks and balances that you can’t do with dumb cash.

Finally, to lose the cash option is definitely to lose some privacy.

Perhaps that will be the edge case that finally leads to a Bitcoin usage explosion? Not for buying illicit drugs on an Internet backwater, but for paying for more humdrum items that you’d still rather a spouse or the government didn’t see.


I’ve come around to the view that Covid-19 is going to change more than seemed likely six months ago.

Encouraging the demise of cash is near the top of that list, I reckon.

From Monevator

Our updated guide to help you find the best broker – Monevator

From the archive-ator: Nine underrated tools to help you achieve Financial Independence – 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!2

The true scale of London’s economic meltdown – capital faces crisis not seen for generations – ES

Stamp duty cut prompts surge of interest in London commuter belt – Guardian

Chancellor threatens tax raid under guise of a capital gains tax ‘review’ – ThisIsMoney

NS&I net financing target raised from £6bn to a whopping £35bn – NS&I

Trading in misery: beware bedroom Forex traders boasting millionaire lifestyles… – ThisIsMoney

Judging by restaurant traffic, the US is still in a partial de facto lockdown – Calculated Risk

Robert De Niro is broke because of coronavirus, might only make $6m this year – Yahoo

Re-examining diversification: Best/worst performers over four-year rolling periods – Arcadian [h/t AR]

Products and services

Monzo launches a new version of Monzo Plus that pays interest – Which?

Fee war hits its limit with the demise of a [US] ETF that paid you to invest – Yahoo Finance

Want to avoid investing in fossil fuels? Check out the iShares MSCI World SRI Fund – DIY Investor

Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade

Zoom mortgages, rates fixed for 30 years, and virtual viewings: the future of homebuying – ThisIsMoney

City flats with outside space for sale [Gallery]Guardian

Comment and opinion

What do World War 2 planes and investment funds have in common? – Bunker Riley

Buy-to-let: It’s not 1994 anymore – Finumus

It took decades – Humble Dollar

Caught in the rain – The Belle Curve

How much should you save? – Fire V London

Merryn Somerset-Webb: Capital gains tax is a ‘stealth wealth tax’ [Search result]FT

The 60/40 portfolio’s returns over the long run [US but relevant]Two Centuries Investments

Seven valuable non-financial assets in retirement – Advance Capital Advisor

Why working from home will not become the new normal – Klement on Investing

The reason equal-weighted index funds have tended to deliver better returns – Morningstar

Wealth inequality and lottery ticket stocks – A Wealth of Common Sense

How a single mum feeds her family-of-three for £9.90 a week each – The Sun

Heads I win [Maths!]Albert Bridge Capital

Gold trading mini-special

“The day I was asked to buy and sell gold”Financial Ducks In A Row

Gold record in sight as ETF inflows skyrocket – ETF.com

Gold timers have rarely been more bullish than they are today, and that’s bearish – MarketWatch

Naughty corner: Active antics

Letting go of investment decisions – Worth

Hedge fund titans grab lion’s share of the industry’s spoils [Search result]FT

Big tech drives the stock market without much US help – Yahoo Finance

You don’t see the whole picture – Party at the Moontower

Covid-19 corner

Hancock orders review of discrepancies in Covid-19 death figures – Guardian

New data on T cells and the coronavirus – Derek Lowe

US shatters coronavirus record with over 77,000 cases in one day – Reuters

New cafe restrictions in Sydney Australia as Melbourne cases spike – Bloomberg via MSN

Stanford doctor: Coronavirus fatality rate for people under 45 ‘almost 0%’… – Washington Examiner

… pre-print from same doctor finds median IFR of 0.24-0.27% using seroprevalence data – medRxiv

There’s apparently a boom in American urbanites buying farmsteads to escape Covid-19 – Modern Farmer

We’re stuck in a lockdown ‘work from home’ purgatory – Wired

Kindle book bargains

The Hidden Life of Trees by Peter Wohlleben – £0.99 on Kindle

The Economics Book: Big Ideas Simply Explained by Niall Kishtainy- £1.99 on Kindle

Alchemy: The Surprising Power of Ideas That Don’t Make Sense by Rory Sutherland – £0.99 on Kindle

When Genius Failed: The Rise and Fall of Long Term Capital Management by Roger Lowenstein – £0.99 on Kindle

Off our beat

“I’ve seen a future without cars and it’s amazing” [Includes cool graphics]New York Times

Four ways to break up the monotony of your workweek – Fast Company

Asia’s ecosystems were buckling before Covid-19. The future has to be different – CNN

Fifteen ways to be happy – Humble Dollar

How we met: ‘It’s 1,300 miles to Romania – the same as the number of pounds my phone bill was’Guardian

Undoing the toxic myth of exclusion and scarcity – Seth Godin

And finally…

“Lost Time is never found again.”
Benjamin Franklin, Poor Richard’s Almanac

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  1. Affiliate link, sort of. If you register I get ten free ‘member shares’ worth about 60p at the last count. []
  2. Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. []
{ 88 comments… add one }
  • 1 Rosario July 17, 2020, 5:14 pm

    I agree that its looking like COVID has given society a big push in a few directions we were already heading, working for home / more flexibly being one and cash the other. I agree its likely that we’ll be cashless sooner rather than later. I can certainly see why a government would encourage this, if nothing else than for traceability when it comes to criminal activities and tax evasion. Although I’m all for resolving those particular issues I can see why some degree of privacy is desirable.

    Like you I don’t agree that ditching cash is disempowering from a budgeting perspective. By its nature cash is less traceable and therefore records in the form of statements must provide more potential for tracking and forecasting spending than cash where the best we can hope for is a receipt?
    Knowledge is power as they say… but I do think we need to be careful where that knowledge resides and whom has access to it.

  • 2 Grand July 17, 2020, 5:14 pm

    Thanks for the round up TI,

    What’s interesting to note on the cashless front, the UK has always seen to be ahead of much of continental Europe and the USA, but behind Asia in this regard – perhaps because of lot’s of competition and a smaller network/less fragemented system.

    Maybe you could do a piece on this – as it’s definitely going to continue to grow.

    Thanks for the links.

  • 3 Matthew July 17, 2020, 5:23 pm

    I was wondering if people would agree that when gov bonds go into negative yield they lose some interest rate sensitivity – since by that point theyre clearly being bought for safe storage and are not trying to compete with cash rates – therefore may be less affected by base rate changes?

    If so should be good to decrease the risk from duration

    As for the end of cash, I’m not sure, I think having a physical form makes it seem real and therefore builds confidence in the currency, avoiding hyperinflation that might happen if it seems like money is not a real thing

  • 4 Kraggash July 17, 2020, 7:01 pm

    “…. if it seems like money is not a real thing”
    I think that bird has flown…

  • 5 ermine July 17, 2020, 7:25 pm

    > solutions using biometrics, cryptocurrencies, and short-term (invisible?) peer-to-peer lending.

    Yikes. We are travelling a long way towards the panopticon here. Gold was a store of value and medium of interchange because of what it was – the ultimate bearer instrument. Banknotes and cash are also bearer instruments. Anything using biometrics is not a bearer instrument, and while cryptocurrencies are bearer instruments, they have a shocking volatility which makes them a tough medium of interchange and a dire store of value.

    In a world of increasing surveillance the anonymity of cash has its attractions, for the small everyday transactions. A blockchain alternative denominated in GBP would be a tolerable alternative. I don’t want an ongoing relationship with a place I bought coffee from, or for them to track and profile me like has happened on the Web. Everyday purchases shouldn’t leave a data trail without good reason.

    What I want of a cash replacement is bearer instruments, and surveillance-free. Enough to store about three months food and bills, in case you get into a fight with anti-money-laundering goons, because there seems to be no equivalent of habeas corpus or the presumption of innocence. I don’t even mind a limit of say 10k on what you can hold in that format, I take the argument that large amounts of anonymous money facilitates criminal activity, but everyone needs to eat while they sort out the trigger happy fintech’s AML shutdowns.

  • 6 Vanguardfan July 17, 2020, 7:44 pm

    Well I’m still carrying round the wadge of cash I got out in the middle of March…I guess I have gone cashless, inadvertently.
    My spending is up though…

  • 7 Vanguardfan July 17, 2020, 7:46 pm

    I’m surprised though that ATM use is only down by a third…who has still been able to spend cash in the last three months? (Aside from dodgy dealings…)

  • 8 Vanguardfan July 17, 2020, 7:49 pm

    Btw does the raising of the NS&I financing target mean they have to attract more savings? So perhaps better rates? Or have I got that wrong…

  • 9 Seeking Fire July 17, 2020, 7:59 pm

    I’ve been thinking something similar as I am sure others have. I have a number of friends who run tourist type attractions in UK seaside towns from whom I am sure over the decades cash has been a attractive way to avoid the tax office. ‘cash in hand’ would of course disappear, which would been again attractive to the tax office to be replaced by bitcoin?. It would also help with negative rates given the inability to hide cash under the mattress. There are a whole heap of reasons why a govt will like it.

    I hope that the govt legislates that cash can continue to be used in all shops as a medium of payment. For one, call me paranoid, but I like the idea if needed, I can transact without being tracked (minor – have no anticipated need), Secondly as you say, if the ‘system’ goes down what then? For that reason I have always kept a couple of months spending in physical cash somewhere (again probably paranoid but who knows).

    Nice links – back to the city on monday – 5 days a week – expect rest of office to return in September. I concur that people where I work do not appear to want to be unlocked. I pass no judgment on what is right or wrong here! If it’s working from home, I see the attraction.

    Wore masks recently – can’t help but feel it will hurt physical retail further.

    Fair play to the lady who feeds a children for a tenner a week – we shop exclusively at the discounters for a family of four and still get through circa a £100 a week but we eat a lot better than that – I guess needs must.

    I’ve got a brit expat friend whose just got a 25 year fixed at 1.35% 100% LTV for a property in France……

    I note Personal Assets Trust have around 33% in US TIPS with a view that inflation risk is rising – note I see no signs of inflation yet but anyone who doesn’t believe that currency debasement is a real possibility has stronger convictions than I. They also bought VISA per the article (see latest annual report).

    Matthew – mmmm no I don’t agree with your comment, both the duration of negative bonds nor the building confidence in the currency.

    I would think with this and Brexit….UK has some tail risks on the horizon no? Global equities, US TIPS and Gold seem good diversifiers for those tail risks.

    I don’t see the argument really for tax rises – with negative YTM for 5 year gilts and circa 50 bps for 30 year gilts it seems more effective to run up debt than dampen the economy further….not to say that’s a solution that won’t have future consequences.

  • 10 Matthew July 17, 2020, 8:11 pm

    Maybe the raising of the ns&i threshold was more of an excuse to not cut its rates, bearing in mind its not the governments cheapest way to borrow

  • 11 AnAdmirer July 17, 2020, 8:37 pm

    Surely the real purpose of most of these digital payment options (like most things Internet these days) is to collect your spending information? (Money Dashboard is at least candid about this).

    And it allows unprecedented levels of analytics and insight into people’s behaviours – your behaviour, actually. Many of these companies (e.g. Google Pay) are all about fighting to get their hands on your spending data.

    It’s obviously already been going on some time, but I still can’t see what the real upside is for me in using a lot of these new shiney apps and “conveniences” – although I’m a weirdo and obviously most people are very happy to give up all their data to make life marginally smoother than it was before.

    Governments obvious hate cash because there’s a whole untaxable sub-economy so they’ll sponsor these companies any which way they can.

  • 12 Matthew July 17, 2020, 8:54 pm

    @seekingfire – well I was thinking once in negative teritory normal savers who have cash as an option start to drop out of bonds as many of us have (admitedly not rebalancers so much but the buy&holders in equities) – so what you have left buying these bonds is more institutional, for because they dont have fscs protection – you have a different customer profile, and these institutions would buy these negative yielding bonds nomatter what, because they have to, they wont dump them for cash just because the rates go up

    As for physical currency giving confidence I’m thinking of the average person who’s concept of the value of a tenner or £20 is from holding a note – we use cash to teach children about money – numbers on a screen might as well be in standard form as far as we’re concerned, some people would find it harder to compare value without physical cash – ie people spend more with cards and contactless than they would with cash which must have an inflationary effect

  • 13 Tyro July 17, 2020, 10:30 pm

    Re Matthew’s second paragraph, this is something that bothers me: how do we teach young children about money, once it’s entirely abstract? It’s hard enough as it is. When I was a child virtually everything was transacted in cash, and opportunities for children to have to first earn, and then spend or save, cash, in small ways, were a normal part of everyday life – all the way from weekly pocket money being contingent on carrying out small household tasks, to ‘bob-a-job’-type initiatives, to Saturday jobs. So we grasped a lot of the basic underlying concepts around exchange and value, as well as arithmetic and accounting, in a very direct, immediate, and tangible way, I do worry a little that once it’s all digital, and detached temporally and spatially from effort, it will all just seem like some sort of video game ….

  • 14 The Investor July 17, 2020, 11:31 pm

    @Matthew @Tyro — There’s a neat (if you like this direction of travel…) Fintech called Go Henry that provides cards for children.

    You can set weekly payments onto your kid’s personalized card (which acts like a spending card with a finite balance of whatever has been so loaded onto it) and you can link such payments to chores or other triggers being completed if you like. Grandparents etc can pay onto their card too. And the kid can see all their ‘cash’, manage it, see what they spent their money on in the past, etc.

    As I say, to my mind the intangible argument against is surmountable… 🙂

  • 15 ZXSpectrum48k July 17, 2020, 11:53 pm

    @Tyro. Children easily cope. Plus it is a video game. Example: my children (primary age) play an Ipad game where they execute tasks. In return for completing tasks, they are credited with “candles”. Candles allow them to buy virtual items for their avatars such as capes, hats, hair styles, musical instruments etc. They quickly learn how to ‘farm’ candles more efficiently. How to wait for a better exchange rate on items (a sale). Not to waste candles on virtual trinkets but to save up candles for a period to buy an item that will allow them to earn candles even more quickly.

    They also learn what the exchange rate is between GBP and those virtual candles when they need to make a large game purchase. They then need to take money from their Piggy Bank or make a withdrawal from their accounts at the Bank of Daddy (BoD). The’ve been depositing birthday and Xmas money at the BoD for a few years (only coins go to the Piggy Bank). The’ve learnt their money at the BoD magically increases in value through something called ‘interest’. They don’t totally understand the math but they like ‘compounding’. So when they make a withdrawal they now dither over whether the purchase is really worth them losing that interest. Opportunity cost has arrived.

    In what way is this different from the real world? To be honest, the real world is so over-rated.

    P.S. To make them hand over the money to the BoD did require an interest rate that would make an emerging market bank in a currency crisis blush but that’s a minor detail (and recently solved by some really aggressive policy easing).

  • 16 Susan July 18, 2020, 1:02 am

    Having lived through the Christchurch earthquakes where power was out for a few days in some areas, and internet etc scratchy at times, my handbag was lost in a building and my phone with it, only having the wallet I had taken to buy lunch at the time of the earthquake I found having 30 cash in my wallet handy for those first few days. I could at least buy a sim from the corner dairy to put in an old phone I had, and some milk, tea and chocolate. I will always carry a small bit of cash. Also I carry hand sanitiser. A little dirty cash needn’t be scary!

  • 17 The Borderer July 18, 2020, 2:03 am

    @TI “…all kinds of automated checks and balances that you can’t do with dumb cash.”

    er.. the automatic check and balance with dumb cash is that when you have no more, you can’t spend any more.
    And something seems to be missed in the argument so far. Let’s say we have a totally cashless society – all money is digital.
    I have my notional ‘cash’ in a savings account. Due to government the savings rate drops to -2%! I can’t withdraw it and put it under my mattress. So what to do? Spend it of course. Think where this might lead?

    Once upon a time an English banknote stated “I promise to pay the bearer (of this piece of paper), on demand, the sum of £x – and it meant £x of gold. Then, with the advent of fiat currency, it went to “I promise to pay the bearer (of this piece of paper) with this piece of paper.

    Now what?

  • 18 JimJim July 18, 2020, 7:39 am

    The traceability of transactions is the big draw for government, and , if you do not intend to do anything dodgy like pay a builder in readies, buy illicit substances from a bloke down the boozer or bribe your local councillor then what is your objection. Who gets the data is another matter, and the option of a state issued contactless card is, as had been said, an option that would limit data collection at the spend end, legislation could be used to enforce anonymised data collection or opt out at the till end. One of the big things I find bemusing is the price to the retailer of card services. The small shops pay up to 3% plus a monthly service fee! A huge spread to cash which is printed by a state owned mint. Yes there are costs associated with cash I admit, especially large amounts of it, but these again are skewed in favour of the large retailers. To the point. If U.K. PLC wanted to go cashless, the first step would have been when we had leverage over the banks back in 2008 to level the playing field up and make electronic transactions more equitable for everyone, large or small, even if this was subsidised to the extent of the savings of minting money or more, the government would still be quids in on the tax take.
    The big hurdle to totally ditching cash is the power cut, the data cut or the potential of a total hack setting you back to zero or below. Solve these with a FinTec and we are on the way. (which I would welcome BTW)

  • 19 Juan July 18, 2020, 7:49 am

    I work for a fintech and the transition to cashless terrifies me. The more “innovation” we create, the less I want my personal data anywhere near it.

    Ermine’s analysis is spot on. Traditional banks may be stodgy and slow moving and that’s a good thing. The slower you move the less goes wrong. Move fast and break things is not a desirable MO when you’re managing someone’s ability to buy food.

  • 20 Xenobyte July 18, 2020, 8:01 am

    I’m still using cash despite the lock-down. The notes I receive from the bank ATM are crisp and clean – the only other person to touch them was the member of staff loading the machine (so the bank tells me). Contactless has proved a big let-down. The only time I need it is in Tescos and I still have to type a PIN into a filthy fomite as the amount is too high.

    I have always found cash superior for instant budgeting at home and when travelling purely because the physical act of handing over cash (and receiving a tiny amount of change) is a reminder of the expense of what I am buying. From the early days, one of the big selling points for card companies was the ‘pain-free’ purchasing process for the consumer which encouraged more spending (and more revenue).

    A cashless biometric solution (urgh!) has the same short coming as the biometric ID card. Good for large company/govt interaction, useless for personal interaction. For both the liberty implications are highly unethical.

    Electronic payment has its place but its only part of the solution.

  • 21 Matthew July 18, 2020, 8:02 am

    @TI – the tooth fairy now makes BACS payments 😉 (tooth fairy payouts actually correlate to the s&p btw)

    By and large yes you can have a pocket money app although there is an age for children where seeing and touching something physical is easier to comprehend, that said its not necessarily a good thing to give financial education to the unwashed masses because we rely on their continued consumption, and savings rates are too high anyway

  • 22 Ecomiser July 18, 2020, 9:07 am

    I am treasurer of a small club, and of a local community organisation which organises a summer carnival and xmas fayre, and am a regular customer (pre-covid) of another volunteer organisation which provides hot lunches on Fridays. All of these are cash only for customer/member transactions. To change this would involve getting a card reader and paying a bank or fintech transaction charges. Immediate ongoing cost!
    Also I spend all day at the carnival taking cash and issuing tokens for the rides. Total chaos. Doing that with a contactless card reader would be slower, as I’d have to be setting the amount, and seeing that the transaction went through before issuing the tokens.
    Contactless is great for many things, but comes at a literal cost for small organisations.

  • 23 David July 18, 2020, 10:08 am

    We’ve sold a lot of smallish value products at events like community fairs. We decided to get a card reader as we didn’t want to miss out on potential sales if somebody didn’t have enough cash with them. The reader only cost around £30 from memory, and the transaction charges are something like 2.5% (and no fixed per transaction cost). We get the money in a few days.

    I’ve been very surprised that almost every customer opts to pay by card and we have very few cash transactions at all. This applies to customers young and old. I don’t really agree that the 2.5% is a particularly significant cost when you consider the time and effort (and risk) involved in counting the money and paying it into the bank, who also take a cut anyway. And taking a contactless payment takes no longer than with cash. It makes me wonder why so many small independent food shops still insist on minimum card spends of £5-£10 when such a simple solution is available.

    So I can see how cash could easily disappear from almost every kind of everyday transaction. But ‘almost’ is the key word here – other commenters have already mentioned advantages of cash like avoiding tax and paying for illegal goods and services. The government won’t win the war on drugs by banning cash! And there’s a lot of cash-in-hand work that just wouldn’t be profitable if it had to go through accountants and tax returns, making it subject to income tax, national insurance, VAT and so on. Under the radar maintenance and gardening businesses and car boot sales spring to mind. All very well to say they should be paying their taxes, but maybe the tax and admin bar has been set too high on small time entrepreneurs in the first place.

  • 24 Gentleman's Family Fianced July 18, 2020, 10:21 am

    Talking to a bus driver recently; backing the depot at the end of a shift young bus driver was cleaning out the bus for lost property.
    He found a two pound coin and deliberately through it in the bin.
    My friend who saw this practically jumped in the bin to retrieve it thinking money is money.
    He asked the young guy why he threw it away and he said that he doesn’t use cash so it was useless.
    I couldn’t believe that someone would throw away £2 because I am the sort of person who picks up pennies but maybe I’m just not millennial enough.

  • 25 Griff July 18, 2020, 10:35 am

    Fomite and panopticon now there’s two words I will try to remember. (interesting youtube video on the latter. As an aside, have any of you received transfer value quotes for final salary pensions lately. The wife’s most recent one is up about 30 percent in two years. It’s on a multiple of about 42 and I am tempted but wondering if its worth the stress. Watching mine is bad enough.

  • 26 Boltt July 18, 2020, 11:23 am


    My last CETV gave a multiple of 32x the current/2019 deferred Annual pension.

    I used to think at 40x I would take the cash, but more recently I’ve been preferring the certainty and low hassle that an index linked pension would bring.

    A 50% transfer would probably be appealing (help repay the IO mortgage) but not many schemes allow them without a divorce!

    Having just got my ratesetter funds back I’ve no idea what to buy with the funds – let alone with an amount 5x the size. Good luck.


  • 27 Ecomiser July 18, 2020, 11:27 am

    @David. For my situation, I can’t see how using a card reader could not be slower than exchanging a pound coin for a token, or a £2 coin for 2 tokens etc.; the bank doesn’t charge for accepting cash; and I don’t charge for counting the cash and taking it to the bank – I’m retired so I have plenty of free time.
    And for the member’s group, a lot of the money doesn’t go near a bank, member’s subs are used for cash purchases.

  • 28 Matthew July 18, 2020, 11:38 am

    I could imagine getting the cash out the atm and getting change does take longer for the customer before the purchase (time that could be spent shopping!), as does counting up a till at the end of a day for a shop requiring some manpower, as does getting change fir the tills, and to actually have a physical till is bulky infrastructure in itself

    Have heard that some homeless have QR codes on tags around their neck so you can just scan to donate, but as to how you give an account to someone who doesnt have an address is another issue, since your address is one of the few things that substantiates your identity (give the homeless letterboxes at least!)

  • 29 DavidV July 18, 2020, 11:47 am

    I’m the Neighbourhood Watch coordinator for my road. Each January I go round the 57 houses on my patch to collect the annual membership subscription, which is the princely sum of £1 (mainly to cover the printing of a newsletter). More and more I have been confronted by the response that they don’t have any cash at the moment. Even ensuring that I always have sufficient change to accept a note doesn’t make much difference. What’s the future for tiny transactions such as these?

  • 30 JimJim July 18, 2020, 12:47 pm
  • 31 David July 18, 2020, 12:51 pm

    With a card machine like the one I mentioned your problem would be solved. Mine also lets you email an online payment link so you don’t even need to call round. PayPal offers the same service I think. You might need to raise your membership fee by a few pence to cover the bank charges.

  • 32 Balfy July 18, 2020, 12:59 pm

    Judging by recent reviews of MoneyDashboard and problems with their new app I think I will continue to stick to manual methods of logging expenses and savings.



  • 33 DavidV July 18, 2020, 1:20 pm

    @David (31) Providing a £30 card reader to each of several dozen street coordinators seems like a large overhead for a parish Neighbourhood Watch. Most coordinators’ patches are smaller than mine. Bank transfers have already been mooted and PayPal is a possibility. The main problem is getting people actually to do the transfer for such an entirely trivial voluntary payment. There’s nothing like being a familiar face standing on someone’s doorstep to collect the money (providing they do have the cash in the house).

  • 34 ZXSpectrum48k July 18, 2020, 2:26 pm

    I’m not as convinced that COVID is quite the dramatic accelerant for digital currency usage or working from home (wfh) that some want to make it out to be. What’s clear is that an event like this creates hysteresis. Some will never mean revert back to the prior behaviour. But (assuming we get some sort of vaccine or therapeutic) then I think we’ll see substantial mean reversion back to the prior position on both. I think the trend for both is clear, just not that COVID per se is a game changer.

    Where I’m also less convinced is that FinTech is really coming to the rescue. To be fair, FinTech is an umbrella including too many different types of company. There does seem to be clear value in managing transactional flow and that is where they clearly could add value. The issue is that I want my finance providers to be stable, to have “fortress balance” sheets. I don’t want to take substantial counterparty risk or operational risk to some small fintech. You only have to look at the disaster that is P2P to see how fintech can go wrong: low quality tech, lousy financial risk management, terrible operational controls, substantial platform risk etc. FinTech needs to be a bit more boring or it’s needs to partner will older, more stable finance providers.

  • 35 old_eyes July 18, 2020, 2:41 pm

    I think the pandemic has accelerated a number of trends already evident. Working from home and online, online shopping and cashless buying. I don’t see us going back to the way it was before. Many people who were reluctant for one reason or another have been forced to try these new-fangled ideas and found that they work pretty well.

    For example, a recent BMA survey said 90% of GP’s wanted to continue with online consultations after coronavirus. That was not the collective view a short time ago.

    Other changes, like more provision for cycling and pedestrians, require infrastructure as well as habit shifts and may or may not be permanent.

    On the demise of cash, I can see arguments on both sides. Personally, I have used less and less cash in recent times, and with the lockdown I have got over the embarrassment of presenting a card to buy a newspaper.

    Clearly, there are risks in creating a further digital divide and making it difficult for some groups to participate fully, but I think some of the concerns are overblown.

    Cash is an abstract concept, just as much as credit. It is just that for many people it is a more familiar abstract concept. So when you are teaching a child about money, you soon realise that its ‘reality’ is rooted in your own models of the world.

    I remember as a small child taking a shilling to a sweet-shop, under the watchful eye of my mother, buying a 2d sherbet (or it may have been liquorice bootlaces) and being delighted that in exchange for this small silver and prettily carved token, I got not only my sweets but ten big heavy bronze coloured disks. Slightly less prettily carved, but a much bigger quantity and weight. Obviously I had a much more money than when I started.

    I went through the same experience with my own kids (smaller coins, but the same principle). Your change is often clearly much more than you offered in payment.

    You have to understand a whole bunch of mathematical concepts to be able to use cash or credit, and once you get that money is just numbers, I don’t think it makes much difference whether the numbers are expressed on a phone, a card or in physical tokens.

    I have a bit more sympathy with the panopticon argument, but I think if we live in the modern world we have already lost that battle.

    The people who want to know stuff about me have plenty of sources. My family makes extensive use of online shopping. We live in a rural area with access to a limited range of ‘standard’ shops, and we all have specialised interests (no – the other kind of specialised interests!) that means we have to go to online shops to get what we want. I understand that I am leaving an electronic paper trail, but the choice is accept that or give up my hobbies.

    To find my customers and trade I need an online presence. As a company director my name and address are matters of public record, and I get plenty of cold calls, emails and post that show lots of people know a great deal about me. If I use Skype to avoid a business trip, it is amazing the number of nubile and attractive young women who are anxious to make my immediate acquaintance. If I make an insurance claim of any type (fortunately rare), I can guarantee that I will be bombarded with letters and emails from people who are surprisingly well informed about my affairs and offer to sue this person, or resolve that issue in a way that will be both painless and profitable.

    Yes, making all my transactions electronic creates a bigger data-cloud about me, but the bulk of my financial transactions have been digital for years. There is no prospect of going back to a cash/cheque society and I would not want to.

    Yes, there can be software problems with digital payments, but when the tills at our local Co-Op crashed, there was no way of making any kind of transaction, whether you were waving bundles of notes or your phone.

    @ermine suggests that uniquely cash is a bearer instrument, and that is right. But we do not live most of our financial lives through bearer instruments. The last time I made a substantial cash payment was in 1993. Living in the Netherlands, it was necessary to pay for a three-piece suite cash on delivery (complicated reasons to do with Dutch practice at the time and my only having recently moved there). Boy was that a pain! In value terms, the vast bulk of our economic lives have been leaving a paper trail for a very long time. My very first job in 1972 involved me setting up a bank account, as the old pay packet was already considered dangerously old-fashioned. Given that, I am doubtful that a record of me purchasing a magazine, a sandwich, a newspaper and a ride on the Underground adds much to my digital footprint.

    The one legitimate concern I can see is the actions of a rogue oppressive Government. In the Lin Carter science fiction story The Thief of Thoth, the hero encounters an alien race that has gone totally cashless. Everything is on the Universal Credit Card. So the solution to dealing with criminals is to simply revoke their card, allowing them to starve to death neatly without any significant cost to society.

    Even with the current governments in the USA and UK, I think we are some way from them actually being able to do that.

    Becoming cashless will be difficult and will create disruptions, but nothing different to the introduction of coin-based money, banks, cheques, banknotes, credit cards and modern monetary theory.

  • 36 KW July 18, 2020, 2:57 pm

    “The comfort of cash in a time of coronavirus” in the F.T. last week.

  • 37 Tony July 18, 2020, 3:16 pm

    Thanks for the links. I only ever read the Monevator article itself previously but going forward will pay more attention, and given all the effort you must put in to select them. This was eye opening and useful: Big tech drives the stock market without much US help – Yahoo Finance.

  • 38 Naeclue July 18, 2020, 3:39 pm

    I have been virtually cash free for a few years. The 0.5% cash back I get on my Barclacard is enough for the Scrooge instinct to tilt it that way.

    There are a few areas that we still require cash, at the small scale end. For some reason the tea bar at my sailing club only accepts cash, even though you can pay in the bar and restaurant with a card. Tips at some cafes and restaurants are cash only, but that just requires a cultural change to fix. Amateur run events we go to, choir recitals, quiz nights, fetes, etc. are all cash only and I can see difficulties here.

    However, the technology to eliminate cash is readily available. Cost and reliability is still not quite there yet, but just a matter of time until it is. If card readers cost £1 you could freely hand them out to kids running stalls at school fetes. I see no difficulty in giving cards to kids either. At some point technology will be cheap enough to show a balance on the card itself.

    A 2.5% charge for accepting a payment is already unjustifiably high and again technology will reduce the real costs involved. It is probably just a matter of time before governments, EU Commission, etc. twig this and clamp down.

  • 39 Ruby July 18, 2020, 4:08 pm

    @ ZX Spectrum – I’m not convinced about the work from home movement at all; it sounds alright for a bit but I suspect it’ll wear thin pretty quickly vaccine or no vaccine. As a NED of a service based business, a few, top of head, points come to mind 1) how many people are going to appoint us for the biggest contracts without seeing the whites of a salesman’s eyes? 2) how are we going to recruit and train people? 3) if staff members start saying there is no loss of productivity by them doing their job at home, I’ll at least think about whether someone in Bangalore could do it equally well at 25% of the cost 3) if that isn’t feasible and the job can be UK home based – fine but you’re saving £x per month on travel, lunches, after work drinks and so on, and I want some of it – it’ll depress wages I would guess and that will test employee enthusiasm. They’ll be plenty of other reasons besides. I am concerned though that it will take a good while for the penny to drop and in the meantime our city centres are being decimated and, with that, we lose a great deal of what makes this country what it is.

  • 40 ermine July 18, 2020, 4:33 pm

    > The traceability of transactions is the big draw for government, and , if you do not intend to do anything dodgy like pay a builder in readies, buy illicit substances from a bloke down the boozer or bribe your local councillor then what is your objection.

    I’m always uncomfortable with the “if you don’t intend to do anything dodgy” argument, along the general lines of Franklin’s dim view of surrendering liberty for safety. It’s a slippery slope argument. You should always have to make a positive case for increased surveillance, and ideally have to include a sunset clause. It’s also perfectly possible to create a digital form of cash that is unforgeable (currently) and untraceable, it’s not digitisation per se that I have an issue with.

    I don’t walk around with a blue and white striped bag on my back, I’d just like the fact that I bought a coffee/paper/100 picture pins/drain cleaner/whatever at time xxx in location yyy to end right there, rather than creating yet another data exhaust. The world is going in a more autocratic direction at the moment, and I’d like to throw sand in the wheels of the surveillance economy, both private (fintechs) and public (government).

  • 41 PaulB July 18, 2020, 5:07 pm

    All the comments regarding the move to a cashless society are interesting but let’s get to the important stuff. The argument put forward in the “Heads I win” blog post is flawed. The correct answer is indeed 1/2 or 50%.

    No need to explain the puzzle again as the post covers it. But the mistake is that there are two (not one) girl/girl scenarios, the girl we have seen could be the first or second born, so we have “seen girl/girl” and “girl/ seen girl” in addition to the “boy/seen girl” and “seen girl/boy”. So we have four scenarios in total two of which identify our seen girl’s sibling as a boy and two as a girl. Therefore 1/2 or 50% odds that our seen girl has a brother or sister. I could not let this go. It’s just the way I am.

  • 42 Matthew July 18, 2020, 5:08 pm

    I would think at 2.5% charge there should be competition moving into that, if there isn’t then we have to wonder why

    @naclue – I believe giving tips is wrong and that businesses shouldnt ask for them or accept them, it creates an uncomfortable feeling to the customer that the price is not really the price, it creates uncertainty about what is acceptable to pay, and we pay enough for what we’re getting anyway. Staff get a wage anyway and the businesses get their cut anyway – and those staff are also customers – the shoe will be on the other foot when they come to buy a meal out. The money saved in tips can buy another service elsewhere, benefitting someone else

  • 43 Weenie July 18, 2020, 6:04 pm

    I still use cash – it’s the only form of payment accepted by the window cleaners, the gardener and my hairdresser. When I’m out on the town, I withdraw a set amount so I know what I’m spending and won’t have any nasty surprises from contactless payments – so old school, I know!

    I also pick up coins off the floor/ground – money is money and I’d never throw it away!

  • 44 Berkshire Pat July 18, 2020, 7:13 pm

    I only pick up 20p and above. Time is money! If it takes 10 seconds to spot and pick up a coin, that’s an hourly rate of £(360 x coin value)
    @PaulB – I read the article and thought I’d got my head round it. Now I’m confused and uncertain again 🙁

  • 45 Berkshire Pat July 18, 2020, 7:34 pm

    There is only one way to have a girl-girl family group.
    Likewise a boy-boy.
    If the puzzle stated the younger/older sibling was sitting in the restaurant it would be 50%

  • 46 tom_grlla July 18, 2020, 7:43 pm

    My issues with a cashless society:

    1: As per TI’s. It seems insane to rely on one’s mobile for so many things (e.g. 2-step checks on internet banking) when the battery rarely lasts more than 24 hours, making it easy for it to run out.

    2: Fiat Currencies are based on faith. Leaving the gold standard made some lose their faith. The current money printing seems to be making more people lose their faith (judging by the gold price). I think that it would be hard to have faith in a completely cashless society. More than ever, do you trust a government to keep every promise they make, when they effectively have control of it? Chris Grayling, Minister for Money, anyone?

    3: Again more relevant than ever, it is only in a cashless society that governments can get really busy with negative interest rates as a way of forcing everyone to spend.

    4: IT systems around the world are a joke in their reliability (there’s a feature in this week’s Economist about the problems of coding, legacy systems etc.). How many companies have been hacked? Cash provides optionality.

    Of course I’ve hardly used cash in the past 4 months, but that’s different from wanting to get rid of it entirely.

    I am all for technological progress, but I find there is a tendency for futurists and early-stage tech investors to be somewhat naively optimistic about what tech can and can’t achieve. So much of it doesn’t work as you hope it will – a bit like Markowitz thinking every investor is rational.

    Happy to trade views, change my opinions etc.

  • 47 Passive Pete July 18, 2020, 8:02 pm

    Thanks PaulB, I read that this morning and have been travelling today and it’s been on my mind. I even considered doing the double coin flip as I couldn’t understand why it wasn’t 50% like his friend affirmed.

  • 48 Jonathan July 18, 2020, 8:05 pm

    @PaulB the whole point is that the question is framed such that older or younger sister is irrelevant. Of the 4 possible two-child combinations one (boy-boy) is excluded so the question simply becomes how many of the remaining 3 satisfy the question.

  • 49 Matthew July 18, 2020, 8:11 pm

    On the coin flip surely it should have 2 girl-girl routes and not one since they could be firstborn or 2nd born – therefore should be 4 routes and not 3, therefore 50:50
    (Likewise there would have been 2 boy-boy routes that got eliminated)

  • 50 marked July 18, 2020, 9:23 pm

    I wrote a paper on the cashless society back in 1985 and got an excellent grade with it. At the time I’d recently came back from America where I just didn’t get the idea that you got a discount everywhere by spending money on your Amex opposed to cash. It seemed (and still does) very odd coming from a society of cash is/was king (Britain – time period – yuppieville)

    I really don’t think we’re any nearer to it today than 45 years ago, and because of that I don’t believe it will happen in my lifetime despite all these fintechs. @TI because of your investments in floated and about to be floated fintech do you not think there’s a little cognitive bias going on there? I think the further out from the cities you get the more likely cash is used in transactions. I am doing some work 18 miles outside of Oxford currently – a lovely cosmopolitan city – but 18 miles away is like being in the boonies. And all those boonies add up, so until millennials are pensioners it isn’t going to happen in my opinion.

  • 51 marked July 18, 2020, 9:24 pm

    In resp – 50

    35 years ago – not 45 years ago – ageing myself prematurely there!

  • 52 Richard July 18, 2020, 11:03 pm

    @ermine – I agree, I have never really liked that argument. Knowledge is power. I am sure the local Soviet Leader said the same thing to his people, as he ransacked their houses. You have to be pretty confident the justice system is truly blind, you are innocent until proven guilty and that someone in power hasn’t got a KPI to hit or an axe to grind. Of course, you probably will get off if you have done nothing wrong, but the stress and possible expense could be substantial. My experience when it comes to money is it is guilty until proven innocent, threats of possible penalties/court etc from the get go.

  • 53 e1 July 18, 2020, 11:42 pm

    An easy way to see that the probability is 1/3 is to imagine you gather 10,000 2-children families in a big room. Other than selecting for them having 2-children, the families are randomly selected. You’d expect that a quarter of these families will have two boys, another quarter will have two girls, and the rest (half) will have a boy and a girl.

    If you then ask all of the families with at least one girl to stay, and families without a girl to leave, you would expect around 2,500 boy-boy families to leave. You’re left with 7,500ish families, of which only 2,5oo are girl-girl. So there is a 2,500 / 7,500 = 1/3 chance that a 2-child family with at least one girl, will have 2 girls.

    This leads to a personal favoutrite: the Tuesday Boy problem. Similar set up – a family has two children, one of them is a boy born on a Tuesday. What’s the chances that they have two boys?

    It’s not very intuitive, so the following questions help set you in the right frame of mind:
    1. A 2-child family, one of which is a boy, what are chances that both are boys? (1/3, as established)

    2. A 2-child family, the first born is a boy, what are chances that both are boys?

    3. A 2-child family, one of the children is a boy born on Tuesday 5th February 2019, what are the chances that both children are boys? (no twins, adoption, or other funny business)

    4. A 2-child family, one of the children is a boy born on an even numbered day (2nd, 4th, 6th of the month, etc.). What are the chances that both children are boys? Assume half the days are odd numbered, half are even.

    Also, hello from a long time reader and second time commenter. Many thanks to all of you at Monevator, especially for the weekend reading each week.

  • 54 Tammer July 19, 2020, 9:13 am

    I read a post on the reddit Edinburgh sub-forum and it was from small retailers and restaurants who are really struggling with the cashless lockdown as the charges they pay on card payments mean their costs have rocketed during lockdown. Also, the charges by justeat delivery services (up to 35%) have made things tougher for them to have a viable business.

  • 55 The Borderer July 19, 2020, 9:26 am

    Seeing as were having a mathematical bent this weekend, how about this one set by my maths teacher many years ago. What’s next in the sequence?
    1/4; 1/2; 1; 3; 6; 12; 24; ?
    Hint – It was a lesson that not all sequences follow mathematical laws.

  • 56 raluca July 19, 2020, 9:30 am

    Don’t want to sound all conspiracy-ish over here, but a cashless economy would ensure at least a low level of government repression in western societies.
    In less democratic societies, it would automatically mean that governments could squash any opposition by automatically confiscating any property of the targeted group. Would anyone be able to resist if the government would suddenly decide : “the protestants are all heretics and they have no right to property under our laws”? Would the Hong Kong riots be possible if you knew that the government could seize all your money in a moment? And not only all your money, but also your family’s money?
    The witch hunts in Vaduz(Liechtestein) are a textbook example of how this can be achieved: government need money, government spreads propaganda about a minority or vulnerable people, government decides that different laws apply to those people, government seizes assets.
    This has happened countless times throughout our history. A cashless society would make this so much easier.

  • 57 Richard July 19, 2020, 9:41 am

    I think the recent post office scandel is a good example of the danager of financial data. How many lives ruined because the data said they had been false accounting? Nothing to fear if nothing to hide…..

  • 58 Matthew July 19, 2020, 9:43 am

    If you are saying that
    (1)boy (2) girl
    Is a different outcome to
    (1)girl (2) boy
    Then you’re saying the sequence matters, therefore it would matter whether the girl in question was first or second born – if you took the 2 girl-girl possibilities (and the 2 boy-boy possible routes) and treated them as 1 outcome where sequence does not matter then you are treating it differently than you are with boy-girl or girl-boy, therefore the methodology here is inconsistent

    @borderer – what is a sequence if its not consistent in some ways? Is that not the definition of a sequence?

  • 59 JC July 19, 2020, 9:48 am

    “Imagine that I told you that that couple has two children, and that one of them is a girl. What are the odds that their other child is also a girl?”

    Surely the odds are 0 because “one of them is a girl”.

    If “at least one of them is a girl”, the odds change to 1/2
    If “the older child is a girl”, the odds change again; to 1/3.

    I think!???

  • 60 JimJim July 19, 2020, 9:52 am

    The risk of a rogue government action is ever present, be it purposeful or accidental, it is a small risk as accountability is part of developed democracy. Even without cashless, governments have trimmed 10% off savings in bank accounts in recent history, devaluation of a currency would have a similar effect. Being able to see transactions does not mean that the information will (or should) be used. Checks and balances take time to emerge as not all problems can be foreseen. Look at the data protection laws as an example, they get stronger with time. Cashless is coming. How quick is anyone’s guess, but looking at the younger generation and how they transact, it is all but inevitable. Following the money is the hard part of detecting fraud and tax evasion. simplify this and we may not need, as honest individuals, to bear so much of the tax burden ourselves. Get the black market into a taxable economy and the burden is spread even wider. If government want this to happen it could. But, does it want it to happen?

  • 61 Al Cam July 19, 2020, 10:08 am

    @Griff & @Boltt:
    A question for clarification if I may.
    Do you mean multiple of the deferred annual pension in todays £’s that is payable from your schemes normal retirement age (e.g. 65) or deferred annual pension at some other age/”inflation adjusted £’s” (e.g. payable now in todays £’s)?

  • 62 old_eyes July 19, 2020, 10:23 am

    Fascinating to see the number of people who see a risk of government repression/suppression in a cashless society. I am genuinely puzzled by this. I would ask those posters what percentage of their total economic activity (both in value and in number of transactions) is carried out in cash? For me it was pretty low even before the whole cashless debate happened, due to the inconvenience and fear of handling large amounts of cash.

    Yes, if we are a cash-based society, it makes it a bit harder to impose negative interest rates, or seize assets (you actually have to go round to someone’s house), but that means taking all your financial assets out of the normal banking and finance systems. And doing it well in advance of this coup (otherwise it will be evident you have done it).

    Maybe I am wrong, but I cannot see that going cashless for minor purchases makes me any more vulnerable to these bad actions than I am already.

    I can see there are issues with small traders and the fees charged, but these are all soluble.

  • 63 DavidV July 19, 2020, 10:27 am

    @Borderer (55) My guess to the next number in your sequence is 30. With your hint that it is not a mathematical sequence, I think it is the value in old pence of the coins that used to exist. The next valuable coin is the half-crown – 2s 6d or 30d.

  • 64 Matthew July 19, 2020, 10:54 am

    Offshore banks/ crypto/ physical gold might be regarded as havens if a country started actually siezing accounts but I’d think for most people who keep their heads down they wouldn’t be a target of anything more than tax – if you want to be a dissident outside of locally accepted political channels then just leave to avoid making yourselves a target and live in exile where you’d be happier. I think you’d also see some posturing beforehand about asset siezing, ie corbyn, but even he was restrained to percentages as against what you might see in total siezure (ie nazis or mugabe)

  • 65 David July 19, 2020, 11:01 am

    Here’s another simple way of looking at the boy/girl puzzle and how the trick works.

    In our extended friends and family social bubble we have my two daughters (GG), my neighbour’s elder son with a younger sister (BG), my friend’s elder girl and younger brother (GB), and my cousin’s two boys (BB). There are eight children in total and a statistically normal set of the four possibilities (GG, BG, GB, BB).

    Now it just comes down to how you ask the question:

    1. The article asks: “I told you that a couple has two children, and that one of them is a girl. What are the odds that their other child is also a girl?”
    – The couple could be my partner and me, my neighbours, or my friends (but not my cousin, who has two boys). The only couple where the second child is also a girl is me. One out of the three couples. 1/3 or 33.3% – the surprising answer.

    2. Whereas if the question was: “I pick one of the four girls in the group at random. What are the odds that she has a sister?”
    – Both of my girls have a sister. The other two girls each have a brother. Two out of the four girls. 1/2 or 50% – the intuitive answer.

  • 66 Boltt July 19, 2020, 12:24 pm

    @A1 Cam

    “Do you mean multiple of the deferred annual pension in todays £’s that is payable from your schemes normal retirement age (e.g. 65) or deferred annual pension at some other age/”inflation adjusted £’s” (e.g. payable now in todays £’s)?“

    My deferred pension gets inflated at 5% fixed pa. (very generous!)

    The multiple is based on the pensionable amount earned when I left 15 years ago x 1.05^15. Or equivalently the pension I will get in 10 years time /1.05^10.

    My understanding is the CETV multiples are supposed to be Based on the today’s money value of the pension amount that will be paid at retirement age.


  • 67 Griff July 19, 2020, 12:42 pm

    Al my wife retires in September, on that date she reaches the normal retirement age for the company pension fund she is in. The multiplication is the transfer value she has been offered divided by what she can expect to receive as a yearly pension come September.

  • 68 Factor July 19, 2020, 12:58 pm

    My younger son and I are long-term season ticket holders at an EFL League Two club. We aim to attend all of the home games during the season, and also those of the away games which are within no more than three hours driving distance from home. The actual number of these away games can occasionally vary, one season as against another, due to promotion and/or relegation but in the more recent seasons has included a club well known for its Green credentials and located in an essentially rural environment.

    Although arriving at the the “Green” club in good time in 2019, we found the club car park already full, and were directed instead by a steward to join the queue at the entrance to large meadow nearby. Reaching the front of the queue, we were confronted by a well-built lady who identified herself as “oim [sic] the farmer’s wife”, and who replied to my query with the response, “Twill be foive [sic] pounds and none of they cards m’dear, tis cash only!” Luckily, I always carry £50 in notes in my wallet “just in case”, which saved the day!

    Returning to the field to collect the car immediately after the game, I counted six rows of cars, each row with about twenty cars in it, generating a tad more than running the same number of sheep on the land for a couple of hours on a Saturday afternoon, although whether HMRC ever got to hear about is another matter 🙂

  • 69 Matthew July 19, 2020, 1:19 pm

    There are 6 possibile configurations, not 4

    1=B 2=B 2=B 1=B
    1=G 2=B 2=B 1=G
    1=G 2=G 2=G 1=G

    If either 1 or 2 is G then you rule out 2 configuations, leaving 4. Of those 4 remaining configuartions;

    1=G 2=B 2=B 1=G
    1=G 2=G 2=G 1=G

    2 if those configurations contain a B
    2/4 =50%

  • 70 Matthew July 19, 2020, 1:26 pm

    Sorry spacing didnt work
    BB BB
    BG GB
    GG GG
    Who is oldest must matter for BB and GG if it matters for BG and GB

  • 71 David July 19, 2020, 2:01 pm

    @Matthew – You can prove this for yourself. Either go away and toss a pair of coins 1,000 times, or to save time enter a formula like this into Excel:
    Put the formula into two adjacent columns, say A and B. Drag it down to row 1000.
    Put this formula into cell C1:
    Drag that down to row 1000 as well.
    Now look at your random combinations of BB/BG/GB/GG etc. in col C.
    You can even sum them up, e.g. with =COUNTIF(C1:C1000,”GG”)
    There will be around 750 results with at least one ‘G’. And out of these around 250 which are ‘GG’. That’s 1/3 like the article says. Same as I explained in comment #65, see also @e1’s explanation in comment #53.
    Now please don’t tell me Excel has been wrongly programmed by somebody who didn’t understand probability as well as you or @PaulB #41!

  • 72 Al Cam July 19, 2020, 2:17 pm

    @Griff & @Boltt:
    Thanks for the info.
    When measuring CETV’s as a multiple of the pension payable (in todays £’s) at normal retirement age (NRA) – all other things being equal (which of course they rarely are) – the multiple normally increases as you approach NRA. This is because, the discount rate applied to the cost to the scheme at NRA often exceeds the rate of pension revaluation. Thus, as far as the scheme in concerned, they should not lose out if you take a CETV at whatever multiple.
    Also, IMO comparing CETV multiples from different schemes at any age other than NRA can be very misleading, notwithstanding the fact that schemes often have different NRA’s as well as other idiosyncrasy’s.
    The only multiple that might be worth comparing is what size/sort of annuity you can buy with the CETV and how does that shape up to the pension you are forfeiting.

    Fixed revaluation of 5% is extremely generous. I trust you have confirmed this by getting the administrators/trustees to provide you with annual quotes/estimates or similar, since you became deferred?
    Also, and I am just being really nosy now, is the indexation of your pension once it comes into payment similarly generous?

    Lastly, I too quite like the idea of a partial transfer.

  • 73 Matthew July 19, 2020, 2:40 pm

    @David – you’re still differentiating between BG and GB Ie whether Albert is born before Winifred without differentiating whether Albert is born before Archibald in BB or whether Winifred is born before Gladys in GG. If you didnt seperate BG from GB you have 3 possibilities that drop down to 2

  • 74 The Hare July 19, 2020, 2:45 pm

    I’ve kept using cash all the way through. Some shops and cafes only accept cash and others I use cash because cash doesn’t mean a card charges hit for the business.

    There needs to be a big debate about the high card machine and card charges that businesses are charged. Big corporations are one thing but when businesses like the little off licence around the corner are charged several hundred a month just to have the machine, with card charges on top, that’s robbery.

    When I was in California last year, a lot of shops went cash only suddenly as their fintech card provider suddenly increased the card charges (Square) and they would have gone out of business if they hadn’t have gone cash only until they found and integrated another provider.

  • 75 Boltt July 19, 2020, 4:10 pm

    @ A1 Cam – No such luck – RPI up to 5% in retirement!

    Interesting i have the option to take the pension between 55 & 62. Taking before 60 costs 3% pa reduction which is great value, BUT the loss of the 5% fixed means it’s not good value (unless inflation is likely to be close to 5% for 5 years). First world problems…

    Agree CETV are not easily compared unless they are similar distances until the pension payable.

    Finally – I wish I had the magic options ZX has to move money between DB pension Pots and ISA! Perhaps there’s a business opportunity for him in retirement, or even better a JV!


  • 76 Griff July 19, 2020, 5:21 pm

    Al, Boltt
    The wife’s increase is RPI or 5% whichever is smallest.

  • 77 Al Cam July 19, 2020, 6:24 pm

    @Griff & @Bolt:
    Both your indexations sound generous to me!

    FWIIW (and that is not a lot, DYOR, etc) I cannot see why you would want to trade either scheme for cash unless you are really worried about the financial security of the scheme. I gather you both stand to lose relatively heavily if your respective scheme transferred to the PPF. You might be able to get a handle on this via what is referred to as the strength of your schemes covenant. Or, am I missing something?

    Also, are you both sure that the indexation of RPI to a max of 5% covers all of the respective pension? I ask as it is not entirely unusual to have different tranches of service within your DB scheme with different indexation rules applying to each tranche.

    Your actuarial reduction (“…before 60”?) looks rather small to me (which is more good news) – but when coupled-up with your fixed revaluation I can see little rational reason why you would want to take it early. Out of interest, what is the actuarial uplift like if you delay beyond NRA – assuming this is possible?

    Also, it seems that is is not entirely unusual for the revaluation and indexation in a DB scheme to operate differently . I have no real idea why this is so; it may be historic, but …..

    The ZX option looks very situational/exceptional to me – IIRC he did explain a bit more about it fairly recently here at Monevator.

  • 78 NewInvestor July 19, 2020, 8:56 pm

    Probability is highly counter-intuitive at times. The above discussion reminds of when a similar problem was demonstrated/explained in the Royal Institution Christmas Lectures in 1997: see https://www.youtube.com/watch?v=JWV6eHNetZ0

  • 79 JediMaf July 19, 2020, 11:54 pm

    Isn’t the problem with card fees that the wrong party pays the fees? That is, it is not the party with the choice of which service to use. If the fees on every transaction were met by an addition to the customer’s statement, I am pretty sure competition would get those fees to a fair value quite quickly, and American Express out of business almost as quickly. As it is, I get 1% cash back on my purchases because the card companies have the shopkeepers over a barrel.

  • 80 JediMaf July 20, 2020, 12:17 am

    @Al Cam
    “Also, it seems that is is not entirely unusual for the revaluation and indexation in a DB scheme to operate differently . I have no real idea why this is so; it may be historic, but …..”

    In the beginning there was little restriction on how a company’s DB scheme worked, and there was no requirement for increases at all. Most companies didn’t care about people that had left their employ, so no increases in deferment was common. However, they might decide to pay an increase to their pensioners (say 3% pa for an example).

    The law changed so that pension earned from 1 January 1985, provided you left service on or after 1 January 1986, had to be increased in deferment (RPI max 5% pa at the time). This was backdated as a requirement on all earned pension if you left on or after 1 January 1991. Then more recently we had the cap dropping to 2.5% for service after 6 April 2009 and also the indexation basis changing to CPI (2011).

    Back in the day some companies (mainly those whose DB schemes were administered by insurance companies) thought administering inflation linked revaluation was too complicated and so just used 5% pa, thinking inflation is generally that or higher anyway. They probably regret that now.

    Statutory increases to pensions in payment came in from 6 April 1997, and lot of schemes changed what increases they paid at that point if they hadn’t already, but only in respect of the pension being earned going forward. The 2.5% cap (at a different date) and CPI law changes have also happened for increases to pensions in payment. But a lot of companies, due to history, pay more that is strictly required.

    There is lots of additional fun with how the statutory revaluation works, particularly when you throw GMP into the mix, but I think I will leave it there.

  • 81 The Borderer July 20, 2020, 2:06 am

    @DavidV (63)
    You got it:-))

  • 82 Al Cam July 20, 2020, 6:37 am

    Thanks for the explanation of the differences between revaluation and indexation rules.
    As it happens, I am familiar with statutory revaluation and the GMP implications’; albeit primarily as seen through the lens of my own scheme.
    I am also acutely aware of the importance, complexity and often great length of scheme(s) rules, which generally reflect the schemes history/evolution.
    IMO schemes/legislation still favours employees & pensioners over ex-employees – just not as much as they used to!
    A question if I may, with regards to statutory indexation (SI), am I correct in concluding that the PPF schemes increases to pensions in payment are less than SI?

  • 83 JediMaf July 20, 2020, 9:44 am

    @Al Cam:
    My understanding increases to PPF compensation, once in payment, is that they are CPI with a max of 2.5% pa on pension accrued on or after 6 April 1997. Yes this less that the statutory minimum that live schemes have to provide, where the cap is 5% in respect of pension accrued between 6 April 1997 and 5 April 2005.

  • 84 Boltt July 20, 2020, 4:49 pm

    @A1 Cam

    The uplift, or actuarial adjustment, for taking the pension at 62 rather than 60 is 15.8%.

    Initially, and without resorting to excel, this seems good value. Until you start thinking about the break even point – it would probably be in my 80’s.

    I/we tend to obsess about rates of return, but a £1 at 60 buys a lot more fun than £1x(1+i)^20 at 80!

    I suppose I could try and replicate the lost early pension with a loan and life insurance – I’ll save that exercise for the winter (or a keen reader).


  • 85 Al Cam July 20, 2020, 6:09 pm


    I guess this means your schemes NRA is 60. Also very nice!

    In due course I would be interested to hear what you decide to do.
    However, in the mean time I would just point out that a lot of our US cousins wax lyrically about delaying social security with increases at 8%PA simple (up to 4 years max) – so very much in the same ballpark. A credible set of worked explanations is available at:
    However, the US income tax system seems to be somewhat less punitive (especially to retirees) than ours. So, depending on the amounts due from your DB, income tax may also have to play into your thinking.
    By way of comparison: from memory, the UK state pension (SP) uplift for delay changed from over 10% PA (with a choice between a favourably taxed lump sum or annual uplift) to around 5.5%PA (with annual uplift only) with the advent of the new SP.

    Lastly, to my eyes at least, your actuarial uplift for delay seems much more normal than your exceptional fixed rate revaluation, indexation rules and actuarial reduction. But, of course, all schemes are/were different in their finer details and we inevitably tend to become anchored to the scheme(s) we are most familiar with.

  • 86 Richard July 21, 2020, 7:05 am

    @old_eyes – for me it is not about cash per se, but about a single person or organisation having a complete financial picture of me. This is what worries me in relation to fin tech or even my SIPP provider that give you ‘handy tools’ to capture the details of your net worth or capture all your spending behaviours. Maybe irrational, but it is the same reason I haven’t done a DNA test. I don’t know what someone can do with that data today or even worse possible future uses. At the moment, in theory, my bank can see how much I spend on credit cards but not the detail of what I spend on etc and no one has this complete picture although I agree the data is largely there. Plus there is not really anyway to avoid it if you want to be part of the modern world.

    Perhaps my biggest fear (again irrational I am sure) is some algo detects something it doesn’t like and I end up like those postmasters. Maybe it is a risk worth paying, but I am not convinced yet.

  • 87 Al Cam July 21, 2020, 7:38 am

    By my “fag packet” calculation if you delay to 62 you will more than break even (in real terms) by the time you reach 74, assuming revaluation=indexation=inflation. In your scenario (assuming I have understood it correctly) it seems likely that revaluation > indexation, so you would probably break even earlier.

  • 88 Emma Vinson August 6, 2020, 3:02 pm

    I think that the question of whether cash is dead or not is also very cultural. In England, especially London, one can pay everything with the credit card, and so many people are using it. Whereas in Germany (still Western Europe), people often pay the equivalent of £70 or more in cash. When one thinks that in China, beggers are using QR codes asking people to make them an online payment! So, even though Corona may have changed temporary people’s behaviour, I think its long-term impact on cash will depend heavily on culture.

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