What caught my eye this week.
The Financial Times has a piece about a Morgan Stanley piece (still with me?) about where we’re at in the three-year old tussle between working from home and returning to the office.
Its most striking graph shows that of the four major economies surveyed, the UK’s employees worked the fewest days at home pre-Covid – and yet now they work at home the most:
They’d do even more if they could, too. (Dark green bar.) It’s such a striking turnaround.
Did UK workers not appreciate how miserable their remorseless schlep to the office was before the pandemic showed them another way?
Did UK employers not trust them?
Or is something else going on in the UK economy as a result of the pandemic that has enabled this transition? (Or is this some artefact of data sampling clashing with local cultural practices?)
My gut says it’s probably in part a London thing, given its dominance. The City is still dead on a Friday.
That’s reinforced by a graph showing how the wealthier the worker, the more days they tend to work from home – and we know more wealthy people work in London.:
Indeed, the lowest income workers are now working fewer days from home. (As if they didn’t have enough to deal with already.)
When we last checked in on this issue in March, big employers seemed resigned to a more remote workforce. This despite a lot of rhetoric about how things had to go back to normal soon.
Yet here in November it does seem like all the hot air urging a five-day commute was exactly that.
At some point politicians and planners will have to do more with this shift than simply use it as an excuse to scrap HS2.
Hurrah! More Monevator members
A quick thanks to everyone who just signed up to our Mavens member subscriptions on the back of The Accumulator’s new decumulation model portfolio.
Sure, the company I talked about last week in Moguls went up more than 30% on Thursday. (Something that won’t happen again in the next five years – so please don’t join up expecting a repeat performance!)
But @TA’s passive mantra is the heart of this site. So I’m thrilled to see so many more of you helping to ensure Monevator’s long-term future – whilst booking a ringside seat on @TA’s new adventure.
Some housekeeping notes for new members:
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We are now about 80% of the way towards the rough target I set for us as a sustainable membership base. (Albeit that’s ignoring inflation, and assuming not everyone signs up for the cheaper Mavens).
So we’re nearly there – but not quite there yet.
Please do consider joining if you’ve not yet done so. You’re in good company these days!
And thanks yet again to everyone who has already become a member.
Have a great weekend!
From Monevator
Introducing our model decumulation portfolio – Monevator [For all members]
From the archive-ator: What are return premiums/factors? – Monevator
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
UK economy flatlines but avoids recession this year – Sky
Housing market past ‘peak pain’ says Savills – Estate Agent Today
Leasehold and rental reform confirmed in King’s Speech… – Mortgage Solutions
…plus other bits and bobs from His Maj that could impact your finances – Which
Regulatory concerns for Hargreaves Lansdown and AJ Bell – Proactive Investors
What cost of living payments are coming and when? – Which
Beware this new WhatsApp recruitment scam – This Is Money
Big hedge funds pay ‘silly’ money, says founder of Europe’s largest manager [Search result] – FT
People in UK are overall less happy than before pandemic – Guardian
Products and services
Nationwide first major lender to offer two-year fix below 5% since Mini Budget – ES
Does Monzo’s new cashback of up to 10% beat rival banks’ rewards? – This Is Money
Aldermore Bank offers easy access on a 5.25% regular savings account – This Is Money
Get £50 free trading credit when you open an account with Interactive Investor. Terms apply – Interactive Investor
As car insurance premiums hit another high, here’s how to save – Which
Bond ladders and target ETFs [US but relevant] – ETF.com
Could doing your washing at night save you money? – Guardian
Open an account with low-cost platform InvestEngine via our link and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
Shopping from China using the popular Temu app – Guardian
Homes for first-time buyers, in pictures – Guardian
Comment and opinion
Not all returns are created equal – Morningstar
UK house prices have suffered a real terms crash from peaks – This Is Money
Why American’s biggest pension fund should just buy ETFs – Meb Faber
Is this bond bear market really worse than the 1970s? [Search result] – FT
How to become a millionaire – A Wealth of Common Sense
Turmoil lies ahead for the pensions lifetime allowance [Search result] – FT
Retirement surprises – Humble Dollar
Average is not the same as median – Klement on Investing
Why you should give more of your money to your heirs earlier – Morningstar
Health and wealth are two sides of the same coin [Podcast] – Humans vs Retirement
Decadence, drawdown, and deceptive sales – Simple Living in Somerset
Bracing for the no-go years – Humble Dollar
Cash mini-special
Five benefits of higher rates on cash – The White Coat Investor
Cash is popular, but be careful when allocating to it – AAII
Isle of Man encourages businesses to get rid of 1p and 2p prices – This Is Money
Naughty corner: Active antics
How to diversify a defensive dividend portfolio – UK Dividend Stocks
11 signs to avoid management meltdowns – Flyover Stocks
2024 Long-Term Capital Market Assumptions [PDF] – JP Morgan
How higher interest rates boost hedge fund returns – CAIA
Investment trusts: a sector under siege [Search result] – FT
Is it finally time to buy US small cap stocks? – Morningstar
Explaining the outperformance of ‘dividend aristocrats’ – Advisor Perspectives
Kindle book bargains
I Will Teach You To Be Rich by Ramit Sethi – £0.99 on Kindle
Poor Charlie’s Almanack by Charles T. Munger – £0.99 on Kindle
The New, New Thing by Michael Lewis – £0.99 on Kindle
The Epic Rise and Fall of WeWork by Reeves Wiedeman – £0.99 on Kindle
Environmental factors
How much climate damage have we already done? – Klement on Investing
Hazel dormice endangered in UK after a 70% decline – Guardian
Australia offers refuge to Pacific nation threatened by rising sea levels – CNBC
Glass buildings kill billions of birds – BioGraphic
Crust-forming algae are replacing corals in tropical seas worldwide – Phys.org
Bizarre echidna thought to be extinct rediscovered in Indonesia – Sky
The good life mini-special
Why adventure is always a good investment – The Root of All
It never gets easier – Of Dollars and Data
The paradox of happiness – The Alchemy of Money
How to avoid death by comfort [Podcast] – Art of Manliness
Five things for your ‘un-retirement’ bucket list – A Teachable Moment
Off our beat
Michael Lewis is still defending Sam Bankman-Fried – Institutional Investor
Tech is going to get much bigger – Not Boring
The AI debate is happening in a cocoon – The Atlantic via MSN
Ray Dalio ran Bridgewater like the global strongmen he admired – Semafor
Justifying optimism [Podcast] – Morgan Housel
Why we can’t quit email even though we hate it – Tim Harford
The Middle East is getting older – Noahpinion
And finally…
“In a thousand parallel universes, what would be true in every single one?”
– Morgan Housel, Same As Ever
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Thanks for the tip re nicknames!
I think our working from home numbers also have something to do with our transport infrastructure. My wife commutes 3 days/week to Oxford along the A40. It’s a nightmarish journey that can take anything between 50 minutes and 2 hours. Public transport isn’t an option, except for the last couple of miles. Clearly her time would be more productively spent working from home.
@Timmo even where there is public transport, commuting can take a big chunk of time.
I live on the South side of London, just inside zone 6, commuting into the City is a 3 hour round trip. It’s very frustrating to be forced to do it and spend the day on Teams calls that I could have done from home. For me, one day a week would work best.
I’ve been full time WFH since Covid and it’s handed me back 3 hours a day. Best thing that ever happened to me, honestly.
I’ve recently changed contract and it’s again, full time WFH – that is a relief.
If I was walked back to the office, I’m in a position to just quit, but it’s not come up yet so no bluff/ultimatums.
Out of the working game now but keep in close touch with 3 children who are still in the fiery furnace
Some thoughts
People were working silly hours pre Covid -emails etc out of working hours from bosses ,60-70 hour weeks -very stressful -employers seemed to be able to get away with this
Covid showed the middle class who could work from home via computers what a good work life balance could be-sadly not an option for many other types of work
Women are perhaps now 50% or more in the work place (I have 2 daughters -a GP and a Prison Governor)-work differently from men-more conscientious and less assertive-not a good position to be in with a tough bosses
Women have often have child responsibilities disproportionately still-probably equality gone as far as it can go until men start bearing children too -life is so unfair!
Working from home helps with this particular burden-women regain control of their personal time
Etc etc
xxd09
Q: ‘In a thousand parallel universes, what would be true in every single one’? A: that there are a thousand parallel universes.
It’s all down to the transport. Just looking at England outside London, for a smallish country for the population size, the public transport infrastructure is terrible and expensive; and, because of housing costs, we have some of the longest average distance commutes. No wonder people don’t want the cost and dead time of commuting. It’s nothing to do with going into or not going into the office. If the office was next door to the house then I’d be jumping for joy to go in every single day. Someone else to pay for the heating, three screens to work from instead of two, face to face contact with colleagues. But it just isn’t like that. 3 hours per day dead time commuting at a cost of thousands per year out of net salary. If there are problems with trains (too often there are) then you arrive already exhausted. It just isn’t efficient for anyone, employer or employee.
“In a thousand parallel universes, what would be true in every single one?”
Conservation of Fretting.
Trying to work out if, as a customer of HL & and AJ Bell (re. the Proactive Investors article), if I need to be concerned. Or if it is a good sign for fees coming down in the near future…
@Algernond: from Proactive Investor piece: “Hargreaves’ premium pricing looks increasingly unjustified versus similar product range, quality and customer service at lower-cost competitors, said analysts”: it sure is unjustified, and a reset is long overdue. Whether this is a cause for HL (& AJB) customers to be concerned rather than pleased in the long term, that I’m much less sure of. It would be really useful if there was analysis out there other than from just a HL & AJB shareholder’s perspective.
@dearime: if they were all genuinely parallel (identical in each and every respect, no matter how small, up to the present moment, and then all running forwards in time entirely separately), then in hundred years I’d expect it more likely than not that human nature would be much the same in every one of the thousand sample.
@All: Klement’s average v median goes to some fundamental truths in investment.
On the eternal “How Much In Bonds?” question,
this is great:
https://www.financialsamurai.com/suggested-stock-allocation-by-bond-yield-for-logical-investors/
@Meany that article does have a few caveats (Samurai is currently a SAHD with high expenses). I’ve definitely pivoted to bonds and am now 80/20 (previously 100/0, so fortunately avoided bondmageddon last year). However half of that is short term Tbills that, if I’m honest are funds waiting for an entry point back into equities. My goal this year is stabilization, not growth and I really should shift into a 10 year time horizon but market timing habits are hard to break.
Regarding the article on dynamically priced electrify tariffs: if you do have the ability to shift your usage to different times of day, it does make a massive difference.
My stats over the last 124 days show that I have saved 36% on the standard tariff. There’s only been two days where I paid more than I would on the standard rates and there was one day I ended up getting paid a few pennies for my usage.
If you’re with Octopus, putting your hand in your pocket for the £1.99 OctopusWatch app is a great investment, giving you a widget that shows you the coming day’s pricing at a glance as well as other analysis.
@GFF (#4):
Re: ” it’s handed me back 3 hours a day…”
Could you say a bit more about this please, for example is this just travel time?
I ask as more than ten years ago I used to do some WFM and noted that I was able to complete a days work in a fraction of the time I needed in the office!
For me, WFH saves 3 hours a day in travelling time alone, not counting how much more I get done because it’s much easier to focus.
Of course there are things that work better face to face, brainstorming round a whiteboard, meeting people at least once .. but one day a week is enough to cover those things.
Regarding WFH and whether my employer actually trusted us (or, perhaps me in particular). I occasionally had special dispensation to skip my 80 mile round trip commute if, for example, I had a doctor’s appointment in the morning and a dentist in the afternoon. I swear though that on these occasions I received three times the usual volume of questions via email. I assumed they were designed to ensure that I was physically attached to my computer for the requisite period. The pandemic changed everything of course. But I soon decided that I’d had enough and retired early(ish) 2.5 years ago.
Frankly, the Tories are only concerned about WFH since it undermines real estate which is the prime concern of their key lobby group. The actual issue shouldn’t be WFH, working from office, or whatever. The only metric should be efficiency.
The UK issue is terrible productivity gains. Take private sector productivity. It’s up just 0.5% since pre-COVID. Worse is public sector productivity. It’s down 5% since pre-COVID. Public sector productivity now has the remarkable statistic that it’s below the level when the series started in 1997. No increase in public sector productivity for over 25 years!
We should not care whether people WFH or not. It is about growth and the key to that is productivity.
I am not sure politicising the productivity argument is helpful
Certainly if we don’t produce goods that other nations will buy -we are all dead!
Business is good-business people pay most of the tax
Classically Tories were the party of business generating money which Labour then spent
Teachers Doctors cost money-but politicians now seem to respond reflexively to who shouts the loudest and are all very similar if not indistinguishable from each other
No easy answers but reality in the form of poorer living conditions for everyone will come up with a probably unpleasant response if the politicians don’t grasp the nettle!
xxd09
@ZX: UK’s low productivity & productivity growth underpins so many other probs: high debt/GDP, 15 yrs’ stagnant median real earnings, etc. Secondary effects create their own issues: populism & magical thinking, divide & rule politics etc. Best guess is we don’t invest enough, we don’t do it efficiently and we then fail to capitalise when we do get good output from R&D (leaving that to the US). We should look to success stories like Ireland and some parts of the US to see if there are any useful lessons.
On commercial property, obviously the Tories have deep financial links to the sector (alongside house builders). With WFH and higher rates its hard to know if the discounts on commercial property ITs are the bargain of the century or the worst kind of value trap. In the last month there has been a mini recovery in the closed end commercial property space with prices generally showing a healthy uptick from 52 week lows. The exception seems to be Ground Rents Income Fund plc, which is currently at a nearly 68% discount and yields 9.2%. The NAV must be badly wrong in light of WFH and a discount like that, but whether that makes ITs like GRIO a steal or an investment ‘dead cat’ I sadly cannot tell.
Happy Diwali wishes everyone. May this Diwali and upcoming Holiday seasons enrich your life, wealth and Happiness.
@Meany, thank you. I’m still capable of being surprised at any article that doesn’t distinguish nominal bonds from index-linked bonds.
Anyway, when shares tumble I will be ready. I’ll increase our equity allocation from 2.5% to something even higher.
Thank you @flyer123. A happy Diwali to you and to one and all. 🙂
@TimeLikeInfinity
I suspect the ground rents income fund is trading at such a discount as a result of higher interest rates, they depress the value of a ground rent source and the prospect of leasehold reform act coming into force and its consequences…
Interesting comments regarding public sector productivity. Simply saying work harder or more efficiently is not an answer. In my field, the NHS, it’s clear that the system is sclerotic and many of its productivity issues are down to external factors.
The available evidence suggests a myriad of contributing, interacting factors in terms of the reduced NHS productivity. Perhaps most important among these is the fact there are fewer hospital beds available for non-COVID-19 patients than pre-pandemic. On top of this, the NHS is finding it increasingly difficult to discharge patients into the community or social care, which further clogs up the system and acts as a drain on staff resources. The NHS now employs greater numbers of hospital staff, but higher rates of sickness due to stress and burn-out mean that a non-trivial portion of these is effectively lost. Higher levels of staffing on paper do not translate in full into higher levels of staffing on the ground. In essence it could mean that a larger workforce is now needed to deliver the same amount of care if staff productivity is hindered by ongoing infection control measures and pandemic-induced fatigue. It is likely that many patients who missed out on care during the pandemic are now presenting with far more complex, difficult-to-treat conditions, and there are signs that general health of the population has deteriorated.
@all — Thanks for the follow-ups and the interesting discussions.
On productivity being the root issue, of course I agree and indeed I almost went with a graph from another FT article, itself quoting new data from the ONS showing productivity in the UK has essentially been flat since IIRC the financial crisis! (That inauspicious date always makes me wonder if there’s some artefact from banking or leverage mixed into the data, but we’re getting a lot of years out now for quirks to unwind themselves…)
Path dependency of human nature is an interesting subject. Would we be at the same point of ‘global consciousness’ absent 3-4 pivotal battles in human history that favoured this or that thinking? I suppose I’m minded to say “yes, I reckon” given how the last few years have played out and the even worse events of recent weeks. It’s hard to unpack where the ‘technology’ of civilisation (including stuff like civil codes) and any evolution in the brain stem over the past 30-50,000 years diverge. But I’m inclined to think most of progress is enshrined in the former, not now embedded in the latter.
So I suppose I think you could look at Earth in a parallel universe and say “wow they really reached a different way of thinking” but you’d really be looking at a different confluence of technologies and events, not any great difference in underlying human nature.
TLDR: As Talking Heads and now Morgan Housel put it: Same as it ever was.
Steve Webb FT LTA article is a good shout. Currently uncrystallized but kinda assumed I’d have to put all pensions into drawdown even if only taking TFLS prior to a Labour budget.
Not sure I should really agonize or hope for anything worth hanging on for as beyond current IHT protection (which I expect to erode in time) I’m not sure there is really that much difference in plonking TFLS in a GIA account and getting taxed on gains when drawn and drawing down taxable income from a DC/SIPP.
Don’t see any speculation anywhere that TFLS cap will ever rise again.
LTA always was a dog’s breakfast/convenient stealth tax that people only spotted when they neared retirement. It’ll be, as he reflects rightly a nightmare to reintroduce.
@BBBobbins does UFPLS have anything to offer you.
Given £1mn, arguably in a SIPP, you could crystallise it all, take £250k TFLS, stuff it in a GIA and eat tax on the GIA. and tax on the 750k drawdown. Or you take successive UFPLS withdrawals, leaving most of your pot to grow still sheltered. If it does grow, do you not get more from the 25% TF parts of UFPLS as you run them down over time, with them having appreciated in real terms as against taking out the 25% tax-free initially, put it into the GIA and then taking the divi and gains from that taxed?
@ermine
Can’t see that UFPLS gets you in a better position unless it’s a quirk of scrapping the LTA. You could only take your UFPLS up to the remaining LTA in the past and I assumed, but haven’t checked that this would be amended to align with the max TF £268k available under drawdown.
The advantage of crystallising a big TFLS under drawdown is that it substantially reduces the pot for any future reintroduction of the LTA as the expense of exposing what you’ve taken to IHT.
Under the old LTA for those not well over it was a viable tactic to take max TFLS and then manage taxable drawdown thereafter to keep under the LTA. Then upon testing at 75 your entire pot would effectively be reunited as far as I could see. The difficulty being still that you were still subject to govt tinkering for up to 20 years.
Ermine, don’t forget the sneaky new £268,275 cap for tax free cash for people who grow their pension significantly over a million.
But, yes I’m pro-UFPLS personally and unlikely to hit that cap issue. Downsizing was the gamechanger for me, previously I was likely to have to use all or most of the tax free lump sum to pay off the mortgage but with that problem gone regular UFPLS payments (maybe even monthly?) seem a pretty tax efficient way to take income.
As for the WFH discussion, it is not just the commuting aspect. The last time I went into our main office I had to go on at least 4 Teams calls with people who were not present.
At a desk, you are either irritating the people around you, or they are irritating you talking.
Eventually I found a small meeting room only to have people peering in trying to commandeer it for themselves when on a Teams call in there. Oh yeah, and the chairs were rubbish compared to the one at home.
And the coffee not as good. And..and..and…
I actually got the least work done of any day in the last 3 years.
Finally, Meany thanks for the link to the How Much In Bonds article. I am praying average gilt yields don’t drop much below 4.5% for the next 2 years as I load up on fixed income. Maybe rates will stay higher for longer, but I fear it will be more like a 6 month window of opportunity.
Here is an article from Tom Stevenson in the Telegraph on why government bonds have become the most attractive investment:
https://www.telegraph.co.uk/business/2023/11/09/government-bonds-have-become-most-attractive-investment/
@Ermine, @Semi-Passive:
Guys, also worth remembering that crystallisation via UFPLS is incremental so all your uncrystallised growth will be subject to LTA tests when it is crystallised; whereas with flexible drawdown the amount drawn down is completely crystallised. Subtle, but could be important for cases near any LTA like limit!
@dearieme, on nominal v indexed bonds, not sure what you’ve picked up.
Samurai’s SWR rule of thumb is 80% of the risk free rate
(https://www.financialsamurai.com/proper-safe-withdrawal-rate/), I think some people rough it as just SWR=risk free rate.
and to the
>when shares tumble I’ll increase our equity allocation from 2.5%
I assume that’s if they tumble causing a rate cut you will increase your
equity in line with the Samurai uber cautious advice.
But look what happens if rates go north of 5.5% for long – Wall St
reallocates to bonds en masse and shares must get cheaper.
Is it obvious which is the screaming “buy” then?