Good reads from around the Web.
I sometimes suspect a few of the great and the good read Monevator.
And maybe they do – but if so they are currently paying more attention to the comments. Or at least the debate in the comments [1] in my recent post about high house prices.
Long story short: I argued that inheritance tax is one of the fairest of the various unpalatable taxes out there, and it should be whacked up accordingly.
Nearly everyone disagrees.
I won’t rehash that debate again, but I would recommend you follow the link above and have a read if you care about this issue, as there are some great points from all angles in that thread.
A civil and constructive Internet discussion! Perhaps I should notify the authorities?
Death to the death tax
It took less than a fortnight for the Conservatives to reveal they are to move the other way, and dial back inheritance tax even further.
You’ll surely have heard by now that ‘death tax’ is to be abolished.
As CityWire reports [2]:
The government is to abolish the 55% pensions death tax charge, chancellor George Osborne has announced.
The measure will come into force in April 2015 alongside the pension reforms outlined in the Budget.
The new rules mean that if a person who dies is 75 or over, the person who receives the pension pot will only pay their marginal tax rate as they draw money from the pension. If someone aged under 75 dies, the person who receives the pot is able to take money from the pension without paying any tax.
Beneficiaries will be able to access pension funds at any age and the lifetime allowance, currently £1.25 million, will still apply.
Within moments of the news breaking, I posted on my personal Facebook wall that while I’ve agreed with most of the changes made to the pension system this year, totally abolishing such taxes will make pensions a charter for the rich to pass on millions free of inheritance tax.
And after an hour I was reminded again by my friends that everyone hates inheritance tax.
Keep in mind too that as I’ve mentioned before [3], most of my friends are – or think they are – pretty left-leaning.
The king is dead, long live the kings!
Anyway, before too long the wider media had picked up the scent, with the always-sharp Merryn Somerset-Webb noting [4]:
A fantastic tax dodge for the already wealthy
[…] advice on pensions will now need to “dovetail” with that on IHT.
Quite. What were once personal pensions are now to be “family assets that can be very effectively used for intergenerational planning”.
Subject to the current Lifetime Allowance, families can pile £1.25m into a pension over time and leave it to be drawn down (or topped up) by descendants as they see fit.
I suspect that George Osborne doesn’t want us to go on about that bit too much.
Merryn also thinks that it might be a political gambit. She believes public sector workers could clamour for their schemes to be changed to enable them to benefit, too – presumably by moving them to defined contribution schemes (which may be less onerous on the State).
She could be right. For what it’s worth, I also suspect critics [5] are correct that it’s futile to raise inheritance tax, simply because it’s so hard to collect. It’s already semi-optional for the rich, and generates little money accordingly.
Money for nothing
Given our previous discussions, I presume most Monevator readers would be very pleased with the abolishing [6] of so-called death taxes.
And I can see the logic of giving people an incentive not to use the new pension freedoms to spend all their money at 55 – not to mention making avoiding inheritance tax more democratic and accessible.
But in an ideal world I’d still rather tax workers and entrepreneurs less, and tax the dead and the recipients of their unearned largesse more.
We don’t live in a society where the rich are having trouble growing any richer.
Quite the opposite [7].
From the blogs
Making good use of the things that we find…
Passive investing
- Sunk costs are irrelevant – Oblivious Investor [8]
- Understanding sequence of returns risk – Kitces [9]
Active investing
- Performance chasing doesn’t add up – The Value Perspective [10]
- Housebuilders in the UK – Expecting value [11]
- The fallacy of the cheap money printing machine – Investing Caffeine [12]
- Short fraud stocks, not overvalued stocks – CFA Institute [13]
- Does manual maker Haynes have a digital future? – iii blog [14]
- ROIC and the maths of compounding – Base Hit Investing [15]
Other articles
- My first week of freedom – The Escape Artist [16]
- Saving Vs Investing: The trade-offs – Abnormal Returns [17]
- Electric bikes: Gateway drug to car-less commutes – Mr Money Mustache [18]
- Election time: Here comes the pork – Simple Living in Suffolk [19]
Product of the week: Virgin Money’s [20] new 2.1% fixed rate two-year ISA is a best buy says This Is Money [21].
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1 [22]
Passive investing
- SCM is offering auto-ETF portfolios, but at 1.2% a year – ThisIsMoney [23]
- Vanguard study backs up buy-and-hold fund investing – Telegraph [24]
- The volatility of risk premiums – Swedroe/ETF.com [25]
- Bill Gross and fund manager performance – WSJ [26]
- Watch for ETF fees that eat up your returns – ETF.com [27]
Active investing
- Eureka! I discovered how funds are named [Search result] – Terry Smith/FT [28]
- How fast will GoPro have to grow? – Business Insider [29]
- US dividend stocks are yielding *less* than the market – ETF.com [30]
- How many stocks should you own? – Ed Croft/Stockopedia [31]
Other stuff worth reading
- “I get 3% interest from 11 different current accounts” – Telegraph [32]
- Where the rich live in England and Wales – Telegraph [33]
- You have no idea – Morgan Housel/Motley Fool US [34]
- A secret of Uber’s success? Struggling workers – Bloomberg [35]
- Understanding China’s hard line on Hong Kong – HBR [36]
- Perovskite: The solar wonder stuff – WSJ [37]
Book of the week: Amazon has launched a new subscription service for readers. With Kindle Unlimited [38]
Like these links? Subscribe [39] to get them every week!
- Reader Ken notes that: “FT 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”.” [↩ [43]]