What caught my eye this week.
I found it hard to be outraged by last week’s decimation [1] in the number of pensioners who’ll get winter fuel payments.
Restricting the annual cash award to those on means-tested benefits will see only about 1.5m pensioners getting the goodies in future.
The other 11.4m pensioners will just have to use their own money to pay their bills, like the rest of us.
Of course in many cases ‘their money’ will be, for you dear reader, ‘your money’
Monevator’s readership skews far wealthier [2] than average, and it’s clear you’re aging out too.
So no doubt I’m biting the hand that feeds/reads me.
Nevertheless, downsizing winter fuel largesse will save the taxpayer £1.5bn much-needed pounds. A good call, as far as I’m concerned.
Low-to-middle earners have had it worse than pensioners for years, and a lot of the strain on the UK’s balance sheet is there because of national lockdowns that especially protected the elderly.
I’m not arguing here that it was wrong. Just that it’s right for the oldies to now share the burden.
If you feel differently then you could sign Age UK’s petition [3] to reverse the decision.
However if you’re a wealthier pensioner who will really miss £200, maybe you could move to a smaller, warmer home instead?
Cheaper cosier homes
Rightmove came out with interesting figures [4] this week. It flags a vast pool of housing equity that could be unlocked by empty-nesting OAPs rattling around in much bigger houses than they need.
The agent claims that swapping a five-bed home for a three-bed could release £500,000 on average:
[5]
Source: Rightmove
Besides a one-off cash tsunami, Rightmove also calculates that moving to a smaller, energy-efficient home could save more than £3,000 annually in utility bills.
The lost £200 winter fuel payment is small beans by comparison.
Unlocking this sort six-figure sum – tax-free – would solve most pensioners’ cost-of-living problems.
Though of course, most pensioners – even wealthy ones – don’t live in five-bed houses.
True, but the same principle holds up and down the ladder. Exchange hundreds to thousands of square feet you don’t need for an otherwise higher standard of living in a smaller property, with lower bills.
Few of these millionaire homeowners could have imagined the windfall gains they’d see from the UK’s relentless property boom when they first bought all those decades ago.
It doesn’t seem unreasonable to suggest more of them might tap into their good fortune to help ensure their own comfortable old age.
Down and not-out
It seems a no-brainer. Yet whenever you suggest asset-rich pensions should downsize if they need more money, there is indignation. (I look forward to reading the good natured variety in the comments below!)
Why should people be forced out of their family home? They may not need those bedrooms, but oh the memories!
That sort of thing.
Or – and I have more sympathy for this one – fine but where are we meant to downsize to?
The UK does have a shortage of high-quality, desirable homes for ‘aging in place’ as the Americans say. And what does exist seems very expensive.
Now that people are living so much longer and in many cases retiring so much richer – especially asset-rich – it’d be nice if property developers responded with bespoke communities of well-priced amenity-adjacent homes that suited ageing owners. Downsizing destinations that are just to good to refuse.
Add it to the list please, whoever is fixing the UK property market!
Oh, and for the record I don’t think anyone should be forced out of their home by government edict.
But equally, I would far rather my share as a taxpayer of that £200 winter fuel payment went towards an inner-city kid’s education instead – or an actually-poor pensioner’s living costs – than to fluff a weekend getaway for a pair of silver foxes living in a £1m-plus rectory.
If you can afford to heat a far bigger house than you need yourself, then fine.
But I don’t see why the state should help pay for it.
Fair enough
I accept there are interesting wider questions about how to juggle supporting or taxing the elderly versus giving the young a leg-up.
My feeling is life chances at birth are not even close to equal. That is mostly why I favour supporting younger people, as well as the better bang-for-the-buck the state will enjoy from their subsequently more productive working lives.
Together with the fact that the young are in the most trouble right now.
(I’m excluding here the several dozen kids with over £750,000 [6] amassed in their Junior ISAs, as per a recent Freedom of Information request. Those lucky mites can fend for themselves too…)
Moreover by the time someone is 70, their life choices have usually contributed hugely to the state they find themselves in. Not exclusively – luck, good and bad, always loom large – but no, I also don’t have a lot of sympathy for someone who never worked much, or who earned well but frittered it all away.
This is exactly what irks many of us who save hard versus our peers, and yet end up being taxed to support the indolent as much as the unfortunate in their old age.
You earned it, you spend it
For many of you, the argument against higher inheritance taxes is similar. If someone did strive to improve their fortunes, why should they be stung extra hard for not frittering the money away?
Understood but personally, I would look to increase inheritance taxes if I was Rachel Reeves.
That’s because I maintain I’d be taxing (more heavily) the recipients of the inheritance who did nothing to earn it. Not the deceased who strived to earn and save it.
But I can see why blurred thinking around this distinction causes so much rancour.
Similarly, with the question of downsizing – or even paying for care home fees [7] – a lot of the anger at the idea of going smaller in their old age isn’t because people actually need all that space to keep a lifetime’s clutter that nobody will want when their gone.
It’s because the should-be-downsizer and/or their children want to transfer that family home – a valuable asset [8] remember – as tax-efficiently as possibly.
And again, ensuring genetically fortunate 50-year-old heirs stay as wealthy as possible isn’t my priority.
The bottom line is the state is cash-strapped, the young can’t afford even starter homes without parental support (where it’s available), we don’t build enough of the right properties for either the young or the old, and something has to give.
Don’t worry – I’m sure I’ll take my lumps too in the Budget come October. No doubt I’ll bemoan it too!
Have a great weekend.
From Monevator
A new long-term World Index for GBP investors – Monevator [9]
Now could be a better time to retire – Monevator [10]
From the archive-ator: How to protect your portfolio in a crisis – Monevator [11]
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.
How the UK’s poor paid the price of ‘cheapflation’ in the cost of living crisis – Guardian [12]
London house prices post first annual rise in more than year – Bloomberg via Yahoo [13]
New Brexit inspection charge is “huge extra expense for nothing” [Search result] – FT [14]
Give schools a stake in NatWest to teach young about investing, says Lord Lee – This Is Money [15]
Road sweeper denied crowdfunded holiday will go on trip after all – Guardian [16]
[17]
UK CPI inflation reverses trend with a 2.2% rise, but uplift less than expected – Sky [18]
Products and services
Mortgage rates fall as Nationwide offers five-year fix at 3.83% – This Is Money via MSN [19]
Is the new Amazon reward credit card worth going for? – Which [20]
How to get a top 6.1% rate on £10,000 of savings with Raisin – This Is Money [21]
Open an account with low-cost platform InvestEngine via our link [22] and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine [22]
Drivers urged to beware ‘quishing’ scams when paying for parking – This Is Money [23]
HSBC student account review: get £125 – Be Clever With Your Cash [24]
Are you due a refund of overpaid pension tax? – Which [25]
Homes next to lakes for sale, in pictures – Guardian [26]
Comment and opinion
Why it’s usually a mistake to own individual stocks – Oblivious Investor [27]
Can you afford a grown-up gap year? [Search results] – FT [28]
A Boglehead interviews new Vanguard CEO Salim Ramji – ETF.com [29]
The inflation scare is over [US but relevant] – Sherwood [30]
Can economists help investors avoid recessions? [Spoiler alert…] – Morningstar [31]
You are on your own – Abnormal Returns [32]
Four dangerous assumptions that could hurt your retirement plan – Morningstar [33]
The Stoic guide to investing – Darius Foroux [34] [author of The Stoic Path to Wealth [35]]
What’s the big idea? – Behavioural Investment [36]
Bonds are still a hedge against bad times in the stock market – A.W.O.C.S. [37]
The prenup prescription [Podcast] – Next Gen Finance [38]
All hat no cattle – Humble Dollar [39]
CoastFIRE mini-special
What is CoastFIRE? – Of Dollars and Data [40]
The minimum investment amount where work becomes optional – Financial Samurai [41]
Naughty corner: Active antics
Super smash: how Nintendo prints money – Sherwood [42]
What do VC returns look like in practice? – Hunter Walk [43]
The big forces – Paul Podolsky [44]
Great explanation of a carry trade – Capital Gains [45]
Kindle book bargains
The Happy Index by James Timpson – £0.99 on Kindle [46]
Freakonomics by Steven D. Levitt – £1.99 on Kindle [47]
Smarter Investing by Tim Hale – £9.29 on Kindle [48] [£9.29! But rarely reduced]
Rebel Ideas: The Power of Diverse Thinking by Matthew Syed – £0.99 on Kindle [49]
Environmental factors
Offshore wind developer Orsted drops green ‘mega’ plant plans – This Is Money [50]
Big tech’s bid to rewrite the rules on net zero [Search result] – FT [51]
“They encouraged us to insulate our home. Now it’s unmortgageable” – Guardian [52]
Liked to death? – The Conversation [53]
Robot overlord roundup
Automation is coming for private equity’s junior roles [Search result] – FT [54]
Off our beat
Why one doctor prescribes walking to his patients – GQ [55]
The freedoms and risks of being raised in a Utopian commune – Guardian [56]
Elon Musk is a threat to international peace – Slate [57]
In defence of beautiful housing – Roger Scruton Legacy Foundation [58]
The real questions posed by counterfeit clobber [Search result] – FT [59]
China’s rhetoric turns dangerously real for Taiwanese – BBC [60]
We oldies can’t help but think of death – The Spectator [61]
Runner raced against grandson on 85th birthday – BBC [62]
And finally…
“The rich get the assets, the poor get the debt, and then the poor have to pay their whole salary to the rich every year just to live in a house. The rich use that money to buy the rest of the assets from the middle class and then the problem gets worse every year. The middle class disappears, spending power disappears permanently from the economy, the rich becoming much fucking richer and the poor, well, I guess they just die.”
– Gary Stevenson, The Trading Game [63]
Like these links? Subscribe [64] to get them every Friday. Note this article includes affiliate links, such as from Amazon [65] and Interactive Investor [66].