What caught my eye this week.
I am not holding my breath for the Spring Budget on Wednesday. The current occupants of Downing Street may be intellectual giants versus the LEGO figures that preceded them. But low expectations can’t work miracles in the real world.
The UK economy is stagnant. The lunatic solution to our national woes has made things worse. The populace is still under the cosh from the cost of living squeeze at the low-end and a growing tax burden for the rest of us. I guess the richest are alright – with interest rates plateauing and markets bouncing back – but there’s a limit to how much a wealthy elite can pay for everyone else.
Some of this is cyclical. Things aren’t much better elsewhere, outside of the US. Perhaps the best thing chancellor Jeremy Hunt could do is sit on his hands and tell us to hang on in there. We’re too frazzled for more drama on the economic front. And I’d prefer they stopped fiddling with ISAs and pensions.
It seems I’m not alone in craving some stability. As Chris Giles wrote in the FT this week [search result] Hunt inherited political as well as fiscal handcuffs from his bungling predecessors:
The irony is that Truss’s most concrete economic legacy is to give economic radicalism a bad name.
Languishing with just 1% average annual economic growth since 2007 compared with 2.5% in the previous 17 years, the economy is crying out for reform, starting with this Budget.
[But…]
Were a government to show radicalism here, opponents would soon raise the ghost of Liz Truss as a weapon against it. UK taxes are not only rising but becoming more complicated, with tapers leading to extreme rates as child benefit, childcare subsidies and personal allowances are removed from the rich. Many of these have arisen because of the focus on whether changes are progressive or regressive.
Truss was right to attack knee-jerk thinking along these lines in September 2022 — what matters is the overall impact of redistribution, not individual effects. But her incompetence in voicing a sensible economic argument prevents other politicians from taking a similar stance. None could withstand the association of those ideas with Truss.
Her failure, and her naive policy positions, will undermine sensible budgetary reform in the UK for years to come.
I suppose something must be done, though. Hunt can’t just whip out a copy of Piketty from of his dispatch box and put his feet up.
Don’t panic!
To that end Simon Lambert offers a wish list in This Is Money on sorting out the UK’s messy tax system.
Abolish the personal allowance taper above £100,000 and the Child Benefit tax trap. Scrap stamp duty or cut it to a flat 1%. Peg student loans to a proper measure of inflation. Unfreeze the tax thresholds.
It’ll all cost money, but I agree it’s more sensible than knocking 1% off income tax or national insurance.
You probably do too. But that’s why we’re not politicians, I suppose.
If we were politicians then we’d read headlines like Britain For Sale: The country’s biggest firms are being picked off ‘one by one’ as foreign predators pounce – and we’d see not a symptom but an opportunity.
As I wrote on X, UK companies aren’t going cheap because of the lack of extra tax breaks.
Listed British companies are cheap and more vulnerable to overseas takeovers than they were because the pound is still down eight years after the Referendum, global fund managers rightly decided the UK was going through a political moment of madness and stepped aside, and our domestic economy hasn’t done anything good to change their minds.
We were promised Singapore on the Thames. They gave us Walmington-on-Sea.
And instead of putting their hands up and admitting we made a terrible mistake, we get renewed talk of a Dad’s Army ISA.
This is all as predictable as it is ill-conceived.
Never mind that a Great British ISA would encourage a home bias that UK investors have only just shaken off. Or that it would enshrine another no-no – encouraging the tax tail to wag the investment dog, as the saying goes.
I don’t think it’ll actually happen, though the chance to slap the Union Jack on something can never be discounted these days.
Even the platforms have warned against it. They’d normally welcome all the sweeteners they can get.
But if we must must have more ISA complications, then it had better be an additional ISA. Not an unhelpful disincentive on private investors putting their money into global markets, by restricting how they can invest the existing £20,000 ISA allowance.
Put that light out!
What we really need is for these tax wrappers to be set in stone, and the annual limits indexed to inflation.
Perhaps they might be usefully reviewed once every 5-10 years. But not every six months! We are trying to plan for our lifetimes with our personal finances. Not for the electoral cycle.
The uncertainty around the Lifetime Pensions Allowance is a case in point. Hunt sensibly scrapped it last year. But Labour – presumed to be the government in waiting – says it’ll bring it back.
How are people supposed to make life-changing decisions about their pensions in this light?
Returning again to the FT:
…some advisers are recommending their clients crystallise excess funds to protect against a future tax charge, but with no guarantees. Wealth manager Tideway Wealth is advising clients […] to crystallise ahead of any election and ideally before April 5. After that date there are some changes to pension death benefits which you may want to avoid by doing the crystallisation before then.
Or then again, maybe they shouldn’t? The article is full of caveats and on the other hands and rightly so.
Pension are complicated enough, without adding a Wheel of Fortune angle to the legislation.
Remember these are savings amassed over 30-40 years that are meant to last for decades more to come. They should not be subject to the last-minute whims of politicians of any stripe.
Ho hum. For a more sober roundup of the announcements Hunt could make next week, head over to Which.
Let’s see where we stand by the end of play Wednesday.
From Monevator
UK tax deadline: how to make use of all your tax allowances – Monevator
Augmented reality [Mogul members] – Monevator
From the archive-ator: A landlord is someone who borrows money on your behalf – 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.
Nationwide reports house prices up the first time in a year – Standard
St James’s Place sets aside £426m for client refunds, shares crash 30% – This Is Money
Millennials on course to become ‘richest generation in history’ – Guardian
Scammers using AI and deepfakes to forge documents and steal money – This Is Money
The pension lump sum ‘emergency’ tax trap could cost you thousands… – Telegraph via Y.F.
…and some examples via Freedom of Information request – This Is Money
Winklevoss crypto firm Gemini to return $1.1bn to customers – BBC
A Protestant retirement ethic? – Klement on Investing
Products and services
Investment platforms failing customers on cash interest – Which
What’s the cheapest way to get solar panels installed? – This Is Money
Cost of insurance soars for previously-flooded homes – This Is Money
Transfer an ISA to low-cost platform InvestEngine and get up to £2,500 in cash as a bonus (T&Cs apply. Capital at risk) – InvestEngine
UK annual property sales forecast to recover by 10% to 1.1m transactions – Guardian
How to apply for Attendance Allowance – This Is Money
Homes for sale linked to film and TV, in pictures – Guardian
Comment and opinion
The UK stock market isn’t working – Guardian
Has the rise of passive funds really broken the markets? – Behavioural Investment
The rise of financial dopamine culture – Portfolio Charts
A mid-life inheritance: handling a painful windfall [Search result] – FT
Coast FIRE is the most dangerous FIRE strategy to follow – Financial Samurai
How rising interest rates affects your retirement plan – Morningstar
The problem with the 60/40 – Cullen Roche
Cash and your portfolio – Oblivious Investor
What lies beneath your money habits – Humble Dollar
Advice for the workaholic in your life – Next Big Idea Club
Naughty corner: Active antics
Ali Hamed: Building an Investment Firm [Podcast] – Invest Like The Best
‘Sell Apple’ [Search result] – FT
Stocks and bonds for the long run: part 3 – Klement on Investing
The new case for active managers – Institutional Investor
Crypto factor investing [Presented without comment] – Sparkline
Diving into Berkshire Hathaway’s 2023 results – The Rational Walk
Kindle book bargains
The Success Myth by Emma Gannon – £0.99 on Kindle
Eat Shop Save by Dale Pinnock – £0.99 on Kindle
Lean In by Sheryl Sandberg – £0.99 on Kindle
The Making of a Billionaire by John Caudwell – £0.99 on Kindle
Empty-planet bring-it-on mini-special
Why South Korean women aren’t having babies – BBC
Marriages in Japan hit a 90-year low – Semafor
UK fertility rate at a record low – Merryn Somerset Webb via X
Environmental factors
Bitcoin miners win a legal bid to withhold their energy data – Semafor
UK a ‘tax haven’ for polluting SUVs, says thinktank – Guardian
Warren Buffett sees a bright future for fossil fuels – Semafor
Robot overlord roundup
Yudkowsky: humanity’s survival timeline looks ‘more like five years than 50’ – Guardian
Musk sues OpenAI and Sam Altman, for putting profit over public good – Sky
AI ‘dream girls’ are coming for porn stars’ jobs [Registration required] – WSJ
What if large-language models change the biz model of the Internet? – Tomasz Tunguz
AI deepfakes are cheap, easy, and coming for the 2024 election – The Verge
Of top-notch algorithms and zoned-out humans [Search result] – FT
Willy Wonka Experience Glasgow: a metaphor for AI hype – Venture Beat
What’s going on with Google mini-special
How Google is killing independent websites via poor search results – HouseFresh
Google reneged on the monopolistic bargain – Pluralistic
Gemini and Google’s culture – Stratechery
Off our beat
Why we don’t trust each other anymore – Kyla Scanlon
How Portugal eased its opioid epidemic while US deaths skyrocketed – NPR
When media outlets shutter, why are their websites wiped, too? – Slate
Should you drink a shot of olive oil a day like the celebrities? – The Conversation
We paid a price for our ape ancestors losing their tails – The Conversation
Learn from people who do, not those who preach – Darius Foroux
And finally…
“When the taxperson takes more than a third of what we earn, we can be sure that the way they take it matters.”
– Paul Johnson, Follow the Money
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Thank you for the article.
Yes, it is all depressing. Why faff around with taxes and policy every year . I agree it would be good to undo some of Osborne’s complications but I am not waiting in hope.
On pensions, why not put NI on payouts above a certain limit and ditch the rest of the pettifogging and while you are at it scrap salary sacrifice ?
As for capital gains tax….My wife is a trustee and next year the trust will only have a £1500 cgt allowance. How can a portfolio be managed within that constraint ?
As you say, we are not politicians.
> The current occupants of Downing Street may be intellectual giants versus the LEGO figures that preceded them.
Ooo-er. Such damnation by faint praise. Be grateful for small mercies, at least the captain has some semblance of trying to avoid the ground rather than dear Liz I was right All Along Truss who seemed to aim straight for it, Death before Dishonour samurai style
Primum non nocere, eh, Jezza?
Couldn’t agree more, pension rules should be put well out of reach of politicians. Planning is hard anyway, with the current level of fickleness, impossible. In the same way interest rates were moved to the BoE could a bunch of other stuff be moved as well? Or at least put huge hurdles in the way of the exchequer every time they try and tinker? Have started trying to get creative on how to manage next year’s paltry CGT allowance. I could do without it tbh.
Really appreciate the AI links as I have some skin in the game with my current role. Off the back of the Bletchley safety summit last year a new government org has been set up, AISI, which is paying stupendous salaries (by civil service standards). Very interesting times.
It’s all gone a bit wrong for Hunt. Two months ago he had lower bond yields, giving him more money to play with plus the possibility of some decent sized pre-election BoE rate cuts. A chunk of that has vapourized thanks to higher US core CPI and payrolls. And there was me thinking “we had taken back control”!
Stimulate too much and possibility of BoE cuts decreases further. So probably a modest budget now, hope for a few modest BoE cuts, and then a full on “scorched earth” budget a month or two prior to the election? It’s about putting Rachel Reeves in the most awkward spot come 2025. It’s not about the economy.
Better Health care, Social Care, Police force, and roads require more money which is found either by growth or taxation. Efficiances in the Health Service need to be found. My opinion is growth needs stimulating. By raising the lower band tax and NI threshold everyone gains the same, but the poorest gain more as a percentage. And the poorest will spend boosting the economy.
What to do with an inheritance? Over the years I passed all of mine down a generation. It covered university costs, opening a pension, contributing to a deposit for a house, …
But while I still had most of it it gave us a welcome feeling of financial security. I suppose it even constituted what used to be called a “get stuffed!” fund.
Thanks for the links. It helped me while away a few restful hours after doing some back breaking shovel work as a volunteer this morning.
The Which article “Investment platforms failing customers on cash interest” was an interesting read. I didn’t realise the Vanguard UK platform fee covered cash holdings. It seems a long time since you wrote that article on the hidden favourable cash interest rates in Vanguard accounts – from Which “The only platform other than Aviva to charge fees on cash was Vanguard, who offers a far worse interest rate of 2.6%”. They’re not looking so good now! Also, who holds £1m cash with Interactive Investor to get 4.75%?
Re cash and interest in broker accounts I was holding too much so bought into a mmf 6 months ago and has done 2.6% since then. Just hoping I never have to find out how ‘safe’ they are. Funnily enough basic global tracker has done nearly 5% in the last month checked today for first time in awhile. The market must be good?!
On the theme of rule changes, I took my PCLS in February. It’ll take me a a few years to hide it in ISAs, assuming the £20k limit remains, but behaviour driven by political, rather than market, risks.
Wrong.
Happy Saturday!
One link worth adding to this weekends list:
https://www.bankeronwheels.com/should-you-invest-100-in-equities/
Just dropping in to say thanks to TI and TA for all the information and inspiration. We locked in our mortgage at 1.56% when it was still possible (having read through here the days of <1% mortgages were about to end), had overpaid the penalty-free max whenever we could, and redeemed the rest on Friday—under 6 years after buying our home. What you do here is so important. Thank you again!
Can anyone enlighten me on the changes to death benefits after April?
I remember reading stories hinting at possible issues, but whenever I searched for clarity got nowhere.
Anyone actually worked it out?
Answered my question. Limit to lump sum benefits, but not income benefits, where death occurs before age 75
https://techzone.abrdn.com/public/pensions/action-needed-before-april-2024
Can someone explain to me like I’m a ten year old why everyone is so scared of lower birth rates and diminishing population?
I get the part where we will run out of suckers to sell aspirational plastic/electronic tat to and that’s bad for the be all and end all of our economic dogma. But if population has to keep growing now, then there’s never a good time for it to stop.
How many things in nature grow forever?
When does humanity start focusing on the upper levels of Maslow’s piramyd?
@The Weasel:
because lots of assumptions about providing adequate services for the older members of society rely on subsequent cohorts being at least as large in order to provide sufficient labour and resources.
@dot — So thoughtful of you to come back and share/say that, cheers and you’re welcome! 🙂
@all — Thanks for the comments everyone, especially as the post was a bit downbeat. (As I said a few weeks ago, I look forward to being sunshine and roses again someday haha.)
It’s an interesting idea, taking pensions out of the hands of politicians and placing them under the jurisdiction of some independent body. So much so that I am sure it has to have been tried somewhere. Something in my mind is even blinking “Australia” but I’ll need to get home and in front of a search engine to dig on that.
@The Weasel #14
Forgive me if I am “teaching Granny how to suck eggs” but I strongly recommend “Economics – a primer”, Hayley & Chrystal, Oxford University Press 2018. A slim volume but commendably so IMHO, and nicely explaining the basic principals of economics with the minimum of technical detail.
Personally I find it laughable as to the scare stories around population shrinking as they are also alongside population explosion stories with other commentators such as David Attenborough firmly of the view that there are far to many people on this planet. We’ve added another billion people in the last decade or so, in which it took several thousands of years to create the first billion. I think it’s ok, Lagos is forecast to have more people than the whole of the UK in thirty years or so. The great question here that most countries, predominately Northern European but also say Japan and even China are going to have to likely accept is a significant shift in the racial makeup of the population, eg migration from sub Saharan countries or Indian. Or automate every single job than can be automated. There’s still approximately a couple of hundred million people in India defecating in the open by common consensus and so I’m not particularly worried that we’re running out of people to climb the economic ladder of consumption necessary to feed global share prices!
It is difficult to second guess changes to pension rules with the impending change of rulers.
Even without changes to the rulers of this great isle, “they” still keep changing the rules.
You are encouraged to fill your boots with all the great incentives & don’t be a stupid boy.
Tax relief, salary sacrifice, employer contributions…all sensible stuff.
It’s all coming up roses.
You probably wont need/(or even get) a state pension if you start now…
but..
When comes the time to impliment your lifetime’s journey toward sanctuary,
as always, a change is gonna come.
And you may ask “themselves”, “Am I right, am I wrong?”
A fair question, once in a lifetime.
I suspect the answer will be….
“don’t tell him pike”
@The Weasel (14)
Here here. Population growth HAS to end, and saying we need more workers to look after the existing elderly population is just kicking the can down the road. It HAS to be faced, and the longer we leave it the worse the consequences of our current inaction, and any future action.
I beleive, with automation and AI reducing the number of people needed to produce things, we have an opportunity to address the over population issue (and directly related issues of climate change, falling biodiversity, pandemics etc) without overly serious consequences. But it will require some serious re-thinking of society, and particularly of economics.
I am not sure that worries about population increase or decrease are like climate change in the purview of humans
Animal populations (humans) expand to available resources and the rapidly diminish as resources decrease
Only the Chinese with a totalitarian police state and a mostly uneducated and supine population have actually ensured a population collapse in their country by enforcing the one child (retaining mostly boys) policy for four generations
Declining populations are a common finding in advanced societies at their apogee( 50% of women in the U.K. have no children-Guardian figures)
However as one population group declines other groups then move in to replace them
By definition these groups value families and children and though desiring the failing groups “box of delights” are content with less and the cycle then repeats
Waves of immigration replacing effete societies is nothing new and is a historical reality
xxd09
Correction-“50% of women under 30”-apologies
xxd09
@xd09 (21)
Well, true but this is the first time on a global scale, and where there is global mobility. The end result of the process you describe is likely to be a (even more) hugely overpopulated world with 99% of people having to settle for much less than we have now (albeit slightly more than defecating in the streets – maybe).
@ xxd09
My favourite statistic on having children is :
“8o% of women have children but only 40% of men”
It took a little mental dexterity to get my head around that.
B
Dad’s Army ISA confirmed. £5K additional allowance a year for investment in British listed companies. Detail to be seen.
Those rich enough to use the full £25,000 total allowance obviously should do.
Put your British stuff in the Dad’s Army ISA and the increase ex-UK exposure in the £20K ISA.
It’s dumb and symbolic and probably inevitable from this lot, but it could have been worse — as best I can tell they don’t plan to mess with the existing £20K allowance, though Hunt talked about ‘simplification’ so let’s see…
For those who complain I’m talking Britain/the LSE down, au contraire.
This is a gimmick to appeal to Tory voters. I wouldn’t be starting from here (I wouldn’t have Brexit-ed and made the UK unattractive) but in Hunt’s shoes I would have abolished stamp duty on LSE share purchases.
Plenty of countries have no such tax. It would have made more difference to the big money that will actually re-rate UK shares eventually.