What caught my eye this week.
A regular listener to the ThisIsMoney podcast, I’ve been waiting for Simon Lambert and his team to get stuck into the election manifestos for three reasons.
First, they’ve been trailing it for weeks and they were clearly ready to go.
Second, I am as curious as any other concerned citizen / consumer / tax-payer / wage slave.
But most importantly, I said I wasn’t going to opine about this election. I wanted to give myself – and Monevator – a break from politics.
Well, I’m half back-pedaling that today. (Hey, that’s politics.) It keeps coming up in the Weekend Reading comments, and, well, it’s obviously something of a big deal.
But I’m still not going to write about it… because ThisIsMoney and the Financial Times have done the job for us:
- The general election and your finances [Search result] – FT
- What the general election means for your money – ThisIsMoney
Both papers do deep non-partisan dives into the various manifestos. Read them and you’ll quickly get up-to-speed on the personal finance angle of the general election. For me that’s a sideshow with this vote anyway; your view may vary.
What’s that? You want some spice?
Well ThisIsMoney editor Simon Lambert takes on the strange anomalies on the tax bands that produce very high marginal rates:
Labour plans a new 50 per cent ‘super rich rate’ of income tax above £125,000 but high earners will have to pay an even higher rate of 67 per cent before they get there.
A combination of the 45p tax rate threshold dropping to £80,000 and the removal of the personal allowance means that those earning £100,000 to £125,000 would effectively pay 67p in income tax for every extra pound they earn.
Despite outlining a radical revamp of income tax, Labour confirmed to This is Money that it would not remove the quirk in the tax system that sees the marginal rate of tax rocket for those lucky enough to see their earnings go above £100,000. […]
An income tax system where the marginal rate goes 20 per cent, 40 per cent, 60 per cent, 40 per cent, 45 per cent is clearly daft.
Clarifying and simplifying the tax system shouldn’t be controversial, but back in the real world it’s radioactive. Labour told Simon they have no plans to change the system, while the Conservatives didn’t even bother to give (or risk?) a reply.
Meanwhile over at the FT the still mostly wonderful (Brexit cheer-leading!) Merryn Somerset-Webb notes that before we soak the rich, we need to figure out who they are.
Yes, Merryn has plenty of sympathy for the devil – aka £80,000-man:
In fact, his take home earnings are not as much higher than the average as a first glance suggests.
The top quintile of earners in the UK are on an average of about £88,000.
The bottom quintile are on more like £7,900. Add in tax and benefits, and those numbers fall to about £65,500 and rise to £19,000.
That means the top fifth take home, on average, 3.4 times as much as the bottom fifth. That’s significant, but much less significant than the 11-fold difference in pre-tax pay.
It’s a point well-made. With that said, as I wrote a half-a-dozen times last week, I’ve no problem with anyone advancing the argument that he’s taxed enough already.
My despair was over his Blimp-ish reality distortion field. I think it was a man earning £80,000 shouting “liar!” at an MP while claiming he was in the bottom 50% of earners on his £80K that set people off, not the technicalities of wealth distribution.
This is the Weekend Reading to debate the financial aspects of the election, if you’re so-minded. But please keep it civil and as constructive as possible, and ideally focused on personal finance. Have a great weekend!
Help! Analysis paralysis is stopping me from investing – Monevator
The lifetime allowance for pensions – Monevator
From the archive-ator: How to live off investment income – 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!1
Last-minute surge in help-to-buy Isa applications reported by banks – Guardian
House price growth has been running below 1% for the past year, says Nationwide – BBC
HMRC warns over failing to declare annual allowance charges on self-assessment forms [Search result] – FT
City investors urge leading UK firms to pay workers living wage – Guardian
Contemporary art delivers returns to rival bonds, says Citigroup report [Search result] – FT
UK ‘has particularly extreme form of capitalism’, says author of British Academy report – BBC
How Europe’s installed capacity per energy-related technology is forecast to grow – Octopus IPO prospectus from AJ Bell via DIY Investor
Products and services
Paragon Bank is now the fifth firm to launch a cash Lifetime ISA; interest rate is 1.15% – Paragon Bank
European investors have been slower to move to passive than US counterparts, McKinsey finds – Institutional Investor
Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter
The Royal Mint is selling a 1g gold bar as a £65 ‘stocking filler’ – ThisIsMoney
American Express teams up with Vitality to offer 3% cashback to the fit and active – ThisIsMoney
Five homes for upside down living [Gallery] – Guardian
Comment and opinion
All-time highs are both scary and normal – A Wealth of Common Sense
Is the growth of passive investing increasing volatility? – The Evidence-based Investor
The best investment you can make – Of Dollars and Data
Monte Carlo Analysis: Understanding what you’re dealing with – Oblivious Investor
One-year and ten-year FIRE anniversaries – Retirement Investing Today
Passive investors, are you destroying your children’s world? – Simple Living in Somerset
30 selected quotes from 30 of Morningstar’s Long View podcasts – Morningstar
Naughty corner: Active antics
Looking for opportunities? Here are four bear markets you can buy today – Fortune
Capital Gearing Trust: playing ultra-defensive – IT Investor
Cryptocurrency will not die – GQ
“Are we there yet?”: General Election and Brexit
YouGov polls predicts 68-seat majority for Conservatives in general election – Mirror
Brexit MP questions economic nous of economics professor in European Parliament – Channel 4 via Twitter
A late surge in registrations hints at general election ‘youthquake’ – Wired
In the wake of Brexit, Amsterdam is the New London – Fortune
How does Boris Johnson not melt with shame? – Marina Hyde
Kindle book bargains
How to Win Friends and Influence People in the Digital Age by Dale Carnegie & Associates – £0.99 on Kindle
The Wealthy Retirement Plan by Vicki Wusche – £0.99 on Kindle
Radical Candor: How to Get What You Want by Saying What You Mean by Kim Scott – £0.99 on Kindle
RESET: How to Restart Your Life and Get F.U. Money by David Sawyer – £0.99 on Kindle
Off our beat
How online troll factories work to distort our view of the world in 2019 – Rolling Stone
This 32-minute morning routine can make your day more happy and less stressed – Country Living
Elastic thinking for a constantly changing world – Farnham Street
Climate emergency: World may have ‘crossed tipping points’ – Guardian
An artificial intelligence predicts the future – The Economist
The bus ticket theory of genius – Paul Graham
“Compare yourself to who you were yesterday, not to who someone else is today.”
Jordan Peterson, 12 Rules for Life: An Antidote to Chaos
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> How Europe’s installed capacity per energy-related technology is forecast to grow – Octopus IPO prospectus
How is the nuclear forecast broken down into fission and fusion?
Good to see another LISA provider.
There are so few for stocks/shares. And some e.g. AJ Bell won’t let you transfer in over the age of 40. Meaning the increasing number of savers aged 40-60 will get trapped, unable to withdraw funds without a hefty penalty but stuck with a tiny number of providers.
A sad week for the I newspaper but it did publish this before it was bought… https://www.independent.co.uk/news/business/news/general-election-labour-economy-spending-corbyn-boris-johnson-a9218041.html
Looking at the two articles on the analysis of the main rivals manifestos, it seems fairly clear that I will suffer a little loss under Labour, in the short term at least, but it is the only party bringing investment in this country back up to 2010 levels. (This is money – “Despite major spending plans, only the Labour manifesto would see more money spent in real terms on public services than compared with 2010, once health is excluded”)
I think the country has suffered austerity enough. Perhaps I would think that when I work in education, my wife in health care and I live in a rural coastal community though.
From the way the red strand of the graph shrinks away, I think they’re presuming fusion remains 20 years in the future and little new fission is commissioned.
As @TI alludes the spending plans are probably secondary to most voters when it comes to their voting choice. I would frame it as voting for a party that respects the people or one that does not, the take of others will likely be some variation of this.
It’s worth remembering then the backdrop – the 2017 Conservative manifesto was widely regarded as a turning point in their electoral fortunes. To this end, I think you’ll see a much more radical product in the Tory ‘2024?’ GE manifesto than you are seeing now.
This feels like a 1997 rather than a 2001… except it looks the Tories will lead for a generation. Quite remarkable after nine years of austerity. I guess telling their core voters they were wrong – they are too unemployed, too poorly paid, too poorly educated, there are too many racists amongst them for them to understand how to vote might not have actually gone down that well with the people being sneered at.
To anyone who might retort – ‘but we’ll be bogged down in free trade agreements with the EU for at least eight years’… I’m not at all sure the Tories will have sufficient numbers to extend the transition period without the ERG. I’m virtually certain they won’t have the inclination to quell an ERG revolt. If you think Boris will get into a position where he’s begging opposition parties to stop us leaving the EU… I’m not sure you’ve been watching him eat the Brexit Party whole.
Whilst the UK has its share of problems and the many years of brexit (are we there yet? ) have distracted the government; I am not convinced that the tax system really needs much meddling with. Headline tax rates at any rate – they could of course make things fairer (reformed counciltax or taxing work the same as wealth anyone? Nah – too complicated )
> have actually gone down that well with the people being sneered at.
Let’s hope they get what they wished for, eh? Good and hard, as H.L.Mencken said. One of his quotes from the 1880s has already been delivered in the States
Thanks for so eloquently proving my point Ermine, luckily we are all as entitled to vote as Gina Miller and you are 😉
If true, BBlimp’s suggestion that, for a majority of voters, nothing is more important than “leaving” rather supports Mencken’s depressing view of the future. Thanks ermine, that enlivened conversation at the breakfast table….
As to the assertion that one of the major parties respects the people whilst the other does not – I see both as having no respect for the people, nor any hint of integrity or honesty between them. Both seem engaged in a race to the bottom, busy promising everything to everyone in a bid to grab power safe in the knowledge that, however the future unfolds, responsibility for the direst of consequences can be refuted with the simple words “but it’s what you said you wanted!” and any election promise quickly overturned with a “well leaving turned out to be more difficult/complicated/expensive than we thought!”. A once in a lifetime opportunity for any politician – power without responsibility for consequences.
For that reason, it seems to me that we can extract nothing from either manifesto that will assist us in managing our personal finances, or any other aspect of our lives.
I don’t think Merynn has gone far enough with her comparison re the difference between the top and bottom on net income. Let’s take 80k bloke/lady, and assume he has 2 kids, and compare to 18k man/ lady with 2 kids. Both have a non working partner who’s a stay at home parent, and assume they both rent.
80k man takes home 4578 per month.
18k man takes home £1320 per month… but wait! He’s eligible for universal credit top ups to the tune of another 1120 (2 kids, and rents privately).
Their new household income is 2440 per month.
So we’ve gone from someone earning 22% of the gross income of the higher earner, to ending up with 53% of their net income.
Some may say ‘fair enough’. The lower income family needs to eat too. Indeed.
However *50k* man/lady walks in to the conversation and really does imho have a right to feel a little aggrieved.
On 50k their take home is 3080 pm. No benefit entitlement. You ‘earn’ way too much.
Now the difference between them And the person on 18k has shrunk to where the lower earner actually only has a difference of *20%* in net incomes.
What on earth is the point in working for that extra?
You might as well, if you’re on 50k and have kids think **** this and ask to work 2 days per week instead, because you’re barely better off!
Tl:Dr. Don’t forget about 50k earners – They really have something to feel a bit shafted on! Mind you, if 50k man decides to salary sacrifice 30k into their pension…..
@moggers. The interesting point here, is, how many people who can earn £50k do actually do what you suggest would make them ‘better off’, and deliberately opt themselves in to the universal credit regime? And if not, why not?
80K is imho about the level where the differences between a minimum wage job and a good one really do start to make a tangible difference in disposable incomes once you have a family. In between that and minimum wage, it’s not that clear cut. Extraordinary but true.
Having spent the past week trying to persuade some of my friends on social media that the BBC is not a right-wing organ of the State — providing repeated evidence of equivalence in treatment, and of anger and even legal charges from their foes on the right who make the same claim, and genuinely rebutting all but a tiny fringe of edge cases when presented with ‘instances’ of bias — I’ve been well-reminded of tenor of our times.
So I think @BBlimp is right — that those who voted Brexit mostly have decided to double-down.
Despite huge swathes of what was on the ticket being shown to be nonsense peddled by unprincipled charlatans, they want what they voted for. Attacking them with evidence and facts hasn’t changed anything, only increased their desire to Brexit. It’s depressing, if not worrying.
So my BBC battles this week reminded me what I already knew — that this emotional decision making these days isn’t a partisan thing, it’s the way the populace has moved from the center, for whatever reason. On Monevator I’m often labeled by some as a liberal snowflake. In the real world my overwhelmingly-lefty and often wrong friends allude to my being a ‘closet Tory’ if not an unprincipled rape-the-world capitalist.
I’m a floating-voter, a centrist who has voted for four different parties in different elections, and will do in the future. Mostly left, true, but far from exclusively. This to me is what democracy is meant to be about. But if I make a pro-capitalism statement then I must be a Trump fan and if I support taxation and redistribution I’m clearly red in the head. No shades of grey.
Obviously I’ve taken a much more tribal approach re: Brexit. But that’s an exception, and as much because of the way the campaign was/is waged and what that represents as because of the result. It’s been toxic, and a step backwards in how we do things.
Tory rule for generations? Given the state of the Labour party, it’s possible. If Johnson does the sensible thing and uses his imminent majority to get through a soft Brexit, maybe likely. So many people have said any Brexit will be an economic disaster, that if/when Brexit isn’t a catastrophe it’ll be billed as a triumph — further softened by a ramp up in government spending.
Remember, I’ve consistently said over the medium-term that Brexit is likely a (to me utterly pointless) drag on GDP of maybe 0.25% a year, not an economic train wreck. That shortfall will compound over time, as will Brexit’s other unfortunate consequences, into a big deal, but it will be slow and hard to pin it on Brexit.
For evidence just look at how little airplay is given to the Referendum result’s economic impact — the UK economy shrieking from fast recovery to a near-standstill over the past three years. At most it’s alluded to as consequence of “uncertainty”. If/when the economy is a little slower indefinitely, it will be hard to blame Brexit, so Johnson is safe.
On the other hand, if Johnson goes no-deal, then unless the EU bends over backwards for us with unilateral temporary standstill trade agreements and so on we will very likely see a big hit upfront, a recession et cetera. That seems very unlikely to be good for Tory prospects (compare with the ERM crisis, which turned out to be good for Britain but which did the Tories no favours) but who knows how Brexit-supporting would-have-been Labour voters will turn then. We’ll have to wait for the propaganda.
To me it’s a tragedy, if not a farce. A decent Labour leader over the past five years and we would be living in a still-bumpy but different world — no Leave win, far faster growth and already out of austerity, no hard tack to the left, no question marks about allegedly high-fiving jihadists. It’s not Corbyn’s fault but his existence has aided and abetted.
Anyway I’ve just realized I’ve broken my own request to focus on personal finance. Apologies! @BBlimp made me do it. 😉
On that note, I’m not thrilled by any of the prospects. I don’t see the need for making the richest cohort richer, which the Tory proposals do at the tails. I wouldn’t be against a re-jig of the tax system bands, as Simon Lambert suggests, with a smoother distribution of who pays, but that’s not really on Labour’s agenda. I’m sort of relaxed about increasing borrowing if it goes on investment so I don’t see a pressing need for the Lib Dems tax increases, but at least they’re straightforward. I’d be happier if they were simplifying the tax bands too, though.
Long-time fans will know I’m all for scrapping the Tory’s inheritance tax-reducing structures. Bring it on Labour! But on the flipside, Labour is pledging to increase spending by too much, too wantonly, to believe the money raised will necessarily be put to good use. I no more recognize Labour’s portrait of a striving populace broken by a cabal of oligarchs than I do the Leave campaign’s portrayal of multicultural Britain.
It’s a grim choice in a grim election, and I’ll be voting tactically regarding Brexit, anyway.
Just quickly/finally on Brexit, @BBlimp writes:
Again, remember this isn’t my verdict on *all* Leave voters (though it is a chunk of them. Rounding down, no racists voted Remain, for instance).
Barry Blimp — the lumpenintelligentsia of the Leave vote –- thinks he’s a great chap, and in many ways he is.
He’s not poor, he’s not racist, and he’s well-educated. But he’s wrong about lots of things, partly for cultural reasons, partly generational. (Climate change, feminism, Brexit). He should have known better, but he doesn’t.
Not many I would guess! But as I alluded to their are two ways of doing it.
1) drop your hours. Can be a difficult thing to do depending on the job.
2) salary sacrifice hugely into the pension. Why people don’t do this – could be ethical reasons (state support is for those who really need it), or just they haven’t worked it out yet.
On the state support thing – after ‘help to buy’ aka ‘help for housebuilders and Sellers’ was introduced, I think all bets were off on ethics regarding personal finances.
@TI, I shouldn’t think the Barry Blimp you’re imagining watches BBC news any more than your friends do…
Sorry for ‘breaking’ the personal finance ‘rule’ my point was meant to be I think the differentials will widen next manifesto
Actually in some cases you could consider doing both (dropping your hours and salary sacrificing) if your full time income is high enough….
…fwiw I’m in this situation completely by chance.
1st came the decent income
2nd came dropping to part time
3rd came big pension contributions (fire strategy)
4th big gross income rise
5th came meeting someone who had kids
Didn’t and couldn’t have planned it but life has ended up that way.
I’m with you and Merryn, Moggers! And that’s one of the reasons Corbyn doesn’t stand a chance, I’d hope!
I much prefer the Tories to win even when I’m not a Brexiteer. Amusingly the Tories are starting to look a little lefty in some respects (spend, spend, spend) , giving Labour no other option than to go even more to the left.
Interesting point quoted from the FT suggesting the take home income of the 20% highest v lowst earners is 3.4x. That is within the 4x boundary proposed by Plato. However the highest 20% are not the richest, it’s the super rich outliers that distort fairness; where to draw the line?
Flat tax rates, at the same rates on all types of income, increasing gradually across the spectum of incomes would surely be fairer.
As for Labour. I doubt I will ever vote for them again after this. The biggest issue in decades and the only chance for a final say referendum, and they propose a manifesto so extreme it makes them unelectable.
Haha – it doesn’t matter who comes in. There’s always going to be a strategy that works.
If Boris gets in and raises the higher rate threshold to 80k – awesome. I might consider ‘earning’ more through various means in future years.
If Jeremy gets in and starts taxing more, no problems. You can’t tax what isn’t there so I’ll continue to work as tax efficiently as possible, and if that means limiting hours and maxing pension contributions so be it.
When looking at marginal tax rates, it’s worth considering the effective rate paid by different age groups. Although student loan repayments and pension contributions are technically voluntary, in reality they’re mandatory for most young people who want a decent job and comfortable retirement. On this basis, my marginal tax rate is already above 55% despite earning considerably less than £80k. The marginal tax rates experienced by most young graduates are 41% for income over £25k and 51% above £50k, plus another 5%+ for pension contributions. Is it terribly surprising that they take a different view to those paying 20% and 40%?
Add in the non-taxed imputed rental income from owner-occupiers and other tax-sheltered income available from ISAs, CGT allowance, dividend allowance, savings allowance, pension lump sums etc. and the difference in tax rates between young workers and older, richer people is even more stark. This isn’t about billionaires or bankers – there’s a huge generational gap in tax rates experienced by those in the moderately well-off middle class and I’m sure this has an effect on how people vote. I won’t vote Conservative because for me they are a party of very high taxes with minimal benefits in return. Whereas Labour offer lower taxes for young workers (if they abolish tuition fees), plus maybe a bit more in public services. Even better, the prospect of some proper inflation combined with real asset prices falling is very appealing for those with valuable skills but few financial assets. They might not be pushing that angle, but it’s definitely a feature not a bug.
Oh and apologies – one more thing!
Actually the main reason I’ve encountered when talking about pension contributions to people (in general, not to extreme levels) is that they simply can’t afford to (housing) or more likely want to (sacrifice any other thing) take the drop in income today.
I know two people who earn around the 60k level with kids who don’t even put that 10k into their pension where their child benefit is tapered away – giving them a marginal rate of 60% between 50-60k. They would just simply rather have every penny of income now, even if they’ve been punitively taxed on it.
@theinvestor haha – I commented as ‘Ronnie Biggs’ on that post. Life has changed *a lot* in four years, but everything I wrote there still stands today. Since 1997, years of self serving, short termist policy from the ties of both colours made following a different path inevitable.
They want you to be either poor enough that you need to suck on their teet, or rich enough that they can suck on yours.
Worth remembering that the student loan (tax) is calculated on gross income though. Large pension payments once again come into their own here in reducing your P60 figure.
If I was a young person earning decent money who was paying that graduate tax, the first thing I’d do is bung everything I can afford to into a pension.
I agree with everything you’ve said on the disparity of the rates between older and young people. Don’t get mad, get even.
@Moggers – i wonder how easy it is to get a mortgage on universal credit. This may put off 50k man – choice of housing.
It’s a good question
Some providers will go on your unadjusted salary – I.e pre salary sacrifice for calculating lending multiples. Some will calculate based on real net income which includes UC entitlement. Find the one that works.
* however – and this is crucial in that decision. Buying means you lose the housing element of UC, which makes doing this a much worse deal. The housing element is extremely good – and covers a large percentage of low income earners rent.
I would say anyone in this position should come to terms that on housing, they’ve been stuffed by high asset prices anyway. Make peace with renting, not having roots (if your partner can deal with it too!) and let the successive governments who has propped up the housing market and encouraged buy to let deal with the consequences.
If you’re stuffing your pension full, you’ll have a nice little sum tax free to buy that house later in life.
(Note – doesn’t apply to me, on legacy tax credits)
I think it was the FT who pointed out Labour’s plans would move the UK from top of the lower third to bottom of the upper third compared to other European countries in terms of spending. Coming after a decade of tory austerity, that doesn’t seem so out of line. Unfortunately we’re about to find out just how much of a fringe opinion that is.
I fear Brexit marks a turning point for the UK, like Trumpism is in the US. Whether they are cause or symptom it’s a different world now.
The Royal Mint’s stocking filler offer of 1g gold bars at £65 doesn’t look like a Black Friday sale. Bullion by Post sell the same at £49.
Both are at an outrageous premium of course.
Re @BBlimp’s comment (5): “To this end, I think you’ll see a much more radical product in the Tory ‘2024?’ GE manifesto than you are seeing now.”
I think the clearest indication of the forthcoming economic impact of Brexit, and therefore the long-term collective wealth of UK citizens, is the Tories now entertaining protectionist, state intervention ideas… You couldn’t make this stuff up!
I’m sure some ( 52pc) of us would argue there’s nothing more protectionist than hiding from the world within a customs union or interventionist than spending 60bn, yes 60bn, on the common agricultural policy.
If labour bring in a 4 day working week there will be worker shortages at all skills levels, not just the unskilled ones from brexit – a shortage of higher skilled people, and increasing cost of them, would negate any advantage to be gained for unskilked workers from the shortage caused by a 4 day week
Brexit on the other hand affects unskilled workers more, and immigration with no minimum income is more “working age unskilled” than the general population – so although they will create some demand, they supply more work than the average person demands
@BBlimp (30) Not really germane to the points I was making; but I’m sure you’re more than well aware of that…
Oh, I thought you were objecting to protectionism and state intervention. It seems the EU can do no wrong.
— “The Royal Mint’s stocking filler offer of 1g gold bars at £65 doesn’t look like a Black Friday sale. Bullion by Post sell the same at £49.
Both are at an outrageous premium of course.” —
Designed to be like the old adverts on the back of rubbishy magazines and spoofed to death by Viz.
Anybody who collects coins or gold bullion has learned over the last 30 years to treat any ad from the Royal Mint just as they do the emails informing them that they have 50 million dollars waiting to be transferred. To be honest, it’s quite sad, but as we all know, if the tabloids haven’t mentioned it, it doesn’t really exist.
It seems that BOJO is heading for a majority government, if the polls can be believed.
I have to a admit to being concerned that our leader may not fare so well negotiating with Putin or Li Keqiang when he struggles with confronting Andrew Neil.
@borderer – in an interview you need to not gaffe, in a negotiation you don’t need them to like you, if the other side seems happy with what they have you probably haven’t driven a hard enough bargain
Although I do think bojos original style of positivity could cause overlooking of gaffes, but he was willing to take more risk back then I suppose. Most votes are already decided I imagine
Part of me wants labour to win so I can go part time.
@BBlimp (33). I’m not sure if you’re being deliberately obtuse but just in case I wasn’t overly clear:
1. You imply that given the embarrassment endured by the Tories following the publication of their 2017 manifesto, they have erred on the side of caution for this GE, but may present a more radical one at the next GE.
2. I contend that as the party synonymous with open market and free enterprise thinking, then seriously considering protectionism and state intervention is, for them in their current guise at least, pretty radical. Today.
3. I suggest that the reason for such a radical change in Heart & Soul is because they (now) concede what a seriously detrimental impact Brexit will have on Businesses; for whom they have historically professed to be the Party best representing their interests.
That said, given the EU’s repeatedly stated position on maintaining a Level Playing Field, I think it could also be part of a Cummings Plan by the Antagonist in Chief to increase the likelihood of crashing out with No Deal at the end of next year whilst giving plenty of room to blame the EU for any lack of progress in the talks…
@Harps – given the context of the article I’m commentating on, I meant radical as regards personal finance… for eg it’s not unimaginable the higher rate threshold will rise to 80k or they will scrap the confusing removal of the personal allowance… but this election doesn’t seem the time.
You know my thoughts on no deal… should have done it in 2016 and we’d be over the worst of it by now. I think with a mandate and four years from an election no deal next year is likely… and amongst a great deal of Leavers it’s also welcome. It’s only ever Remainers who say how complicated and prolonged leaving the EU will be… that’s not just hopeless naivety on part of Leavers it’s because it’s a political choice, and we’d choose WTO.
Where WTO stands for Welcome To Oblivion presumably…
That’s right Harps… back of the queue for a trade deal with America, planes won’t be able to fly, a deep and immediate recession, have to pay the Eu over a £100bn divorce bill… I can’t even remember what else Remainers said would happen all I know is none of it seems to be happening
Don’t you remember Harp? WTO was right there in the ballot paper, right next to the easiest deal in history!
‘The easiest deal in history’ was on the ballot paper ?
I don’t remember that, only
Leave or Remain
I feel an early closing of comments looming..
I think the tories were wise not to raise the 40% tax band to £80k pa in their manifesto, Labour would have had a field day with that one given they even opposed raising it to £50k pa as being just for “the wealthiest”.
I am disappointed the tories didn’t commit to the rumoured increasing of the starting threshold for NI to £12,500 (so in line with the personal allowance), that would have benefitted nearly everyone and been a crowd pleaser.
The child benefit taper between £50-60k that Moggers points out should be looked at, thats a shocking marginal tax rate and it is ludicrous that single earner family on £60k gets nothing but a couple on £50k each get full child benefit. Maybe they could raise both the start of child benefit taper and the 40% band to £60k to help the “squeezed middle” without helping “the rich” too much.
In terms of the parties manifestos in personal finance terms it seems clear everyone other than the precariat will be considerably better off under the tories even under most Brexit scenarios.
I can certainly see quite a few Remainers being forced to vote Conservative rather than LibDem purely to keep Corbyn out.
But those claiming Labour would walk this election if they had any leader other than Corbyn have massively missed what has happened to the Labour party. It’s been taken over by Momentum/the far left and just swapping the leader would change very little.
I still stuggle to see why Labour don’t poll much lower but the LibDems much higher. They need to bin the hysterical primary school teacher Swinson and find another Paddy Ashdown type character.
@all — To @anon’s point, best if we stick to the personal finance points rather than go further down the Brexit rabbit hole. I know there’s some crossover, but we are just all going to end up restating our positions and snarking at each other.
Given we have something slightly different to be snarky over for a couple of weeks, let’s seize the opportunity! 😉
Is anyone expecting a ‘Boris bounce’ if the tories win a majority?
Businesses seem to think they’ll do better… but a rising £ will presumably depress share prices
@theborderer If he wins a big enough majority I expect him to shift to a Brexit so soft it will make Andrex blush.
On a good note the Vanguard SIPP has just been announced
“Cryptocurrency will not die”
Will be interesting to see how the Facebook currency develops.
Not sure about Facebook taking the place of the central bank but I guess this may depend on where in the world you live.
As of 1 December 2019 – Vanguard has provided a update in respect of their SIPP (pension) launch, scheduled for early 2020. Information shows 0.15% charge capped at £375 pa (across all accounts – General, ISA & SIPP). Drawdown to be available 2020/21 tax year. Long list of services where no charge will be levied. Overall a competitive offering.
If anyone’s interested I read about the idea of “reverse christmas” where you plant a tree instead of cutting one down, I think it could catch on as it ties in with the new life thing of christianity, and it distracts from materialistic christmas expenses for the family, and the environmentals will like it
You can just pay £3 for someone else to do it too:
> Is anyone expecting a ‘Boris bounce’ if the tories win a majority?
Yes. IGWD is my friend to offset some the relative tanking of VWRL due to relief driven uplift in the pound. Brexiters reduced the future value of my £ income by 20%, so I may as well take some lift from the depths they’ve sent the £ to. They’ve also improved valuations on the FTSE250 IMO. It’s an ill wind and all that.
I’m not sure you get as much of a Boris bounce in the GBP/USD as you would have if Brexit had been sorted out earlier in the year. The market is fully aware of the Dec 2020 deadline for the transition period. A fallback to WTO is not pretty so it’s going to remain concerned about that. A big majority might generate a bigger bounce since it defangs the ERG to some degree.
It’s also worth remembering that GBP/USD is dependent not only on GBP but also on USD. The USD remains strong given still high interest rates of 1.25-1.50% on a relative basis and the Fed seemingly close to done with rate cuts. That USD strength could falter as we head toward the presidential election in late 2020 but that’s another debacle in the making.
> Boris bounce in the GBP/USD as you would have if Brexit had been sorted out earlier in the year
Agreed, but nominally I have done well out of Brexit, by roughly about as much a BBlimp and his crew have devalued. I am the guy Monevator talked about here. Well, a little younger, but by rights age-wise I should have voted with Bazza. Globalisation torched the end of my career, and if I had kids I’d be pissed off that they can buy cheap electronic gewgaws and citybreaks but can’t buy houses or afford to have kids like back in the day. That UK house prices are high largely as a result of domestic policy to pander to making my cohort feel good seems to escape. I listened in amazement as one fellow at a party talked about how much he had made on his house and BTL while bemoaning his kids seemed stuck in renting forever before perhaps unwisely ask whether he thought there might be a connection?
Despite my view that Brexit is the biggest recent unforced error made by any government in recent years – other than in the swivel-eyed camp there wasn’t a widespread groundswell of demand for it, I don’t consider it dreadfully rude to try and preserve some of of the nominal profit. If it doesn’t happen or the US goes titsup next year, hammering both, then that’s the markets for ya, at the end of a 10 year bull run it’s not unsuspected.
Sadly that opportunity will coincide with the end of my investing career as a net buyer. But I’ve had a good run. And anyway, just to trade smug git chops with Barry, you get your dream Baz, I want to make a bit of money out of the nightmare. Foreign productive assets seem a better place to do that that pure FX which I don’t understand how to trade
Just on the subject of the DB\DC debate, it is inherently unfair that the LTA effectively varies depending upon which scheme you participate in. As matters presently stand, a £40k p.a. pension (being the maximum permitted under a DB Scheme as I understand matters), translates into a cash value of just under £2m based on index linked annuity rates for the average 65 year old male. Of course, as gilt yields change, the effective cap will change as well. If that is ok for a DB contributory why not for a person with a DC Scheme. The answer, as ever, is political. Most public sector schemes have a DB basis of some sort (and I appreciate that some are better than others). If the maximum DB pension was c. £23k at age 65, there would be rioting in the streets… Of course, it is technically possible to level the playing field somewhat if you own your own business with a DB SSAS. The level of contribution is far higher than that justifiable under a DC scheme. The bigger issue is that unfunded public sector pensions are utterly affordable in the long run but such a toxic issue that meaningful change is largely impossible.
This article is a must read for anyone interested in FI. I’m not suggesting you vote in any particular way, but make sure you know what could be coming:
Personally, I’ve booked the 13th of December off so I can move my money around. Just a precaution, of course.
Apologies in advance for IT rather than finance question. But has anyone else noticed if looking at monevator on your phone, you no longer see the homepage as a list of articles with the no of comments on the right? I am now seeing just the most recent article, i.e. the same as if I were viewing on my laptop browser. Wondering if I’ve inadvertently changed something or its same for everyone? The prev view was preferable.
@TheRhino — It sounds like at some point you’ve enabled ‘desktop view’ on your mobile, possibly by viewing the comparison table. Try deleting Monevator cookies?
@ 7upfree, being a recipient of a DB scheme, I would argue that we knew what we were getting into when we joined. Salaries in the civil service are not that great and we have to have some reason to endure them. According to the institute for government, I quote “Across the whole civil service, the majority of staff (64%) are paid below £30,000 – with nearly a fifth of civil servants (19%) paid under £20,000” (2018)
Compare that with the national average across all sectors (a lot of which do not need the qualifications, clean bill of health or talents that it takes to get a public sector job)
Compare this to the national average wage, which is £29009 or £35,423 for full time work. (ONS) A £23K cap on DB pensions would hurt only the few, not the many.
@TI – nice one, mucking about with cookies seems to have done the trick! delete my comments as appropriate!
@JimJim. Of course I appreciate and respect your position: you are simply receiving the contractual benefits of what you are entitled to receive. I also do not seek to devalue the work undertaken in the public sector. There does seem be significant anecdotal evidence to suggest there is little difference between public and private sector pay, so I am a little surprised by your statistics. I will see if I can dig out what I have read on the subject. Someone retiring on a pension of say £23k (to keep it simple i.e. a £1m DC pot). If we assume they are entitled to that sum based on a working career of 30 years and enjoy a 5% return, the sum invested each month to secure that income is £1222 (including the tax relief). A second assumption would be that they have been earning £40k and their career average pension is £23k (not unreasonable from what I have read). That gives net earnings of £2561 per month after tax. There is no way that between employee and and employer contributions you could reasonably fund that level of entitlement in retirement. In effect it is a subsidy from non public tax payers. Many non public tax payers have much poorer pension provision as well. The pension and the salary combined leave many people in the public sector in a much more advantageous position than would be the case. If it is unaffordable to remove the LTA…. All I am seeking is a level playing field; not a reduction in public sector pensions.
@7upfree. Yes our retirement benefits are superior, especially in this world of low interest rates, my point is simply we knew that when we signed up and were prepared to take the salary knowing our retirement was secure. It is part of the package. As for being subsidised, again it is part of the package, the deal done with the devil to secure our retirement.
When I eventually (barring redundancy, I have already lived through nine sets of redundancy and survived) I have 30 years service and reach my normal retirement age, my pension will be less than £15k. and that is with a salary not too dissimilar (a little further south) than the example you quote above. A £23k cap would not even tickle my pension. Factor into this a sub inflationary pay “increase” for the last 10 years, that, taking into account the lower of the two measures of inflation year on year and compounded, equates to a 17% reduction in pay, the words “final salary” take on a whole new meaning.
@7upfree – I guess time will tell how correct or not this comment turns out to be – but essentially it would seem somewhat unfair to claim DB pensions are always super expensive based on current interest rates.
A quick check on best buy annuities gives a rate of c.5pc so a £1m pot would buy 50,000 not 23,000 unless I’m missing something ?
Someone might be reading this comment in 2030 and if interest rates are 9pc then a £1m pension pot will buy 90,000 and conversely a 23k income would require a pot closer to 300k
I believe after fees most people would be hoping for growth of closer to 7 or 8pc than 5 over a 40 year period but whether this stands the test of time we don’t know.
I also don’t think a 30 year working life is particularly realistic now and would be very surprised if you could find examples of DB pensions that paid out their maximum at 30 years that are open to new entrants.
The LTA is a ‘soft’ ceiling on DB pensions I guess. It’s not a ceiling but once a ‘high ‘ (as we discovered last week one persons high is another’s average/low) income is produced it is subject to an additional rate of tax.
I actually don’t agree with your solution. Partly for the reasons above, partly for reasons JimJim raises around wages being lower, and also because you’re seeking to create a level playing field by making DB worse rather than DC better. When I look at pensions and policy I usually consider whether it’d be a good thing if people contributed to a pension rather than BTL and if so how can that happen.
@BBlimp If interest rates are 9% then inflation isn’t going to be hovering around 2%.
@JimJim & BBlimp.
The most fundamental difference between a DB pension and a DC pension is that one is guaranteed, and the other is subject to the vagaries of the market.
What, do you think, is this worth?
@BBlimp: “A quick check on best buy annuities gives a rate of c.5pc so a £1m pot would buy 50,000 not 23,000 unless I’m missing something ? ”
You are missing something. You are looking at level annuities which do not rise with inflation. For an annuity which rises with inflation (and has no inflation cap) you would struggle to get better than 2.0-2.5% (so £20-£25k on a £1mm pot). DB pensions are typically inflation-linked though the precise definition of inflation and whether there is any sort of capping varies from pension to pension. You simply cannot compare level annuities with inflation-linked annuities.
@the Borderer, Re; 67
For me it is priceless, The offset in lower salary has it’s drawbacks (my tax relief will only ever be at basic rate) but it has given me an effective large savings rate towards my pension, (one that is an option for a higher salaried defined contribution recipient) enabled me to see this steady retirement income as bond equivalent and freed me up to use risk assets and cash buffer for the rest (ISA’s). The downside is the effective savings rate is hardly optional if times get tight (four years of spousal sickness nearly had me opting out) and if redundancy strikes, I have to think again about how my final 5.7 years of work will go, or work longer in another job. Not much different to the norm on that front. I remember in the mid 90’s when the market was roaring and annuity rates were high a lot were tempted to jump the scheme… Glad I did not. As it stands when I draw it, it will make up about 38% of our retirement income, a lot less when and if we manage to draw the old age.
@ZX I stand corrected, thanks. That said my point regarding judging the relative unfairness of DB vs DC pensions on current ultra low interest rates doesn’t seem right
@Borderer – to me, priceless. I’m that sort – I have a ten year Fix on my mortgage for eg. For others less so.
On the subject of DB scheme inflation protection, all the ones I have been in capped inflation cover at 5%. This was one reason I transferred away from one. If the pension is going to cover 30 odd years, I was concerned about the probability that we could see a spurt in inflation significantly above that for at least some period. I think there is a case of taking the higher payout from a flat annuity and investing some of the surplus in something offering some chance of weathering a future storm.