Weekend reading: Looking down when the tide goes out

What caught my eye this week.

Sensible readers who passively invest and so haven’t been following the gyrations in the markets this past week, please jump to the links below.

Oi! That includes you, Accumulator!

Right. I presume I’m now addressing only those readers who have ignored our exhortations to invest purely into index funds like Saint Accumulator – those who instead get up to naughty active activities like yours truly.

In which case, I’m curious: How was it for you?

Ooft!

For my part I’ve had one of the toughest 10 days or so that I can remember, investing-wise.

At the worst point my portfolio was down by nearly 10% in barely a week.

That’s not the end of the world – I’ve seen far worse – but what was infuriating is that I’m running the lowest equity exposure in my tracked portfolio since, well, forever.

True, I was still well over 70% in pure equities. Ben Graham – who advocated 75% at the most bullish times and 25% at the least – would have frowned, given that I have slowly been decreasing my exposure to shares partly on account of my nervousness about the rampant complacency others were showing concerning the risks of shares. (Especially in the US, but also here whenever we made a case for cash or bonds.)

Still, I’d hoped mine would prove to be a pretty eclectic 70% collection of shares, as it had in the past, and hence it wouldn’t simply shadow the market down. That proved optimistic.

Most times over the years when markets fall 5-10% quickly, I’ve owned some small caps or thinly-traded larger companies that don’t move much at first. Many a pleasant 30 minutes I’ve spent trying to grind out a few points of gains or risk reduction by rejigging between them in a sell-off.

This time, none of that. Almost everything was down – on Thursday in some cases by 7-10% on the day.

Had underlying markets become more (or less?!) efficient since the last lurch down? Was I unlucky? Or was there something different going on with this fall?

One aspect wasn’t a mystery. I knew I was running some chunky additional risk with my active stock selection.

If I were marketing my portfolio as a fund, I’d perhaps spin it as a ‘barbell’ approach of low volatility assets mixed with ‘strong conviction holdings in global disruptors’.

But what it boils down to is I own several outsized shareholdings in tech shares that have multi-bagged. They are taking forever to whittle down, because I own them outside of tax shelters for historical reasons. And that, as I’ve written before, is a massive pain.

There are paperwork hassles. There are capital gains taxes to consider. Also, I am forever trying harder not to sell my winners too soon, because sins of omission have cost me much more over the years than sins of commission. (That is, I’ve forgone big gains by selling too soon and putting the money raised into some turkey.)

I knew this risky exposure was there. It was another reason why I’d been de-risking the portfolio where I could inside my tax shelters. But clearly I miscalculated somewhere because when the markets fell, I still went down with it.

Remember – I felt I was running less risk versus the market because I held fewer equities.

What’s more, historically my portfolio has been less volatile than my underlying equity benchmarks – even with the concentration risk and sector risk I manage, and even when I’ve been near-100% in shares.

Hence I really felt it in the nads when it all came to naught in the falls.

It’s not a disaster. I was nicely up against three of my four benchmarks when the rout started, and I’m still ahead of each of those by several percentage points. I remain down against the world index year-to-date, but the gap didn’t really widen. I’m underweight the US/dollar, and I think the under-performance here in the last couple of years will probably reverse if and when pound recovers.

We’ll see, but anyway I know I shouldn’t feel too bad that a bit of mean reversion has caught up with me.

So why do I?

Partly I think it’s because my purposeful risk reduction hasn’t paid off.

This slightly gives me the willies.

Lord make me a passive investor, but not yet

I have an existentially bleak view about active investing. In fact I’d bet I see active investing as far harder than almost any active investor you’ve met, despite what I’d argue is my creditable record.

In the middle of last week’s sell-off I described what I believe is required to even try to beat the market nowadays to a friend asking for advice on Facebook. He persisted even after I told him my only advice was – as ever – to invest in some select index funds every month from his salary and come back in 30 years.

He said he’d seen the news, and wanted to know if it was a “buying opportunity” because in his opinion the market had been too calm before.

Didn’t I have anything clever insights, he wanted to know? As usual I got the impression he felt I was blowing him off by urging him into passive funds. Keeping the good stuff to myself!

Eventually I snapped. Me in blue:

(Click to enlarge)

Often I tell friends I won’t know if I was a successful active investor for another 40 years, whatever my track record is to-date. It’s that uncertain, and luck is so hard to disentangle from skill.

As that renowned day trader Sophocles wrote:

“One must wait until the evening to see how splendid the day has been.”

I know I’ve not been obsessed in the past six months, if I’m honest. I’ve spent countless weekends shopping for home furnishings. It’s ages since I read an annual report in bed gone midnight – something I used to do more weekday nights than not.

I thought about putting everything into a Vanguard LifeStrategy 60/40 when I bought the flat near the start of the year, and taking a year out. Perhaps, on this evidence, I should have.

Home alone

I guess I also have to acknowledge that the mortgage I’m now running to sit in this flat that I’m typing from has probably turned some of my dials to new settings.

For as long as I’ve been investing, I’ve had a relatively monstrous buffer between me and the streets. Long-time readers might even recall that I really started actively investing when I decided to put my house deposit to work in equities, rather than in property, way back in 2003.

Don’t get me wrong, there’s still a big buffer in place. I feel secure… a healthy monthly cash flow from earnings in the front line, cash deposit ramparts, NS&I saving certificate moats, and a five-year fixed rate mortgage that means I’m safely inland from raids from along the coast. My assets well outweigh my debts.

Still, mine is not the fortress balance sheet it once was.

Effectively, like anyone with an investment portfolio and a mortgage, I can consider my portfolio to be levered up. (Because I could instead use the portfolio to pay down the debt.)

This was by design, but it would be foolish to deny there’s a price to pay.

Losing loadsamoney

Finally, while I’m sharing, there’s also the fact that while I’ve suffered bigger percentage losses in a week – far greater in the financial crisis – this was the biggest in cash terms.

I’m ten good years on from 2008, and hence I have more money exposed to the shredder. It’s harder to be as gleeful at the prospect of a bear market as I used to be.

Perhaps that’s why my back pain returned on Thursday. Like George Soros’ gnomic spine, mine tells me when I’m stressed, which is handy because I seldom feel stressed much.

I felt it this week.

A warning to recalibrate before the big one? Or have I just got to get my money-losing muscle memory back?

Something to ponder.

How was it for you?

From Monevator

Preparing for retirement: Finding a path to a flexible income and lower taxes – Monevator

From the archive-ator: Volatility, inflation, and asset class returns – Monevator

News

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

Will Chancellor Philip Hammond cut pension tax relief in the Autumn Budget? – MoneyWise

High Street sales decline for eighth month in a row – ThisIsMoney

Brexit uncertainty has crushed the housing market, says RICS – Guardian

Treasury weighing up tax break for landlords who sell to young adults – JW Hinks

This Texas finance professor sifts data for signs of rigged markets – Bloomberg

Residential retail bubbles around the world [Graphic and analysis] – Visual Capitalist

A million-plus Britons live in “food deserts” [Surely shops respond to demand?] – Guardian

Treasury admits ‘no consensus’ for wholesale changes to pension tax breaks – ThisIsMoney

The death of the IPO – The Atlantic

In essence, holding gold is a bet on a weaker dollar – Capital Spectator

Products and services

Natwest and RBS launch 1.5% savings rates, with a catch – ThisIsMoney

Lenders slash buy-to-let interest rates as demand falls – ThisIsMoney

Profits slide at big six energy firms as 1.4m customers switch – Guardian

You’ll get £100 [and I’ll get a cash bonus] if you invest £1,000 with RateSetter for a year – Ratesetter (or see this article for more on the risks and rewards)

Comment and opinion

Time horizons Vs endurance – Morgan Housel

Latest from the 89-year old founder of Vanguard Jack Bogle – Humble Dollar

Is the best predictor of future stock market returns useless? – Of Dollars and Data

What everybody is getting wrong about FIRE – Mr Money Mustache

Diversification pros and cons in three slides [Geeky but excellent] – Alpha Architect

Why stock pickers must hunt for ‘extreme returners’ – James Anderson

Great discussion about hard money, gold, and Bitcoin – Invest Like The Best

Meet the FI Family: Mr and Mrs Young FI Guy interviewed [Podcast] – UK FI Pod

Just another panic attack in the market [For investing nerds] – Calafia Beach Pundit

John McDonnell is not offering workers real share ownership – Guardian

What should you consider in a ‘forever home’ [US but relevant] – Morningstar

What would you do with £1 million? – FIREStarter, indeedably, Quietly Saving, Ms ZiYou, Saving Ninja

Is Hargreaves Lansdown’s dividend yield too low for income investors? – UK Value Investor

Life advice: Don’t follow your passion – Scientific American

Brexit

Hammond says double bonus from Brexit deal would bolster Budget [Search result] – FT

On Brexit, Tory ‘ultras’ are gaslighting half the country – Guardian

No-deal Brexit will leave households facing higher food prices, restricted travel, medical shortages and curbed consumer rights, Which? warns – ThisIsMoney

HMRC chief faced death threats after opining on customs costs – Civil Service World

Polls suggest many Leavers want Brexit whatever the outcome – YouTube

Kindle book bargains

The Templars: The Rise and Fall of God’s Holy Warriors by Dan Jones – £0.99 on Kindle

Over and Out: My Innings of a Lifetime by Henry Blofeld – £0.99 on Kindle

You Are a Badass: How to Stop Doubting Your Greatness by Jen Sincero – £0.99 on Kindle

Way of the Wolf: Straight line selling by Jordan Belfort – £0.99 on Kindle

Off our beat

Amazon owes Wikipedia big-time – Slate

Off our beat: Environment special

Why you have (probably) already bought your last car – BBC

What would real ambition in tackling dire climate warnings look like? – Vox

We need to act now on climate change, or we’re screwed – DIY Investor UK

47-year old plastic soap bottle washed up on beach still looks brand new – BBC

The biggest threat to long-term wealth [Oldie from me!] – Monevator

And finally…

“In my view, risk is primarily the likelihood of permanent capital loss. But there’s also such a thing as opportunity cost: The likelihood of missing out on potential gains. Put the two together and we see that risk is the possibility of things not going the way we want.”
– Howard Marks, Mastering the Market Cycle

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1. Note some 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”.

from Monevator http://monevator.com/weekend-reading-looking-down-when-the-tide-goes-out/

The App That Could Save You Money

We’re all guilty of relying on ease and convenience from time to time. That’s why so many of us stick with the same overpriced deals where our bills and utilities are concerned. According to Ofgem, in fact, millions of homes are wasting £300 a year simply by failing to compare and switch energy suppliers. By the time you factor in other major household outgoings – like broadband, TV and mobile phones – that figure can quickly swell to beyond £1000.

A solution in the palm of your hand

BillButler is a newly launched app that aims to take the hassle out of the comparison process, saving you both time and money. Free to download for iOS and Android, set-up takes mere moments, during which you can sync up your various bills. Via a central dashboard, you can then monitor and alter your expenses on the go, easily identifying where your biggest financial drains are. With notifications alerting you when better offers become available, there will be no more sifting through mounds of paperwork, or tiresome trawling of the internet trying to hunt out deals.

Conceived around an ethos of collaboration and transparency, the app has a built-in instant messaging service, and a ‘split bill’ feature, which makes it easy to divide costs between friends and family where appropriate. With more than 40 trusted suppliers already signed up, users will be able to incorporate a wider variety of bills – including car insurance and Netflix subscriptions – as the app continues to grow.

A service that benefits everyone

Aside from the obvious advantages this presents for consumers, it has been structured in a way that works for suppliers too. By evening the playing field, smaller, lesser-known companies now have a direct means of connecting with potential users, helping them to showcase their services (and often lower prices), so they can compete alongside the market giants.

With a solution as simple and intuitive as this, there’s no longer any reason to settle for outdated deals; the days of wasted money hopefully soon behind us.

from Finance Girl http://www.financegirl.co.uk/the-app-that-could-save-you-money/

Record Fall in Home ownership among the Young

For many years the number of young people buying their first house has been falling. There have been a wide range of reasons for this, with lifestyle factors making an impact as well as economics.

In a recent study it was found that home ownership fell amongst all income brackets for 25-34 year olds. Amongst the top income bracket, who had a household income of £41,000 a year after tax, home ownership had fallen from 85% to 65% in the last 20 years. The fact that this fall in home buying has equally affected wealthier young people suggests that there might be more factors than just economics.

A lot of young people simply aren’t considering home ownership until far later in life, if they are considering it at all. Another study predicted that one in three UK millennials would never own a home. Many young people have been spending more on other things, like travel and rented accommodation, because saving for a house isn’t a priority. The previous urgency to buy a house has been replaced by a sense of living in the moment and waiting until they are older to start a family, buy a house and settle down. Many millennials feel like owning a home is completely unattainable so have decided to spend their would-be savings on experiences for now instead. Different approaches to working have also been on the rise, with ideas like flexible hours, remote working and spending time abroad appealing to this new generation. These alternative lifestyles mean that owning a home can sometimes be a negative, tying people down to endless mortgage payments and one location.

Rising house prices have obviously made an impact on young people’s ability to afford a house. Due to record house prices in the UK, the average first time buyer needs to put down a deposit of around £33,000. The amount needed for a deposit is so high that people need to be earning or inheriting a great deal to get on the property ladder. With rising rent bills, student debts and a high cost of living, this simply isn’t possible for many young adults. House prices have increased almost 160% since the middle of the 1990s and the income of young people has only grown by 23%. With a population that is living to an older age, young people will have to wait even longer for any help from their parents or grandparents towards a deposit.

As buying a house is no longer a priority for many young professionals, they are often willing to spend more on their rental accommodation. Increasing expectations, like en-suites, fast internet and on-site facilities, from young renters mean that high end rental properties are in greater demand. Properties like these RW Invest apartments – https://www.rw-invest.com/manchester-property-investments/ – are perfect for investors looking to capitalise on this new opportunity. Millennials are currently redefining what is essential to them in a property. Space isn’t as important as a stylish interior design scheme. Living in the city centre, in the heart of the action, seems to be more desirable than living on the outskirts. There is far less of a rush towards frantically saving for a deposit and paying a large proportion of their income on rent is an accepted fact.

An increase in rents has been predicted to carry on rising as demand increases, especially from younger people. The historic lack of top quality rental accommodation means that there is a real need for property investors and developers to provide solutions for young people from the fittingly termed ‘generation rent’.

from Finance Girl http://www.financegirl.co.uk/record-fall-in-home-ownership-among-the-young/

How To Make Yourself Stand Out At A Trade Show

Trade shows are a great way of meeting other people in your industry and getting your name out there but often these events are flooded with people selling similar things. In order to stand out at a trade show and encourage people to buy into your business, there are some measures that you can take. In this article, we are going to take you through some of these things so keep reading if you’d like to find out more.

Greet People

At a trade show, people are constantly walking by to see what is on offer. If you want to stand out and have people remember your booth, you need to think about greeting every single person that walks by. Only talking to people who stop to talk to you is not going to cut it, you need to make yourself present and show confidence. Like most people you won’t be able to speak to every single person but putting on friendly gestures such as a smile or a nod will help make everything a lot easier. As long as you show some confidence, they might be more willing to stop and have a chat.

Get A Nice Display

At a trade show, most of the stands are going to look the same and so it is very hard to stand out. This is why you should try to ensure that your display looks as eye-catching and appealing as possible to any passers-by. To achieve this, you should utilise prominent imagery that helps emphasise your product or brand in the form of banners or pop up stands like these. Using this form of display, you will be able to provide quick information about your company and those passing by will be able to get a glimpse on what you are about right away. Make sure that your display hits the right boxes; it looks good but not over the top or nonsensical, if you want to stand out at a trade show.

Give Out Prizes

Everyone loves to get something for free so if you want to stand out at your next trade show then you should think about giving out some prizes. Consider what sort of competitions might be relevant to your business and think about giving away prizes that involve the product or service that you are selling. You could have photo contest loosely related to your business or product line or possibly a prize draw for people who sign up to your mailing list. The bigger the better so make sure to try out a fun competition for your next trade show.

Post On Social Media

If you want people to come to your booth at a trade show you need to think about posting about your location on social media. This will give people more information about where you are, and they will be more likely to come and visit your booth. If you wanted to take it one step further, you could let people know about your competition or a giveaway that you are doing on social media. The more that you advertise your position at the trade show, the more people you will get to come and visit your stand.

Final Thoughts

It’s not always easy to make your company stand out at a trade show as often the other companies that are there will be offering the same things to the other guests. Think about how you can make your booth stand out by getting some banners or even doing a prize giveaway. Try to be pleasant to everyone that walks by and show that you are willing to talk to people. If you take on board all of our advice, then you should be able to have a very successful trade show.

from Finance Girl http://www.financegirl.co.uk/how-to-make-yourself-stand-out-at-a-trade-show/

What Is An IFISA?

As a comparatively recent addition to the finance market, Innovative Finance ISAs can be much more complex for potential investors than other traditional ISA options. We’ve worked with our friends at Just ISA Investments to make the world of innovative finance clearer, including details such as IFISA limits, how your investment generates returns, and how some companies like Just work to make your investment safer.

IFISAs Explained
An innovative finance isa (or IFISA) is the third, and newest, type of ISA available to UK investors and is specifically intended for you to use your tax free ISA allowance to invest in peer to peer lending – where your investment is lent to borrowers and businesses, who then pay back the amount with interest based on the length of your investment.

Litigation-based IFISAs, for example, use your investment to finance legal cases brought by third parties – often where the litigant cannot afford to pay the legal costs that would be a part of pursuing their case further. The return on the investment, if the case is successful, is then paid back to investors.

You can only pay into one IFISA in each tax year, but you can pay into a cash, stocks and shares and innovative finance ISA in the same tax year as long as you do not exceed your total yearly ISA allowance – allowing investors to vary their payments across several savings options.

What Makes ISA Products IFISAs?
IFISAs commonly differ from normal ISA offerings by increasing the options for investors to consider – Whilst a cash ISA is commonly held with a bank or building society and offers low interest and low risk, IFISAs can give you the opportunity to invest in a wide range of different sectors – including litigation finance, property, and even precious metals.

As innovative finance ISAs function as peer to peer lending, some companies also use IFISAs as a means of gaining direct investment (usually through bonds) into their own projects or partnerships, with the company acting directly as the borrower. The funds gathered through their investors are then further invested into areas like housing or litigation, and the investor gets a return based on the success of the IFISA company.

Risks can include the borrower defaulting on the loan created by your investment, or failure to raise enough investment to properly explore the chosen market. As with all investment options, your capital would be at risk.

How Can You Invest In An IFISA?
In the U.K., the number of investors interested in innovative finance options has only grown since the release of IFISAs into the public sphere. Peer-to-peer lending, group investment and specific products like bonds are all accessible options for new investors – and as the number of willing investors continues to grow, the opportunities for investment should also continue to increase.

What Risks Should I Be Aware Of?
Whilst there are a large number of risks associated with any investment, and every company offering IFISAs should have a complete breakdown of the risks associated with their sector, there are always several things that investors should be aware of (and are often caught out by).

Impact of Fees
IFISA investment opportunities often carry a series of fees payable by the investor to the management company – which will have some impact on the net return of the investment. These fees are usually set out in the terms and conditions of the investment, and those considering investing smaller amounts should be especially careful of the impact that fees could have on their eventual return.

Exposure to External Events
Whilst litigation funding is often sheltered from external financial events, the companies offering investment into litigation funding are not – the trading and assets of funders could be affected by unforeseen events, including economic, social and political events or trends. Whilst these events are unlikely, it is always worth taking the current financial and political climate into consideration when deciding on the best method for investing your funds and planning accordingly.

Diversification
Diversification means spreading your investments across different asset classes and sectors. Diversification is a common means of reducing overall risk to your investment portfolio. When you invest in IFISAs focused on specific financial sectors – like litigation funding or property investment – you should be aware that all monies invested will be in the same sector and through the same asset class. To mitigate the inherent risk in this practice, investors should consider spreading or diversifying their other investment activities and seek independent advice if they have any doubts, particularly as some markets are more volatile than others.

from Finance Girl http://www.financegirl.co.uk/what-is-an-ifisa/

Preparing to take a retirement income: Finding a path to a flexible income and lower taxes

Here at Greybeard Towers, the economy has taken a turn for the worse. Like many other freelance writers and editors I know, I’ve seen a softening in the marketplace in which I sell my skills.

These things happen. Ten years ago – exactly ten years ago, as banks imploded, and stock markets plunged – the same thing happened.

Back then we had kids still living at home, and the last few thousand pounds of a mortgage to pay off. Today, my wife and I are far less encumbered with fixed outgoings. Nevertheless, the experience has been instructive.

Firstly, it’s been instructive in that I took a decision to cushion the hit to our lifestyle by withdrawing a monthly income of several hundred pounds from my ISA-sheltered share portfolio.

This was a weird sensation, and left me – no, leaves me – feeling oddly guilty. For the first time in decades, instead of reinvesting dividend income, I am withdrawing it, and spending it.

Somehow, it doesn’t – yet, anyway – feel right.

All change

The second instructive experience has been less angst-inducing, but is still challenging.

Namely, I have decided to accelerate my plans for retiring. Or, rather, semi-retiring. I hope to carry on working, but I’ll also be taking a pension income.

As readers with long memories may realise, this wasn’t the original game plan.

For years I have planned to retire at 70, gradually winding down as my seventieth birthday approached. And – to be blunt – probably carrying on doing a few simple commissions for long-standing clients, if such opportunities came along.

But having just turned 64, with the state pension two years away, it seemed sensible to consider taking income from my two SIPPs.

Former pension minister Steve Webb’s much-vaunted pension freedoms have not only made that easier, but also introduced new options such as UFPLS¹ flexible drawdown.

Frankly, why not take advantage of these freedoms?

From strategy to tactics

Right from the outset, the broad strategy seemed clear:

• Disregard the annuity option. Some form of cautious drawdown on my assets should leave an inheritance for the kids, as well as hold out the prospect of a growing income.

• To this end, take the natural yield, rather than eat into capital. With tax-free ISA income from a share portfolio, some freelance earnings, other investment income, two state pensions, and my wife’s occupational pension, that would be ample.

• Although (as I’ve written before) I’m attracted to the more flexible end of the new pension freedoms – and in particular, to the UFPLS – it would be necessary to figure out some way of mitigating the effects of the £4,000 Money Purchase Annual Allowance (MPAA) limit, which would severely restrict my ability to shelter freelance earnings in a SIPP, away from the beady eye of the taxman. This wouldn’t be a problem with either an annuity or traditional ‘capped’ drawdown, but would be a problem with UFPLS.

All good stuff, but I was uncomfortably aware that it was very high-level stuff, as well. The practicalities would need thinking through, and organising. And I would need to be very careful about avoiding any hidden bear traps.

Plus, of course, there was a significant element of irrevocability. Once I’d triggered drawdown, for instance, there would be no turning back.

A summer of careful reading and researching beckoned.

Here’s what I found, along the way.

A route to follow

One immediate realisation was that multiple pension providers offer an abundance of free literature, readily downloadable. I devoured stacks of it.

I could also send off for pension projections and illustrations – including my personal state pension forecast of £148.88 a week, or £7,768.35 a year, which was curiously empowering.

The government’s Pensions Advisory Service and Pension Wise websites also contain a wealth of useful information.

Not all the advice I obtained was through the written word. Determined to do things ‘properly’, I took up my option of a free pension consultation with the government’s Pension Wise service, booking a Pension Wise appointment, which duly happened in early August.

The adviser, named Colin, was incredibly knowledgeable, and we went the distance, going for the full hour. Well worth doing, and highly recommended.

Right from outset, it was clear that the inflexibility of traditional drawdown posed a challenge.

Essentially, I was turning on a tap, releasing a flood of income. Should the freelance market pick up, I’d face an awkward choice between turning down work or getting clobbered by higher-rate tax. Due to the MPAA rules – designed to clamp down on tax-rebate ‘recycling’ – once I’d sheltered £4,000 in a pension, any further earnings were taxable.

This in turn reinforced the attraction of UFPLS as an option.

While UFPLS is a form of drawdown, it’s a flexible form of drawdown. If the freelance market picks up and my earnings look to leave me exposed to a hefty higher-rate tax liability, I can simply turn the UFPLS income tap to the ‘off’ position. Like this I can maintain a level income, by using UFPLS as the balancing factor.

On the other hand, the initial plan of a monthly UFPLS income seems unrealistic. Providers do offer it, and apparently people do take it. But the paperwork seems disproportionate, with every UFPLS drawdown triggered by a completed UFPLS application form, and accompanied by an ensuing (and legally required) UFPLS illustration.

Being pragmatic, it probably makes sense to combine my two separate SIPPs into one, and going for three-monthly or six-monthly UFPLS payments, rather than monthly payments. The downside: to some extent, this will limit my ability to ‘flex’ income to avoid higher-rate tax.

Finally, the rules around the taxation of pensions after death seem unduly harsh. If I die after age 75, and my wife survives me, the remaining pension investments she will inherit are taxed as income. That’s not a good option for a sum that should amount to several hundred thousand pounds.

To avoid a massive tax hit – repeated again when the kids inherit it after my wife dies – it’s necessary to set up a dependents’ drawdown account, from which an income is taken.

More research is needed here, but at least I’ve got 11 years to undertake it.

Ready, steady… go?

So what have I done? Nothing, so far. But at least I know the broad outline of what I will do, when I push the button.

Our income, at the moment, is just about adequate without massive belt-tightening. (If you’re looking for a first-class writer and editor, get in touch…)

What have I learned? More than I thought I would.

Moving into retirement – and making the right choices – is a complicated business, unless one goes for the straightforward annuity option. I knew that already. Even so, I’m still surprised at the complexity of the choices I face.

The government, it seems to me, has brought into being a range of pension freedoms, but hasn’t invested the time and energy to provide a regulatory and tax framework to help retirees readily access those freedoms. That is regrettable.

Making the right retirement choice was difficult enough in the old ‘annuity versus drawdown’ environment. It’s tougher still, now.

Read all of The Greybeard’s previous posts on deaccumulation and retirement.

1. Uncrystallised Funds Pension Lump Sum

from Monevator http://monevator.com/preparing-to-take-a-retirement-income/

Weekend reading: Financial Independence against the odds

What caught my eye this week.

Most of us moan now and then about life sneaking some booby-traps across our path to financial independence.

But few of us will face the hurdles overcome by The Humble Penny’s Ken Okoroafor and his family.

In a must-read guest post over at The Escape Artist this week, Ken relates how:

For a very long time, life in the UK felt like living in a prison. This is because we had a visa issue technicality on arrival in the UK. This meant we had no right to the NHS, no right to apply for jobs, no right to benefits etc. Basically no rights to anything till we heard back from the powers that be on what our future would be.

Months of waiting turned into years.

So how did we make money to buy food and survive? The only path available was to get creative and go underground.

A job at Pret would have been fantastic. However, that wasn’t an option. We needed to go lower – informal jobs cleaning factories, plate washing.

Do check out Ken’s full story to financial independence.

I’ve always been inspired by recent immigrants. In the main, statistics show they work hard, contribute more than they take out, and they are more entrepreneurial, too.

As I wrote back in 2007:

Mostly those who’ve taken the plunge and come to the UK don’t say, “We are very lucky to come here and scrounge from you stupid, lazy rich British.”

They say, “You British are very lucky to live here, to be able to make such money.”

They’re on a mission – the kind that happens when you decide to reinvent your life and choose your own path.

One of the many dismaying aspects of the Brexit referendum centered on immigration.

When the saner elements of the Leave campaign realized they couldn’t solely target EU migrants as a drain on the state – because such migrants contributed more than they put in – they shifted the argument to claim they were taking our jobs and driving down wages. Again with scant-to-no evidence.

One of the best retorts I ever read came in a comment from a Monevator reader:

The difference between “the poor Northener” and the “the poor immigrant” is that the poor Northeners can catch a train to visit their families on their days off, that they don’t have to learn a new language, and that they will have it even easier to find a job.

But because they don’t want to use their right for free movement (not even within their home country, FFS!), they decide to take that same right from other people.

[…]

London is a challenge for everybody who comes here, no matter where you are from.

I see 19-year-old girls who are still babies in their head leaving their family and their nice sunny beaches in Spain or Italy to come here and work 50-hour-weeks for £7.20 per hour and getting told off by their managers for being late for their 5a.m. shift, which happened because they don’t know what “this bus is on diversion” means.

They are afraid to lose their jobs for minor mistakes, because how shall they pay their rent…actually, how shall they pay their rent?

They don’t have a bank account and to open a bank account you need a proof of address and they don’t have a proof of address because flatsharers seldom have their name on utility bills, and their NINO appointment is only due in four weeks.

They are tired all the time, because they spend too much time commuting, and running errands or shopping for groceries takes five times as long in London as in any of their home towns.

When I say that my main reason for being here is that I love to be here, they look at me as if told them that I love to swim naked in the Thames every morning. I could go on forever.

The struggle is real, as they say. At least it is for those who take it on.

For others, easier to find a scapegoat.

Note: I’m publishing early this week. If I’ve missed anything good, please do feel free to pop it into the links below. Also, if people do want to debate immigration please do so respectfully. I’ll be moderating hard anything I personally deem racist or inflammatory. There are other places for that.

From Monevator

The Slow and Steady Passive Portfolio Update: Q3 2018 – Monevator

From the archive-ator: Valuing the market by P/E ratio – Monevator

News

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

Potential conflict of interest remains as rules tightened on financial salary transfers – Money Observer

World markets rattled by US inflation concerns – Guardian

London house prices fall again as stamp duty and Brexit fears bite… – Guardian

…and luxury homes face new hit, as UK plans extra tax on foreign buyers – Bloomberg

…while new tube map shows flat affordability for every London station – Metro

(Click to enlarge)

How a few model portfolios have performed in the medium-term past [US but relevant] – Wealth Management

Products and services

Santander launches robo-adviser for first-time investors – CityWire

New mobile bank N26 from Germany to launch current accounts in Britain – CNBC

Childcare Vouchers replaced by Tax-Free Childcare scheme – Your Money

Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter

Mortgage rates for potential first-time buyers continue to fall – ThisIsMoney

Prenups are losing their stigma in the US – Business Insider

The best value used car is apparently the super-fancy Mercedes E-Class – ThisIsMoney

Comment and opinion

My best investment: Low returns, high value – The Vanguard blog

Try a modern spin on a classic idea with the Pinwheel Portfolio – Portfolio Charts

Rick Ferri interviews Vanguard’s founder Jack Bogle [Podcast] – Rick Ferri

What if stocks don’t crash for a long time? – A Wealth of Common Sense

Make sure you’re not over-exposed before a [US] bear market comes – MarketWatch

Budget busing – The Humble Dollar

Are investment returns from cannabis stocks just a pipe dream? [Search result] – FT

So much for the bond bubble – Morningstar

What happens after (in retrospect) stock market peaks – The Irrelevant Investor

Good health and fitness gives you optionality in retirement – Random Roger

Win or lose, every [trader] gets what they want out of the market – The Macro Tourist

Are you a UK start-up looking for funding? Here’s a guide to the UK’s top seed funds – Medium

Brexit

Paris set to triumph as Europe’s post-Brexit trading hub – FT via CNBC

Forget Brexit, we’re heading for BRINO [Brexit In Name Only. Search result] – FT

Brilliant lampoon of the Tory’s miserable Brexit-addled conference – Guardian

The ‘opportunity’ created by Brexit [Graphic] – Seb Dance MEP via Twitter

EU negotiators see Brexit deal “very close” – sources – Reuters

Kindle book bargains

Way of the Wolf: Straight line selling: Master the art of persuasion, influence, and success by Jordan Belfort – £0.99 on Kindle

The Templars: The Rise and Fall of God’s Holy Warriors by Dan Jones – £0.99 on Kindle

The Slave Trade: History of the Atlantic Slave Trade, 1440-1870 by Hugh Thomas – £0.99 on Kindle

You Are a Badass: How to Stop Doubting Your Greatness and Start Living an Awesome Life by Jen Sincero – £0.99 on Kindle

Off our beat

The war on sensible things continues, with Shetland no longer to be put in a box on maps – BBC

Hungry like a wolf [Video] – via Twitter

And finally…

“And when the golden handshake finally came, there you were at your leaving party one day, and the next you’d fallen off the proverbial cliff and on to the sofa, slippers at the ready. Easing into retirement by gradually reducing your hours was virtually unheard of.”
– Celia Dodd, Not Fade Away: How to Thrive in Retirement

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1. Note some 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”.

from Monevator http://monevator.com/weekend-reading-financial-independence-against-the-odds/