All in it together

Being “in it together” makes things easier when the going gets tough. David Cameron appealed to this when he vowed to tackle the deficit, albeit that some have since tried to turn it against him. In pension terms, employees were typically all in it together in the days of defined benefits schemes, before they closed to new members and further accrual stopped. The State pension was supposed to mean we were all in it together although there’s now a sense that this broke down as longevity increased but retirement age didn’t, turning its un-funded efficiency into an inter-generational transfer. However, we must not learn the wrong lessons: as a principle, being in it together is a very good one – and one that helps in pensions.

I had recent experience of this in another context and it was surprisingly informative. One of my sons needed an operation, my wife was abroad and it was down to me to see him through this. He couldn’t eat for some time before-hand and it wasn’t going to help him if I was tucking into hearty meals in front of him. So we fasted together.

From various articles I’ve read, it seems there is considerable evidence that fasting increases longevity and has other health benefits (for example, fasting & cancer or, in more detail). It stands to simple reason: if our ancestors were weakened by not having 3 meals a day, none of us would even be here – we are anti-fragile, if you like. I’m also perfectly well-aware that many religions observe fasts, for example in penance for past excess, to focus on the spiritual rather than material or to remind us of the struggles of those less fortunate than ourselves. So how many times have I fasted when I didn’t have to? Err … do I have to answer that one? And how much was I looking forward to this brief, one-off fast? An amount inversely proportional to my number of voluntary fasts, truth be told.

So how did my son and I get on? As it turned out, I was surprised how easy it was. Don’t get me wrong, a certain amount of fortitude was required but far less than my foreboding had indicated. When my son was rewarded with hot toast and Marmite after his op (you’ll have to skip a couple of meals if you really want to know how good that smelt), I still didn’t crack, not even when he offered me a slice (what a good son, hey, but, no, I couldn’t). Looking back, I wonder why I was surprised at the relative ease of it. But then again … how many times have I fasted since then? Can I decline to answer that one, too? And how inclined am I to test myself again, even just once? Oh dear, Human Failings: 1 Longevity & Spirituality: 0.

This is precisely why auto-enrolment has been working so well. It’s giving the population that little bit of a push to do something they know they should do – and, at a certain level, they want to do – but which, without auto-enrolment, millions have manifestly failed to get round to. We are all in it together, all having to give up a little bit of jam (or should that be Marmite) today, all knowing it’s worth it in the overall scheme of things. The low opt out rates so far suggest that most people are finding this easier than they expected. It is beholden on influencers everywhere to show a little fortitude, resist the temptation to give in (for example, to scaremongering about pay freezes to pay for pension contributions) and keep everyone going.

No thanks, son, I’ll have it when I’m retired, instead

Re-building initiative in SIPPs

Another budget, another pensions surprise. Rather than the usual crimping, however, this time we got a new initiative: to allow SIPPs and SSASs to convert commercial property with unused space to residential property.

“Housing

2.18 Changes to pension investment rules to encourage the conversion of unused space in commercial properties – The Government will explore with interested parties whether the conversion of unused space in commercial properties in high streets and town centres to residential use could be encouraged by amending Investment Regulated Pensions Schemes rules. Any amendments would need to be consistent with sound public finances and the Government’s wider pensions strategy.“

Two Sorts of Capital Punishment

There is a massive issue in the SIPP industry at the moment: the FSA’s proposals for a new SIPP capital adequacy regime. There’s a big difference between capital adequacy and capital punishment but, nonetheless, it seems the difference needs clarifying.

Apparently, there are two sorts of people: those that divide everything in to two sorts and those that don’t. When it comes to capital adequacy, this “two sorts” type of thinking abounds. For example, there are two sorts of SIPP operator¹: those that can meet the capital adequacy proposals and those that can’t.

Nothing in between Capped and Flexible? I can’t Adam & Eve it!

I’d like to share with you the extraordinary tale of two 60-year-old retirees, born on the exact same day. They are both in capped drawdown and they have both just received notification of their new income limits. Neither is happy.

Failing to Illustrate a Simple Truth

Projected growth rates in illustrations are being cut to 2%, 5% and 8% per annum, delivering a supposed cold dose of reality. I can’t really agree.

The rationale for reducing the assumed investment returns is that we have been in a period of very low growth since the financial crisis began and policymakers believe that it is likely to continue. It’s not that I dispute this; nor am I particularly inclined to argue the toss on what exactly the rates illustrated should be. To me the whole thing is an example of learning the wrong lessons.

Learning the Wrong Lessons

This chap is on holiday in Hong Kong and he’s just ticked off one of the tourist classics – he’s had a suit made. He goes back to his Kowloon hotel to show his wife and, to his surprise, she hits the roof! For when he tries it on, she is accosted by a tailoring train-wreck. The jacket arms are uneven and twisted; the trouser legs are, if anything, worse. The seams, the pleats, the lapels, the collar: it’s a contorted, mangled mess from start to finish. Nothing hangs straight. She sends him hot-footing it back to Tsim Sha Tsui to confront the tailor.

Play Your Cards Right

You may be surprised to learn that many years ago I was a casino manager. For those who know no better, this conjures all sorts of visions: Vegas, excitement, Robert De Niro and gangsters. I can assure you, they are all a Mirage. In fact what my experience revealed was insights into the dark worlds of highly regulated industries and the intuitive mistakes of the human mind. It is the latter which I believe provides a warning for owners of some of the 120 companies in the SIPP businesses – and gamblers.

Drawdown Rhetoric Should Be Capped

A tacit competition to find the individual whose drawdown income has fallen the most is raging like a hot new Olympic event. Some providers have then used this to argue that the way capped drawdown operates needs fixing. It’s straight out of the Alastair Campbell play-book. In reality, their case is far from clear.

Let’s examine the evidence: what has, hasn’t and will change? Let’s also remind ourselves that capped drawdown does not sit in splendid isolation: what should we be learning from alternative financial products such as annuities, flexible drawdown and ISAs?

Talking Rubbish

I have come to a startling realisation: it is just incredible how little attention we pay to detail, how imprecise we are, how much rubbish we inadvertently talk.

Smashing Milestones

Today our family celebrates something that nearly everyone seems to call a “milestone” for my dad. To tell the truth, I don’t think he’s that excited about it – the “milestone” thing, I mean, not the family gathering.

Milestones don’t really carry the right connotations. They indicate progress on a journey. If life is a journey, it starts spontaneously – as far as we’re concerned – at birth and ends at the same point, location unknown, for all of us (the bit we don’t like to think about, and nor should we). It’s a journey we are in no hurry to complete and signs of “progress” are profoundly unwelcome.