andrew's blog

The final lie

He may have been hanging around to ensure his legacy. In the end he'll be remembered only for Iraq (if he's lucky) and for Iraq and in addition for being a lying scumbag (if he's not).

True to form, he went out on a lie.

30 September 2004: "If the British people - it's their decision - if they elect me, I feel I've still got lots more to do and to give, then I want to serve the third term". (source: here)

10 May 2007: He tells a crowd of supporters in Trimdon Labour club he will stand down as PM on June 27. Less than half way through the term!

Happily, Labour has bungled the leadership succession. Too many idiotic Labour MPs have muttered about how Blair moving on is good for the party, when what they should be considering is what is best for the country. Expect a dead cat bounce when Gordon Brown is appointed leader, followed by a Conservative victory at the General Election in 2010.

Here we go

It's a good time for the market to tank. Because I got the following e-mail today:



From: "Edinburgh Money Purchase"
Subject: RE: Transfer of pension

Thank you for your email.

The transfer has been calculated and payment will be made on 11 May 2007.

Written confirmation will be sent to you stating this on Friday 11 May.


Depending on how much money comes through, I'll be looking to buy 17-18 units for my new SIPP, to complement my existing ISA portfolio. Exciting times!

On her own

A rather disturbing story of a holiday gone wrong.

We have never left Katie on her own, not even for 5 minutes. We have always arranged a baby sitter for the few times we have both been out.

But going out for two hours and failing to make use of the baby sitting facilities which appear to have been available? What on earth were they thinking?

Totally gay

It's hard to overstate just how stupid journalists really are.

There are plenty of articles in almost every quality newspaper this week fretting about whether there is a 'pink' ceiling preventing gays and lesbians from making it to the highest echelons of British business...

(such as here and here and here and here and here and here and here)

... all of which manage to weave in a reference to Lord Browne of BP, quite possibly the single most successful British businessman of all time, certainly of this generation. Indeed, as a BP shareholder myself, I'm much more worried about their results and activities, including the Texan fire and the Alaskan pipeline troubles, not what the CEO is getting up to in his private life.

And as Robert Peston, the rather tiresome Business editor at the BBC, says: "His departure was not prompted by homophobia at BP or among BP's shareholders."

That's a "no" then.

Pensions part 5 - what we're doing about it

This is a post about our pension provision as it currently stands. If you want to see how we got here, you may wish to read part 1, part 2, part 3 and part 4 first.

It’s important to stress that we are doing a lot of saving outside pension plans. Pension plans are great if you get a contribution from an employer – it’s free money and you’d be daft to turn it down. And you get tax relief at the marginal rate at the point of paying the money in. However there’s a heavy price to be paid for that relief – you have to lock the money away for a long time and you cannot easily get much of the capital back. And, as I mentioned in part 4, the Government has a habit of changing the rules arbitrarily. Recently the age at which you could start drawing a pension was raised from 50 to 55. Why? I don’t really know. It’s certainly not going to entice more young people to put money into a pension scheme.

Our preferred approach is to invest my annual ISA allowance (currently £7,000, due to rise by £200 from April 2008) in a self-select ISA. We’re following the Motley Fool’s High Yield Portfolio approach and it’s already producing the goods – in about 3 years of investing (including transferring in money from a mini shares ISA with prior year allowances) it’s now generating a tidy sum in dividends a year. If we manage to keep this up, and the tax rules on ISAs stay where they are, this will be a very significant part of our portfolio for retirement. And, as it’s outside the pension system, we maintain control of the capital to do with what we wish.

We’ll leave the KPMG pension fund where it is, unless the rules change to let us get the defined contribution money separate from the defined benefit money. Also I can’t move the ICAEW Friends Provident money unless I change jobs, which I’m not planning to do. Any orphaned pension funds will get swept into the SIPP if possible. The SIPP will be run on the same basis as the ISA, only inside a pension fund. We won’t seek to add to it, though.

Maintaining this path, together with the money we currently expect to receive from the state pension, should provide us with adequate income for our entire retirement, no matter where we end up retiring.

However it’s easy to underplay the discipline and resolve necessary to deliver this strategy. We manage it because we are hard-nosed when it comes to household expenditure. Other than our mortgage, we don’t have any debt. We don’t take multiple foreign holidays a year. We don’t own a car. We have pared every other household bill down to the bare minimum. Can we keep it up for the next 20 years or so? Looking at it another way, we know we can’t afford not to.

Sadly, even if we manage to maintain our discipline there’s always the risk that other Britons don’t and therefore put irresistible pressure on the Government of the day to “Do Something�, with savers bearing the brunt. Gordon Brown’s shameful pensions swoop is a case in point. By keeping our money as flexible as possible, we can hopefully avoid any nasty stealth taxation. We already intend to emigrate, so any adverse legislation would only serve to encourage us to move earlier.

Pensions part 4 - the state system, ludicrous complexity and dodging bullets

This entry continues my pensions story. If you want the background to all of this, you may want to read part 1, part 2 and part 3 first.

So far, I’ve referred to employer pension schemes only. This little piece will look at the UK state pension and what it means for us.

The UK state pension is widely regarded as one of the meanest in the developed world. Don’t take my word for it. This is a direct lift from the first report of the Pensions Commission (p.58). Currently the UK state pension comes in two bits – the basic state pension (BSP) and the state second pension (S2P), formerly known as SERPS.

More on each of those follows. But first it’s worth pointing out this fundamental truth: The UK state pension scheme is as complex as it is stingy. I’m a qualified chartered accountant and even I struggle to keep up with the convoluted nature of the state pension system. So what follows is a general guide only, to the best of my knowledge.

BSP is something that any UK resident is eligible for. You must earn ‘qualifying years’ in the system, which you do by paying National Insurance contributions (NICs). Most people do this by working in employment. You have to have a minimum of ten qualifying years to get any BSP and a man has to have 44 qualifying years to earn the maximum (currently 39 years for women but increasing to 44 by 2020). If your number of qualifying years is in-between you get a scaled-down entitlement. Full entitlement is, from April 2007, a mere £87.30 a week (£4,540 per year) so it’s clearly not going to be sufficient in itself. And BSP doesn’t keep pace with earnings – it’s uplifted every year by the retail price index only, which is a pity because that doesn’t adequately reflect the cost pressures faced by the elderly.

As of the time of writing, I have a pretty good entitlement record – broken only for my three years at university, in fact, so I am on track for full BSP if I work through to 65. However the system is discriminatory against, in particular, women because many of them stay at home to look after children and therefore don’t pay NICs during this time. Many of them get a paltry entitlement, despite some changes to the system to allow for those with ‘home responsibilities’. In the past, you could make this good by voluntarily making contributions. And for many this was a fabulous investment – you paid something like £300 in order to get another 39th of full BSP in return every year, i.e. £116 per year. We pondered volunteering for Regan, but decided to delay because we knew the system was under review.

Good move. In fact we totally dodged a bullet here. It seems likely that the number of qualifying years will be cut to 30, and that more robust protection will be introduced to give credit for the years spent unpaid looking after children. The Government has stated that it won’t pay back people who volunteered NICs in prior years who have now effectively wasted their money.

The uplift in BSP doesn’t apply to everyone. In fact many people living overseas don’t get an annual uplift at all. But some people do – those living in the US, for example.

BSP is generally paid from 65 (it used to be from 60 for women but will change to 65 by 2020). The age is set to rise to 68 by 2044.

S2P is based on earnings and NICs. You used to be able to opt out of this and, while I was at KPMG, I was opted out of it for a time. Generally now it’s accepted that the scheme is so generous that you’d be daft to stay opted out and many schemes are opting back in.

I have no idea at all what my entitlement under S2P is or what it means. And in any case, it seems likely that the Government will change it to a flat rate payment in the future. This will most likely involve an element of stealth taxation somewhere along the line.

And that’s the problem with the UK state pension scheme. Nobody really understands it, because it’s too complicated and the Government has shown time and time again that it can’t be trusted with our money. My employers’ pension schemes and my SIPP are protected by contract. But the Government can change the rules of the state pension scheme any time it likes, without providing any compensation to those affected by the changes.

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