Hello loyal readers. I’ve got a favour to ask. I’m looking for a bit of advice on the content of the blog. In short, what types of posts do you enjoy reading the most? What content brings you to my blog? What contents keeps you reading?
Some background on why I’m asking. I usually aim to write two posts a week. One being on a ‘technical subject’ (like this week’s on the Lifetime Allowance) and one on FI or other related subjects. Recently, there’s been more of tilt towards the technical subjects. That’s because I generally find them easier to write. I find that I often stumble into writer’s block with FI posts. I think that’s for two reasons. Firstly, there’s already so much good content out there that I feel I’m just rehashing the same things others’ have already said. Secondly, when I write ‘my journey’ type-stories I can’t help but feel a bit self-indulgent.
I guess what I’m asking loyal readers is: Am I over thinking this? Do you still enjoy reading FI posts even if it covers familiar ground? Do you like hearing me talk about my journey (or conversely do you think I should keep it to myself?
Please do share your thoughts in a comment. I’d really like to know your collective thoughts.
Odds and ends
There are a few things over the past week or two I’d like to comment on. I don’t think, as yet, that I can write a ‘full length’ post on them. So I’ve bundled them together to share today.
A few weeks back the Work and Pensions and BEIS parliamentary committees released their long await report on the Carillion mess. I was very much looking forward to it, both from a professional point of view and a personal one. I have to say that I was very disappointed in the quality of the report. My biggest disappointment was the lack of detailed research or analysis in the report.
There was no analysis of the accounts. No critical review of the advisors’ work. Nor any basic research into any industry practices. I had hoped to read a bit about invoice factoring as Carillion was a known abuser of credit terms in the industry. Instead, we were given broad statements sourced from Investopedia.
Likewise, the summary of the report was: everyone is to blame except us MPs who write the laws. Much criticism was given to the regulators (The Pensions Regulator and Financial Reporting Council) but from what I gather they have both been doing their job. The limit on their powers seems to be, at least to me, because MPs are reluctant to give non-government bodies strong powers. That doesn’t mean they are perfect, both could do with reacting quicker to ‘blow-ups’. But their ability to do real investigatory work requires much more money (and better staff) than both the government and the market are willing to pay for (read Serious Fraud Office).
That said, there are big issues with the quality of audits. Although I really don’t think conflicts of interest or the big 4 oligopoly is to blame. [For disclosure I have worked both for one of the big 4 and for a non-big 4 competitor]. In summary, the report really felt like a “we’ve made our minds up, now let’s find the evidence to fit that narrative”.
The Pensions Mountain
Royal London / Steve Webb released their latest policy paper: “Will we ever summit the pension mountain?” The headline was that you “need” a £260,000 pension to maintain current living standards,up from £150,000 16 years ago. That headline grabbed a lot of attention. But the underlying numbers less so. The £260,000 is based on a person aged 65 making up a shortfall between the state pension and the average UK income (£26,728). The analysis also assumed retirement would bring cost savings such as: no longer having to pay a mortgage, not contributing into a pension and the end of work-related costs. Therefore, the analysis suggested workers can retire on two-thirds of UK average earnings (£17,819). The shortfall being £9,273.
Putting aside the question marks on the assumptions, the report suggested a 65-year-old could buy an index-linked annuity for £9,273 at 3.56% (£260,000 = £9,273 / 3.56% rounded). I’ve got to be frank: I read this in a sanguine way. That 3.56% seems like a pretty good deal to me (most in the FI community use a 4% SWR). An inflation-protected, guaranteed 3.56% for life seems pretty darn good (I know that’s a bit of an apples to oranges comparison). Saving £260,000 over c.50 years of working seems pretty manageable. The elephant in the room is, of course, housing costs. Saving £260,000 and having a mortgage-free home is a bit more challenging. And that’s the key message from the report. We can fiddle with pensions and incentivising savers as much as we want, but housing is still the elephant in the room.
The Monetary Policy Committee and boardroom diversity
Yesterday, the MPC announced the appointment of the latest member of the committee (Jonathan Haskel). To very little surprise in some quarters it was, once again, a white middle-aged bloke. The timing could not have been much worse. The day before, the Department of Business, Energy and Industrial Strategy released the mid-way report on promoting greater gender diversity in the boardrooms of our listed companies. To accompany the release, they set out a top-10 worst reasons companies gave for not including more female members to their board. (Such as, “We have one woman already on the board, so we are done – it is someone else’s turn“).
Maybe Prof Haskel is the most qualified person for the job. But when you have 19 members, 18 of which are men; and you interview 5 candidates and select the only male interviewee, questions are going to be asked. The trouble is, time and time again, we see questionable appointments of people to public decision-making roles (remember the Toby Young fiasco?) Too often, the reason given for these appointments are: “they are the best candidate” or “they have the best fit” or “their objectives in the role are aligned to ours“. All these reasons really boil down to: “they look like us, talk like us and think like us“. Nazir Afzal hit the nail on the head for me:
What about pitiful excuses why we only appoint men:
They look like us
Wear same suits
Went to same schools
Drink at the same clubs
Drop their wives off at same places
Treat other women with disdain
Make the same shitty decisions
One of us
I have no desire to be one of them https://t.co/rO3M88ghEr
— nazir afzal (@nazirafzal) May 31, 2018
Too often, it’s the cronies or the familiar faces who get the nod. Where we are appointing people to oversight and decision-making roles we should be setting out the precise reasons why. No hiding behind platitudes or weasel words. Until this intellectual honesty becomes part of the game, women (and other minorities in society) will continue to be short-changed.
All the best,
Young FI Guy