Of spending time and financial folly

Three months away from retiring I had been doing a lot of philosophising about a massive purchase I was about to make, for a few hundreds of thousands of pounds in opportunity cost. There was no need to add this purchase to my home insurance, and it wasn’t going to be delivered in a pantechnicon or even by Yodel.

It was eight years of the Ermine’s time, for delivery with effect of June 2012. It was one of the best things I’ve ever spent a shitload of money on, though it’s oddly intangible and ephemeral. In three years’ time it will be rendered to aught, I will be a few hundred grand poorer than I otherwise would have been. Je ne regrette rien 😉

Freedomsoul, a wise fellow who has clearly used his 25 years on earth well, reminded me of this in his post

Nothing…is ours, except time. We were entrusted by nature with the ownership of this single thing, so fleeting and slippery that anyone who wishes can oust us from possession…It is too late to spare when you reach the dregs of the cask. Of that which remains at the bottom, the amount is slight and the quality is vile.

Seneca the Younger

I don’t have the benefit of a classical education, so I have to hoover such wisdom up off the intertubes, but I have to hand it to the old boy Seneca, he’s a lot more poetic than the oft-quoted modern form of this principle from Paul Tsongas

Nobody on their deathbed has ever said “I wish I had spent more time at the office”

Time to turn this into action.

Kill off matched betting and get it right out of my life

I’d already come to the conclusion that matched betting bored me and wasted my time. I am most definitely not saying that you can’t make a very handsome sum, probably in the tens of thousands of pounds a year at the upper end. But I am definitely saying I can’t be arsed. If I was rich enough to be able to buy eight years of my own time back for a few hundred grand[ref]opportunity cost – I didn’t have to save this up first[/ref] then WTF am I doing selling my time to the lowlife scum/bookies of this country at a lower rate? At least at work I was occasionally creating something.

I lost about £200 to the bunch of thieving scum otherwise known as the betting exchange Betfair (Queensbury rules, about a week and a half after writing the first draft this and providing about ten different items they enabled the withdraw button. I am not sure I have enough ID to pass as a sentient mouth-breather in the modern surveillance state.)

I am old enough to have opened that bank account in the innocent days of the late 1990s, when I could rock up to the branch, show my photo passcard from The Firm and get an account. It apparently doesn’t match the verification on the electoral roll, and despite supplying a copy of my passport and birth certificate to Betfair, they have still frozen my account and won’t let me withdraw it. One of the things that I found distasteful about matched betting was swimming in the same currents as sharks, it’s not a restful experience.

Remember Seneca’s dregs that are slight and the quality is vile. No point in pouring some of the good stuff down the drain 😉 You get to the bottom soon enough.

Gnothi Sauton – know thyself

Know Thyself in Greek in a stained glass window
‘Know Thyself’ in Greek in a stained glass window

‘I’m a big picture guy, I am poor at fine detail’, was what I first thought about why matched betting was a mismatch for my temperament and financial situation. It’s something that involves a lot of fine detail, you as basically trying to match one big risk against a counter-big risk. It’s easy to screw up [ref]my biggest fail was expecting Betfair to have a modicum of integrity in returning my money – the takeaway is only deposit the minimum with any betting shop to test if they will verify your account. I didn’t actually screw up any of the matched bets and I am up overall despite the shafting. I was only in this biz for a month and a half. The ROI on matched betting is crap when you factor time into the investment, the money is fine.[/ref].

There are other aspects of life where this shows too. I don’t bother yomping cash through a bazillion accounts to try and get an extra two percent on the deal[ref]I’m not hard and fast on that, I save £500 a month of my SIPP pension with the Nationwide because they’ll give me 5% on it and it can be set up once. It’s the stuff you have to do every month and watch what goes where and when I CBA with[/ref]. Part of this is if I am going to allocate headspace to finance I find getting better at equity investing is a much easier win, even if the result of getting better turns out to be do less and sit on your backside more. Life is too bloody short to chase a few percent here or there on cash, particularly when your fellow countrymen can have a brain fart that destroys ten years of that sort of streetfighting at a whim.

I’m a slack blighter in other areas. I clocked up a £45 credit card interest fail because I bought something for £3k and failed to actually clear the balance over Christmas. I have the minimum paid by direct debit but pay the main part on manual. And just didn’t give this enough attention in December. Of course when I got the bill in January I paid the lot off plus £100 to stop them adding more interest. Shit happens sometimes. I had the money in December because I don’t buy things before I have the money, but cocked up.

But it’s the big picture that matters. Diversifying risk and reducing fees in many, though not all cases has enabled me to get up on the Brexit dividend this last year, and that puts crapping out on £245 into perspective. Look after the pounds and the pennies sort themselves out or don’t matter 😉

Pointless pastimes like learning Morse Code still teach me things I didn’t know about myself

At the moment I am toying with pointless ideas like dragging some radio gear to high places and making contacts. For the umpteenth time I figured I’d have a go at learning Morse code. Its advantages are few, but mainly that the display and keyboard are compact, the display is visible in the sun because it’s auditory, it doesn’t involve a computer and I can contact people, which is totally ridiculous in the modern world when you could call them up on your iPhone. But what the hell, hobbies are like that. It made slightly more sense when I tried the first time as a teenager when the phone was most definitely fixed to the wall. In those days I didn’t have the money and had other concerns, as teenagers do. Now I have more time, I get to see a decent view and more of the attractive parts of this sceptred isle. Fits in okay with an interest in prehistoric stones, too, they tend to be in out of the way places to, so I get to use the same petrol if I can solve the travelling salesman problem. One needs variation in one’s decadence as well as challenge.

The usual way of learning Morse is to go on LCWO and use your computer. Two things mitigate against this for me, one is I want to play with radio and get away from the damn computer, and the other is an oddball discovery I never suspected. One of the joys of not selling great wads of time to The Man is getting to learn bizarre and useless facts about life because I can be curious about the world and have the time to dig deeper. Turns out that the way I parse text is way more odd that I had suspected.

I learned to type as a teenager on an old typewriter[ref]for anybody born after 1980 a typewriter is a machine where the keyboard is connected straight to the printer without the computer we didn’t have in those days jammed in the middle[/ref], using some Pitman book.

I’m sure that keyboard is way too high by modern standards

Funny how all the pictures in that book of how you were meant to hold your hands and sit the right way were women in miniskirts and manicured nails rather than spotty proto-geeks trying to grok code, but that was the Seventies for you. I never learned to touch type where you don’t look at the keyboard, but once in the right position I know where all the keys are and use all fingers. The school end was a teleprinter which saved the programs using punched paper tape, and there was only one, connected periodically to the North East London Polytechnic via an acoustic modem.

I did that because I was able to get about three lines of BASIC code written in a half hour period on the timeshare computer system at school, which wasn’t any use at all, hence the need to type faster. Presumably they teach kids to type at school nowadays, since it’s probably more useful in the modern world than cursive handwriting.

I never needed to type any faster than I could think, since I was usually originated ideas, or code, or whatever. Looking at the rate that I am writing bits of this, using a watch and the WordPress words counter, it appears I can type at about 50wpm tops. I can’t really think that fast in a sustained way, but it was the peak over about 10 seconds.

No problem, I should be happy copying Morse on a keyboard at 20wpm. Trouble is, if things come in one character at a time, I am turned into a hunt-and-peck-er, and I am down to 6wpm. I never realised this, so I have the good fellow Chuck Adams to thank for warming me up to the fact with the manual for his freebie Morse CD image. So I read his manual, which tells me to go get a particular type of gel pen and an A5 spiral bound notebook, and I will find that at lower speeds I can write any character as soon as I hear it, rather than the ‘oh, that was a C, now where the hell is that on the keyboard, damn, the next character has started’.

In the depths of one’s brain just behind the ears there is a guy with a tape recorder recording incoming sound on a loop of tape about a sentence long and ready to roll tape again routed to the speech decoding systems of the brain in case the first pass didn’t work out, which is why sometimes when you go you what? and by the end of what you have got it the second time round without the need for the speaker to actually repeat. When the tape is playing the ears aren’t connected, so with Morse I get the first two characters and then I’m out for the count trying to use a keyboard. The average data rate of conversational speech is about 120wpm, but I would probably be able to catch the first sentence in copying speech, because I am capturing the words as units, not a string of characters. We used to have people called stenographers who used a special script shorthand to capture speech at 120wpm, I guess these days we use a digital recorder and set a bunch of people in India on the job.

Chuck is right. I can write much faster than I can type if the signal comes in character by character. I discover trying another system that even if the characters are read out to me in English, so no decoding needed, I am stuffed as far as comprehending things coming in a character at a time at 20wpm. Now in the early 1990s I found out that I could easily read at 300 baud[ref]300 bits per sec in ~10 bit character chunks at 8,n,1 is 30chars per sec. A word is about five character average so 6 words per sec, or 6*60=360 wpm[/ref] at ~360wpm. Clearly there is more to this reading and understanding speech malarkey. I had no idea all this went on. All the other times I had tried to learn Morse I had no idea that I had no hope of typing at 20wpm or even grasping text read out a character at a time at that rate, so I was never going to get anywhere until I crack that. I can forget using Morse code until I fix these issues. So I am a long way ahead of my teenage self even if I the contents of my cranium is three decades older. Oh and a day where I learn something new is a day well spent, who’d have thought all this language processing is that highly tuned to specific forms.

I discover it’s now become OK to borrow money to buy cars. WTF?

Schroders tell me that loads of Brits are buying new cars on the never never. WTF is up with that? Pretty much first rule of personal finance is never buy depreciating assets with borrowed money. Seems to be what people are doing

This ain’t gonna end well

This is a bum steer. Modern cars are a lot more reliable than they used to be, and every time I pass a used car lot near me I am staggered at what you can get for not much. I used to take the line that about 5k was a reasonable price for a used car which would give me a good few years’ service, but you can now get pretty good value for £3000. If you can’t afford that much then you sure as hell can’t afford to borrow money for a new car, and wasting assets should be bought with cash or interest-free credit backed by cash. I have never bought a new car, not because I can’t afford to, but I can’t stand the dreadful clattering sound of half its value falling off as soon as you drive it from the sales lot. A bit like Merryn over at the FT, though probably more tight; there’s a breathtaking kind of metropolitan decadence in hiring an agent for £600 to buy you a used car IMO. Even if you do get dashboard ambient lighting[ref]let’s hear it from Volkwagen for what ambient lighting is and why Merryn S-W or you might need want it[/ref].

Dashboard ambient lighting on a Mercedes S-class. It’s the blue glow in a line

Mind you, given an ambient lighting kit is £117 I guess the used car buying agent may well be worth his salt. Personally I’d go with electroluminescent wire or LED strips from China, but I’m not the target market it would seem. Maybe that’s why Brits and buying new cars on the never never, because they’re getting too decrepit to find their cars in the night. VW tell us

When you’re driving at night, the glare-free light also helps you to find your bearings and locate things more easily.

Hmm. What, exactly, is wrong with the old-fashioned courtesy light, particularly now they delay the switch-off long enough that you wonder if you locked the doors when you look back 50 yards away from your car? Anyway, back to the never-never.

Schroders dig deeper into the PCP farrago and have an entertaining report from the front line:

[lessons from the financial crisis] Most people, you would imagine, might say an important point to take away from that time was that lending money to those who cannot afford to pay you back is not a particularly sound business plan.

Some people have apparently reached a different conclusion, however – that while lending money to those who cannot afford to pay it back may not be a good idea in the context of the biggest asset in people’s lives – in other words, their house – everything  will work out just fine if it is only their second-biggest asset – their car.

Hell, yeah. The story’s pretty simple. If you need to borrow money to run a car then you can’t afford it. Move downmarket or do without. As Schroders say, however, it takes two parties to make a right hash of this –

Or, if they have learned a lesson, it is a very specific one: that sub-prime is not helpful – but only when lending to people who cannot afford to buy a house. Cars though? Game on.

One of the things that disturbs me is that ‘other’  in green. Some of it is securitized auto loans. When was the last time were heard securitized? Ah, in the financial crisis. It usually takes a generation to forget the lessons of the past, but I guess everything happens quicker now, it’s all a bit The Eternal Sunshine of the Spotless Mind without the good bits. There’s the wider point that if your second biggest asset really is your car then you are seriously doing something wrong, generally along the lines of having too much car, particularly if you need to borrow for it. By the time you are 40 your pension should be a bigger asset than your car. In fact FFS if you are buying new cars your general savings should be worth more than your car IMO, certainly after you drive off the forecourt.

The timing on that ‘other’ looks very much like P2P to me, and I’ve just upped my P2P by a few grand. I am beginning to wonder if I am not that stupid sub-prime lender in some ways. After all, last time I looked at what people were using Zopa for it looked like this

which is a litany of conspicuous consumption and financial folly. Zopa still needs an Ermine behind a desk with a green banker’s lamp to introduce these good people to the following infographic

How to decide if borrowing money to buy it is a good idea

In general, Zopa punters, the answer is save up or go without more often that it’s not. I guess Zopa would go bust if they took that line. But heck, I can eat the loss of my Zopa stake if it all goes titsup, I will take a far bigger hit on my ISA, because I am not the only dumbass counterparty out there. No doubt the banks are in there too, and while I have no banks in my individual share portfolio, the index stuff is riddled with them. I need to think about this. The Zopa risk premium isn’t particularly big, I will stay with the instant access[ref]as Northern Rock showed, instant access can fail you when you need it[/ref] and start to wind out of the non-instant access.

It’s too late when this happens

It always pays to be one of the earlier panickers in financial crises, so when interest rates start to rise I want to be able to suck my cash out of Zopa before all these indebted car buyers start losing their jobs or feel that their mortgage is a more important debt than their Zopa car loans.

It’s kinda odd that it took us 80 years to get into deep shit again by dismantling the financial firewalls built in the 1930s, and only 10 years comes to pass before this all looks like a great idea again. This is not progress.


26 thoughts on “Of spending time and financial folly”

  1. I have an acquaintance over 60 & still working as a reasonably well-paid software programmer, so is proven intelligent in that intellectual way. His finances however are a disaster, his relationship with money matters only being possible to describe as management by hand grenade. After meeting resistance on several gentle attempts to help, I generally let him be, but recently tried again when I saw how distressed he was after his car died.

    His credit rating is so poor the car dealers wouldn’t let him have a PCP to get even a ‘pre-loved’ replacement. [yes, apparently they are actually limits]
    He has various debts mostly with conventional lenders like the standard high street banks, amounting to ~£50K on credit card interest rates of 18%. Yet when I told him he should check out zopa to consolidate, he came back with ”It’s not worth the bother because they’ll only give me 15% anyway.”

    A guy who can do the maths involved in computer programming that I can’t envisage even in the abstract, can’t understand that a saving of 3% annually will tidily buy you that car – £1500 just for the one year….. So, he’s now buying [probably] the most expensive rail tickets in Europe instead & complaining that the few years he has left to live are being wasted on freezing platforms/unscheduled delays while enriching the CEOs of the various rail corporate cartel members.


      1. Ah, excuse me for being unclear, I don’t know if they do PCPs for used cars – he’d flunked the criteria for a new one – before progressing through the more humble options …..until timing out when it became obvious he was financially ‘untouchable’. But I was trying to nudge him into seeing that a new vehicle is always a dumb deal because paying a significant premium for the temporary smell of relatively newly-set chemicals can never be worth it.


    1. “I have an acquaintance over 60 & still working as a reasonably well-paid software programmer, so is proven intelligent in that intellectual way.”

      Got to say, my heart is cheered by this. 60 and still coding! I’m about 40 now and being optimistic figure I probably have 15 years at most before work dries up, then another 15 years to survive somehow before being eligible for a state pension – if such a thing still exists in the second half of this century.


  2. stenography is still going strong – http://www.openstenoproject.org/

    I’m typing this in colemak, it took me a while to unlearn qwerty (about 3 years), but now i’m up at approx 80wpm

    maybe plover next to smash through 200wpm?

    nice to hear the views on matched betting, presses my confirmation bias buttons very pleasantly

    I was a bit shocked by the thought of paying someone 600 notes to buy me a used car too. Maybe shes not as smart as I thought..


    1. I guess if she can get £500 net writing the article in less time/effort than traipsing round used car lots maybe there’s a case to be made 😉 I confess I don’t move in such circles!

      I didn’t realise stenograph ywas a keyboard thing – it seemed to be squiggles in a reporter’s notepad back in the day. Question is, can you think at 200 wpm to use that typing skill? Though if conversational speech is 130-200 wpm then maybe the answer is yes.


      1. squiggles in a notepad is shorthand, thats different again.

        no i can’t think at 200wpm so prob not much use from a speed perspective

        whats nice about colemak isn’t necessarily the speed, its the buttery smooth feel to typing that you get from rarely having to move from the home row – it feels strangely zen like after a lifetime of qwerty. your fingers/wrists will thank you..

        qwerty is a great lesson in the value of getting there first, even if the technology is shit

        note colemak is just an alternative keyboard layout, its not stenography


  3. A few years ago a friend bought a bike: one of those thousand pound jobbies. The salesman said that the best way to pay was £500 up front and the rest on Hire Purchase. My pal hadn’t, he told me, heard of HP in years: dreadfully old-fashioned.So he did the obvious thing and offered to pay the lot up front in return for some modest discount. “Oh no, sir, we can’t do that.”

    So, £500 now and £500 on the never-never it was.

    My pal is an assiduous student of his bank statements: every couple of years he sits down to check them. And lo, the bike shop’s finance people had never actually collected the HP payments from his account.

    In a year or two, he tells me, he’ll point their oversight out to them. Not to do so would be theft; to do so promptly would undermine their incentive to get it right next time.

    He doesn’t seem to use the bike much, mind.


    1. I’d imagine the bike shop has their cash and have offloaded the risk onto the HP firm, which is presumably why they do that – take a hit on profit but increase sales. Personally, if a HP firm never asked me for the money I’d leave it in an interest-bearing account until they get round to it 😉


  4. Funny thing cars. Back in the day before the crisis I worked on a few transactions to securitise car finance. Corporate fleets, mind you, not personal car loans.
    A new car loses a lot of its value the moment it stops being new, so you have to make sure that you recover that loss from the borrower, but after that, it’s all about used car values. When times are good, people buy new cards and change after 3 years or whatever, which floods used car market and depresses valuations. In bad times however, used car prices increase because there aren’t as many new cars being converted into used cars every day. Of course, if the borrower totals the car then insurance picks up the tab (an instant get out of jail free card for the lender).
    That’s why they think that lending money on cars is different. Purely anecdotally, back in 2008 and 2009, when valuations of MBSs tanked completely, securitised car loans held up more or less ok. Of course, part of it was that they hadn’t been as popular as MBSs, and were mostly held by institutionals who had actually known what it was they were investing in, and had the capacity to reassess valuations, so there was less of a panic factor overall.
    I don’t know if this time is different.
    Just my 2 pence anyway.


    1. Interesting – certainly if the bulk of this is corporate fleets then it probably is more sustainable, because it’s a bit like hte shift a while ago for companies to sell their premises and lease-back to gain flexibility. I would hope that Schroders had done that part of the research.

      It’s disturbing when buying a secondhand car in a dealer to see the look of surprise when I say I have the cash, so the process of saving for a new (used) car seems uncommon. The sort of finance always looked like a bog-standard consumer credit sort of thing.

      This description of a PCP seems to very much emphasise the personal and for that sort of target market I’m still pretty much of the view that if you haven’t got the cash upfront you can’t afford a new car. It seems much more like an extended rental, and this is not the most cost-effective way of getting automotive transportation. That sort of vanity is expensive!


  5. Don’t blame you for ditching the matched betting. I only do it because for now I’d rather spend my days with the gambling idiots than with the degenerates that usually make up my work colleagues. I certainly will stop the moment something better comes along. It’s funny though, my wife spends most of her day in work moving data around 2 screens (earning a reasonable wage for around here, more than I could earn without moving away). And I do pretty much the same at home as a house-husband (no kids ever though, lol). Not what I had imagined when I was growing up, for sure. If I had kids I’d be pretty worried, but I don’t so I can afford to look at this social experiment dispassionately. The West deserves whats’s coming, in my opinion.


    1. Sounds like a good compromise! I can see that it would be more attractive than an awful lot of what passes for work, and why not? The beauty is that you can do it from anywhere, so it could offer ways to ditch the rat-race and occupy some of the more attractive parts of the country for a while.

      What it says about the system isn’t a good thing though. I guess a lot of mug punters need to feed the Beast to make it as workable as it seemed to be.


  6. Sad to hear that your matched betting experiment didn’t end well, I always suspected that you wouldn’t take to it much being that it does take quite a time commitment and you don’t need to money to retire.

    I’ve always maintained that its not a get rich quick scheme.. more like a tax-free 2nd job. Obviously that has huge advantages for those of us working already or need to be able to work remotely.. but it is still work nonetheless.


    1. I really can’t say it didn’t end well – I made some money and learned something about myself, even if that something was I was too bone idle and that my loathing of bureaucracy and pettifogging rules was a lot worse than I had suspected 😉 One has to try new things sometimes. But I’d agree with your last paragraph, it’s more like a second job.

      I do think it has much to offer the somewhat mathematically inclined and that flexibility will fit with people who had children or who want to travel untied to a particular place (though opening accounts and passing the infernal KYC rules would be tough for the latter)


  7. May i just ask you about your third footnote which mentions something involving a SIPP and 5%? Have had a google but can’t find the product… sounds too good to be true!


    1. I take £500 a month money from my SIPP and lob it into nationwide who offer 5% on the cash. It isn’t a 5% SWR replacement, because integrated over a year it is in fact only half that, and it’s only £500 a month. Sorry to raise hopes 😉


  8. I appreciate your unique perspective, you share my thoughts on the modern workplace and there is much commonality (well, in my eyes) with livingafi.
    You’re wiser than I am but I would look closely at Zopa Access. Loans are up to 5 years so given a rush to the exit you may be waiting up to 60 months to drain your funds. Access is only available if there are new lender funds to take over your loans. Perhaps worth investigating RateSetter 1 Year, loan terms of up to 12 months unlike the Rolling market where loans are from 6 months to 5 years in duration.


    1. That’s interesting – I guess Zopa has the same problem as any bank in a bank run. It’s probably worse than that, because some of those loans will go bad in such troubled times.

      What I’ve now done is say that I will take all repayments from my previous Classic exposure and extract these, and these are subject to a roughly five year maximum term so it may take me 5 years to get all my money back. I have a few grand in Access, I will take the chance on asking for this back when interest rates start to rise. I would hope this is in a year at the latest, but I’ve been hoping that for the last five years 😉

      Certainly favours being an early panicker, but for Zopa Classic one has to book one’s panic five years in advance. Taking that out was probably a cock-up in retrospect. But I only have the price of a used car in Zopa in total, so if I take a bullet, well, life is like that sometimes!


  9. Matched betting isn’t everyone’s cup of tea – at least you took the step to try it out to see if it was for you or not. It’s great for people with time and inclination and the tax free thing is a bonus too.

    I have to say that I’ve always bought new cars – I’m not really bothered that as an asset it starts depreciating as soon as I drive it out of the dealer’s forecourt – it’s not as if I buy it to make a profit or even to break even, I don’t see it as an investment, just something I’ve spent money on.


  10. A couple of thoughts on learning Morse code.

    Firstly, don’t learn at a straight 5wpm since you won’t properly hear the rhythm of the characters at that speed. Instead, start at 12wpm but with a “Farnsworth” gap so that overall text speed is 5wpm or so. Then move up from there by reducing the gap gradually until you reach copy at the full 12wpm. (Then increase speed to 20wpm or so!)

    Secondly, if you want to use Morse on air quickly, concentrate on the formulaic template used in most brief CW contacts. Tnx fer call, name is, rst 599 (or 5nn)… and so on. Once you can anticipate/recognise the shape of these common words and abbreviations you ‘read’ Morse much faster, since you’re up to handling entire words as effectively single entities. The only ‘random’ stuff you’ll really need to copy will be callsigns, and even these you won’t have to capture first time since they’re regularly repeated throughout (except perhaps in contests). Most Morse contacts contain little or no chit-chat, for obvious reasons.

    And finally, on-air Morse can be of surprisingly variable quality. Best is sent using an iambic keyer, worst is usually straight keyed, and it won’t take long for you to be able to tell the difference in some cases. As far as sending is concerned, while a straight key can be satisfying in its simplicity, using a keyer yourself will be much more reliable, less error-prone, and generally more pleasurable overall. Avoid the temptation to cheat by sending and receiving in software alone!


    1. Secondly, if you want to use Morse on air quickly, concentrate on the formulaic template used in most brief CW contacts. Tnx fer call, name is, rst 599 (or 5nn)… and so on.

      Thanks for that tip – I see on the SOTA list that seems a good win so I may change tack from more general texts. The only point of using Morse is to get away from using a computer – else I may as well use PSK or other data modes, although that seems very poorly standardised


  11. One more, rather arcane, thing about so-called “low-cost” endowments, if I may. Prior to about 1970 (and, “yes”, I was at school then!), they didn’t exist. If you wanted an interest-only mortgage backed by a life assurance policy you could choose a “non-profit endowment assurance” or a “with-profit endowment assurance”. With the former, you were guaranteed the figure agreed at outset on maturity or earlier death. Period. With the latter, you were also guaranteed the figure agreed at outset or on earlier death but both of these figures would be increased by the addition of “reversionary bonuses” which once added were guaranteed. So, as long as you paid all the premiums you had a reasonable chance of seeing a decent return on the cost. Remember these were times of high inflation and higher interest rates.

    Although both types of policy offered substantial guarantees, they were an expensive option in comparison with a repayment mortgage despite the fact that the monthly premiums attracted tax relief way back then.

    Royal Insurance combined decreasing term insurance and with profits endowment assurance to create the “low-cost” version in 1970/71. You were offered about a third or so of the required maturity value on the endowment basis and the term policy element provided the requisite life cover to fully discharge the loan on early death. These policies, because very conservative investment returns were insisted on by the actuaries, pretty much all worked until around 2000/01 when the “death of inflation” destroyed investment returns.

    However, from the early 1980s onwards “unit-linked” low-cost endowments came to dominate the market as it was relatively easy to manipulate the monthly premium by pushing up the assumed investment return. Most of these policies were sold by “direct salesforces” such as Abbey Life, Allied Dunbar, et.al. The underlying investments offered no guarantees, aside from, perhaps, a minimum growth rate (3%-4% per annum) on so-called “unitised with profits” policies. At all times, the “target maturity value” would only be fully guaranteed on early death, hardly ideal.

    Here’s the thing.

    The life cover on most of these policies is paid for by cancelling units in the underlying investment fund, with this cost increasing each month as the policy holder ages.

    I have seen a policy where over 60% of the monthly premium was going to pay for the life cover element, meaning an heroic investment return would be needed.

    I suspect that pretty much 100% of unit-linked policies will fail because of this obscure expense deduction.

    With a few exceptions (such as certain lump-sum arrangements), muddling up life insurance and investment is rarely a good idea.

    My suggestion is that those with such policies “abandon ship”, after arranging any needed replacement life cover via a cheap term life policy, and pay whatever they get back on surrender off the mortgage and convert the darn thing to capital & interest over as short a term as possible.

    And, don’t even get me started on the even more squalid tale of the pension mortgage!



  12. Sounds like you made the right decision to give up on the matched betting. You are a man of freedom and it is just a time suck you didn’t really need. It sounds like I enjoy the whole process a whole lot more than you did but even then I’m certain I would not be doing it if I didn’t need the money, unless I got really bored on the odd occasion I suppose… And as you might guess I may well still like a punt even after FI has been achieved!

    You could ask me if I wouldn’t do it after FI then why do it now and you’d be making a fair point. Why am I not doing the things that I might want to do after FI now such as picking up the guitar again, making Computer music, playing more golf or even just writing more blog posts or reading books. Well I guess the answer is that I only really do MB in what I’d consider dead time, e.g. while watching TV (shock horror yes this is still a nightly occurence in the TFS household) which I like because it’s still “time spent with the missus” as MB is fairly mindless once you get into so I can still watch and have conversations with her, or while commuting, and even sneaking some in while at work. The only thing I could really do in these times on my FI list of activities is the book one, and that is less sociable in the TV/couch situ and obvs a no go when at work. I do miss reading books but there is plenty of time for that later in life and part of the reason I’ve bombed out on them is too much blog reading and commenting anyway 😉

    I’m rambling now anyway so will just say well done on the experiment while it lasted, at least you gave it a go, and thoroughly enjoyed the rest of the random info in the rest of the post
    Thanks as always!


    1. Interesting that you could do it in dead time, I found I needed pretty much 100% concentration not to screw up. Maybe that was being a noob.

      In the end it came down to me asking myself why did I pay so much opportunity cost to buy my time from The Man, only to sell my time to bookies. And the more I thought about that the worse it looked. I’m not stinking rich, but there was nothing I could buy with the proceeds that would make up for the loss of my time.

      Mind you, if you want to bust a time sink out of your life, getting rid of your TV is right up there 😉 Easy for me as I loathe all forms of sport, you couldn’t pay me to watch it!


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