In praise of the Flexible ISA

Flexibility is a good thing in an ISA. For most of their existence, ISAs and their forerunners PEPs were both use it or lose it tax-free allowances, and one way tickets. You could contribute money to an ISA, but draw it out and you lose the tax-efficiency of that contribution. Put 20k into your ISA in one tax year but draw 10k out, your allowance for that year is 20k-10k

Flexible ISAs make this work right. In the above example your allwoance for that year is still £20k, as long as the net contribution is made within one tax year. Here’s the Building Societies’ Association on flexible ISAs.

Most of the running about flexibility in ISAs is made about Cash ISAs, and the advantages are most obvious in cash ISAs. For most people, however, Cash ISAs are a waste of time, because you can usually get a better return on your cash/lose less of it to inflation with non-ISA accounts, because most people have a £1000 tax-free personal savings allowance on interest. Typical interest rates in the UK are up to 2%, so if you are using this allowance to the full you have about £50k as cash savings. That’s quite a lot – if you have that amount held as cash then you should ask yourself if you are allocating capital in your best long-term interest1, although of course if you are buying a house or have a highly variable income then maybe that is OK. Continue reading “In praise of the Flexible ISA”

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Through the Brexit looking glass

Curiouser and curiouser

This is purely a Brexit rant. I am not a fan of Brexit. If that sort of thing bores you then move along, nothing to see here.

The Ermine sits in his eyrie surveying the discombobulation that is Brexit in puzzlement. It was all supposed to be so easy in 2016. I’m reminded of that cartoon of the guy in the signalbox 1 watching train wrecks all around, muttering that’s no way to run a railroad.

Funny old crew, Brexiters. Despite the Leave conspiracy theory that it’s all Remainers wot are doing the wrecking, I think the most useful idiots in this game, from a Remainer point of view, are the misnamed European Research Group 2 . These are professional wreckers, the 21st century equivalent of Red Robbo and his crew at British Leyland. With top hats and Eton accents. I’d also remind Leavers that theirs is a broad church that contains two diametrically opposed constituencies.

One team of leavers set against the other

One of the tenets of Brexit fundamentalism is that there should be no backsliding on 2016. There was a single vote in June 2016, they got the result they wanted, that is the fundamentally determined fricking will of the people and shall stand for all time despite the bullshit said on all sides. Continue reading “Through the Brexit looking glass”

O tempora o mores

Midnight CET today is meant to have been the culmination of Theresa May’s premature invoking of Article 50 to leave the EU. She did that, without really having much idea what success looks like with Brexit, in an unforced error which seems to have played into the hands of the other side, who naturally looked after themselves and their own interests. Not sure we are any closer to knowing what a successful Brexit does look like. I am of the opinion that there’s no such thing, which explains why the search party keeps returning empty-handed.

A spaffage of headbangers, each and every one rich enough to survive a bout of disaster capitalism and profit from it

The Brexit crew seem to be channelling Thomas Edison, but they seem to lack his talent

I have not failed. I’ve just found 10,000 ways that won’t work

 

Thomas Edison, on the electric light bulb

Why you need Financial Independence – The Sovereign Individual

Let’s take a deeper look a Jacob Rees-Mogg, headbanger at the end on the left. Hopefully his crew are unwittingly acting more as useful idiots in weakening the No Deal ultra-case, but it ain’t done yet.

The Latin in the title is a hat tip to JRM’s tendency to break out into Latin, to confuse the bejesus of of those not drug up right in some elite British public school. Fortunately the proles have Google on their side

Where did he get his twisted ideas from? Maybe his Dad, who wrote The Sovereign Individual, basically Thomas Hobbes updated for the 21st century. Let’s hear it from JRM’s Dad

Nation-states will experience a sharp drop in revenue…but retain the unfunded liabilities and inflated expectations and social spending inherited from the industrial era…tax consumers will be the losers.”

The Sovereign Individual

To summarise, it’s a libertarian manifesto, Ayn Rand updated. Look after yourself and your own, and may the devil take the hindmost.

The Sovereign Individual was written in the last years of the last century, but its predictions do track some of what has come to pass in the ensuing twenty years

Rhys on Medium has a good summary. The SI looks at the metamorphoses of society through the intustrial revolution to now through the lens of capital, the capacity to impose your will on others through capital and violence on the one hand, and information and myth on the other. Daddy Rees-Mogg’s analysis bears witness on today’s world.

the arrow of time runs left to right, the form of the means of production and mastery or slavery vertically

You need financial independence to be less enslaved to those with more. Violence isn’t a fist-fight in the street, it is the ability of the church, nation-state, or sovereign individuals like Jacob Rees-Mogg to make you do their bidding. The Church used the Inquisition, the Nation-State police forces and armed forces (in connection with other nations states) and Jacob Rees-Mogg and his libertarian ilk will use their superior capital assets.

Continue reading “O tempora o mores”

Red and White dragons fight under the edifice of Brexit as the end of the ISA year approaches

March is still a time to get one’s affairs sorted and use the ISA and SIPP allowances by the end of the tax year. It’s been hard to get excited about that this year. The rough Beast of Brexit slouches towards whatever it’s denouement will be. We seem hell-bent on turning a sackful of Great British Pounds into a sack of Lesser British (for the moment) farthings. Life goes on despite all this noise and hum, and the end of the tax year needs dealing with, lest opportunities pass by.

Sharp investors do their lump sum investment into their ISAs as soon as the new tax year starts. That’s because it makes sense, logically. Time in the market, dear boy – it is a corollary of the fact that integrated over decades markets march skywards. The reason most of us don’t do that is because we fear taking a market crash the day after we invest. If you invest over 20 years the 19 years it doesn’t happen will cancel out the effect of the one year it does, but, well, loss aversion and all that. We are irrational that way, slimy meatsacks that humans are.

Many have the good excuse that they have to earn the money that goes into the ISA over the year,  but that doesn’t apply to me. I ran the other way, and extracted £20k from my Charles Stanley ISA earlier this year. I figured there was a chance of a lot of shit doing down sometime this year. It didn’t happen, so I didn’t run out of money, and I have shifted that 20k into iWeb. So I am fully invested this tax year. Wait, but surely there’s the possibility of opportunities in the Brexit bunfight? I have more potential capacity even though I have completely used this year’s ISA allowance.

That is because I have more than one ISA. Charles Stanley’s recent price hike meant they are no longer that good for the long term. Their flexibility is useful for a fellow soon to use up cash reserves ahead of drawing my pension. So I am happy to pay their usurous charges for a couple of years in return for flexibility.

People with multiple ISAs need to check they can contribute to an old ISA before the tax year end

If you didn’t put any money into an ISA last year, providers have a nasty habit of stopping you topping up unless you jump through extra hoops. Once upon a time I had aims of keeping the amount with any one ISA provider below the £50k FCA protection limit. That gets unworkable fast, I would have to balkanise holdings across several providers. Although I am cynical about the value of compound interest in getting you to FI, once you are there and provided you don’t draw down1 on a stash, the total does get out of hand fast – all the win with CI is at the end. There’s a diversification case for having two unrelated ISA platforms, but after that it’s diminishing returns. With more providers, your risk of getting timed out for inactivity increases.  I found even after two years of inactivity I had to go through the reactivation process again.

At worst they may need you to go through all the anti money laundering hoops again. It takes time to go through that check, so give yourself  a couple of weeks. Make a test deposit roundabout now, at the latest, if you have left this well alone. Sensible souls who have been pound cost averaging into the market since last April can stop reading and go do something more useful with your time. It’s the first deposit in any tax year where you will run into that sort of grief. Continue reading “Red and White dragons fight under the edifice of Brexit as the end of the ISA year approaches”

Dutch Brexit humour from outside the nuthouse

Note: If you think we are conducting Brexit in a competent manner and it’s all a great idea, let me save you the time; don’t bother with the rest of this, OK?

Once upon a time, when that Jacob Rees-Mogg were a nipper, he sat on the knee of Daddy Rees-Mogg in charge of the Thunderer. Our lad Jacob was regaled with tales of Imperial derring-do, and he thought that’s the world he’d grow up in. Sadly, his cosseted public-skool upbringing never forged character in the crucible of adversity, so he got to grow up thinking that the world really was like he had been taught by daddykins, that it remembered the British Empire with fond sepia tones like the Road to Mandalay declaimed by BoJo rather than say, the trains oozing blood in the Punjab when in the shambles of the secretive Partition as the British scarpered. Sure, Britain did less badly de-Imperialising than some of her European neighbours, but let’s not celebrate that as something that will be a source of great common cause and better trade deals in the 21st century, eh, Jakes me old mucker? It’s probably safe to assume that Empire is recalled more fondly by the aristocratic class of this septic isle than the erstwhile subjects in all those red bits on the map, so check your facts Jakey-boy before sending your henchmen to go batting on that wicket in the trade talks, should we ever get that far.

Right now we Brits are making such absolute twats of ourselves on the international stage, what with striking a deal with the EU and seeming to agree, then saying well, no, that’s not what we actually meant all along, though hold the line, caller, while we actually work out what it is that we meant.

May picks up the old hotline to Jake’s pad where he celebrated her defeat with champagne for his buddies. Yes, I know, with friends like that who needs enemies and all that, but any port in a storm, eh? Brr, brr may I speak to JRM please? “heeelooooow, Jacob Rees-Mogg here, what’s that? (screws monocle into eye) oh what do we want? Simples, Treesa me gal, dont’cha-know, one wants not to give a bally inch. We keep all our cake and eat it, those dashed Continentals will soon come to their senses, they need us more than we need them. Stiff upper lip, Treesa, still upper lip and all that. Tally-Ho” Click.

It’s left people scratching their heads and wondering WTAF is going on here1. Hat tip to the Dutch government. Sometimes, faced with a clusterfuck over which you have precious little control, a spot of humour is the best answer. That’s exactly what they’ve done with their latest website to help their businesses understand Brexit. 2 Obviously they can’t really help them because nobody understands Brexit as it’s being made up on the hoof, but they’ve depicted it as a great big obstreperous woolly mammoth looming over small biz’s attempts to work out which way is up with Brexit.

And yeah, I’m doing the sneering Remainer bit here, because, to be honest, the absolute snafu being made here with Brexiters fighting with each other to imagine what success looks like does look bloody stupid. It looks bloody stupid inside the country, it must look like a collective nervous breakdown outside, though I tip my hat to the Irish Times in calling it a peculiarly English breakdown. Of the two constituencies of Brexit, I have some sympathy with the people who lost out to globalisation3, and I guess Theresa May’s original agreement would have been a serviceable answer to their complaints. I’m not sure it would have been a solution to their problems, but nevertheless, it would have delivered the result of the misbegotten referendum and allowed us to get on with life.

But it wasn’t to be, because there is another part of this heart of darkness, and it consists of people rich enough to not care one whit about the knock-on effects of their dreams. These are the toffs and aristocrats of Jacob-Rees-Mogg’s European Research Group. Just like you can take a bet that any country that has ‘democratic’ in its name is probably not democratic in any accepted term of the word, the ERG is neither European nor does it do any research, if you define research as inquiry into a topic where you don’t know what the answer to your inquiry is beforehand. These are guys who have a very purist view of sovereignty – pretty much ‘we are top dog and no other bugger has influence on what we do‘. Ahem, chaps and chapesses, along with that whole sun never sets on the Imperium no longer being a thing

that was the late 19th/early 20th century, guys

some dashed clever buggers invented something called trade, y’know, where you buy and sell stuff and services to foreigners. It goes on a bit more nowadays that it used to. Anytime you want other people’s money, well, you get to dance a little to their tune. It also pays to speak nicely to them rather than charge around like you own the joint. You do seem to have your heads stuck in a time when you did own the joint, it’s been nearly 80 years since then.

The ERG and their ilk are despicable rich bastards that don’t have to giveashit

And they don’t give a shit. Sure, the entire UK body politic has conspired to make a pig’s ear of this, but I’d like to direct Donald Tusk’s infernal ire better. I reserve a special place in Hell for Jacob Rees-Mogg, BoJo and all the strutting rich bastards who seem to be getting a massive horn out of sticking spanners in the works, and telling people that the only way to think about sovereignty is the way Kim Jong-Un thinks about it. Presumably Jacob’s got My Way on repeat on the old gramophone, with some pliant serf to wind the dratted thing up when the spring runs down.

If this is the way we are negotiating our first and possibly largest trade deal or non-deal with our largest and nearest trading partner, then as far as negotiating with Trump-land and China, well, so help us God. It reminds me of Tacitus’ description of the Druids retreating to Anglesey and hurling curses at the invading Roman Army across the Menai Straits.

On the beach stood the adverse array, a serried mass of arms and men, with women flitting between the ranks. In the style of Furies, in robes of deathly black and with dishevelled hair, they brandished their torches; while a circle of Druids, lifting their hands to heaven and showering imprecations, struck the troops with such an awe at the extraordinary spectacle that [it was] as though their limbs were paralysed, they exposed their bodies to wounds without an attempt at movement.

Apparently the troops got a right bollocking for such wussy behaviour along the lines of WTF is wrong with you lot, are you men or mice, and they stormed the island swimming across the Menai Straits with their horses. There’s a lesson in there, and it’s that hurling curses across a watery boundary at the other side doesn’t end well.

This is not a professional way of carrying on, people. We look like incompetent buffoons, and a great big blue furry buffoon looks about right. Hats off to the Dutch

Project Fur – you gotta have a larf, else you’d cry

At least they will be shot of it soon enough. We have to live with the massive monster of our projected id – it’s Forbidden Planet all over again without the pretty girl to make it better.

Forbidden planet – beware the power of the twisted darkness within the ERG

So here’s a gratuitous picture of Altaira

Altaira

before we have one of the villains of the show, the “I drink champagne wiv my Brexit Bruvvas when ‘my’ side loses a battle they deserve to lose” Jacob Rees-Mogg

Jacob Rees-Mogg

Now I’d rather have JRM for prime minister than Boris Johnson, but that’s not setting the bar high. In fact I’d prefer the Dutch woolly mammoth to either…

Our next PM, the fella with the blue wooly head!

because when it comes to British politics, let’s take a leaf out of Hippocrates.

Rule 1: Do no harm


  1. I am aware of the Brexiter’s line that you have to keep the enemy on it’s toes and not knowing WTF is going on during negotiations. Sometimes you do have to play the capricious fool. However, I think that the problems here stem from Brexit hiding two quite opposing world-views, and like the Red Dragon and the White Dragon under Vortigern’s castle, they fight endlessly so no stable structure can be built on the house divided.  Where are Merlin and Arthur now? We need them now in the kingdom’s hour of need, there is only greed and evil in those that rule today… 
  2. since obviously nobody in Britain speaks foreign any more, what with our Imperial glory meaning all we have to do is yell louder at our subjects till they get it, Google can help us with that
  3. In theory these guys would be ably represented by the Labour Party,  it’s fairly simple and honest what they want – less austerity, a better welfare state, some middling and low level jobs that pay enough to live on. They don’t really give a toss about the trade deals. However, if anybody can work out what Jeremy Corbyn thinks about Brexit, well, could they tell him, please, because there’s no consistent signal that comes out of the noise from his mouth, apart from that it’s not what the other lot wants. Which other lot, Jezza? in fact which part of which other lot? Oh, fuhgeddaboutit. 

Will the last UK finance blogger please switch off the lights on their way to Twitter

In a recent post Monevator started off decrying the slow fade-to-black of the UK finance blogs, did nobody tell him that

This is the way the world ends
Not with a bang but a whimper.

but more seriously, I wonder if it isn’t in the nature of the beast. The blaze of frenzied writing is to be had in the initial stages as you are working out what is what, and if this FIRE malarkey is possible at all, and what  stage of the process you are at. Then come years of grind, when not much interesting happens at all, particularly is your investment strategy is basically buy a tracker every month for 20 years, then quit on the proceeds.

The end of the world features tumbleweed

Before I join in bemoaning the passing of the old guard we really ought to have a rundown of some great new UK FI blogs I have come across:

There are also some interesting EU FI blogs, achieving FI is different in most of Europe because tax-sheltered accounts seem to be less generous and tax thresholds lower. It reminds me of the situation in the UK when I started work, when although we were all poorer the social safety net seemed to have a bit more humanity1. The Anglosphere has gone more towards a winner-takes-all model, diverging both from mainland Europe and from its former self when jobs were more stable, addressed a wider range of the intellectual ability range and particularly in the UK, housing was less vile. Firehub.eu is a good place to start. I wonder if the Brits will be kicked out in April for their renegade ways 😉

Steady investing and a lack of market drama isn’t good for narrative

I would say that RIT has done well with the steady investing narrative, turning it into a book. But there are only so many ways you can slice the lemon. Maynard Paton has an interesting FIRE journey – note that it also features some fantastic luck. In his case, calling the housing market well, but selling out of stocks before the GFC to realise liquidity to buy the house. Luck on its own is not enough, you must also carpe diem. MP gets to stop work nine years earlier in life than me.

It was much easier to write about investing ten years ago. We had just gone through a humdinger of a crash. Not only did you stick out in a big way saying the stock market was something to run towards, rather than away from as fast as you could, but starting from such a low base meant the market was tolerant of mistakes other than churning. The expected return is inversely proportional to valuation, you could buy pretty much anything left standing in early 2009 and do reasonably OK. Building a high-yield portfolio (HYP) with a useful yield looked like a reasonable possibility then. Nowadays you’d have to indulge in risky behaviour to get a high yield because valuations are higher. Sure, there’s Sturm und Drang in the papers about recent retrenchments, but the FTSE100 is back to two years ago, not 10! Continue reading “Will the last UK finance blogger please switch off the lights on their way to Twitter”

100% mortgage backed by BOMAD? I’ve seen this movie before – it didn’t end well

Rich kids will get to bid up house prices aided and abetted by BOMAD1 and a Lloyds bank 100% mortgage. BOMAD are on the hook for defaulting rich rugrats in the first three years, then Lloyds bank should be OK with the equity said kids2 have built up in those three years. Let’s hope Brexit doesn’t make the housing market go titsup, eh?

No, actually scratch that. I wish exactly that. I have no sympathy for these featherbedded chillun – let them suck up the negative equity, and let BOMAD be rocked for a chunk of the debt as a useful playing-field levelling action. Bring it on.

Perhaps after that’s happened some other poor devils will get to afford a house, should they be fortunate enough to still have a job in post-Brexitland.

BOMAD-backed mortgages are tough luck for kids who don’t have well-heeled  parents, because, natch, the rich kids will bid up house prices. So we can understand the delightful sentiment behind Frank Field’s letter to the Grauniad which proposes extending the largesse of the 100% mortgage to all those who don’t have access to BOMAD. Bless your egalitarian cotton socks Frank me old mucker, but you happen to be older than I am. So how come in your 76 turns around the sun you haven’t noticed yet that if you subsidise people’s mortgages, what happens? House prices go up. The maths is simple.

Punters have £x they can spend on housing, and in general when you are young an inexperienced as to the vicissitudes of financial life you deploy all of that £x, because everybody around you tells you that you can’t lose with housing. You also don’t tend to have much capital behind you and are in the first part of your working life, so your earnings are limited. You’re running on empty once you’ve committed your £x to the rapacious maw that is UK residential property. There are no reserves. If you’re £x is more than someone else’s you soak it up by having more house or living in one of the more tony districts, or reducing the zone on your London Underground ticket if you are rich enough to buy in the Great Wen.

The market is set by some punters finding their £x just ain’t enough to own where they want to live, so they leave the market for the rapacious BTL rental market, reducing demand of housing to buy. So, Frank, you go and subsidise that buyer’s £x by £y allowing these folk to borrow more than they can actually afford, guess what happens? Prices rise by £y, or if you subsidise mortgages by £y, by the increase they can borrow with that extra £y, which is a lot more. Result misery. This is an area that needs tough love because of the law of unintended consequences.

We’ve been here before. MIRAS, Help to buy3, LISAs. Get the government the hell out of the home loans market and keep it out of it, nail their feet to the floor. That includes you, Frank. Sure, BOMAD ain’t fair and the rich will screw everybody else. See also: private schools, moving to catchment areas, the lot. If you have the money you will always shit on other people’s kids to get yours ahead.

Government – stay out of the home loans biz. Get into the house building biz

The government can do something about housing – build the bloody things as social housing, don’t subsidise the buying of houses. Leave that to the market. Fewer that half of British households can afford to buy a house IMO. It’s a tremendously expensive capital asset that sucks up roughly 6-10 years of your gross earned income4, and in earlier generations before 1979 we catered for these people with something called council housing.

Let’s not over-romanticise that – some council housing was ghastly, I remember playing on some of the elevated walkway council estates as a kid where some friends lived, and they were dire. Council houses were often terrific, though, particularly for families – far more space than the typical four bedroom premium executive detached-in-name-only5 rabbit hutch constructed now.

Typical taste bypass of a modern estate aimed at those with more money than taste, this one in Turkey. Someone’s missing the whole point of a castle, these ones are definitely DINO. A castle should be 10 miles from the nearest one 😉

The government should stay out of the homes loans biz. Totally, other than to regulate charlatans, minimum lending standards, and to deny BTL lending totally IMO. I’ve nothing against private landlords, if they really own their properties. If they are competing for mortgages with homebuyers, well we survived perfectly well without BTL mortgages up to 1994 and nothing about the British housing or rental market has gone in the right direction since then for the poor bastards that have to live in the properties.

If the government wants to do something about housing, then look to the days before Thatcher screwed it all up to buy votes giving away free money to council tenants with Right To Buy. They were council tenants because they weren’t rich enough to buy their homes, and 40% of these houses are now in private BTL hands, shitting on the generations after. Thanks, Thatch.

We could roll this back  – build social housing, which we used to call council housing, and employ the best lawyers in the land to place a perpetual restrictive covenant on council housing so that any politician that even thinks of doing a Thatcher Right to Buy to sell them for votes is threatened with an official summons to be put in the stocks at the Tower of London to be pelted with eggs by everybody that can’t afford to buy a house until they think better of it.

In other news, personal insolvencies reach a seven-year high and household spending is at a 13 year high often fuelled by credit or depleting savings. Just the sort of situation that absolutely calls for 100% mortgages , natch?


  1. That’s Bank of Mum and Dad if you are one of the lowlife oiks that don’t happen to have mater and pater with the odd 10% of your starter house kicking around in loose cash they don’t need for three years. 
  2. In the curmudgeonly Ermine worldview you’re still a kid whatever chronological age you are if you are financially dependent on your parents. Paying your own way in the world was one of the key rites of passage to adulthood in my day. I do appreciate that such non-launched kids like to be called adults nowadays, but this is my narrative, so bite me ;) 
  3. Help to buy was on new houses, FFS. Yer typical first time buyer isn’t rich enough to spaff their money on a new house, you whazzocks. This was straight bung from taxpayers to Dave’s housebuilder chums 
  4. At a purchase multiple of say 5* one salary, and typical mortgage terms at typical multi-decadal British interest rates of ~ 6% means you pay about twice the capital sum over 25 years 
  5. DINO is when there is separation of about two inches from one ‘detached’ house to another. You need a few feet to get away from your neighbour’s bad taste in rap and to keep your squealing grandchildren out of their beauty sleep.