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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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”

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”

Unitising my portfolio shows I sucked last year

The trouble with unitising one’s portfolio is there’s nowhere to hide. Unitising lets you track the effects of adding money, which helps avoid the easiest gotcha in fooling yourself on returns. The Beardstown Ladies Investment Club effect. The hard earned cash you lob into the pot makes your portfolio go up, but it’s not profit, or ROI, or anything like that.

Unlike starting with a one off lump sum from which you draw nothing, evaluating performance gets a lot more complicated if you draw a yearly stipend from your stash. It gets a lot more complicated if you’re one of the ordinary mugs who has to actually, y’know, earn the money they are putting into their future freedom fund, paying it in year by year as they go.

The UK version of the Motley Fool used to have the greatest description of how to unitise and worked example called Stockpicking – Are You As Good As You Think? by G.A.Chester which was still visible to freebie members, but all that was lost when they reorganised the website(19 January update – see Neil’s comment for the original text – he had saved this). Sadly G.A. Chester seems to serve up endless spammy clickbait articles these days, what the hell happened to you, man? Stockpicking was an article pure genius, putting across a tough concept in actionable bitesize steps.

Monevator has a description here but for some reason I really struggle to follow that, although I recognise the moving parts when I analyse my spreadsheet written to implement GA Chester’s more ermine-friendly narrative. I tested the spreadsheet against Chester’s example. Pity that gem of wisdom is lost to linkrot.

Unitising is quite a grief-stricken and error-prone process because it involves going through the spreadsheet and entering the current price of holdings I own at the January sampling datum point. After 10 years, particularly with some occasional muppetry I have a few dead lines of stocks I have no holdings in, but it’s easy to miss the odd line where I do have holdings. It fails safe in that if I don’t enter the price of a holding I own, it says the value of that line is 0 which makes the unit price lower, which is an incentive to go back and catch all of ’em on the grounds I can’t be that crap, surely? There’s also a error-checking catch line that tots all the holdings up, it’s kinda nice if it matches Iweb’s view of my world. Obviously fans of Cloud Services like Money Dashboard will have this easier, though you still need to do the annual spreadsheetery to unitise. Money Dashboard claims to be

a secure cloud-based open banking website that enables you to replicate and then track all the spending categories you set up in MSE’s Budget Planner

Colour me a cynical sonofagun but I am of the firm opinion that secure and cloud-based do not belong in the same sentence. See Equifax for a worked example.

The Ermine portfolio unit value is down 5% this January to last January. It’s also changed nature, more gold and I have taken 20k out as cash, though I may stick that back in to Charles Stanley, which is a Flexible ISA, and pull it out again halfway through April. And I may contribute something to Iweb this year, though I can’t make the full 20k.

Now that’s not dreadful. What would I have been doing otherwise – I’d be in VWRL a la Lars Kroijer.

Hargreaves Lansdown tells me VWRL is down 6.87% Jan 18 to Jan 19

I get divi from VWRL, which is about 2%, I guess there’s a .25% platform fee too. So instead of all that tracking, I could have had one lot of VWRL and been about the same.

What about VGLS100? That was about -5.36% in acc units. Much of a muchness and not worth the Sturm und Drang. In general, a little bit shit. Where Eagles Fear to Perch did better than me last year for instance, congratulations that man!

Defence, not offence is the word at the moment

Now I did shift much more defensively, there’s a lot of gold, there are some government bonds in there. I am probably suffering the deadweight drag of the gold not earning an income. Well, that’s my excuse. I shifted more defensively for several reasons. It is not quite determinate when the best time to take my main pension is, there is a balance between the actuarial reduction because I am not 60 and what appears to be high CETVs which incidentally seem to reduce the actuarial reduction, for reasons I don’t understand.

So I have to keep on pinging the pension modeller. I might need some of that cash if the modeller says delay a bit, and money you might need in the next five years has no business being in the stock market. Particularly when said stock markets are at high valuations. I did much of the switching mid last year, but all that gold and the cash is pretty much a passenger now. I am not one of you young finance workers getting a savings rate of 50% into your SIPPs, I might have a negative savings rate this year.

I’m also trying to keep some of this year and last year’s ISA allowance, because I will draw a pension commencement lump sum from my main pension. And there is some hazard of a Corbyn led government in the future. As a retiree I won’t have a particularly spectacular income1 so I will probably be safe from his ministrations, but an ISA allowance of £20000 is way above what the vast majority of the population could even dream of saving. The argument that letting the rich shelter such a large yearly amount from tax does have some cogency, so I want the possibility of getting that PCLS into the ISA within the next year or two. Whether £20,000 will have any useful value in the Brexit Brave New World of buccaneering brio will remain to be seen.


  1. by the standards of my professional self or indeed the general UK PF scene – even the employed Ermine was way down in the ranks of finance whizz-kids well represented on the UK PF scene now. It wil be fine and more than my early retired self, but I don’t expect to be a tall poppy in Corbyn’s sights. Hopefully Corbyn won’t have the Blairite ambitions of siring a baby-boom through pronatal giveaways as we had in a tough period midway through my career, where every other bugger seemed to be getting the breaks. 

New year, New You, New hope

A Happy New Year to you – what are we looking forward to in 2019 then?

I was out walking with two friends – the sun was setting – suddenly the sky turned blood red – I paused, feeling exhausted, and leaned on the fence – there was blood and tongues of fire above the blue-black fjord and the city – my friends walked on, and I stood there trembling with angst – and I sensed an endless scream passing through nature.

Oh. Not so much, really. Did you know there were four versions of this picture? I didn’t until now, so I have learned something new today before 10am. Can’t be all bad. There are great parallels between now and the beginning of the global financial crisis. There are some that say there are great parallels between now and the 1930s, but let’s fight that one later on, eh? What do we have in front of us?

It’s an ill wind blowing, young FIRE folk…

The problem with seeing many new bloggers starting on their journey to financial freedom in the last couple of years is the thought in the grizzled Ermine’s fur that you really want to start that journey with a stock market that hasn’t been pumped up by funny money. I wish y’all the best of British luck, but I know from bitter experience that taking a suckout a couple of years after starting one’s journey to fabulous riches financial independence via the stock market is tough as hell if you take a spanking a few years in. Here’s how I did it wrong, so you don’t have to 😉 Continue reading “New year, New You, New hope”

Odd Christmas sales and consumerism

Unlike most years, where the Santa rally is a thing, there’s not so much cheer on the stock market at the moment.

In other words, there’s a sale on. The Ermine has an additional problem, in that my money is held in increasingly worthless Lesser British Pounds, which are going lower relative to foreign assets day by day. That’s largely due to the pickle we have got ourselves into. Having narrowly voted to leave the EU for a land of unicorns and unlimited supplies of cake, hard reality seems to have met the dream. Usually when that happens the dream loses the fight.

The narrow majority for Brexit covered up an inconvenient problem in that there are two pro-Brexit constituencies, and their interests don’t really overlap.

These are roughly the groups as I see it – one lot want their unskilled jobs back, or at least not to see them going to young folk from the EU who can live more cheaply than their constituents can for a while1. There’s another lot who are the Tory headbangers of the ERG group, who are sore about the loss of sovereignty. There’s an argument that the sovereignty fight should have been had at the time of Maastricht and they should have signed up with James Goldsmith’s Referendum Party. These guys are usually rich enough to weather any storm of a no-deal, or old enough that they don’t have to find work in the resulting maelstrom, and some of them have fond memories of an imperial past when Britain ruled the waves. Whenever I hear Jacob Rees-Mogg speak, I do feel that the 1950s called, and I wasn’t even born in the 1950s, although I am about ten years older than him!

The top left side want much less immigration, they don’t really care about trade deals with non-EU countries, the top right don’t care about immigration but get off on the idea of trade deals free of the yoke of the EU that limits their coruscating ambition. There’s a small dark side of xenophobia, which isn’t necessarily just people who favour Brexit though it does tend to go along with the Brexit patch

At best only one of these groups with non-overlapping interests can be satisfied. Rationally, the largest group that can be satisfied would be the Remainers, because their desire is simple and achievable, what we had before that Cameron chap cocked it all up trying to hold his party together.

If one of the Brexit group gets what it wants, the other group largely doesn’t. The Remainers at least know they lost the fight. The Brexit contingent that doesn’t get what they want will be doubly pissed off because they thought they won. There is no win on offer here that gets anywhere near 50% of people happy. And yet Brexiters are busy screaming the house down about “The Will of the People Must Be Respected”. Well, yeah, as long as it’s not the will of the remainers and as long as it’s not the will of the other half of the Brexit voters, because for them that other lot’s Brexit is not my Brexit.

I’m all for respecting the will of the people, as long as they tell us which will of the people they think that should be. Will the real Brexit stand up and make itself known to the hapless captain of the good ship Britannia? Even when May brings them something that looks like a Brexit, as in ‘submit Article 50 to leave the EU’ people still yell out like two year-olds that’s not what we wanted, Waaah. So they defenestrate May and it’s Groundhog day again.

There should be an honorary eagle pecking out the liver for David Cameron for putting the question is such a stupid, damn-fool and undeliverable manner. It is like having a referendum on “Do You want Real Live Unicorns on the High Street Every Sunday”. The answer may well be yes, but it’s a tough one to deliver. Because: Unobtanium. In the form of cakeism in the first case and unicorns on the other

All that is as may be, but in the immediate future it drives down the real value of my cash. Continue reading “Odd Christmas sales and consumerism”

Anti-FIRE – the YOLO train-wreck edition

It’ll soon be the season of goodwill, which also seems to bring about exceptional financial muppetry for some reason. A few years ago it was Shona Sibary and her excessive brood that was financial folly du jour, along with TV producer Charlotte and a few also-rans. Along with running articles on how you can get to retire early, we’ve had a few on people who don’t seem to be planning on retiring ever.

I was tickled by this young 30-year old singleton living with her parents. Now I have some sympathy for her original plight of living in London on 40k a year. If you don’t want to share your living costs with other people, be they a partner or some sort of shared housing/flatshare arrangement, I can believe 40k isn’t enough to live in London. What’s a girl to do in such a quandary? Clearing off back home to live with Mum and Dad seems like an eminently sensible thing to do. Hats off to her for effective action in the face of adversity.

£40k p.a and living in her childhood bedroom, but still with a negative savings rate. WTAF?

I also have to admire that she doesn’t have a credit card because she’s too worried about ending up in debt. Wise move, that. But where I am totally nonplussed is that of her £2200 pcm take home,

By the time I’ve paid rent, done some food shopping (I want to pay my way as much as I can), settled my phone bill and insured, taxed and put petrol in my car, there’s not a great deal left.

I mean FFS? Let’s leave aside the breathless insouciance of not getting that: hitting Bank of M&D for a few hundred sods a month for foreseeable expenses like eating and car maintenance is not paying your own way by any of the usual definitions of the term.

An ermine spent some £400 on road tax and insurance and £1k on servicing and fuel last year. My phone bill is some £50 a month, so that’s about £2k p.a. Let’s say that’s £200 a month. Leaves our heroine with £2k a month. Say she spends £1000 a month on drinking with her workmates and clothes, and surely the reduced rent to Mum and Dad plus food can’t eat up the remaining £1k. I’d say our young lady has a serious drugs habit she’s not letting on about if it’s really true that none of the £2200 a month actually sticks to the sides. There’s precious little detail about what she actually does spend it on, this is Grazia, after all, which seems to have little detail about anything. It did, however, introduce me to the latest wheeze to part the financially naive from their hard-earned:

Klarna – a buy-now pay later app

As I was considering a corduroy pink boiler suit in the Topshop Black Friday pre-sales, under the Add to Basket button, a rectangular box winked at me: “Pretend it’s pay day! Pay ⅓ now and the rest later”. That’s Klarna.

I confess I’ve read the entire article, and looked at the Klarna website, and it looks like a credit account that’s restricted in stores you can use it to pay. It absolutely beats the hell out of me why on earth you would want to do that, but if a subset of Millennials really are so gormless that they find ease of use of payment so important to them that they will take these restrictions lying down, then they deserved everything that’s coming to them, quite frankly. A jolly good shafting, by the looks of it.

Financial Friction is your Friend

There’s a strong hint that Klarna’s bad for your wealth right in the rubric here

Klarna is the millennial store card, designed for a generation who want things as easily as possible, or in Klarna’s words “a frictionless buying experience”

You want friction in the buying experience. It throws sand in the wheels of your advertising-addled monkey-brain. One of the wins I had in racking back my spending was the simple addition of controlled friction. If it cost more that £100, I wrote it down on a piece of paper with a date. Allow a week to pass. If it still looks like a good idea a week later, go get it. It’s really quite amazing how many things don’t look like such a good idea a week later. Hours of your life died to earn that money. Honour the sacrifice by taking the time out to think. Obviously if it’s a piece of safety equipment or it’s going to save life right now then go right ahead, but most purchases really aren’t that urgent. A little bit of sand in the wheels of the Iwantitnow reflex doesn’t hurt. Nowadays I can get away with 24 hours, but the week cooling-off period is a good one to break the I-want-it-now habit at the start.

Klarna is good for them. It’s not good for you. Much of Grazie’s article is spent talking about how great it is to be able to ‘buy’ a gazillion sizes, try out the ones that fit and return the others, without having to front the money. In the old days you could do that in the store, it was called a changing room. But fair enough, I geddit, things change, Millennials live busy lives and don’t do face to face, life is lived best through the screen of a smartphone. What I can’t get is what does Klarna do here that my trusty credit card can’t.

If I buy five pairs of high heels just after I pay the card off, I get well over a month before I even need to think about paying back my flexible friend. That’s probably long enough to find out which four pairs will give me bunions and return the buggers for a refund 1

a hard credit search each time you want to slice it

But the worst thing about Klarna is that say I am Grazie’s Sian, and while Klarna lets me return 9 out of my 10 items without raising the capital up front, I still decide that I need to slice it because my 40k salary is insufficient to buy myself all the things and experiences I wish to have in my young life. Each and every time Sian hits the old ‘slice it’ button, that’s a new hard credit search. Since she’s in the habit of spending more than she earns, that’s a new hard credit search every month, if not every purchase.

In comparison, if a grizzled Ermine decides to slice it, that’s called ‘not paying off the credit card in full every month’. No new credit search, just business as usual. It’s a stupid way of living for all the usual reasons, but were I saving for my house deposit then when I get to ask for a mortgage the bank isn’t going to go ‘Holy cow, 12 hard credit searches in the last year, no way am I lending this punter a single lousy penny, never mind a couple hundred grand’.

Nobody will lend me any money, because I have virtually zero income. The last time a hard credit search for ‘would you lend this mustelid any money’ was run on me was when I took out my credit cards, which was when I was still employed – it’s getting on for over ten years now. I took a look for credit searches on me. They are all for insurance and ID qualification, plus one for Starling bank. Who then go on to lie about my balance, saying it’s £0. It’s £2500 FFS, because they pay me a gnat’s cock of interest on the current account as well as being the solution to not getting receipts for contactless payments. They also don’t charge me stupid amount for using the card abroad 2.

Over There and Overindebted

Everything’s bigger in the States – houses, hot dogs, cars, and debt. And Financial Folly in the pseudonymous Kate and Tom. The problem is simple. Too many snowflake kids, too many airs about the kids, too much house.

Our first house was perfectly fine, but I was pregnant with our third child, and we had three bedrooms in that house and wanted a fourth.

They could probably afford the kids – just save the $15k pa each that goes on private schooling and give it to them as a bounty on reaching 21. See Rule 5 later on

But we have a good deal — we’ll pay $15,000 for the three of them. But, of course, it’s all going back on credit. There’s a company that offers educational loans for private school.

I love the way he claims to be good for $90k a year, and get works as a bartender at night. I mean, how does that bartending job even get to shift the needle on the dial? Then there’s this sort of addled thinking:

Tom: To be fair, we do try to save money where we can. We had a lease on a minivan that was costing us $405 a month that we just downsized to a $208 car.
Kate: We always lease cars. Honestly, we can’t afford repairs. If our car broke down, we wouldn’t have the $3,000 to fix it. We need to have that high car payment because, frankly, we are not good enough with money to have savings.

Dudes, it’s simple. If you need to lease a car, you can’t afford to drive one. End of. Sure, if you could afford to buy one, but choose to lease, well, perhaps you get the new car smell more often. I pay too much for some things, because I can’t be arsed to squeeze the lemon on everything. I can afford to do that because I don’t borrow money for these things.

These guys aren’t stupid and they’re earning a decent screw. They’re playing a strong hand incredibly badly.

More and more I start to wonder if the road to financial success is far less about what you do do. It’s a tough one – in nearly all other endeavours you progress by getting better at what you do do. With money, an individual surrounded by clever people manipulating the atavistic monkey-brain with advertising, social media FOMO and people who want your money finds themselves in an unfair fight. It’s what you don’t do that matters:

Rule 1: Don’t spend more than you earn

Rule 2: if you really must break Rule 1, then not on wasting assets. Sadly wasting assets often includes education nowadays

Rule 3: Don’t lock in commitments you can’t afford

Rule 4: Never own anything that eats while you sleep

Rule 5: invest in your children. Teach them the skills to be self-sufficient adults

The writers of The Millionaire Next Door bring out rule 5 of unassuming millionaires: Their adult children are economically self-sufficient.

None of that is about investing. You gotta plug enough of the holes in the bucket to stop running out of month before you run out of money.


  1. I guess as a quadruped an ermine will need two pairs of heels to strut its stuff, but Visa and Mastercard can handle that 
  2. Not that that’s going to be a thing until we find out which way is up with all the Brexit bollocks coming along.