I opened my S&S ISA in March 2009, with Interactive Investor (III). I was used to their system, had used it for shares research in my dotcom boom and bust days, and their charges were OK. What I want in a ISA platform is pretty simple. No ongoing fees, and specifically no percentage fees. I am happy to pay for buying and selling shares, not to hold them.
Before the Retail Distribution Review (RDR) this was common. Platforms made their money on kickbacks from funds. I had been educated to this problem so I didn’t have any funds. Simples. The RDR was supposed to help the common people, but I took the shaft. I was perfectly happy to have my platform costs subsidised by all those fund holders. III introduced a £80 p.a. fee, apparently for our own good. From their guff at the time
We believe that customers should be engaged with their investments and actively manage their portfolios. To support this, we are introducing a quarterly fee of £20. If you already trade twice or more a quarter then this fee will make no difference to what you pay – it is effectively an advance payment of those first two trades for the quarter. If you are trading less than that then you will still have the right to your two trades in each quarter without any additional payment and hopefully feel encouraged to more actively manage your investments.
It took ages to move that ISA, I moved it in stock format. Don’t know why we suddenly resurrect Latin and call this in specie, but that’s the convention. You have to watch it because some platforms charge a transfer out per line of stock. OTOH you get to pay the transaction charges twice if you convert to cash and rebuy. Some people say there’s the extra hazard of being out of the market, and I suppose since bull markets are longer than bear markets that’s probably the case for a randomly chosen time period.
I had five years with TD, where they generally did what I wanted them to do, and didn’t give me any trouble, other than starting to charge for holding funds. So I got rid of funds I’d acquired with TD and switched to using ETFs. That gets easier as the ISA becomes a bigger beast. I don’t really buy less than £2k of anything now, £12.50 out of that is 0.63%, on a par with stamp duty. So I take a 1% hit upfront. On the £500 transactions when I started out in 20091 that 12.50 was an ugly 2.5%, which is why everybody used funds in those days. Paying the 3% in kickbacks and fees, no doubt 😉
I was in my late 40s before I ever saw an account with six figures to my name. Apparently you need a deposit of £100k to buy a house in London. Housing has always been expensive in London. I was born in London, went to university there, and spend the first decade of my working life there. I had job-switched a few times and the Bank of England inflation calculator tells me I was earning reasonably well for a twenty-something. I was single and child-free.
What was the best housing situation I could afford back then? A single rented room in a HMO in Ealing where I had to put salt round the periphery to prevent black slugs invading the place. This was an upgrade on the various rooms in shared houses I’d lived in before. I was in my late 20s, and no, I didn’t really have any savings either, other than about £5k, because I had believed that I needed to pay the fees of my MSc course myself, but it turned out that the Manpower Services Commission gave me a grant. It still didn’t help me buy a house in London.
So I moved out of London. The problem of not having a deposit was still there, but when I moved to Ipswich I was earning better and the prospects for salary increases were better for me. So I borrowed about £10k from a MBNA credit card on interest-free credit for a year to put down as a deposit for a house, perpetrating the single greatest piece of financial folly in my entire life – buying a house at a market high. I used my better salary to pay down that interest-free card over the year – I really did pay 0% on it. But I didn’t have savings of £15k from the start. Those were more innocent times, when mortgage companies looked at only your salary and didn’t ask about CC debts, because such debt was not as commonplace as now.
That £15k deposit was the equivalent of £40k now. Earlier generations of Ermine weren’t any better at saving than Millennials. There is an argument that young people start off more skint now than they used to. There is a compensation for those working in cities that they observe much faster career progression in their early 30s than previous generations
so it’s difficult to tease this appart – I would say that average and middling talented young folk had an easier time in my generation that Millennials, but high-flyers have much better opportunities now, part of a general winner-takes-all trend.
The Hemingway law of motion – Slowly at first, then all of a sudden
In Hemingway’s The Sun Also Rises, there is this passage summarising economic change
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”
I guess we’re still European at the moment 😉 Though I do wonder if our good fortune is perhaps connected with our impending departure from the continent. I came across Mrs W of whatlifecouldbe.eu[ref]I was surprised there are so many German FI blogs, and surprised to see German blogs are written addressing the second person singular not the formal third person plural[/ref]- who is already FI at 32, this is their story. Basically Scottish lass goes to work in Germany in 2005, meets handsome young Romanian fellow starting college, ten years later they have a couple of nippers and are FI/RE. Even my grizzled and cynical old heart is warmed by the tale of chutzpah, enterprise and general derring-do.
I confess that when I read the story of what makes them FI, invested 100% in a single asset class of German rental property it makes me feel a little bit squiffy for the FI part of their future, particularly when I hear Mr W’s diatribe about the SWR and equities in general. But then I recall that he is still in his early 30’s at a guess, so while I intensely disagree with Mr W’s approach to diversification and cavalier use of leverage, it will probably work out just fine in the end though probably not exactly as planned. These guys have got human capital in spades. It’ll be all right on the night even if something goes wrong with the FI side of things. This fearful Ermine would be scared of with the mix of leverage and lack of diversification. Unlike the Ws, I have already earned all the money I will ever earn, so I have to be more timid, because I have no human capital in reserve.
What makes you FI/RE in your 30s is very different from what makes you FI/RE in your 50s
The world is too unstable to convincingly clock off in your 30s, unless you have a very serious trust fund behind you. Yes for Petra Ecclestone[ref]Queensberry rules require me to point out that the Graun makes out that Petra earns her crust. Do you believe that explains how you get to own a Hollywood mansion at 25? Me neither[/ref]
no for people who have to earn the money to become FI.
In Petra’s case her dad did the heavy lifting, though I believe her mum wasn’t a pauper either. Mr W nails it, however, when he says passive income is worth more than net worth. Back in the dark days of 2009, I took the same line, albeit in a different asset class, and started building a high yield portfolio – at the sorts of valuations one was getting then it was possible to envisage getting there. And in all fairness I still have that HYP, and it’s paying a decent steady return in aggregate for what I paid for it then. The bad odds for FI/RE are written in the stats of the SWR – if it’s 4% then you need to save 25 times your desired annual spending rate that is a big ask for a working life of 20 to 30 years. You ain’t got years enough to get there from here if you are looking to live a normal life of spending most of what you earn.
You can get there if you earn a heck of a lot more than you plan to spend, but you then have the living like a celibate monk in a brothel problem because you will be surrounded by spendy peers. You can get there if you are prepared to work for 50 years, because the faint whisper of assistance of compound interest may give you a bit of a leg-up[ref]A bit like NASA’s ion drive, compound interest’s action is feeble compared Saving Hard, the equivalent of the sturm und drang of chemical propulsion. But it keeps going steadily, and over timescales longer than a FI/RE working life it can add up significantly[/ref]. But otherwise it’s a very, very long stretch. In your working life it’s also good to be able to buy a house, which is a hedge against paying rent, otherwise you will have to lift your savings target to cover renting for the rest of your life, so it’s all a tough ask.
Having an unleveraged stash of wealth it’s the canonical way older people look at becoming FI – you build up enough stock of assets that the flow of income from them is enough to make up for the flow of income you aren’t getting from selling your time or skills for money.
At this point most Brits would yell Get into BTL in my ear and indeed that’s what an awful lot of people do. If you still carry a mortgage on that BTL then it’s a bit like taking out a mortgage to buy the assets in one’s SIPP or ISA, it obviously reduces the upfront costs and you can get a lot more bang for your buck. For someone like me that would be insane, not just because I loathe real-estate as an asset class with a deep and heartfelt hatred born of the way it hurt me early in my working life, but also because I don’t have any earning potential left – my human capital is close to zero. You just don’t carry debt when you are all out of human capital[ref]there are specific times when it’s okay for FI/RE people to carry debt because of the 55 limit on drawing pensions, but as a general rule, don’t[/ref], because it’s a drag on your financial capital. But looking at how Mr and Mrs W do it, I wonder if perhaps leveraged BTL is more healthy in the young than in the old.
We are greatly privileged in the UK in terms of tax-sheltered accounts
We can shelter £20k a year in ISAs tax-free and up to 40k a year in SIPPs tax-free, which is stupendous compared to the paltry $6000 annual limit for the US equivalent of a SIPP, an IRA. In Canada that’s about $15000 CAD, about £9k p.a. Here we have people bitchin’ and a moanin’ about the lifetime allowance of £1M, our North American FI colleagues would find it hard to get that much after a normal lifetime of working. Then there’s free health provision, which is a whole world of hurt for US FI/RE people, which is a lot of money you don’t have to save for.
Then let’s look at the situation in Europe – countries like France have a wealth tax, and countries like Switzerland charge tax on the imputed rent of a house. In Belgium No More Waffles is battling a dividend tax rate of 30%.
There is, of course, a case to be made that is all a byproduct of the way British elites are keeping their money to themselves, tossing a few crumbs for the upper middle classes, making it look like anybody could do that. After all Britain has an ignoble tradition of government facilitating large scale tax evasion through looking the other way as far as tax havens and things like trusts to circumvent the already generous IHT allowances. Perhaps the FI/RE community is just slipstreaming the kind treatment of wealth and its owners, because they have to save much more money at a much higher rate than normal workers are doing. The generosity of the ISA allowance is roughly the same as the median UK household income of ~£23,000. Your average FI/RE saver is chuffed if they get to a savings rate of 60%. Getting to 90% is a serious stretch, so let’s face it, that £20k ISA allowance is one for the rich – FI people earning £50k p.a. net and probably normal people earning at least twice that. The rest will struggle to fill it each year.
Of course all this lost tax probably makes living in Britain a bit more shit for other people, and as a result said elites get an angry howl of rage when they hold referenda. So perhaps we might have had a better collective quality of life if the tax-sheltering regime were not quite so generous, but you have to work with the world as it is.
It’s not all upside, however
There’s trouble brewing in the increasing shitstorm being made of Brexit, where none of the protagonists can agree what success looks like though they all have very fixed but orthogonal views of what it should be. That, combined with flatlining productivity could lead to serious unrest in the years to come. There are some things historically peculiar to Britain – the general godawfulness that is hideously expensive housing. The horribly unequal distribution of jobs with all the investment happening in the southeast and London. You can find cheap housing in the UK, just not near any work of substance. Then there’s expensive tertiary education, which could be circumvented by studying in Europe as Mrs W did, but is no longer an option[ref]Whether the Erasmus scheme that served Mr W (and Mrs W perhaps?) carries on for UK students after Brexit is unclear but probably no because of the issue with free movement despite the Brexit boosterism of the torygraph – even they have to confess the Swiss had to craft a replacement after they voted to can free movement. For the Torygraph scenario to be right the UK Government would have to craft a Swiss style UK Erasmus replacement and fund it for cheaper studying in EU universities than the high cost of studying in England. In other news, a flock of pigs was seen flying to the coast[/ref]
Be grateful for what you have, UK FI/RE people, and sweat it while you’ve got it.
Gratitude is good for the soul, and British FI/RE aspirants have a massive leg-up in tax privilege compared to many other First World countries. Celebrate your good fortune, and hit it while you have it…
Here is a message from the CEO describing just how we are going to obfuscate our previously simple offering to you. We will obscure things by bundling some services, charging more for others and complicating the process of comparing our charges with other ISA providers. Of course we are going to make out that we are doing you a favour, but basically we want you to trade a lot more often so as we get more money. Geddit? No, well, what we will do is charge you for two trades a quarter, constraining what you can do, and enticing you to churn more. Oh and we’ll wrap it all up in fluffyness of how we believe in the stuff we’ve been forced to do. Unfortunately, Mr Ermine, you weren’t using any of the funds that we were stealing some of the proceeds from every year, because you identified them as a ripoff. So you get to take the shaft, this time, buster. That OK with you? Because if not you know what you can do but it’ll cost ya. Bwahahahahahaha
Pretty much rinse, repeat – I was happy with TDs costs – basically now’t if you do now’t[ref]ETFs and shares – I got right out of funds in TD when they started charged platform fees to hold them[/ref], and £12.50 per trade. As opposed to £90 p.a. with III, which is reduced if you trade often enough. ‘Cos that’s where money is to be made for III, on the turn, they want to nail you in transaction fees or in annual fees.
End of October I requested a transfer to iWeb, and TD Direct acknowledged this by email on the 1st November.
We’re sorry to hear that you’re looking to move the assets you hold with us today but we’ll work closely with IWEB to ensure your transfer is completed as quickly as possible. If you change your mind and decide you’d prefer to stay with TD Direct Investing, please let us know and we’ll look after this for you.
Moving is a big step
We know that moving your assets is a big decision and we want to make sure you know what to expect during the time it takes IWEB and ourselves to complete this for you. Please take the time to read through the points below so you know what’s involved. We won’t charge you for moving your assets to another provider but it’s worth checking to see whether IWEB will charge transfer or exit fees if you decide to move your assets again in the future.
Things to consider
• Some providers will only accept cash transfers in pound sterling (£). If IWEB will only accept pound sterling (£) you’ll need to convert any cash you hold with us in other currencies before we can move your cash. Foreign Exchange (FX) rates will apply to all currency conversions you carry out.
• Transferring assets can take up to 6 weeks, sometimes longer, depending on the complexity of the investments being transferred but we’ll work closely with IWEB to make sure this happens as quickly as possible.
Since then they have done diddly squat, to the extent that IWeb sent another letter saying they hadn’t heard from TD Direct on the 24th. Which pretty much confirms my initial feelings about III from five years ago – shysters. From this thread on MSE I’m not the only one to be taking the shaft here.
The RDR has been a bastard from my point of view – I was mainly a shares/ETF sort of guy and was quite happy to pay my way in buy/selling costs and for the massed ranks to pay for their free fund buying/selling via the various kickbacks on funds/OEICS. The information was out there that you were being ripped off annually in charges, and if you couldn’t be bothered to learn about it then I figure it’s fair enough. Whereas the shares proposition was always that you pay for activity. Not churning your portfolio was the win there. In other words don’t do this:
Then the RDR came along and said it isn’t fair that the sheeple are being gouged, so we now have this problem of platforms being incentivised to make their punters churn their portfolios to generate some transaction fees, and changing their fee structure to try and catch people out. It’s a little bit like the way regulation of the power market means you have to shift supplier every few years, because all the best prices are aimed at new customers. The FCA come along all self-congratulatory and say that early signs are that the RDR is working, well it sure as hell ain’t working for me. I was quite happy for the fund buyers to pay their hidden platform charges, after all if you don’t want to pay annually then shares and ETFs are your friend 😉
You see the background radiation of the old system in the new charging structures. Platforms made their money on fund kickbacks, so they didn’t charge for buying or holding funds. They didn’t make money on shares, so they charged transaction fees on shares. Now that they don’t make money on fund kickbacks, they charge annual fees just for having funds, and just because they can, they extend this ripoff and charge annual fees for shares. The likes of Hargeaves Lansdown at least have a little bit of shame about that, inasmuch as they cap their annual fees on holding shares at £45, while fees are unlimited on funds until you reach £2 million assets under management. HL would actually be half the price of iii for my ISA, as their charges on shares and ETFs top out at assets of £10,000 under management, but £45 is still too much to charge for inactivity. The one greatest lesson I learned in investing is the power of sitting on my backside. Time in the market is your friend. I don’t want to be paying for it.
UPDATE 27 Nov 18:00
III have acknowledged the poke about the transfer and say
Dear [griping mustelid]
Thank you for your secure message in respect to transferring your ISA account to Iweb.
We have received the transfer form – transfer reference nnnnnn and we are due to send a statement of your account to Iweb. Due to a spike of activity in the transfer team, transfers are taken longer than normal to process but I will make them aware you have been in touch so they can expedite this for you.
I can assure you that as we can see you have already requested a transfer out, you will not be expected to pay the fee. If your account is still open in January just email us again at this time and we will waive or refund it.
Should you have any further enquiries, please do not hesitate to get in touch again. Our response time to secure message is usually 1 working day, although in times of high volumes we may take up to 5 working days.
The Ermine has two retirement resources. One is my DB pension, which is easily enough to live on at the moment – it is deferred for only a couple more years, because the Ermine is grizzled of fur and will reach normal retirement age for most of that pension accrual, some time after Brexit, sadly. But it’s denominated in pounds, and there’s an inflation cap on it. Neither of these had been a particular concern until June 2016.
The other is my stock market holdings, which are in two ISAs for platform diversification. I hold equities and ETFs with TD Direct, which by a quirk of fate don’t incur platform fees because TD make its money on the buy and sell commission. The ermine is not a source of rich pickings here, as my aim is to never sell in the case of the HYP or a world index ETF. Sadly TD Direct have been bought by iii, and I fell out with them a while ago for stupidly hiking fees in an attempt to make us all churn our portfolios. That good fees fortune may not stand.
I also hold funds with Charles Stanley, or rather a single fund, the excitingly named B2Q6HW6, which tracks the FTSE World (ex UK) Index. The original aim of this was to lean against the home bias of my HYP.
Brexit changes the risk balance
The classic view is a DB pension is steady as she goes, as close to gold as you can get, whereas equities are an exciting but unreliable floozy on the side. Brexit changes that because it is likely to hammer the value of the DB pension in real terms by devaluing the pound. It’s a massive risk to the UK. The rest of the world will probably tootle along just fine. Now it’s entirely possible that the Brexiteers are right and nothing of note will happen, or having flung off the yoke of the EU we will do well. Trouble is, I am very heavily exposed to the UK – the ISA is worth only about half the notional value of the DB pension, so even if it was all in foreign assets I’m more than half exposed to the UK. And what I’ve experienced so far of Brexit is inflation, and we ain’t even left yet. Now on a contrarian basis there’s an argument for buying the UK, but I felt a bit bad writing that last time, and @hosimpson and @Neverland weren’t sold. No, I can’t really convince myself either. There might be a case to do that if I weren’t in the eye of the storm – a Frenchman could consider a small contrarian punt on the UK, but the trouble is if the UK goes titsup so does my main pension. I don’t need any increase in UK exposure.
There are some things I could do with the pension – I could draw it a couple of years early, shovel those years into my ISA. But then I get to pay tax on my SIPP that I haven’t cleared out yet. I could take a pension commencement lump sum, which commutes some of it to cash, and invest that, but the rate isn’t terrific.
Doing nothing is iffy, I am sitting on half a house worth of cash much of it borrowed from my ISA and a Brexit steamroller coming to pummel the value of that into the ground.
The Ermine takes a sneak peek behind enemy lines
Most of what I hear of Brexit boosters comes from the Brextremist wing of the Tory party, for the simple reason that they seem to be doing most of the running these days. I obviously hear the endless barrage of whiny Remoaning, to which I am adding here, but it’s always good to hear other voices. I thought I’d look wider, and in amidst a lot of Googling, I came across these guysI confess that I quite like the cut of their jib on a lot of things, since it appears that I share some of the sovereignty issues[ref]I haven’t searched all the Leave Alliance, but I note they don’t really say much about immigration[/ref], though I am nowhere near as worked up about them as they are, and weight the economic hit much greater which explains why I am still a pusillanimous Remoaner. I also kinda like North’s descripton of blogging as a way to learn 😉
In the search I came across all sorts fo flotsam and jetsam, I was tickled by this piece by an anti-fangirl of Jacob Rees-Mogg, as a cheerful interlude before we get on to what Peter North thinks Brexit will mean, as led on by the no deal wingnuts. In some ways people who voted Brexit seem almost more pissed off by the mess May and her crew is making than Remainers. At least the latter know they lost the fight.
The phoenix must burn to emerge
Bloody hell, and I thought it would be bad, and North is still a fan of the process.
all JIT export manufacturing will fold inside a year… Across the board we will see prices rising… Britain is about to become a much more expensive pace to live. It will cause a spike in crime… lot of engineering jobs to be axed since a lot of them are dependent on defence spending. It will kill off a number of parasitic resourcing firms and public sector suppliers. it will wipe out the cosseted lower middle class and remind them that they are just as dispensable as the rest of us.
major rationalisation of the NHS and what functions it will perform. It will be more of a skeleton service than ever… a lot of zombie projects will be culled and the things that survive on very slender justifications will fall. We can also expect banks to pull the plug in under-performing businesses. Unemployment will be back to where it was in the 80’s…. Anyone who considers themselves “Just about managing” right now will look upon this time as carefree prosperity. There are going to be a lot of very pissed off people.
young people actually start doing surprising and reckless things again rather than […] tedious hipsters drinking energy drinks in pop-up cereal bar book shops or whatever it is they do these days. We’ll be back to the days when students had to be frugal and from their resourcefulness manage to produce interesting things and events.
A few years in and we will then have started to rebuild EU relations […] we are looking at a ten year recession. Nothing ever experienced by those under 50.
I really recommend you read the whole thing, I like his style, but I think he graduated at the Nietzschean school of dialectic, perhaps with coaching from Tim Gurner regarding da feckless yoof, who seem to have dropped some smashed avocado into his beer at some stage.
That which does not kill us, makes us stronger.
Mind you, I need to be careful what I say, I was/am part of the cosseted lower middle class and an engineer to boot, so already up against the wall in his world. He’s saying that the economic fallout from Brexit will blight a third of the amount of life I have left, statistically speaking. The bear case always sounds smarter. [ref]It seems to be a more general case in more than investing[/ref]It’s poles apart from keep calm and carry on, and it’s a more dramatic story. But this narrative of woe comes from a fan of Brexit. Leave alliance has the most cogent takedown of the no-deal it’ll all be OK with WTO rules stance of the wingnuts – it’s not all about the tariffs guys. But in the end it’s for the Brexiteers to sort out what Brexit means, beyond the gnomic tautology of Brexit means Brexit.
In the time we have left, is there a brace position?
Foreign assets, basically. That FTSE World (ex UK) Index. There’s not enough time and I don’t have smarts enough to do anything better. It’s the world according to Lars Kroijer but I get to atone for my seven years of nonchalance in not anticipating that my fellow countrymen would suddenly perform an act of economic hara-kiri with the ex-UK slant.
I did have a look to see if I could buy that in a L&G ISA to get rid of Charles Stanley’s platform fee but sadly the L&G ISA index funds list doesn’t include the L&G fund I want. Go figure.
It won’t be enough to compensate, but it may slow the fall a little bit. I will probably have to pay health insurance to make up for the fact the NHS will be eviscerated and life will be a bit more shit in many ways, but we will have taken back control. The same sort of control of the pilot taking a hammer to the autopilot and getting in a flat spin, but goddamn it, it’s his own flat spin till the crunch comes.
OTOH it may well go all swimmingly, bluebirds will be tweeting and there will be the fine sound of leather against willow on a thousand village greens in the joyful sunlit summers that will come when the foul yoke of the EU superstate is thrown off.
Fair enough – so what’s the worst that will happen out of my attempt to brace for Brexit if it all goes swimmingly? I will end up with a ISA that is more or less balanced according to the advice of Monevator’s tame ex-hedge fund manager, albeit oddly with the old HYP core. I guess there are worse things that could happen.
Plus I increase my risk of devaluation due to a stock market crash, since valuations are high, but then I am almost guaranteed another value of cash sort of crash with Brexit, so I’m stuck between a rock and a hard place. A market crash usually comes good in a few years, whereas Brexit looks like it will hammer the pound for a decade – and that’s according to parts of the Brexit camp, they have so little faith in the competence of Her Majesty’s Government to know their arse from their elbow. I need to pay back my ISA from the cash from the house sale, pay this year’s 20k in and get me some Brexit ballsup insurance in the form of foreign assets while the pound is still worth more than a bucket of spit.
There aren’t any good answers here. Unlike Rees-Mogg and his band of happy Brextremists I am not rich enough to come out of Brexit unscathed. I will go down with it, it’s a question of how much. I need some light relief. Let’s hear some Moggmentum from Madeleina Kay, JRM No 1 fan – not.
I have much sympathy with the view of Guy Verhofstedt that Brexit is the result of a catfight in the Conservative party that got out of hand. The more I see of how the Tory party prosecutes the aim of leaving the EU, the more Verhofstedt’s observation rings true.
Very little of what I have seen since June 2016 has convinced me that I erred in voting remain. However, it is clear from the result of the referendum that there is considerable animus in the UK to what the EU does or how it does it. Added to that seems to be a terrific amount of projection of other issues the EU is not particularly responsible for, from the winds of globalisation and automation to the fact that Britain was a much more significant player on the world stage 40 or 50 years ago, and those of late middle age feel the ways of the world slipping away from them, and hearken to glories past.
The tragedy of the referendum is that it was couched in the nihilistic terms of this or not-this. The problem is one of direction. A remain result would have been a clear result for a particular solution – the status quo in that case. A no result is a vote for ‘anywhere but here’. If I get in my car and set the sat-nav for London it can take me there. But I haven’t yet found the ‘get me the hell anywhere but here’ button.
The Tory party is ripping itself apart like a bunch of rats in a sack, because it is not of one view on anywhere but here. We have the swivel-eyed nut jobs, step forward John Redwood, Bill Cash, Daniel Hannan1, Jacob Rees-Mogg and others. Now to their credit they do deeply believe in Brexit, from a point of basically despising John Donne’s dictum that no man is an island – basically it’s everyone for themselves and let the devil take the hindmost. You can take that point of view as long as you are much richer than average, because you can buy your services and security on the open market. It’s Ayn Rand’s Objectivism, and Britain is Going Galt, 2 along with everyone in it.
These Brextremists positively crave a no-deal Brexit, because any deal gives the EU a say in something, and that pisses them off. No price is too high to pay for purity, and anything that doesn’t give them what they want is always the other side’s fault. There is a mirror-image of this in the EU with the focus on the terms of process, but in the end the UK is the dumper rather than the dumpee, so we get the advantage of calling the what and when, but fewer rights in calling the how.
We have the self-serving egotists – hello Boris Johnson, Gove et al, trimming their sails to whichever wind will blow them personal aggrandisement. The concept of living in a country run by BoJo is I suppose a little bit less bad than living in one run by Donald Trump, but the fundamental problem is the same – narcissist at the switch. BoJo is brighter than Trump, but has more of a tin ear, whereas I have a sneaking admiration for Trump’s ability to signal to his vote base via a barrage of what looks to others like random brain-farts.
Then we have a whole bunch of non-extreme people that think a well-negotiated Brexit would work well for Britain, who seem to be AWOL on both sides, scared of the intensity of feeling of the nut-jobs. If we could kick out the swivel-eyed nut-jobs, then perhaps the rest of Tory party could make a fist of it, but at the moment my greatest hope is that they rip themselves apart in the next few months. Cats will fight, and the buggers have been fighting about this for 40 years, it’s time that the fight goes all the way to death or dishonour for the sake of the rest of us. The endless yowling needs to stop, and Top Cat needs to stand on top of his dustbin lid.
What does a successful Brexit look like?
The trouble with the referendum is the nihilism of the No response leading to a lack of direction.
It should have been more nuanced – for instance
Should the UK remain a member of the EU or leave
Remain a member of the EU
Leave the EU
If you voted Leave the EU, what are your primary concerns?
The primacy of Parliament to determine life in Britain
The effects of freedom of movement on the social fabric
The effects of freedom of movement on wages
The effects of freedom of movement on services
It would have been useful to gauge which of the aspects of the EU concerned people the most.The obvious pushback is that it sets a leading question and favours the Leave side, and the government didn’t really want the No answer, but Cameron stupidly made it a manifesto promise hoping a Coalition would spike it. Very little work was done on what a successful Brexit looked like. However, I saw the vile creepy grins3 and the spring in the step of my fellow voters who were all of a certain age (I voted in the afternoon, like all retirees) and I was pretty sure they weren’t voting remain 😉
Qualifying the issues people had would have informed what to prioritise afterwards. For instance, May and the wingnuts are making a hullabaloo about the ECJ, which probably doesn’t exercise people bothered about immigration, while the wingnuts frequently don’t even bother to mention immigration. I love Hannan’s disingenuity in asserting
In the event, of course, things worked out differently. Britain appears to have grown more strongly in the six months following the vote than in the six months before it, and finished 2016 as the world’s most successful major economy. Unemployment, far from rising, has fallen consistently since the vote. British stocks are the best performing in Europe..
Hannan, me old mucker, you may be a wingnut, but you’re not shit for brains. The result you wanted has devalued the pound by a lot. Obviously things measured in pounds will look bigger, in the same way as it takes you twice as many six-inch rulers to measure your carpet as 12-inch rulers.
A lot of those stock market gains you’re seeing aren’t real. The way unemployment is measured is deeply borked. I will be considered employed this year because I was working as self employed between April and May. We torture the genuinely unemployed with pettifogging rules and regulations; it’s not surprising that people claim to be employed but make no money and get tax credits. Look at the increasing number of rough sleepers and the use of food banks, which are also caused by the increasingly worthless pound among other things.
rich Brexiters fuss about sovereignty, the poor about immigration
It is of course possible as a remainer I have missed some aspect of the Leave debate, but of what I have heard, rich Brexiters tend to lie on the sovereignty axis, often not really giving a toss about freedom of movement, whereas poorer Brexiters have concerns about immigration, the effects of freedom of movement and the effect on their wages. The rich make sweeping assertions about Ricardian advantage and Schumpterian creative destruction, but when Tony Blair opened the UK to people from Eastern Europe the resulting influx had a negative impact on wages the lower end of the market. There is a very strong argument that the influx was good for the UK economy as a whole, which probably made people that took the sharp end of the stick feel even worse, seeing rich Londoners living it up on fine dining while they went to food banks.
If you’ve taken the shaft on minimum wage, voting Leave is not necessarily irrational even if it impoverishes the country. It will be immigration that lights your fire. It is tragic that the effects of globalisation and automation are hurting these people too, and it is compounded by the wilful destruction of the welfare safety net in the last few years. The EU ended up shot for an awful lot of decisions that should have been laid at the door of UK politicians or the tides of capitalism and Schumpeterian destruction, as well as secular trends which aren’t going the way of unskilled labour. There’s some case for adapting the welfare system to ameliorate this shift from labour to capital, but it’s not really the theme of the current administration.
Free movement of persons seems to be the main sticking point. Freedom of goods is OK – not that many people seem to have an an issue about driving German cars or eating Italian ham. Curiously enough nobody seems to have a beef with the free movement of capital, even if they don’t have any, though that also makes working a bit more crap than it used to as the capital chases the lowest labour costs offshore. Freedom to establish and provide services across the EU doesn’t exercise passions either – people rich and poor are happy to bank with Santander.
The Ermine, sadly, is in the same camp as the swivel-eyed nut jobs in one aspect. I think the EEC jumped the shark with the treaty of Maastricht and the inception of the Euro. The change of name from European Economic Community to European Union showed the nature of the rot. I view the economic benefits of the EU as the reason for being in it, the political union as misbegotten, I’m not so keen on a United States of Europe, although it doesn’t exercise me with devastated dreams of Imperial derring-do of yesteryear, I’m not old enough to recall the pink of the British Empire maps.
I don’t give a toss about freedom of movement, so that places me on the rich people side of the issues – with sovereignty. But I’m not rich enough to afford that sort of navel-gazing – in the end rubbing along with people in the world is about compromise. Britain secured specific opt-outs from the ever closer union and the Euro, which means what we had was better from a sovereignty point of view than what we would have if we left and rejoin once the old colonels dreaming of Empire days of glory die off and the interests of younger voters and the economic argument shifts the balance, as Verhofstadt carried on to say
“I am also sure that, one day or another, there will be a young man or woman who will try again, who will lead Britain into the European family once again. A young generation that will see Brexit for what it really is – a catfight in the Conservative party that got out of hand, a loss of time, a waste of energy, stupidity.”
Let’s not forget, Britain entered the union as the ‘sick man of Europe’ and thanks to the single market came out of the other side Europe made Britain also punch above its weight in terms of geopolitics, as in the heydays of the British empire.
And we from our side must pay tribute to Britain’s immense contributions – a staunch, unmatched defender of free markets and civil liberties. Thank you for that. As a liberal, I tell you, I will miss that.”
I am not rich enough to prize sovereignty above economics. I expect to be hit less than the poor by the economic fallout of Brexit, but I expect to be a lot poorer, and we will be the sick man of Europe once again. Looking at the swivel-eyed crew with their indifference to the economic costs, I am nowhere near as rich as they are, I would probably need to have much more than twice the wealth I have to share their insouciance about the economic fallout. I have no human capital left, so unlike the young who might be able to make it up by moving and working abroad – after all people worked in other European countries before 1973 – I will have to make my stand in the UK, stuck on a small island with these guys
I will probably face the need for health insurance as the NHS is destroyed because we can’t afford it, I expect social unrest because we won’t be able to afford even the eroded welfare state that we have now. It’s not an attractive thought to grow old in. And in the event that Britain does leave and rejoin, we will have less sovereignty than we had before we left, though I can hope that the Euro explodes due to its internal inconsistencies before any of those events come to pass, which may trim some of the dream of ever closer union. Europe doesn’t even share a common language FFS, never mind a common culture, there is more history in any one European country than there is in the entire United States (born 1776) which is why the United States of America is a viable union of states in a way the United States of Europe isn’t.
I do get some of this Brexit bollocks, from a sovereignty point of view, but nowhere near enough of it to think it’s a grand idea and vote for it. The EU had a lot wrong with it, but an awful lot more right, inherited from the old EEC, which was partly shaped by the UK, particularly the Single Market that the wingnuts are so keen to get away from. I find no conviction in the notion of a buccaneering Britain striking trade deals left, right and centre. The one with the United States will be ‘Here are our terms, you sign here for our GMO crops, chorinated chicken and antibiotic and hormone-pumped beef’. It’s been 60 years since Britain surrendered its Empire, the 1950s ain’t ever coming back, and Verhofstadt was wrong. Britain did perhaps punch above its weight in terms of geopolitics as part of the EEC, but not as it did in the heydays of the British empire. Declinism is a disease of late middle age, and we are in peak Boomer time. I am one, but hey guys, we didn’t have to actually help the downswing come.
Brexit was a vote of confidence in our ability to shape our future as an independent democratic nation — a choice that few of our European neighbours feel they still have. We should not allow declinist panics to confuse the outcome.
I think matey boy is barking, but I admire his chutzpah, and ability to sell a great story. I suspect it isn’t just me that doesn’t have any idea what this Brexit bollocks means. The only people that do have an idea are the wingnuts. It’s the usual problem
The best lack all conviction, while the worst
Are full of passionate intensity.
The wingnuts seem to be in the ascendant. Their no deal Brexit probably won’t be about immigration, bucanneering free market Britain will need all the lost cost hands it can get, and if that keeps the oiks in their place, well, all to the good if you’re Jacob Rees-Mogg and his ilk.
The personal finance angle – what to do?
Most of the last few years I have been allocating new spend towards foreign assets, with a bias ex-UK. As I accumulated stocks, I became lazier as I realised I wouldn’t have to eat an actuarial reduction on my pension, so I shifted towards the world according to Lars Kroijer. I didn’t sell my HYP but I bought a lot of a FTSE World ExUK index, to offset the fact my HYP was heavily UK biased. If you expect the UK to go titsup due to Brexit, it’s a good move.
Against that one should set the fact that fund managers deeply hate the UK at the moment (H/T Monevator)
When I see something stinking up the place like UK equities I want to go buy it – there’s now’t wrong with schizophrenic investment and so I am tempted to Buy Britain at the moment. Maybe a push on small/mid cap with about a quarter FTSE100, after all I should lean against my own prejudices every so often and I am too biased towards UK big fish. Brexit might turn out absolutely great, I find it hard to believe, but it’s possible. I may allocate half of this year’s £20k ISA allocation to Lars and half to the UK. If Brexit is a bastard the UK lot will go down the toilet, if it is a terrific success then it will save my ass for this year’s contributions. And vice versa for the L&G Lars option, which coincidentally is heavily weighted towards the US (because the US is the largest component of world equities by valuation) so I still remain contrarian. The US is also notably hated by the professional fund managers. I really can’t think why 😉
I need to stoke my SIPP with £7200 this year and next. It will follow the rest of my small SIPP which is currently in a gold ETF, this is money I will call on in the next year or two and I don’t trust the £ across March 2019. I will be most happy to eat the hit if Brexit is a roaring success and the pound soars 😉
It’s a funny old world. Way back in 1979 when I got my first bank account I got issued with a thing called a cheque book. You could write out the recipient and how much you wanted to pay them and that was all you needed to do. In those days the cheques were open, so some thieving git could swipe it or steam open the letters, and pay the cheque to themselves or ask for it to be paid in cash over the counter. Fewer people had bank accounts then – when I started my first job I was paid by open cheque that I had to go to the bank over the road and exchange for cash.
To forestall the hazard of dodgy geezers steaming the mail open they changed the system so you got to draw a couple of lines across the cheque and write A/C Payee, and they changed the law such that this happened
Not if it is crossed ‘A/C Payee Only’ or ‘A/C Payee’. The Cheques Act 1992 and Section 81 of the Bills of Exchange Act 1882 give statutory power to the ‘A/C Payee’ and ‘A/C Payee Only’ crossing, when it is used. The legislation means that a cheque which bears the ‘A/C Payee’ or ‘A/C Payee Only’ crossing can only be paid into an account in the name of the receiver of the cheque exactly as it appears on the cheque.
Now in practice you could usually get away with paying in cheques in a different name if they were small, or if it was just the first name that was different. I presume if the payer kicked up a fuss then the bank would have clawed the money back, and if recipient had skipped to Rio then they’d have to refund the money. All in all a perfectly serviceable system, though because of all this possibility of fouling up you could only count on having the money after about five working days of paying the cheque in. When I bought my last house in the dog years of the 1990s, I had to make up the mahoosive amount of money I had lost on the previous one and pay even more because I was going upmarket from the two-up-two-down bachelor pad I had foolishly bought in 1989. To do that I went to my solicitor and paid them a cheque. There was never any issue of the secretary deciding she wanted a knees-up in Lanzarote with all her pals funded by running off with the cheque because she’d have had to change her name by deed poll to the solicitors and open a bank account in that name.
Fast-forward 20 years and we don’t check the name any more
Twenty years of technical progress passes, and I get to receive the proceeds of my old house. It all comes down to a six-digit number and an eight digit number. Sure, the payment system would like a name to put in the payee field, but it doesn’t matter if you put Mustela erminea, Beyonce or Beelzebub in there. The routeing system doesn’t give a damn. So criminals hack emails and change the details, because the humans look at the name and think it’s all okay but the transfer goes to a different account, which is then emptied and the bad guys scarper with the money. And you get to read newspaper articles like this, this and this
Given all the usual delays involved in selling a house, there’s something to be said for the security of the good old crossed cheque. We were smart enough in the 1980s to realise that making the name matter was key to fixing this, but that wisdom has got lost in the search for expediency. Is it really too much to ask that 21st century money transfers meet the standards of the 20th century paper methods?
So you can easily mistype or transpose the numbers, sending your payment to the water company to Bill in Basildon, and you don’t get to know that until you start getting dunning letters from the water board. Bill doesn’t have to give you the money back – after all he’s done nothing wrong. He never claimed to be the water board, all he saw was a kind gift from an unknown benefactor come out of the blue, and he’s probably spent it now. As Faster Payments say on their website, it’s tough luck
Faster Payments, once sent, cannot be cancelled.
Whilst the vast majority of payments are made without issue, in rare cases problems can arise if the wrong information (e.g. sort code and account number), is entered – resulting in a payment being made to the wrong account. It’s vital to double check the sort code and account number before sending a payment: payments are processed only using these numbers and getting them wrong is like sending a letter with the wrong address and post code.
The last statement is bullshit – if you send a letter using the wrong address and postcode there’s a much better chance of it getting to the right place because there’s some redundancy and there’s also local knowledge with the postman. And the name would help clarify matters, as it did with crossed cheques.
Double checking doesn’t help with some conceptual errors, like transposing some digit pairs, for the same reason that it’s tough to proof-read your own writing. To err is human – we could do with helping people out a bit. This is why credit card numbers use the Luhn algorithm, to catch simple cock-ups like transposition and single digit errors.
How about BACS – this is the payments system[ref]BACS has a rather neat PDF describing the six inland money transfer systems in use in the UK[/ref] you use when you put money in, or take it out of NS&I. My solicitor was proposing to use that for the house money because it would save me the £30 transfer fee. I decided I was easy with paying £30 to know I’d got it on Friday afternoon rather than some unspecified time probably Wednesday the next week. If something goes wrong, time is absolutely of the essence to flag up that the crims have made off with the loot to at least try and freeze the receiving account before they empty it over the weekend[ref]This is why in an ideal world you should complete on any day other than Friday, particularly a Friday before a bank holiday weekend. Of course, everybody wants to move on Friday so they don’t have to take time off work, which suits the bad guys just fine[/ref].
I was unable to determine if BACS checks the name, though the warnings from NS&I to get the right sort code and account number imply not. BACS gives you an automatic delay of three working days, as I found to my cost when I transferred money into NS&I using a debit card, and then got to ring them up to find out what black hole half a house worth of money had disappeared to. At least that made the three working delay between transferring out and receiving it a bit more understandable, though it still raised the blood pressure.
We have implemented a system without number error checksums, casually tossed away the A/C payee name checking of the cheque era, and sped up the ability of the criminals to scarper with the money by an order of magnitude. This is not progress.