Holiday in Siberia

Isn’t it a shame that now we have an opportunity to travel almost anywhere in the world, increasingly when we get there it’s just the same world as the one we left? I’m just back from a four day break in Krakow which, as far as European cities go, I suspected might be a bit different from the usual modern metropolitan experience that sees a McDonalds and an Starbucks on every corner. Please note that I’m not saying that I “hoped” Krakow was a bit different from every other city across the world in that respect. I like my home comforts, and sometimes that includes a good dose of globally branded outlets and hotels. But I did hope that Poland had retained an old world charm that corporations hadn’t fully snuffed out yet. Well, “yes and no” was the answer.

In terms of differences, I liked using the Zloty and my “cabbage rolls stuffed with rice and mince in a tomato sauce” was more satisfying in a number of ways than a Big Mac, although I knew this wouldn’t be the case every day. The centre of town was picturesque for sure, but it was bordered by McDonalds, Costa Coffees, United Colours of Benetton and the like. The underground bar and cafe scene was a bit different, but I suppressed a groan at hearing Coldplay playing over the speakers in the Black Gallery and what, exactly, were Polish pubs doing selling Grolsch and Heineken anyway? Their own beer is far superior. 

I liked the old Jewish Quarter in the city where, thankfully, Starbucks hadn’t arrived. Yet. But on the other hand the old coffeeshop/bookshop concepts felt just like that: concepts. Coldplay were absent, but only because they hadn’t ousted Dylan.

What has this got to do with early retirement I hear you ask? Well, at the top of the list of a lot of early retirees is the desire to travel and see a bit more of the world. To be fair, I’m noticing a couple of bloggers are acknowledging that this ain’t necessarily so, and that whatever it is they’re looking for might not be found on a Goan beach, the Australian outback or upon an old Patagonian Express. These travellers tend to be more the “long haulers” in terms of both time and distance, however, and I’m thinking more about those that are planning fewer, shorter breaks nearer to home. That weekend in Gothenburg or Pisa perhaps, taken on the ultra cheap Easyjet and Ryanair tickets on a Tuesday afternoon and maybe returning early Saturday morning on a half empty flight? Snaffling up some cheap hotel deals when the weekenders are missing and the businessmen are in the Hiltons and Marriotts?

Ha! Easyjet and Ryanair don’t do half empty flights, or not for long anyway. Bums on seats is what they’re about and they’d rather not fly at all as put up with three quarter full ‘planes. The probability is that you’ll be going City breaks on a full flight or you won’t be going at all.

Meanwhile the hotels are at a similar game. Occupancy is what they want and they’ll drop their drawers on price to get it. I booked my hotel through Hotels.com about four months ago and our friends, booking two weeks ago, got in for almost half the price we paid and were upgraded to a suite! Of course they risked not getting in at all, but luck and the algorithms were on their side. Either way the hotel is doing what it has to do: sell rooms. That’s ALL their rooms, every last one, and the internet helps shift them on a global scale. We think sites like Trivago are there to benefit us, and that’s true, but I’m beginning to suspect they benefit the hotels more. York has about three mid-budget hotels being built as I write, so the projected demand is clearly there. And increasingly full ‘planes arrive from across Europe to fill them up.

If Krakow is anything to go by, the future of city breaks in Europe is going to guarantee one thing: everywhere is going to be mobbed full of fifty and sixty something tourists. (And, of course, millennials). That includes your continental breakfast where you’ll be queuing with ten other grey-heads for a coffee out of an increasingly exhausted machine.

Krakow was unbelievably busy with tourists, but I travelled via Edinburgh which made the former town look like a dust bowl. I know it’s The Fringe, but ye Gods, doesn’t it portend badly when millions flock to the city desperate to find some “experience” that they hope will brighten their Tuesday? The Fringe is shit, take it from me. Not that I’ve ever been, by the way, I just find the whole concept to be shit. If I saw one “comedy” poster with a smart arse quip about Trump, I saw ten. Every comic sported a beard, including the women, and I wondered why they bother advertising with a big picture of themselves? Is their appearance one of their stronger jokes?

As for the theatre types, they are worse than corporates. They strut about Edinburgh wearing their backstage passes around their necks like they’re something to be proud of while the newly under-unemployed arts degree graduates wear “Road Crew” T shirts with the same smug expression I sported at their age when I wore a “Solidarnosc” one. But at least I wasn’t yapping down an iphone as I strutted the streets. Honestly, I couldn’t get out the place fast enough.

You might not have guessed it, but I did enjoy my weekend break. This, however, was because I felt I was learning lessons and building my mental retirement database, helping to shape my post-work dreams into more focus. Frequent city breaks abroad, I feel, have dropped down the priority list and I’m thinking more about farther flung and more isolated places. I’m going to be heading far from the madd(en)ing crowd, where the streets really have no name and the biggest brands are those that are burnt on a cow’s arse.

Siberia, anyone?

Willfull Ignorance

I was listening to a podcast from MoneyBox called the Death of Retirement the other day with a growing sense of annoyance and, possibly, outrage. There were a variety of reasons for this, most of them boiling down to ignorance, most of it my own.

For a start, the podcast kicked off with a panel of “experts” interviewing a “millennial” who was in her early twenties and was looking for some advice on pensions, as she suspected she wasn’t saving enough into her plan at the moment.

“How much do you currently contribute?”, asked the kindly host.

“Well, I looked at my last wage slip and I’m putting in nine pounds a month”.

“FFS!!! Are you raving mad!!!???”, screamed the host. “You’re heading for abject poverty!”

Oh sorry, that wasn’t the host screaming. It was me. You see, the host and panel, in a fantastically polite and paternal BBC fashion, were far too sensitive and non-judgemental to make any such uncontrolled outbursts. Instead, they gradually tiptoed toward the suggestion that maybe, possibly, depending on her circumstances and an uncertain future, this might not be enough.

“Do you know what your employer is contributing?”, gently prompted the host.

“Well, unless it’s about five hundred quid a month I’m totally screwed”, joked the young girl. No, sorry, that was me again, and I wasn’t joking.

When it comes to this stuff I think I’m in a state of willful ignorance, because I kind of assume that, by now, surely, 99% of the country are aware of the financial catastrophe that old age is going to bring with it and are taking steps to avoid it? Okay, maybe not 99%, but 75% must be?

Alas, a quick Google search on “What is the size of the UK average Pension Pot?”, pours cold water on this notion. It’s currently sitting at 50k, according to the This Is Money website. (Pause to remind myself that this is the TOTAL POT and not what it’s going to give as an income every year). A 50k pension pot currently pays an annual annuity of about £2,500 a year.

I’ll admit, I find this frightening, but then I do live a rather gilded financial life. Many people have to survive on incomes of around £10,000 a year so, if you combine a 50k pension pot with the state pension, then you’re heading for that amount. Plus (I believe) there are other government support mechanisms available to supplement this income, such as housing benefit.

This is a good thing, I think. I want to live in a society that provides a social security net for all, providing everyone is contributing in a fair manner. (I did try to expand on what I would define as “fair” in this context, but that turned into a bit of a rant that included dreaded words like “Brexit” and “NHS”.)

So, setting a lot of political issues aside, I see “fair” as being a bit of “give and take”. You put something in as does your employer and the government. That’s pretty much what we have at the moment. It’s not a perfect system but it’s better than nothing. The key, for me, is the first part of the sentence, “YOU put something in.” Part of the reason why a lot of people are heading for a State Pension and very little else is because they failed on that first step – they put nothing in.

The BBC seemed easily enough to find young people who are still bridling against the notion that they need to contribute to a pension. “I just don’t trust pensions”, says one. Another “Just can’t afford it”, and objects to the fact that her employer can decide where her pension money goes. Against this, perhaps the young millennial putting away nine pounds a month is to be congratulated –  at least she’s doing something!

How can this situation be changed? Well, if you listen to this series of podcasts, it seems that enrolment of employees in company pension schemes has been a success. There clearly needs to me more of this kind of thing. But, for me, the pensions “industry” has to become much simpler, transparent and fair. And it needs to have the same attraction that investing in property has. It should be publicised as being just as safe and just as beneficial as having a roof over your head. But, at a nine quid a month contribution to a pension, the roof will be falling in as opposed to holding up.

 

FIRE Dog

As I settle into my fifties, counting my cash, it’s comforting to find myself in the fortunate position of thinking that, financially, I should be pretty set. I look at my personal pensions, investments and tell myself to relax, it looks sorted. Even if we go through another 2008 and everything drops by 40%, I’ll probably survive.

That’s the upside, sitting warming my hands by this financial fireside. But there’s a downside. I’m stuck! Okay, I can survive a 40% decrease in my pile in any given year, I suppose, but I’ll probably NEVER see a 40% upside over that year in those same funds. Why? Because to get that return, I’d have to risk a sizeable element of my funds to get it. And risk is not something I want to entertain when it comes to the money I’ve amassed to date.

I find this quite sad, in a way. I think I’m thinking this way at the moment because I’m reading “Shoe Dog”, the autobiography of Phil Knight, the founder of Nike. His story of building the company up from nothing is exciting, dramatic and full of life. It feels like he never had a dull moment, although his early days of building the business were mostly full of stress, flirting with bankruptcy, dealing with corrupt suppliers, ruthless competitors and even more ruthless banks. He risked everything to build his company, and now – he’s worth over $28 billion dollars – he’s sitting on the rewards.

In my current job, I’m dealing with quite a few start-ups and spend a bit of time with the “entrepreneurs” behind them. Generally speaking, they’re a colourful bunch who are driven to get things done. There’s always a way for them to continue to move forward, get what they want and they’re prepared to put their money where their mouth is. They have to. Most of their money goes into their business and not many of them are living flash lives – as neither did Phil Knight for decades either. I don’t envy them the stress of what they’re trying to achieve, but I do envy their willingness to take the risk.

I don’t know too much about their personal circumstances – have they a pile of cash sitting somewhere they can fall back on? Do they have a pension? Is their partner a secret millionaire? Are they secure in the knowledge of a big inheritance eventually coming their way? It’s possible, but even if this was the case, why not live a cushy life instead of throwing bundles of cash at something that has a damn good chance of ending in misery?

Now, in my fifties, I wonder if I’ll ever know that excitement that I feel must be involved in throwing yourself into trying to build a business? In my career, I chose the corporate life and can’t knock it for the relative security it gave me, and the perks I enjoyed too. And I often asked myself just what kind of business I’d have to build to pay me the kind of benefits I eventually enjoyed in that role? It would have to have been pretty damn successful, I know that.

Over my career I used to think and chat about having the chance to build my own business, but latterly I used to qualify this dream by stating I’d loved to have had the chance to “build my own really successful business!”  There was no guarantee of that, which makes all the difference. I have two personal friends who pretty much ruined their lives trying to realise their own dreams on their own terms. Phil Knight is a winner, I suppose, so it’s their histories we read about and envy. Real life for the rest of us is often very different and it was partly the “real life” that I saw that helped keep me where I was.

I have the option, of course, of scooping some money out of my savings and plunging it into a new venture that, potentially, could pay me millions in ten years’ time. Or at least will give me an interest and side income in my next shot at “retirement”. After all, the brilliant podcast, “How I Built This” showcases loads of people who have done just that, often with a lot less than big bucks to start with. I don’t have to risk a massive amount – the first “How I Built This” interviews the first female billionaire business woman who, I think, started with an idea and five thousand dollars she’d saved. The rest was hard work, more hard work and a bit of luck.

So, that whelk stall down the front of Scarborough could be in for a new owner soon.

 

Vested Interests

Homer Simpson once asked himself, “Kill my boss? Dare I live out the American Dream?” That particular dream is not exclusively American, of course, but generally, and unfortunately, it’s the boss who’s funding our dreams one way or another. Even if you’re self-employed, the customer is the boss, and I know many small businessmen who’d love nothing more than to nuke their customer base.

I remember reading Paul Allen of Microsoft telling of one of the major problems he and Bill Gates encountered as their company began to really take off. In order to attract the best software engineers, they’d offered potentially incredible share option packages to lure employees to rainy Seattle from sunny California. In addition, to make these options even more attractive, they gave them a relatively short time frame to mature to a point where they would become the employees’ property and could be sold on the market. In American parlance, when an employee gained their shares, they’d be “vested”.

Allen and Gates became concerned that when the first big tranche of options they’d given out became tradable, many of their key employees would become multi-millionaires overnight. Perhaps they’d all leave and retire? How could they continue to retain them?

Soon, however, they had an almost bigger problem when their employees started cashing in their options. These key people didn’t leave or retire. They became a different type of employee. Allen turned up to a meeting once to meet an engineer wearing a T Shirt stating “F*** You, I’m Fully Vested”. The message couldn’t have been clearer.

This may well be where the phrase “F*** you money” originated from. As far as I remember, Microsoft started firing any employee demonstrating what they saw as this “Couldn’t care less what you think” attitude. It was a real problem and probably still is. When you don’t need the money, do you need the boss and his crummy opinions?

Biting the hand that feeds you can become an option as you near your FIRE goals. In retrospect, I was affected by it in my own employment but it had a slightly different effect on me because it’s such a gradual process and, psychologically, I never fully believed it (probably because, unfortunately, I wasn’t made a multi-millionaire overnight.) I’d admit, however, that as the salary became less of a life support for me at work, I became more cantankerous, more prepared to say what I really thought in meetings and more critical of how things were – or how I perceived them to be – in the office. In retrospect, I think I made it quite obvious that I didn’t need, or want, to be there and that, as I’ve blogged before, is the quickest route out the office.

Most of us will take years to reach a position where we can walk out of a job and never look back, but increasingly as we stick to our saving strategies we will be approaching that point. This brings about a “So near, and yet maybe so far” frustration, because our calculations are based on an uncertain future which might mean we DO need to work a little bit longer. There’s a line that we hope to cross, but as we near it the line becomes a lot more fuzzy and indistinct. Worse, we are relying on our employer to give that line a more solid definition. You begin to spend time wondering how you could negotiate a severance package to sweep you over, and that is a dangerous road to travel. Your mind morphs over from doing a good job to focusing on what a good job it would be not to have to work. You become increasingly unsettled and discontented and it begins to show. You don’t wear a T Shirt, but you start to focus on when you can buy one.

This “Should I stay or should I go now?” question promotes the  “Just one more year” promise that you make to yourself when you feel that you could probably retire today, but begin to feel that maybe a further twelve salary cheques will provide a financial buffer to seal the deal. The buffer, however, is more likely to be in your head as opposed to the bank. Really, if a year is going to make that much of a difference then you don’t have enough to make the move, regardless of the money in your bank. Something else is holding you back.

These are things to bear in mind as you work toward your FIRE goals. The journey will be easier if you continue to appreciate the people other than yourself who are enabling it – your customers, your workmates, your employer. This would be an appropriate point for me to thank all my own previous employers for the help and money they gave me in realising my ambitions.

But you know what, I put a lot of that salary into index trackers, so *@*! ‘Em, because I’m fully (in)vested. 😉

 

Fund Mismanagement

Finally, one of my old investments came on line so that I can go in and check it at will. It was an endowment policy that I took out back in 1992 because, frankly, I didn’t know any better in those days.

Years later, when the scandal of mortgage mis-selling reached a peak, I discovered that the first full year of payments that I’d made into this endowment policy went straight to the agent who’d sold me it. I didn’t remember him mentioning that when he sold me the policy. I made a claim against this for compensation, but it was judged that not pointing out this fact in plain English wasn’t seen as illegal or dodgy practice and my claim was turned down. The agent could show that he’d done everything else right in terms of the sale, and I suppose he had. But he took the first £1,500 of my payments which, 25 years later at maybe a 5% return….oh, it’s too painful to work out!

As I clicked through to the website to have a look at my investment, however, I suddenly find nothing’s changed. So far, this year to date, I’ve been charged over £700 in fees for the “management” of this policy. Suddenly, the screen before me went red. Then I realised it wasn’t the screen, it was a red mist of rage descending on my brain. Frankly, if they’d charged me a tenth of that for their “management”, I’d still have questioned it. Fifteen minutes later I was on the ‘phone to them trying to discover if I cashed the policy right now, today, were there any charges, bonus forfeits or anything else that I needed to be aware of before I did so? The answer was “no”, so I asked for that in writing. Preferably in their blood. And then I cashed it, well aware that charges of one sort or another on this policy over twenty five years had cost me in excess of twenty grand.

Isn’t that scandalous? It makes me feel almost physically ill. I mean, what are they doing for this money? I even originally chose the damn funds that the investments was being split into so they didn’t even have an input into that. Not that they were probably allowed to. I can still remember as clear as day how the agent (I’m not sure if they were called IFAs in those days) “advised” me on picking funds for the endowment. He basically held open a magazine and started flicking through pages that listed literally hundreds of fund options. He’d highlighted a few of these with a yellow marker as some that he, personally, found of interest but, of course, the choice of where to put my money was absolutely mine. What did I think? Again, he personally would choose maybe three or four to split my monthly payments equally into, but the decision of how many was up to me. Sitting there, in his office, I was at a total loss – this was all beyond me, but I was far too proud to admit that to him, or my young wife sitting next to me. I picked three with absolutely no idea what I was doing, but hoped that I looked as if it did.

Actually the funds I picked were none too bad, but I had no idea of the charges they’d accrue. I still don’t. In a way, I don’t want to know the detail because I can’t turn the clock back and change anything now. I’ve lost twenty grand. I’m on the verge of tears writing it down.

At this point, I have to grudgingly admit that this firm were – now – making very clear what I was being charged on my investments. I can’t say this about the other financial providers I hold funds with. Why can’t I, very simply, go into a website , click on that “Global Special Situations” fund and see what I’ve been charged on it this year to date? And I mean all the charges, every last one, shown as a total figure? With a percentage next to it that I can then compare to similar funds?

And, you know, maybe I can do that. But if that’s so, then it’s not simple – either to do, or to understand. And I’m bloody interested in this stuff! What chance have other people who are “trusting” that their grandly named fund management company will be giving them a quality service for a fair price?

They say that the margin in the fund management industry is over forty percent. They’re probably creatively accounting like mad to make it that low.  I look at the City, the salaries and the bonus payments, the cosy self-congratulation about just how great they all are and it makes my blood boil. I’m paying for that, and so are you. Supposedly there’s change in the air with so much money now going to Index funds and government reports into excessive profits. Vanguard have also launched into the the UK with their lower cost model, and praise be to them. But until we get real transparency on fees, real healthy competition and a government more interested in consumers than a non-exec future seat on a City firms’ Board, change will continue at a glacial pace. After all, it’s been this way for a long time, and the customer’s yachts are still missing from the harbour.

My Tuppence Worth

The question of the week in the UK FIRE blogshphere is: Could Channel 4 have made a less effective TV show about “How to Retire at 40” if they’d tried? The answer is a resounding “NO!”

For me, the show didn’t get off to a great start. As a thick, Northern, Brexit-loving, neo-fascist who could hate gays, women and disabled people, I have to be reminded to celebrate diversity by my intellectual superiors at Channel 4 through their selection of presenters. Patronised? Moi? Surely not.

Putting aside my petty hatreds, the first couple of minutes of the show sounded promising.  The presenters announced that there was a growing amount of people interested in the concept of Financial Independence and Retiring Early in the UK and that they were going to explore the subject from a variety of angles. This seemed like a decent premise, and I felt a wee glow of pride in that I found the book “Early Retirement Extreme” back in 2010. “I’m a pioneer!”, I cheered, and then quickly warned myself not to become the FIRE equivalent of someone who claims that they were at the first Sex Pistol’s gig in 1976. It’s really not that big a deal.

The show quickly went downhill from there, and it soon became clear I wasn’t the intended audience and neither was any of the rest of the FIRE community. We wanted to see the elegance of the maths (which The Escape Artist made a heroic attempt at, no doubt, only to edited down to about thirty seconds of soundbites “You only need to save 75% of your income and you can retire in seven years!”) We wanted to see the heroes of FIRE, Jacob Fisker, Mr Money Moustache et al, and not some bloke selling potatoes who was happy to tell us what his profit was, but not his turnover, and young Pippa of Nut Butter fame, who was happy to tell us the turnover of her business, but not the profit. I held my breath to hear what Huw from Financially Free by Forty would say, but clearly the editor had decided his contribution was going to be his startling good looks alone.  As for Julie and Jason, whose blog I follow as they wander around Europe on permanent holiday, if they’d a point to make I must have missed it.

The following day at work, the couple of colleagues I’d nudged to tune in informed me that they’d squandered an hour of their lives on “utter crap”.  “What was it all about?” they asked, and I was at a loss to tell them. As I’ve tried to evidence on this blog, I’m no evangelist for Retiring Early but would like to see a rise in interest on Financial Independence. I had harboured quiet hopes that this show would at least spark some interesting debate on the subject, but judging by the complete lack of reaction following it in the national press I can’t help but feel an opportunity has been missed.

It’s easy to criticise and forget that while we in the FIRE community had this show planned as TV event of the week, the rest of the nation were immersed in the body-shaved car crash that is Love Island. We find this stuff incredibly interesting and appealing, but 99% of the rest of the population couldn’t give a toss about it. That’s what the producers were up against. But when the Mad Fientist can string together a bunch of immersive, informative and entertaining podcasts on FIRE and the people involved in it, is it beyond TV to produce something of a similar ilk? As it stands it seemed all they managed to do was annoy anyone interested in the subject while failing to interest anyone else. Bit of a shame really.

 

Tell Me Lies

I’m reading an interesting and entertaining book at the moment, “Everybody Lies: What the Internet Can Tell Us About Who We Really Are”.  It’s about how Google searches tell us much more about people in general whereas relying on surveys, or Facebook, Instagram, Twitter – or even blogs! – is perhaps the worst way to understand anything about anybody because almost nobody “tells the truth” about themselves on these platforms.

Then, driving into work, I decided to listen to a podcast I haven’t for some time, the Dave Ramsey phone-in, a very American biased show about debt, money issues and how to deal with them (hint: buying Dave’s books, audio tapes and signing up for his courses helps).
Dave alway starts his shows with the adage that his is a world where:

“debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice.”

Unfortunately though, having “a paid-off home mortgage” is one of the least symbols of status you could imagine. Look out your window. How many people in your street have paid off their mortgage? Exactly. You’ve no idea. Like the fabled “Millionaire Next Door”, you’ll never meet your mortgage-free neighbours unless they introduce themselves as such.

Similarly, on the internet, if everybody is lying, does that include Mr Moustache, Jacob Fisker or even little old me? Are we really walking the talk? Or are we just broadcasting a facade to the world for some ulterior motive?

After all, attaining FIRE is quite a status symbol, isn’t it? Or at least telling people you’ve attained it is. I’ll hold my hands up here and admit that I got a nice charge from telling people I had retired early. I was proud of this fact, although now having gone back to work I kind of wish I’d kept my mouth shut. Outside of pride and ego, I’m not sure what my motivation was for announcing it. I like to think it was something more than just to parade my own “status symbol of choice”, but I don’t know. I sometimes think that I had to tell people as a way of committing myself more to the idea of retirement and I do think there is a germ of truth in that. It’s just not a very big germ. Maybe I thought I’d be a bit of an inspiration to people, but that’s a pretty vain assumption too. Perhaps I felt it made me a bit of a curiosity, a slightly more interesting person who, as Dave Ramsey states, “lived years like nobody else to now live like nobody else”. Pride, vanity, ego. Surely there’s more to it (and me!) than that?

Well, one thing I could argue about why I told people I’d “retired early” was that I was definitely inspired and motivated by the FIRE bloggers who I’d discovered via trying to learn more about investing, saving and being cheerfully frugal as a lifestyle choice. If it inspired me, perhaps it would inspire others to adopt, what I felt, were worthwhile goals and objectives? There is an alternative to buying pairs of £500 shoes, if only more people knew what those were. I can’t say I wanted to be an “inspirational figure”, I just felt that maybe some people could learn from my example and experience of the FIRE lifestyle that seemed to be gaining prominence in certain circles. When you’ve experienced something positive in life, you’re kind of inclined to want to share it and I find that blogging allows me to do that whereas trying to “convert” individuals on a personal basis is, I find, being a bit more evangelical than I want to be. When if comes to my blogging, people can take it or leave it.

So, as my blog attests, the “retiring early” part of the FIRE equation didn’t work out and I wanted to write about that because I was fairly sure I wasn’t the only one out there discovering that I missed the workplace once I was out of it. All the same, I didn’t want to dismiss FIRE as a waste of time because the “Financial Independence” part was a massively positive goal that I couldn’t see a downside to. The difference between having to work for a living and choosing to work to enhance your living is massive, and more people should strive to allow themselves the opportunity to achieve it. I’ve seen quite a few bloggers describe this state of employment, where you’re not doing it for the cash, as having “FU Money” but when I see my salary drop into the bank for doing a job I’m choosing to do, it’s more “Thank You” than FU!

 

My Top Ten Pension Questions

As I approach 55, and the first opportunity to take my Defined Contribution pension, I keep going back to the same questions about pensions that I feel I should either find out more about, or make a decision on. I’ve listed them here, not necessarily looking for answers, just trying to get them out my system:

Do I take my DC pot at 55, even if I don’t retire then?

This is so I can get my hands on the 25% tax free sum, before the Government come in and reduce it. When it comes to pensions we almost all take it as read that the endless tinkering on this potential cash cow by whichever bunch of inadequates happen to be in power will just never stop. But why? Why can’t they leave us in peace and let us do our sums against a background of stable assumptions?

If I do take my 25% cash Lump Sum, do I “recycle” it back into personal SIPPs to get some tax relief?

This is where pensions begin to get complicated – even when you’re trying to keep it simple. There’s also a “moral and ethical” aspect to doing this which, frankly, as long as I’m not breaking the law, I’ll consider for all of two seconds before I do it. My bigger problem, I feel, will be “Can I be bothered”? working it all out and then taking the necessary administrative steps. Which leads me to my next question:

Do I get Professional Pensions Advice?

Can I get it for free, is my rejoinder to that one. Isn’t all relevant information available on the internet anyway? Of course – but how much of it is “fake news”? There seem to be so many shades of pension options that I’m never sure if what I’m reading applies exactly to me. It’s like when the newspapers do those tables of how the budget will affect you, and they pick about six different groups – singles, married couples, pensioners, students and so on – estimating their incomes and expenditures. Never once  in history has any one of these sub-groups applied exactly to my situation.

Assuming I take my DC pension at 55, and my cash free lump sum, how much then do I drawdown?

Firstly, what are the damn rules on drawdown? What’s the minimum I can take a year? What’s the maximum? Will I still be working? Is it beneficial to continue working? Should I go part time? If so, what’s the most tax efficient approach?

Am I in danger, when taking all my pensions into account, of exceeding the Life Time Allowance?

Absolutely no idea. I’ve taken the “protection” available, although I’m not quite sure what this means. I can’t seem to get an estimation of what my Defined Benefit pot is worth, or will be worth when I decide to take it. I’ve written three times to the provider to get some guidance only to eventually be informed of a sum of money that I’m due per annum. But is that if I took it at “normal retirement age”? And is it in today’s money? No lump sum options are given either. I used to get a really clear statement every year about this pension. Now I have to write and then wait two months for a rubbish response.

How much will I need to live comfortably in retirement anyway?

Well, I’ve come to answer on this one. It’s: How long is a piece of string?

What’s the best Spreadsheet to estimate (a) what my pensions will be worth and (b) how I might take them over thirty years?

An easier question might be how many spreadsheets do I have trying to work through these scenarios? I’m only certain that it’s too many. I do have a “definitive” effort sitting on Google Docs, but that only serves as the model that I compare all the others to. It will also only be “definitive” until I find one that I think surpasses it (i.e. gives me a better outcome).

Will the State Pension be means tested by the time I get there?

If there’s anything that the last General Election taught us it was that if you mess with Pensioners benefits they will vote you out of office. They won’t even give up on a free bus pass, for Gawd’s Sake, so no, I predict that this isn’t about to happen anytime soon.

What are the rules when it comes to pensions and inheritance?

Answering this question means I have to contemplate the fact of my own death. Which I currently refuse to do.

Haven’t I anything better to do with my time?

This is always my final pension question after hours of wrestling with the above ones.

 

Working (for a) Living

It’s been a tough week. Yes, for lots of reasons, but I’m not going to be talking about politics here, nor terrorism, nor the horror and scandal of what happened at the Grenfell Tower in London. No, I’m not discussing those, but suffice to say they help put the worries and troubles of my own little world into perspective. So many others have so much more to worry about than I do.

Having said that, it now seems almost pathetic to state that the reason I’ve found this a tough week has been because it’s been really quiet at work, and I find that difficult to deal with. We all know people who can turn up to work, have one task to complete in the day and then find a multitude of ways to not complete it. That’s not me, I’m afraid, and I’d guess for the majority of FIRE adherents that’s not you either. If I turn up at work at 0900 with one task to do, I’ve usually completed it by 0901 and am looking for the next one. We are the type of people who set goals, take action, push out into the world and make changes in the hope that these will help us attain our ambitions. We’re doers, whether that’s in the world of work or leisure. We fill our days and we’re happiest when we get to the end of the day, pour ourselves a beer, a glass of wine or a cup of tea and reflect on what we’ve managed to achieve in the waking hours.

I reflected on this when one of my recently early-retired golfing buddies mentioned that he’d “Never been busier” since quitting work. He then added, “I’ve just not had time to be bored, not like you were when you were retired.”

Well, I’m sorry, but if I ever did say I was “bored” in my year out, that’s not what I meant. I wish I had been just “bored” because I could have fixed that in a millisecond. There are endless enjoyable ways to fill empty hours – take a walk, read a book, splurge on a Box Set, listen to podcasts, cook, bake, go for a swim, go to the pub, practice your golf…..on and on the list can go. Boredom? Of course there were times when I would admit that I was at a loose end, but it was never a major problem. It could be rectified.

No, filling the hours wasn’t an issue. For me, the problem was filling the hours with things that were, in my mind, constructive. What I was looking for in my retired days was “fulfillment” and, as those days stretched on, that became increasingly hard to find.

It’s funny, because my attitude to this changed over time. In the first month or two of my retirement I was ecstatic about having the ability to take ninety minutes to walk into town from home and reward myself with a nice cup of coffee and a read of the paper in a favourite cafe bar once I’d arrived. I’d listen to podcasts as I walked in and reveled in having the time to think about what I was learning, maybe heading to the library later in the afternoon to find a book on a subject that had whetted my interest. It was fantastic. At first. But, as my diary attests to, nine months in and I was moaning that this self-same activity was a total waste of time and was doing my head in. What was it achieving? How was I growing? What was I contributing? If I was learning things, how was I applying them? Really, what was I doing with my time?

Perhaps this was a legacy of the near thirty years of working life I’d had up to that point. It was never going to be easy to readjust. I thought that in acknowledging this situation I’d find a way to cope with it. The thing was that I expected to come to terms with lazy days over time, that I’d grow to ever more appreciate them and the finer things in life that my career had prevented me from enjoying. But that wasn’t the case. If anything, the feeling that I wasn’t achieving anything concrete with my days began to torment me and I realised that, at the bottom of it, I was missing work.

Was this a bad thing? I came across an interesting TED talk this week, where Mike Rowe laments the way manual work has been demeaned in today’s society. I could argue the same for many white collar jobs too. There’s a cliche that “Nobody on their deathbed ever stated ‘I wish I’d spent more time at the office’”, but in my retirement I found myself thinking that I wished I could spend at least SOME more of my time in the office! “You don’t know what you’ve got ‘til it’s gone” – another cliche that has an element of truth to it, but that’s not the whole truth either.

So yes, I’ve had a quiet week at work and I’ve found it tough, but it has not been as tough as having a quiet week at home. That’s one of the things I discovered in my early retirement and, for the moment, is something that that I’m happy to have rectified through finding a job.

Home Thoughts

It’s the eve of the General Election and it seems to me that there are two groups of voters that all the parties have to attract and woo – the young and the old. I like to tell myself that I’m the squeezed middle, but have to admit that I’m heading toward the latter camp much faster than I’m comfortable with, and thus I know where my sympathies selfishly lie.

That’s not to say I don’t relate to the predicament young people today find themselves in, I just don’t understand why more of them don’t seem to recognise it? Or, if they do, don’t seem to be overtly bothered with the debt ridden future that faces the majority of them.

While the young probably figure that the future will work itself out and live a bit more for the moment, the nearer I approach pensionable age (which I’m taking as 55) the more I find myself pondering the future and trying to work out the detail. What steps do I have to take to fully realise the next two, or hopefully three, decades of life that might be left for me to really enjoy?

For those of you who’ve managed to plough your way through self-improvement tomes, there’s a trick or technique they often encourage you to employ to help you work out your values and what’s important to you in life. What you have to do is vividly imagine your own funeral service and focus on what your close family, friends and possibly colleagues might want to say about you in a eulogy. What would you want them to say?

I’ve played with this technique over the years, but I’m a bit like Woody Allen when it comes to my own death – I’ve no intention of being there when it actually happens. And, on the occasional time when I have actually had a serious attempt at imagining this situation, I can’t say I found any blinding insights. I didn’t imagine anyone getting up and saying, “He had a fantastic house that we all envied, with that red Ferrari parked in front of it. And wow, I see he’s still wearing that Rolex Oyster there, lying in the casket.” (Actually I can’t imagine anyone picturing that at their own funeral, except maybe Piers Morgan.) What most of us probably think about are people extolling our social connections, the deep friendships we had, the importance we placed on being close to our loved ones.

Another thing I don’t imagine many people thinking about is their funeral taking place on some distant shore. I have a few friends who are currently enjoying the expat life in Hong Kong, Dubai, Spain, the Philippines and so on. I’m sure none of them have any intention of dying in these countries though, because all of them, when I’ve asked, are imagining retirement to a serene Scottish shore, or a rose covered English cottage with the village pub a stone’s throw away. Where, of course, everybody knows your name. Which begs the question of why they left in the first place, but we all know the answer to that, don’t we? Unless they’re running away from something, it’s usually money, or an improved life they think money can buy, that they’re running toward. Fair enough, I say, I’ve been tempted to do the same myself over the years – but I’ve never imagined anything but my own retirement here in Britain.

It strikes me that the young know and appreciate the value of friendships and community every bit as much as the old. I don’t think you ever forge as strong bonds with anyone as you did when you were young. If you’re lucky, and work at it, you’ll keep those friendships with you for a lifetime and you’ll always feel your heart warm a little bit when you walk the streets of your old home town.

So, given that the young and old seem to have a surer sense of what’s important to them, it’s a bit sad that the election focuses so much on the monetary side of life – tuition fees, tax bombs, the cost of social care, whether or not you’ll receive a free bus pass. Yes, those things are important, but when they exclude everything else then we all end up poorer because of it.