No wonder saving for retirement has hit an all time low - down from 51% to 46% over the past year alone

What incentives are being given to save into a pension, other than the 'tax breaks' which are arguably worthless for anyone on basic rate tax. The tax benefit is more than outweighed by the restrictions on access to the funds, withdrawing money and the inevitable interference by sucessive Governments (witness GB raid on tax credits) who see savings in whatever form as a 'cash cow' to be milked for their benefit

The present scandal revolves around 'drawdown income' in retirement and the existing Government's contribution to the mess

Successive Governments are obsessed with two over-riding ideas

  • Firstly - underlying pension funds are going to be used as a vehicle by a few to avoid death duties & IHT - so the majority are penalised by the very same ministers whos families have off-shore interests
  • Secondly - if you are allowed access to your pension fund then you will spend it recklessly and fall back on the state when the money has all gone

In order to ensure that you are prudent with taking income from your own pension fund the Government has implemented a number of artificial measures to restrict pension income:

  • Artificially low interest rates - which in turn affects medium-term Gilt yields; currently 'floored' around 2.25%-2.50%
  • Annuity and pension drawdown rates (GAD) are largely based on medium-term Gilt yields and have been forced down by engineered interest rates to the lowest they have ever been
  • Just to add insult to injury the GAD maximum annual income limit has been reduced from 120% to 100%

The net affect of all the above is that pension income has been severely reduced and those who anticipated having a realistic lifestyle in retirement have had rather a shock

However, if the pension fund investment return if greater that the permitted drawdown income then inevitably the value of the fund grows; which on death means a greater 'tax take' for the Government with a tax rate of 55% despite the fact that the pensioner has been forced to have a reduced income during their lifetime

The question has to be:

Why should anyone bother to save for their retirement into a pension fund when clearly they are not going to benefit in line with their expectations? These funds are built up over a lifetime and yet Governments can change matters at the drop of hat with no accountability

Now to put this in context:

If you owe a lot of money then interest rates are the key and the classic way of wiping out some of the debt is to increase inflation whilst at the same time lowering interest rates

This means that anyone with debt (i.e. mortgages etc.) potentially becomes better off, although savers are penalised and are worse off, being hit with a 'double whammy' - loss of 4% interest on savings and reduction in their capital of 3%-4% via inflation; making them 6%-8% worse off

So once again the prudent are penalised in favour of the feckless, which seems to be the way of things in the UK at the present time

GAD = Government Actuarial Department

Tags: | Categories: UK Government

So now mountaineers climb over the dying to make their bid for the summit?

Who else feels ashamed at the conduct of Leanna Shuttleworth and her father in their bid for the summit of Everest.

Once upon a time there were ethics and a code of conduct in the mountains in much the same way as at that of seafarers, however it would seem as those days are gone and it's every man/woman for themselves nowadays

'.. There was another man who was almost dead ..' said Shuttleworth ... '.. but as we passed he raised his arm and looked at us ..'

What a damming indictment of their behaviour

The only person who seems to have acted with any code or honour was Nadav Ben Yehuda, the 24 year old young Israeli, for whom the decision was simple when he saw Aydin Irmak slumped on the ridge below the summit

'.. I realised that the expedition was over for me ..' said Yehuda who put the other climber on his back and carried him for eight hours down to South Col

Quite frankly the Shuttleworths should be ashamed of themselves and the fact that their ego's took precedence over the lives of other mountaineers. One can only hope that they never encounter the same callous disregard they show to others if they themselves ever get into a problem on a mountain

Nevertheless I am sure it will look very good on Leanna Shuttleworths CV but I for one would certainly not employ her. Perhaps it is just as well she has opted for a veterinary career rather than that of a doctor, because would you want to be treated by someone who puts their ambitions above simple humanity?

Shuttleworth said she was briefly elated when she reached the peak. '.. I actually walked onto it with my dad, and for a moment we were the only two people standing there ..' But the day will haunt her for life, she believes. '.. You’re thinking, ‘Is there anything more I could have done?’ It’s put me off Everest. I really, really didn’t enjoy summit day because of that ..' 

Yes Miss Shuttleworth there is something 'more that you could have done' - forfeit your bid for the summit to assist those who were in trouble

No doubt we are all sure that the relatives of those she left to die will sympathise with Miss Shuttleworths disappointment at the inconvenience of having to see fellow mountaineers dying and the fact that it marred her day - how inconsiderate of them!

Not a very edifying episode in mountaineering history

Tags: | Categories: Sport

Under normal circumstances if you give your money to someone for safe keeping you would not expect them to use it for speculating in high risk areas; so why are the rules different when it comes to banks

Clearly this 'custodian' concept does not apply to the banking system, which seems to be able to lose depositors money with impunity and then expects Governments to step in to bail them out; thereby mutualising their problems over the entire taxpayer base

Surely speculating with client money is not the function of the banking system, however attractive the idea of quick profits at someone else's expense may be? We are all quite capable of gambling/speculating/trading on our own behalf if we want to, so the very fact that most people do not risk their own money in this way must mean that they are not comfortable with the risks involved

Therefore with this in mind, why should depositors with 'risk averse' profiles be jeopardised by the greed of the banks which inevitably means breaking the 'trust contract' between bank and depositor

This type of 'trading' may be highly profitable but getting it wrong can prove disastrous and essentially leaves the depositor with all of the downside and virtually none of the upside - therefore the risk/reward ratio is all geared in favour of the banks and stacked against the depositor/customer

Client Money .v. Deposit

  • Client money - cash in you accounts is segregated from the bank's own assets and held in trust accounts
  • Deposit - banks hold money as a banker and not as a trustee

Why are bank customers not given the choice of how the banks hold their money (client .v. deposit)?

Taking this approach to banking would allow customers to determine their own exposure to the banking system and moreover would permit the Government to withdraw their compensation scheme (£85,000) for those who chose to accept the risks involved with allowing banks to handle their money as deposits

Finally, just to reinforce the whole subject - there needs to be proper accountability and in this context and in this context the proponent of 'Black Swan' events Nassim Nicholas Taleb has the right approach with the 'architect rule' - if an architect builds a house and it collapses killing the occupants then the architect himself if put to death

After all there is nothing quite like accountability to provide a wake-up call for ones actions

Tags: | Categories: Banking