This is not Olympic diving 😉
The filmmakers found 30 people who had never jumped from a 10-meter platform. Each was paid about £25 to climb up to the platform and walk to the edge. What they did from there was up to them.
This is not Olympic diving 😉
The filmmakers found 30 people who had never jumped from a 10-meter platform. Each was paid about £25 to climb up to the platform and walk to the edge. What they did from there was up to them.
I’ve been playing with spreadsheets again, and I’m not liking what they’re telling me, which is that 3652 days may not cut it. It might, but it’s not very likely. My expectations of investment return have been optimistic, and unless we soon have another market crash a’la 2008 followed by a 10-year bull run, come 2025 I may not have enough to retire on.
Nobody knows for sure. Retirement calculators, Monte Carlo simulation and stress testing can give us a reasonable idea, but we don’t really know. Hence we end up using some sort of an estimate, and usually that estimate has an inbuilt layer of fat, just in case.
My estimate is a million in invested assets, including pension, indexed for inflation (December 2015 = 1), and no mortgage. That would give me about £1.9k post-tax income per month – enough to fund my life and leisure in retirement. It’s more money than I spend now, but I’ll need more when I retire. Because: I’ll have more time to travel.
All that headspace which my work occupies – I need it for personal use. In a recent Banking Standards Board survey 26% of respondents said work had “a negative impact on their health and wellbeing”. I’m no wimp, in fact I don’t have much patience for weakness, but I’m getting sick and tired of being knackered all the moverloving time.
I want to retire so I that can slow down, take more trains and fewer planes. I want to know what trees are called, where they come from, and which tree families they belong to. Ditto rocks. I want to use my Natural History Museum membership more, I want to go to movies when I feel like it, not when I have time, I want to read more books, see more of this weird and beautiful planet we live on, maybe learn a couple more languages, or at least improve the ones I’ve tried learning in the past, my German sucks, for example. I want to kitesurf, sail, swim, walk, cycle, climb, discover. I need more time to do things, and I want to take my time doing them. I don’t want to get home at 3am from a weekend away and have to be at work by 9am the following morning.
Reducing my working hours is not an option in my role, my contractual 7 hours a week are a joke anyway, since I’m paid for results and not the time spent achieving them. Changing employers would solve nothing, I’ve tried that a couple of times before. I can’t be self-employed; as much as I’d like to dodge some tax and NI, it’s not possible in my industry in my line of work. So what’s left is biting the bullet – hard – and hanging on ’till it’s over.
Here’s what I’m not prepared to do:
Having said this, I’d make one exception to expending effort at a low rate per hour, and that is acting as an extra in a Bond film.
Back in the day, when I was young and good looking, the company I worked for had a leadership development programme, which involved, among other things, an international secondment. I was one of two people selected from our office. For the secondment part I could pick any international office, provided they had a vacancy and agreed to take me. At the time, aside from the usual suspects, being our branches in global financial centres, there were vacancies the Bahamas and the Cayman Islands.
I, being a boring idiot with no imagination, went to a proper city with a financial services industry, whereas my colleague… didn’t. He went to the Bahamas, and promptly started flooding my fucking inbox and later facebook feed with photos of sunny beaches and pool parties. Also, boat parties. Then when Casino Royale came to the Bahamas to film their beach scenes, he signed up as an extra, the animal, and got paid to play frisbee in the water with some girls in bikinis.
So, ok, having thought about it, maybe I’d do it too. Even if I were retired at the time, I’d make an exception.
I’ve looked at it this way and that, and the earliest I can repay the mortgage is 2023. That assumes that I don’t get sacked from my job, use all my pension allowance and ISA allowance, and don’t invest anything in taxable accounts, except my portfolio allocation to gold ETFs, which could be about £6k p.a.
Given that I want to retire with 4 years’ worth of expenses in cash outside of ISA and pension, and given that I’d have to live on that cash plus the ISA until I can access my pension… it’s tight. And I haven’t even begun thinking about whether or not I should continue paying NI contributions post-FIRE in hopes of maybe someday getting more by way of state pension.
And then there’s the joker – am I or am I not going to buy a boat? It’s a cheap way to travel near, but it’s a fixed cost at home when you’re away traveling far. Do I want it enough to work 2 years longer than I’d do otherwise? Am I sure that I don’t want it enough so I could say no to it and never regret it? Also, if I bought a boat and then things went south later, I could rent out my place and go live on the boat. If I couldn’t afford moorings in the UK, I could take it to France or Holland. The Med is tricky in summer, but winter is usually fine, and there’s always Turkey.
So I can laugh at RIT changing his delivery date every 9 months, but my own cojones are an untested quantity. There’s nothing safe about a 4% safe withdrawal rate. I’m aiming for 2.5%, and it looks like time ain’t on my side.
They say I won’t be able to take it with me. I say it’s a rebuttable presumption, and even so, I hope it will be a few years yet before the disposition of my assets after my demise occupies more of my headspace than trying to figure out how they’re going to turn back that dead ice dragon in Game of Thrones. Surely they’re not going to perma-kill Viserion, right? … Right?
The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least amount of hissing.
— Jean-Baptiste Colbert
I’ve been lately contemplating on tax. This year my income tax and NI will come to £37k or thereabouts, which is more than double the amount of my annual expense budget, including mortgage interest. Add to this number the council tax, VAT, IPT, alcohol duty, airport taxes and import duties, and it soon becomes apparent that I render unto Caesar three times more than I expend on my own worldly pleasures.
This begs the question: what the fuck?
And why, even with me paying this amount of tax, do I keep hearing about the country’s finances being a mess, teachers, doctors and policemen overworked and underpaid, and don’t even start me on the infrastructure. How do Normandy and Brittany afford their acres of marina moorings – mostly public property owned by local communes – when my council in London has to economise on garbage removal?
No discussion about income tax goes far without some social justice warrior pointing out that top marginal tax rates are higher in Scandinavia. If we only taxed the rich more, then all would be well and good.
I find it funny hearing people, some of whom haven’t even been to Scandinavia, speak of The Scandinavian Tax System as if they knew what they’re talking about. Also, Scandinavia is a geographic region – not a nation. Here’s a crash course: Norwegians can be eccentric at times; they mostly keep to themselves. Danes are a little fatter and louder than the rest, but generally good fun. Swedes are alright, and just so we’re clear, Finland and Iceland are not in Scandinavia.
Going back to tax, personal income tax rates in Sweden and Denmark are higher than in the UK, and the Norwegian top marginal rate is 0.1% lower than in the UK. Yet all three Scandinavian countries raise significantly more tax revenue – both as a percentage of the GDP and the share of the aggregate tax take – from individual income taxes than the UK does. That is because tax rates are not the most important feature of these countries’ tax systems. Their tax takes are high because their taxes are quite flat: they tax most people at high rates, not just the taxpayers in the top income decile. Below are some numbers from OECD Data and OECD Stats that help illustrate this point:
|% of income||46.9%||60.1%||55.8%||47.0%|
|% of GDP||21.2%||27.9%||24.7%||15.3%|
|% of total tax take||55.7%||63.3%||53.8%||46.2%|
|Times the average wage||1.6 times||1.5 times||1.2 times||4.1 times|
So the next time you hear someone pipe up about taxing the rich like they do in Scandinavia, please feel free to point out that if the UK were to adopt, say, the Danish model, this would mean that all income over £43,885 (1.2 times the average wage of £36,571) would be taxed at the top rate of 55.8%. There’d be no tax free allowance, income up to £5,400 would be taxed at 8%, after that the basic tax rate would be about 40%. Also, Denmark is the only Scandinavian country with inheritance tax; spouses are exempt, by everyone else pays a flat 15% on any inherited property over £33,500.
I’m not suggesting that if Britain adopted the Danish (or Swedish, or Norwegian) tax rules, that would be a bad thing. The country needs a broader tax base. And we’d get a lot in return – free universities, free healthcare, very heavily subsidised childcare and aged care for most, free for those who pass the means test. I could get decent and affordable moorings for my retirement yacht … it’s preferable to an allotment.
However, in practice, the Scandinavian model may be difficult to replicate. Henrik Kleven in his 2014 paper demonstrates what we kinda already knew. Social attitudes matter. In Sweden the rich, however defined, don’t to support the welfare state. The society pays for its own welfare through taxation: everyone pays a lot, and those who can afford to pay more do so, generally without excessive hissing.
Socialism, just like democracy, works better on a small scale; when it comes to spreading the wealth, it helps to have a relatively small, homogenous population. People are happy to chip in to help out us, not so much them. Social welfare without social cohesion is a real hard sell – that’s one of the reasons why polarising events (see: Brexit) aren’t good for the welfare state, nor are polarising politicians (see: Corbyn).
When it comes to personal taxes, the UK is running concentration risk: 50% of income earners pay 90% of all income tax, 40% pay none, and 1% – about three hundred thousand people with incomes over £160,000 a year – are responsible for 28% of the tax bill. Three hundred thousand people is the population of Wandsworth.
As for the 40% who pay no income tax at all, I submit it as my opinion that it’s a mistake to have working people pay no income tax. All that it accomplishes is cut the payroll bill for low wage employers, e.g. in hospitality and catering. I call it the Starbucks subsidy. People work for net pay, not gross, so personal income tax is largely borne by the employer, but for those who distrust the invisible hand of the market, there’s a tool called the minimum wage. It should be set at such a level that a person with a job is able to both live himself and contribute towards supporting the young, the old, the unlucky, and those who are unwell.
There also should be a link between public spending and people’s own purses. How else can we claim that we as a society together decide how our money is spent? Anything other than this is merely a gimme-more-of-yours, which is both unhealthy and unsustainable.
It all boils down to one main question: can we have a welfare state with a low-wage economy? I say we cannot. One or the other has to give. By OECD standards, the UK’s average wage is not that low. And yet 40% of people don’t earn enough to pay income tax. If we’re keen on keeping the welfare state intact, then the median wage needs to come closer to the mean. The minimum wage has to go up, and all working people have to start paying tax.
Would there be job losses? Yes. But would it really be such a bad thing? At least then we’d be able to identify the people in need of re-trainign and redeployment. Perhaps then the productivity would finally begin to improve. The UK has had a productivity problem since the 50s, and any economist will tell you that productivity growth is the only way of ensuring long-term prosperity.
Widening the tax base is doubly important now that we’ve effectively terminated the lease and served an eviction notice to foreign capitalists who, until Brexit, have been using Britain to gain access the European single market. This New York Times article explains why, but if you don’t fancy reading it, here’s the gist:
The UK’s favorable financial and legal environment helped draw foreign capital. But it was access to the EU that allowed this to happen on a large scale. Since the early 1980s, leading global corporations have located plants and offices in Britain, sometimes taking over British businesses in the process, using British soil as a terrestrial aircraft carrier to assault the single European market. Trade figures for the past three decades show with brutal clarity how dependent the UK is on this aircraft carrier status, and how much it stands to lose if a full Brexit is carried out.
In the City of London quite a few of the 300,000 people who pay 28% of income tax depend on foreign – mostly American – capital. Some of these people are foreign-born, and some are not. Regardless of their place of birth or the location of their client base, they pay taxes in the UK, which help support the NHS and other public goods.
Pos-Brexit, their jobs will not move to the continent immediately: people and their personal situations are complex, companies want to retain good performers, also, there aren’t enough people in the EU-27 with the right skills to take them. But as people relocate, resign and retire, eventually these jobs will follow the capital which they service, and so will the tax revenue. Britain needs a plan on how it’s going to replace this revenue. Broadening the tax base could be an option, if only we had a political party with the cojones to do it.
the rich /ðə rɪtʃ/ noun [plural] those who earn more than I do.
For simplicity’s sake, let’s ignore the anomaly of the 62% effective marginal tax rate on incomes between £100,000 and £120,000.
Stephen Hawking is dead.
Also, there will be no special Brexit deal for the City. To be honest, we knew that – I spent this past year getting ready for it. I thought I’d get used to it, my anger would morph into something like acceptance. It hasn’t happened.
Granted, the manner in which the so-called process is carrying on isn’t helping. It’s like watching a slow motion train wreck. The EU are asking Britain to tell them what Britain wants. Britain is terribly sorry, but is unable to oblige: apart from a general preference for eating cake and having it, Britain hasn’t yet settled on what it wants, specifically. Can someone please send our government a memo reminding them of the seven habits of highly effective people? Number one: begin with a fucking end in mind.
Also, I don’t have any more carried forward pension allowance, so my tax rate is going up, just in time to start paying for this clusterfuck that our gullible xenophobic half got us all into. My pleasure.
The actual year to date average is 73%. Let’s hope it lasts 😉
Emergency Fund: not yet, but there’s hope.
Freedom Fund (aka S&S ISA): ongoing.
Fail. It’s going to be more like £30k+
I’ve decided that I don’t need any more stuff this year, and am trying to restrain myself from buying anything non-perishable. I’ll admit, it’s harder than I thought.
I don’t volunteer. Maybe it’s because I’m lazy or not very charitable. Or it could be that my past volunteer work was illuminating for all the wrong reasons. I’m not alone in having been thus illuminated, Philip Greenspun sums it up well in his blog:
Non-profit organizations exist to provide their staff with great jobs and the fun of making decisions and spending money. The folks who work at a non-profit organisation are very interested in drawing a salary higher than their skills and working hours would command at a for-profit enterprise subject to competition. They are not especially interested in efficiency or accomplishment. If you’ve come from the commercial world, in which McDonald’s must be ruthlessly efficient for fear of being destroyed by Burger King, working with or in the typical non-profit organisation will likely drive you to insanity.
There, that’s the gist of it. If you’re pressed for time, please feel free to read no further.
I haven’t always been a misanthrope. As a student I worked pro bono for sever causes I held dear. It was alright. Student volunteers – bright-eyed, bushy-tailed, eager to please – are treated well everywhere. Because: people diskile being personally responsible for sowing cynicism in young hearts.
Then I got a real job, there was a greasy pole to climb, my passion for bettering the world was put on hold.
In 2012 the Olympics came to London. After taking two weeks off work to lend a hand I was so pleased with myself, I wanted to continue. Which I did as a trustee of The Charity: small but old, helmed by a few volunteer members of the local gentry and some professional charity employees.
There’s an important difference. The former are folks who serve on the board of only one charity or non-profit. They are or have been employed full time in private or public sector, they often have a personal connection with their charity’s line of work, and they are not in any way remunerated by any charitable organisation.
Multi-charity trustees are a different breed of cat. These are professional charity workers, interlinked with other such persons via a network of paid full-time or part-time roles, ad hoc culsultantships and volunteer directorships and trusteeships. It’s a sort of a demented SPECTRE, if Ernst Stavro Blofeld’s chief aim were to keep his buddies on some charity’s payroll doing fuck all.
All who work in the City eventually learn to handle certain remarks from outsiders – sometimes subtle, often tactless – without a blink. My favourite response to “What do you do with all that money” is “I preserve: banknotes with plums and crab apples. I’ll email you the recipe”. The truth is, very few in the City earn the proper big bucks. Most of us don’t. We don’t do our jobs because we love them, money isn’t how we keep the score – it’s how we pay the mortgage.
In my experience, as far as charitable sector folk are concerned, working in financial services makes one a millionaire with no morals. Volunteering at a non-profit while working in financial services makes one a millionaire wtih no morals in search of redemption. At first I thought the misconception silly. Later it began to chafe.
I expected the trustee board, and governance in general, at a smallish charity to be something of a shambles, though not anything quite so unholy as what I found.
Board meetings in the City are held mainly to endow what has already been decided. Where a new initiative requires board approval, first the executive directors informally “socialise” the proposal with non-execs. If non-execs are broadly in favour, it is put on the agenda to be discussed at the meeting. If non-execs are unconvinced, they ask for further information, evidence, input from various business functions. Once/if they’re satisfied, the proposal is put forward. Ambushing your non-executive directors with unexpected motions at the board table is a career-limiting move. Also, making requests where there’s a chance of outright refusal is embarrassing.
Surprising trustees with new proposals not much progressed from a
brain fart new idea stage was modus operandi of The Charity’s management. The mode in which the proposals were put forward made it clear that the director was merely seeking a rubber stamp. Queries were treated as a nuisance, especially finance-related queries: a charity’s purpose is to Do Good, you understand, it is Not A Business and hence we shouldn’t Focus On Money. Such cavalier attitude can be frustrating if your role on the board is Hon. Treasurer, which kinda makes you responsible for ensuring the outfit remains solvent.
I volunteered at The Charity out of a genuine, albeit misguided, belief that my contribution would help make a difference. There was no other reason. It’s not and never has been on my CV. I had to tell the HR and Compliance at work to get a conflicts of interest waiver as per terms of my employment contract, but I never told anyone in my team, nor my boss. Some friends found out about my extracurricular activities towards the end – we were moaning about work, someone wished for more meaningful employment, e.g. at a non-profit, I failed to suppress a rant – and some didn’t.
For The Charity’s employees who ran the place day to day it was a job. A cushy job with flexible hours, above-average skill-adjusted salaries and no management by objectives. There were limited opportunities for advancement internally, but only the director was ambitious. His ambition was, from what I could tell, in the political line and he devoted a lot of his time to
networking seeking collaboration opportunities with other non-profits and local politicos, and CV-building by attempting to represent the charitable sector at whatever latest social manifesto initiative the Labour party would trot out.
My first year at The Charity was the best, for there was hope that I wasn’t wasting my time enabling a hot air filled non-entity not bright enough for the private sector climb his retarded version on the greasy pole. As this hope diminished and then dissipated, so did my givashit.
If you’re retired and are being gnawed by an urge to make this world a better place, what the hell, give it a shot. After all, what do you have to lose? If you’re old enough to be retired and not yet cynical as fuck (which you can’t be, given the aforementioned urge), then you’re probably resilient enough to work for any sort of charity and come out of the experience unscathed.
But don’t do it if you’re still employed and depend on your income. It takes time to do it well, and trustees are ultimately responsible for everything a charity does. They can be legally accountable for decisions made. Trustee indemnity insurance protects you financially but can’t protect your reputation. And if, as part of your job, you’re subject to the PRA’s SMR regime, signing up for the board of a loosely governed non-profit is madness. If you’re itching to do something, then write the charity a cheque. Not only is it tax deductible, it’s also quicker, easier and more enjoyable than having debates about what constitutes effective and financially sound management.
London’s West End season is wrapping up for another year (#sad). There are no surprises with Olivier 2018 nominations – Hamilton features in almost every category. Good. If you haven’t yet seen it, you should.