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.
Savings rate: 60%
The actual year to date average is 73%. Let’s hope it lasts 😉
Property wealth: overpay mortgage by £20k
Pension wealth: use up all available allowance
Financial wealth: Emergency Fund & Freedom Fund
Emergency Fund: not yet, but there’s hope.
Freedom Fund (aka S&S ISA): ongoing.
Tax: pay no more than £25k income tax in 2017/18 tax year
Fail. It’s going to be more like £30k+
No new stuff year
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.
Early volunteering career
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.
A one-charity trustee vs a multi-charity trustee
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.
Professional charity workers are better
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.
Givashit is a depletable resource
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.
Should you volunteer on a charity board?
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.
- The clergy should be excluded from this group, even though some are involved with multiple charities. It could be argued that for them it comes with the territory.
- For fairness’ sake I should note that this was pre-Kids Company. Maybe that episode, which ended with the charity’s directors banned from running companies for up to six years, has knocked some complacency out of the charitable sector. At least I hope it has.
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.
Like any Londoner with a square foot of outside space I own a compost bin. It houses remains of several years’ worth of leaves and hedge trimmings and not a single scrap of kitchen waste. Because: I also own a wormery – a lidded bucket which is home to several thousand tiger worms (eisenia foetida).
Vermicomposting involves joint action of worms and microorganisms to break down organic waste. Since the process doesn’t rely on heat, it can be done on a small scale and entirely indoors.
The journey so far
I have been vermicomposting for three years. It hasn’t always been smooth sailing.
My first attempt ended in mass worm death. I took their bucket outside and chanced to placed it under a broken gutter. It rained heavily for several days. The wormery should have been able to cope with rain, but I guess a constant drip from a broken gutter was a stretch too far. It filled with water, the worms drowned. I felt bad about it.
In last summer’s heatwave we came close to another accident. It was 30 degrees in the shade, I hadn’t checked up on the worms for a couple of weeks, the wormery needed emptying of compost, I procrastinated. When I finally lifted the lid there was a layer of semi-dead barely moving worms on the surface. Decisive action saved the colony. They wouldn’t have lasted much longer.
The eco angle
Is having both indoor and outdoor composting facilities an overkill? Not for me.
In winter I rarely go out in the garden. If I didn’t have a wormery, in the cold months most of my kitchen waste would end up in the rubbish bin, thus adding to my landfill footprint. Because: my faults are legion and laziness is definitely one of them.
Luckily my worms don’t share my vices. These amazing little organic factories work tirelessly day and night transforming tea bags, pizza crusts and apple cores into a thick lavender hedge and several healthy rose bushes.
It may be doubted whether there are many other animals which have played so important a part in the history of the world, as have these lowly organised creatures.
– Charles Darwin
Even my long-suffering house plant perked up once I started feeding it worm fertiliser, else it would’ve been dead and composted a long time ago 😉
The composting angle
My garden is too small to keep the outdoor compost bin constantly supplied with carbon for the right C:N ratio (about 30:1). Some of my friends’ bins are fly-infested receptacles of smelly gelatinous mess because of that reason, especially in spring when there are no fallen leaves to balance out nitrogen-rich kitchen scraps. With a tiny garden like mine, wedged in among terraced blocks of flats, this could provoke unwanted scrutiny from delicate neighbours, the council, and other assorted vermin.
It may be counterintuitive, but a small compost bin is more difficult to look after than a large compost heap. It’s more sensitive to outside temperature variations – there’s little to be done about it without turning composting into a full-time job – and there’s less leeway for mistakes.
A wormery can take a larger proportion of nitrogen than the outdoor bin. Worms eat the waste, so it doesn’t have time to rot or ferment; good drainage and ventilation keep anaerobic bacteria in check. This is further helped by worms burrowing in the compost and me occasionally digging in it as per instructions, and because I want to see the worms 🙂
Manufacture of synthetic fertilisers produces large amounts of greenhouse gas. On top of this, soil microbes convert excess nitrogen unabsorbed by plants into nitrous oxide, so a large chunk of the liquid synthetic plat food that people pour on their flower beds goes up in the air.
Worm compost is better for the environment than synthetic fertilisers: the nutrients are released slower, plants have more time to absorb them and less of the good stuff ends up in the atmosphere. It is also full of microorganisms that enrich the soil and help keep the plants healthy. And best of all, it’s all free 😀
Worms make great pets
My worms live in the cellar in winter and out on the patio in a shaded corner in summer. There’s no smell. If I stick my nose into the bucket and sniff hard, the most I get is a damp earthy smell, like a tomato plant.
Worms are quiet, don’t annoy, don’t whine, don’t chew up furniture, nor shoes, and there are no vet bills. They are ideal pets for the commitment-challenged. My wormery can go without food for weeks while I’m away – all I need to do before I leave on holidays is drain the bucket of any liquid (this can go straight in the garden, plants love it) and add a handful of kitchen scraps mixed in with plenty of paper or cardboard. Then place it back in the cellar, and I’m good to go.
- Garden earthworms are not suitable. Apparently they have a thirst for freedom and need to burrow in soil – both undesirable tendencies for creatures you’re planning to keep in a bucket with damp shredded paper. On the other hand, tiger worms, also called red worms or manure worms, often found in fallen leaves on the forest floor or in manure piles, are surface dwellers and like living in colonies.
- I could use paper or cardboard, but honestly, I don’t see myself doing this for my outdoor compost bin, checking it twice a week for temperature measuring the pH ratio, adjusting the mix of scraps I put there based on conditions. I find it easier to keep up the motivation when there’s some living thing I’m trying to not kill.
- I’m not an organic gardener (if I can be called a gardener at all) by any stretch of imagination, but I don’t like putting chemicals in the environment if I can help it.
There was a good to fair chance of me hitting George Osborne’s pension allowance taper this year, so I spent the last couple of months trawling the internet, looking for ways to avoid this eventuality.
The results were mixed
The good news is that I can keep my pension allowance at £40,000, probably for the last time. The bad news is that I’ll have to pay more NI than I would’ve if George had not been inspired to meddle with pensions in the first place.
Here’s how it used to work.
- My employer’s pension plan is non-contributory. They pay a percentage of my salary into my pension regardless of whether I choose to contribute myself.
- On top of that, I can salary sacrifice whatever I like – as a lump sum or a monthly payment – into the company pension from my pay, and my employer will chuck in an additional 7.5% of the amount sacrificed. Because: ‘ee NI is 2% and ‘er NI is 13%, which is 15% in total, divide that in half and you get 7.5%.
- For every pre-tax £100 I salary sacrificed into my pension I had £107.50 paid into the plan.
- Naturally, each year I would salary sacrifice whatever I could in order to get the 7.5% uplift. Then I would transfer that amount from the company pension into my SIPP. Because: lower fees.
Enter George G. O. Osborne. Things become complicated.
Those whom George considers to be “high earners”, now have their £40,000 pension allowance tapered down to £10,000 if their adjusted income exceeds £150,000. BUT only if their threshold income is more than £110,000. Mechanically pension allowance taper works the same way as the personal allowance taper for incomes over £100,000: for every £2 of income over the limit you lose £1 of the allowance. Does that sound unnecessarily complex? That’s because it is, and wait till you hear more.
My threshold income is as follows:
- My net income (which includes my salary, bank interest, SAYE dividends and P11D benefits); plus
- Any salary sacrifice I make into my pension (since the arrangement is flexible, it’s caught by the anti-avoidance clause); minus
- The gross amount of my SIPP contributions.
The last point is key: if I make pension contributions via salary sacrifice, then they are part of my threshold income, but if I make a personal contribution into the SIPP where tax relief is given at source, then that amount is excluded from my threshold income. Of course, by doing so I lose the 7.5% uplift I would have received from the company and I have to pay 2% employee NI.
Each £100 of pension allowance I keep by claiming relief at source costs me £19 (I have to forgo £200 of salary sacrifice given the 1:2 taper), but its value to me is the £15 tax deferral and £25 tax saving. So the differential benefit is at least £6.
My adjusted income is:
- My net income (same as above); plus
- Any salary sacrifice I make into my pension (same as above); plus
- Any pension contributions my employer makes;
In my case the difference between adjusted income and threshold income is pension contributions – my own, paid into the SIPP, and my employer’s, paid into the company plan. Pension contributions made as salary sacrifice are included in both.
Bad laws badly written
It annoys me how poorly drafted the rules are. The whole thing is rife with contradiction and confusion. Let’s take the definition of net income. The HMRC website states that the net income is taxable income less any reliefs. You’d think this would mean gross income less personal allowance, dividend allowance and personal savings allowance, which would be consistent with the verbiage in the self assessment tax return, where total income on which tax is due equals total income minus personal allowance.
But no, it does not. Net income is in fact gross income: your personal allowance doesn’t enter the calculation, neither does the £5,000 dividend allowance, nor the personal savings allowance. So if your income is more than £150,000, the interest and dividends you receive in taxable accounts – even if the amount received is less than the tax free limit – reduce your pension allowance due to the taper. It would be nice if the HMRC Pensions Tax Manual made this clear.
Another thing that strikes me as inconsistent is that rental income is included net, i.e. after subtracting allowable deductions. I can’t claim platform fees against my SAYE dividends, but a buy-to-let investor can deduct property expenses from the rent he receives. As an aside, rent-a-room scheme is looking increasingly attractive: £7,500 p.a. tax free AND it doesn’t impact the pension allowance by the virtue of being tax exempt and hence not part of the net income.
One last time
My past disregard of all matters Personal Finance has endowed me with some carried forward pension allowance, which is the sole reason I can avoid the blasted taper this year. I’m over the limit on adjusted income, but my threshold income is under the £110,000 mark. Next year … unlikely, but we shall see.
I never thought I’d say this, but at least I don’t have a DB pension. From what I’ve glimpsed on the DB plans, the rules there appear even more confusing.
Guides and tools
Below are some resources I found useful.
As per usual, reader beware: I have gathered only what I deemed applicable to my current situation. The reference list is not intended to be complete, nor can I vouch for the accuracy of any of the materials.
- Willis Towers Watson provide a free app for calculating annual allowance, but you’ll have to input your own figures.
- Pru’s Annual Allowance Calculator is a version of the Towers Watson app, and you still need to provide your own numbers. It won’t tell you what sources of income should or should not be included in the calcs, but despair not: this guide will.
- Scottish Widows clarify the components of net income, threshold income and adjusted income.
- AJ Bell’s guide has some easy to follow examples.
- Royal London have more examples. With diagrams.
- You can call the Pensions Advisory Service on 0300 123 1047.
- If you have 30 minutes to kill listening to elevator music as you wait for someone to answer the phone, you can also ring HMRC on 0300 200 3310. If you manage to get through to them, they’re actually very helpful.
A few words on the subject of LISAs
If in future my pension allowance is reduced, I may have to open a LISA account. That’s annoying because a LISA isn’t as good a deal to a higher rate tax payer as the pension.
A higher rate taxpayer wants to save £100 of his pre-tax income into a pension at the age of 39, and earns a 5% annual return until he retires at 58 (let’s ignore NI).
In 19 years’ time his pension will be worth £100 x 1.05 ^ 19 = £252.70. A quarter of this can be withdrawn tax free. The rest of it can also be withdrawn tax free, provided he keeps his annual pension drawdown within his personal allowance. This shouldn’t be very difficult, as any tax free income from his ISAs can be used to supplement the pension income. With no mortgage and living modestly, he doesn’t need to pay much (or even any) income tax post-retirement.
A higher rate taxpayer wants to save £100 of his pre-tax income into a LISA at the age of 39, and earns a 5% annual return until retiring at 58.
In 19 years’ time his LISA will be worth £60 x 1.25 x 1.05 ^ 19 = £189.52. This is tax free, but so what? If he’s living modestly and has tax-free income from other ISA products, that’s a waste of his personal allowance.
Also, LISAs don’t have the same protections as pensions, e.g. in case of bankruptcy, and they will count as “savings” if you ever need to claim unemployment benefits. Granted, the possibility seems is remote, and having other ISA products renders it a moot(ish) point. Still, one can never be sure.
LISAs weren’t brought in for the benefit of the people – they were brought in so that HM Treasury can get more tax revenue sooner. If I were a conspiracy theorist, I’d say the additional complexity and confusion that the taper rules introduced to pensions were part of Osborne’s plan. But I am not. And I don’t think they were.
I think the hurried, badly written legislation, which has turned an already complex area into a multi-layered clusterfuck of convoluted rules, guidelines and definitions, really was the best he could do. George Osborne simply wasn’t a good Chancellor.
- With no differentiation between the cost of living in London vs the rest of the country.
- There are more things to take into account, which are not relevant to me. The full list can be found on the HMRC website.
- I don’t expect to pay 40% tax after I retire, so ignoring any investment return and assuming tax rates don’t change, the tax I’ll pay on the £100 when I start drawing my pension is £100 x 75% x 20% = £15.
A hoarder slumbers in most of us, I fear.
3rd Rock from the Sun had it all wrong. Humanity’s favourite pastime isn’t to do with sex; it’s to do with acquiring dwelling places and filling them with stuff. From the Old Testament to the Aeneid to modern literature, people’s obsession with possessions is staggering.
On Tyrian carpets, richly wrought, they dine;
With loads of massy plate the sideboards shine,
And antique vases, all of gold emboss’d
(The gold itself inferior to the cost)
You know that icebreaker in group trainings – if you could meet any famous person, living or dead, and spend a day with them, who would it be and what would you do? I’d meet Virgil and I’d take him to Westfield. He’d love it there.
It’s under our skin
Maybe there’s an evolutionary explanation? Perhaps monkeys who hoarded their sharp flint flakes had a better chance at survival: having immediate access to tools and/or weapons meant that they didn’t need to look for a suitable stone each time they wanted to knock something on the head. I don’t know how it began, but I think we have been like this since the beginning.
A couple of my more obscure uni electives were in comparative religion, whence I was expected to read (and occasionally even comprehend) both Testaments, the Quran and bits of the Tripitaka. It’s all the same shit, by the way: teaching peasants to not challenge those in charge in exchange for jam after death.
As they admonish serfs, slaves and assorted free paupers to forswear material possessions (should be easy enough to do when you have nothing), holy scriptures go into fascinating minutiae describing the items to be forsworn. We have detailed inventory lists of Job’s and Abraham’s livestock and servants, Solomon’s gold, chariots, housewares, robes (the dude liked purple, apparently), wives and cattle, in addition to all the stuff he inherited from David. As for Muhammad’s arsenal of bejewelled weaponry, armour and silk shirts, not only do they have descriptions – they have names. Unlike his horses, slaves and some of his women. Parts of the Nirvana Sutra read like House Beautiful shagged the GQ: for your next spiritual retreat consider this unique West Bengal mansion with beryl walls, lattice windows and golden hand railings. Arrive in style in a latest model luxury four horse wagon sporting a white roof and golden bells.
My point is, consumerism – present or aspirational – is part of our civilisation. Giving it up is damn hard.
One month in
Did I manage to get through the month with no new stuff? No. Below I present a list of the offending articles:
- Huawei modem (£15.99 from ebay). I recently switched from Virgin to BT, and their sixth generation Home Hub can’t be set to bridge mode. I have an extended home wifi network where Apple’s Time Capsule and three Airport Express gadgets provide great coverage, automatically back up my data, and I can use airplay in every room and in the garden. In my defence, I tried to get that BT thing to work. I really did. After four hours of messing about with settings (and a lot of swearing) I had to concede defeat: the only way of getting around double NAT is to put the Time Capsule in bridge mode and connect it to the Home Hub via LAN, but then the backups are soooo slooooow. I’m no expert, but I think it’s because the Home Hub OS is rubbish and can’t deal with the throughput of data from my laptop to the Time Capsule. Also, Airport Express don’t connect to the Home Hub, so the network can’t be extended, the signal in the garden is weak and none of the airplay devices work. I figured, fuck it, I’m allowed one exception that enables me to use fibre the way fibre is meant to be used.
- Five kitchen towels (£0.00; gift from mother). Why people need kitchen towels when there’s kitchen roll is beyond me. And especially since I already owned two perfectly adequate tea towels. Also, I banned her from buying me any more kitchen stuff a year ago, clearly with no results.
- Cheese baker (£0.00; another gift). It is a truth universally acknowledged that 15 minutes in the oven can transform average camembert into a gooey piece of heaven on a cracker. Or garlic bread. Or a carrot stick. Or a celery stick. Or an asparagus spear. With walnuts. But what is it with this thing for specialist dishes where no specialist dishes are required? You take camembert, you pierce the top, insert some rosemary or garlic, place it on a baking tray, into the over it goes, and voilà! I can’t even re-gift it because we had to use it.
I hope I can do better next month.