"Almost" and "If Only..."

Last week I read an article on Interactive Investor discussing how to invest in the Internet of Things - a world in which everyday objects contain technology that connects them online.

We are beginning to explore this type of technology at work so I know a little about it and I also know that it is definitely a growth area so I was very  interested to read about the some of the companies involved as potential investment opportunities.

The one which really caught my imagination was CSR and the more I read about the company and its products the more I began to wonder if this wasn't "the one" that would finally make me take the plunge and buy individual stocks. If I'd had my CIS funds in my ISA I do believe I would have gone ahead, sold a little of them and bought £1000's worth of CSR, but, not having available cash and not wanting to sell anything else, I just put the company on my watch list for the time being.

This is what happened two days later:



The stock went up by over 30% overnight.

I was stunned. To be honest although I "knew" that things were volatile out there in the market I have had my limited experience of it cushioned by the fact that I have been watching large funds move slowly up and down. This was the first time that I realised that things can actually move very fast indeed at individual stock level. Am I actually really ready for the type of environment where this was possible? Although I consider myself towards the top end of the "prepared to take a risk" spectrum", this has never actually been tested. Seeing first hand what happened with CSR and being so close to actually being in the thick of it has concentrated my mind on what I would actually be letting myself in for . It has given me the opportunity to think about what individual stock picking and its potentially higher level of risk/reward would mean to me.

These are some of the things I came up with:

Benefits

• The satisfaction of feeling more directly involved with the company in question. I really enjoyed researching CSR and reading about their development work. 

• Technology is my "field" so I felt that I would be able to make a genuinely informed choice to invest rather than relying on the recommendations of financial pundits where I sometimes find it difficult to separate the genuinely knowledgeable from the salesmen.

• I would feel that I am investing more responsibly/ethically by choosing the company and area of business rather than leaving it to a find manager or tracking the whole market. 

• I would learn far more about the business world and how that works which would be time well spent in preparation for actual retirement because at that point I intend to transform my portfolio into an income-producing rather than capital-building model.

• Excitement/ Enjoyment/Enrichment due to a feeling of getting things right

• Potential Financial Gain

Risks

• Loss of confidence if things go wrong

• Excitement/Over confidence/Too much risk taking

• Potential Financial Loss

From the list above I guess you can tell which way I'm leaning and I'm pretty sure I knew which way I was going to go with this even before my experience this week. However I'm glad it happened as it really got me thinking about what I would be getting myself into. I know that this kind of thing doesn't happen often but, crucially, I now know how it feels when it does. 

After all, I almost bought, I almost made a fair bit of money overnight. I now know how it feels to have to deal with "almost" and "if only" and it hasn't put me off. 

(btw I still like the look of CSR. Hurry up ISA transfer :-))

Going It Alone

We own a small studio flat which we bought for my son to live in during a gap year in his studies. We have been renting it out via an agent for the past 4 years or so and have now paid off the mortgage so are finally fully benefiting from the income. (An extra expense we had a couple of years ago was having to buy a lease extension which cost over £10,000 - but that's one for another post).

For the most part we've had good tenants, one of whom stayed 2 years which was great (no void periods and none of the expenses attached to finding a new tenant), but we have had a couple of less than perfect ones, one of whom continually complained about tiny maintenance issues (loose screw in window catch etc.) and one who got himself deported to South Africa on New Year's Eve owing 2 months rent.

However, because we pay 12% for a fully managed service, the agents sorted out any issues and we just paid the bills (which, to be honest, have seemed ridiculously high at times for things like minor repairs and cleaning). In other words, up until now we have been taking the "our time is more important than our money" stance as far as the flat goes.

But the current tenant has just given 2 months' notice and this has prompted me to have another think about this strategy, mainly because I came across the OpenRent website. The difference in cost between what we pay and how much they charge is quite substantial.

What we're paying: - 

• Initial charges: (ie advertising, contract, deposit registration, references, rent collection) - £395.
• Ongoing Charges: (Conducting viewings, Organising any repairs, ongoing rent collection, meter readings etc) - 12% + VAT

What our current agent offered when I told them we were thinking of using OpenRent:

• Initial Charges:- £295 +VAT
• Ongoing Charges - 10%

What we would pay with OpenRent :-

• Initial Charges: £49
• Ongoing Charges: Nil

In cash terms this means that by using OpenRent and DIYing we would be saving at least £1000 per year. (All other things being equal of course - there is the danger that the property won't go as quickly with OpenRent due to them being an online only service, but I think that's a smallish risk - surely a fair number of people use Zoopla and RightMove? and the flat is in a great area. On top of that we have had empty weeks with our current agent anyway so I think it's worth a try).

Is this saving worth the work? I think so. It means £1000 a year (less any extra tax that's due) that could be going straight into our ISAs and even if we don't strictly speaking "need" the money now, we certainly will once I leave work. I think it's worth giving it a go and learning to deal with what's involved sooner rather than later.

I'll be spending the weekend reading up on landlord's responsibilities and making sure we know how to cover all bases before I take the plunge and give our agent the required 3 months' notice to quit. It's still a little scary though :-)

Transfer Blues

This is going to be a bit of a rant ...

On Feb 19th 2014 Interactive Investor sent me a secure message saying that they had received my ISA transfer application form and would start things moving, but that I should be aware that the process could take up to 8 weeks.

Yesterday (26 weeks down the line) I had another message from them saying that they were still waiting for RLUM/CIS to re-register my funds with them in order to complete the transfer process. They expect that this will take another 2-3 weeks.

The time between these two messages has been interspersed with several messages/calls from myself querying the hold up which eventually uncovered the facts that:

1) They were holding the wrong address for RLUM/CIS. That is, they were holding the RLUM address in London (my fault, I wrongly believed that since RLUM had taken over CIS that was where correspondence should go) insted of the CIS address in Manchester. I corrected this for them by sending in another transfer form with the right details.

2) When it came to sending back the acceptance letter to CIS II didn't use this updated address but sent the letter back to the wrong address. They didn't chase when they didn't receive a reply.

3) At no point did any of the hold-ups on my transfer process alert II to make further enquiries/look at my paperwork/wonder why they still have a transfer that hasn't completed after more than 6 months. I have had to chase all the way.

I was aware that I was transferring at a time when we are continually been told that S&S ISA transfers are taking a long time due to volume so we have to be patient. I have been patient but am beginning to wish I hadn't. If I'd shouted a bit more they might have looked a little closer at what was going wrong.

The whole process is not transparent and no updates on progress are forthcoming but from what I have pieced together it seems that this is the order of proceedings:

• Customer sends transfer request to new platform
• New platform asks old platform/fund manager for valuation (via postal system)
• Old platform prepares and sends valuation (via postal system)
• New platform receives valuation and sends acceptance letter to old platform/fund manager
• Old platform re-registers fund.
• Fund appears on new platform.

Repeat for each fund in ISA

If the process stalls at any stage (at least in the case of II at this point in time) things grind to a complete standstill until the customer starts jumping up and down.  

In the meantime II have credited me with the commission credit and cash due as part of their transfer offer, which sounds good but which isn't actually quite so good as I can't use it until I have my CIS funds to sell as part of the re-balancing I'm planning. Unused commission credit is lost at the end of each quarter. The frustration grows. However, I was assured during (yet another) phone call yesterday that they will ensure that I do not lose out due to the delay, and will ensure that I can carry the credit forward. I intend to ask for this assurance in writing.

I know that my experience with II is not at all unusual (my husband's transfer has still not completed after 16 weeks and there are numerous posts on MSE complaining about the same issues), but at the end of the day I am not sorry that I started the transfer process, nor that I chose Interactive Investor. They are going to save me a hell of a lot of money, the online interface does the job, phones are answered promptly and messages replied to in a fairly timely manner but they do need to look at the systems/workflow behind their transfer process. It is absolutely not fit for purpose.

Back in April 2014 I read an article in Investors Chronicle which said that fast transfer for S&S ISAs was already possible but that it hadn't been implemented by many brokers due to the fact that their systems couldn't talk to each other. If the technology is in place I'm sure things will get better in the future, just as I am sure that at some point my funds will magically appear. But it will all be too late to change the fact that this experience hasn't done anything to help my already dodgy blood pressure.

Deep breaths ...

The Real Thing

My thoughts were much provoked by Mister Squirrel's recent post.

His final paragraph made me want to try to pinpoint what we are actually searching for in our quest for early retirement. On the surface this seems to be a bit of a no-brainer. Who wants to go to work? Don't we all want to be released from that particular shackle? But this isn't as self-evidently true as it seems at first sight. Many people (especially whose who are self employed) can't (or don't) separate "work" from "life". What they do has somehow become a part of what they are. I'm sure that examples of this kind of person can be found in many, if not all occupations - farmers, motor cycle mechanics, teachers, politicians, bank managers and corner shop owners.

There is a subtle difference between those of us who "suffer" work and long to be free of it and those who, although they may grumble about the pain of getting out of bed on a cold winter morning, then go on to engage in a working day that they have no need to examine because they know that it has been a good use of their time.

The difference lies in that word "engage". Work should have a purpose that can easily be seen by the person doing it. If we start to ask ourselves "What am I doing this for?" we have moved into a very toxic work situation. People who are bored, uninvolved, unappreciated, unskilled and/or not paid a fair wage soon become disengaged. The working environment is becoming worse for many people. Zero hours contracts only serve to give them the message that they are valued simply as "job fodder" to fill in. Good employers are few and far between with the government now encouraging them to fall to the lowest legal level in the name of economic "growth" (sic) -. This is what happens. 

I wouldn't go as far as to claim that this kind of blatant contempt for dignity at work is what is behind my dream to get out soon. I work in the public sector. Employment law is followed to the letter. No, it's a little more subtle than that. I used to know I was doing a good job, and I still do. I still see direct evidence that what I make happen is valued by the public and improves the lives of those who use it. But things are changing. What I'm also now seeing is services being cut and downgraded not, despite what we are told - believe me I know first hand what kind of savings we are not making - not due to financial necessity, but due to a political agenda fired by the belief that those services shouldn't exist at all. Libraries, youth centres, museums, transport to school for disabled youngsters, mental health hospital beds, emergency duty social workers - all under threat. It breaks my heart to work where I have to see this happening.

It seems that I have become disengaged due to a political shift that, for the first time in my working life, has given me cause to doubt the organisation that I work for at a very deep level. Maybe I've been lucky to keep my faith for so long but that doesn't mean it doesn't hurt now. The work I do is no longer "The Real Thing" and the time has come to find something that is.

This leads me on to weenie's kind nomination for the Liebster award. She explains it very well so I won't repeat the rules, but here are my answers to her questions:

1. What's your favourite holiday destination? - Skipton, the Dales. For the fish and chips, pork pies, dog walks up Phen-y-ghent and great pubs

2. What piece of financial advice would you give to your 18 year old self? - Live for today but try to put a little away for tomorrow

3. What was your favourite book when you were a child? - The "Little House on the Prairie" series by Laura Ingalls Wilder - the books are nothing at all like the twee television series. 

4. What's your favourite quote? - “your body is not a temple, it's an amusement park. Enjoy the ride.” (Anthony Bourdain)

5. Which song is currently on your top play list of your iPod/generic MP3 player/radio? - "What's so funny about peace, love and understanding" Elvis Costello

And finally, I hope weenie will forgive me if I follow the spirit of the award but not the letter by just nominating one blog:

This is "nomaggsrush - diary of a wandering boomer". Not an early retirement/PF/Investing blog but definitely what I'm doing all this stuff for. 

Signing out with Elvis:-

Knowing When ...

The mantra "Thou shalt not take thy pension early for that way actuarial reduction lies" is very well known to those of us with defined benefit pensions.

This "rule" has always made sense to me (and it still does when applied to the majority of people in the majority of situations) and so I have been planning my early retirement to comply with it and haven't questioned the wisdom of waiting until 66 to take my pension. However failing to question a general rule in the light of your own particular circumstances can be a mistake and, as the LGPS has now released the details of the 2014 pension scheme and the protections that have been put in place for those of us who have long service, I decided to take a closer look. After some time with a calculator and spreadsheet these are my thoughts and findings:

• I had been aiming to save enough in my SIPP and FSAVC to fund the 6 years between 60 and 66 at a level just below the personal tax threshold level and supplement to the required level with income from our ISAs. As I have a small Civil Service pension and share the income from our rental flat with my husband this means that I was planning on raising a total pension pot of £48,000 (6 x £8,000).

• In the local government scheme there has always been what is called a CRA (critical retirement age). This differs from both the normal (state) retirement age and the scheme retirement age. It is calculated using the rule of 85 - i.e. it is reached when length of service in the scheme and age, when added together, reach 85. My membership started in Nov 1995. If it continues to my 60th birthday (2019) I will have 23 complete years of membership. Therefore I will satisfy the rule when I am 62 (in March 2021). 

• At CRA certain protections to my pension are applied one of which is that pre-2008 pension entitlement can be taken without reduction. 

• The actuarial reduction applied to my post-2008 pension is a complex calculation applied at two different levels because the 2008 - 2014 pension has a retirement age of 65 and the 2014 onwards bit of the pension has a retirement age of 66.

• All these factors mean that my calculations (checked and double checked) give me a figure of £9,154 pension pa if I leave at 60 and take my pension at 63. This is compared to £10,389 if I wait till I'm 66 before I draw it. Therefore I would draw £27,462 extra pension during the 3 extra years which means that it would be 27 years before the larger pension starts to be the financially better deal. 

• In addition I would get my (slightly reduced) lump sum and AVCs (which can also be all taken as a tax free lump sum - a quirk of the pre-2014 LGPS scheme) three years earlier. Together these should come to around £27,000. I can see that there would be all sorts of advantages to getting access to this pot sooner rather than later.

In view of these considerations I have decided to be very careful about how much I put into my personal pensions because If I do decide to take my LGPS at 63 I don't want to have "left over pension" that will end up being taxable. If this does happen I might have been better off putting the money into my ISA instead.

The result is that I have reduced my target for my SIPP/FSAVC to £37,000 to give me a lump sum of £9,250 and a drawdown of £9,250 for the 3 years. This is still probably a touch high but there are all kinds of unknowns such as the status of the tax free lump sum and the personal tax threshold - a new government might make changes that could have a big impact. Also it's not yet completely clear how drawdown will work post 2015.

All this doesn't mean that I will be saving less, just putting it in different pots to get the balance right and making sure I don't leave it to cook for too long. Timing is all important, it's not just a matter of what you put into the pot, it's also about when you take it out and enjoy it.

July 2014 Update

Things have been a little up and down this month and yesterday was a "red all over the board" day but the good news is that II credited my ISA account with my £20 transfer bonus so maybe the actual funds themselves will arrive very soon. Fingers crossed. :-)(Why am I getting a sense of deja vu as I write that)

Portfolio Update Here