Tuesday, 30 June 2015

June 2015 Update

This has been rather a momentous month in our household as my husband has now retired completely and my youngest son achieved his Doctorate. We've been out and about a lot and have just got back from the Dentdale Beer and Music festival (they ran out of beer on the Saturday evening would you believe :-)) where we spent a couple of nights in a tent for the first time in years and enjoyed it well enough, despite the midges, to be planning another camping expedition some time soon.

Moving forward into July feels like the start of a new stage in our lives so taking stock at the end of this month has been happening on all sorts of levels, not just financial, however our portfolio update is here.

During June I moved about £15,000 out of investments and into cash (or cash-like) accounts. This is money we will likely need in the shortish term. I also applied to transfer my CIS FSAVC to my Fidelity SIPP and sold £500 of my AXA Framlington Biotech Fund in order to take some more of the profits it has gained over the 8 months since I bought it. Luckily all this was done before the recent slight drop in the markets. (Our combined portfolio is down 3.3% this month.)

The possibility of Voluntary Redundancy/Early Retirement has receded a little as my boss has been told by HR that he should get rid of the contractors he employs before he can offer VR to permanent members of staff. He is contending this because being forced to achieve the level of cuts he needs to make by losing contractors, would mean that he has to shed 75% of the staff working in a particular part of the service he manages. I'm intending to just plod on as normal, wait and see what happens, but make sure I keep all my options open particularly with regards to my AVC/SIPP contributions.

I hope everyone enjoys the sunshine this week :-)

Saturday, 20 June 2015

Being Taken for a Ride. An Uber Rant

I am heavily dependent on public transport because I decided not to learn to drive in my 30's (after having given it a couple of goes and hating it). This decision has had an impact on where we have lived over the years - we have always had to live near facilities such as schools, libraries and shops - but it has never felt like a negative impact. We like being able to walk to pubs, restaurants, parks and local shops and the extra exercise carrying shopping and pushing buggies (at one time a double one to nursery and back twice a day), has kept me far fitter than I would have been if I had used a car. The cost benefit of only ever being a one car family has also been significant.

For the most part I enjoy my "bus time". I like the way you can sit back and let the driver do the work, and although I often still have to sit in jams on my daily commute at least the bus can skip past some of them via a priority lane and I'm able to jump off and walk the last chock-a-block mile through the park. The problem is that bus services on the routes I use are currently being reduced. I am more and more having to consider using taxis if I want to go out in the evening, or even just stay out for a couple of drinks after work. (Btw I live, work and play in medium sized towns in the Midlands - not the back of beyond - and am finding it increasingly hard to travel between the three after 7 o'clock in the evening. What ever did happen to a Government policy for public transport?)

 My problem with using taxis isn't just the cost. At times they can be cost efficient especially if several people are travelling together. They can certainly be time efficient. However I'm of a generation that didn't "do" taxis when younger. As a student my friends and I wouldn't have considered it, even though I was at Leeds Uni when the Yorkshire Ripper was at large and a door-to-door service would have felt much saver (in fact I lived in the same block of flats as his last victim which was very unnerving). Buses were much cheaper in those days (and more plentiful). However in my case the reluctance to use taxis was heightened by an experience at 17 which was very frightening indeed. On my way home from a night club the driver took me the wrong way and wouldn't explain where he was going - just kept driving in silence despite my questions. I came to no harm except that the charges were probably double what they should have been because he took such a circuitous route - obviously his intention was just to bump the meter up and not anything more sinister. However that feeling of powerlessness and vulnerability that is inherent in being in a car with a stranger has stayed with me and I only take taxis by myself as a very last resort. Especially at night. On a typical night out I will walk a third of a mile across a park to a bus stop rather than get a taxi from the train station. However due to the reduction in buses I may soon be faced with not only the walk but also a 45 minute wait at the bus stop after 11 at night. Not something I relish.

As an attempt to bring a little rationality to my relationship with the taxi I have been looking at statistics on safety and in doing so came across the Uber story. The Uber product is essentially an app that brings together drivers and customers wanting to buy a lift and the company is undercutting more traditional registered cab services all around the world. They were funded as a start up by "super angels" in Silicon Valley and have been highly successful financially (currently valued at around $50 billion.) but have been involved in a great deal of controversy along the way.

One of the primary concerns about Uber is the extent of its responsibilities towards both customers and the drivers it "employs". Many governments and taxi companies have protested against Uber, alleging that its use of unlicensed, crowd-sourced drivers was unsafe and illegal. 

But it has also been in trouble for its allegedly blase attitude towards the safety of women customers. Sexist advertising campaigns "that offered free 20-minute rides with Avions de Chasse ("hot chick" drivers)", and executives who have repeatedly had to apologise for making inappropriate comments (and worsehaven't helped. More recently the UN has pulled out of an initiative whereby it had pledged to encourage women to sign up as drivers for Uber due to concerns that the app does not protect women

Uber has been in the news again this week due to the fact that one of its drivers lodged a case for expenses that would be due to them as an employee whereas Uber contend that their drivers are independent contractors only. The driver won the case which, although the decision is expected to be contended, has at least opened up the discussion about what responsibilities the people who are making the money out of a business have towards the people who are doing the day to day work (never mind how menial that work is).

In some ways Uber seems to be a perfect example of where the market will take us if we let it. It demonstrates how profitable a company can be when it develops technology to do a job that used to be the province of the skilled or semi-skilled human (although ask the London cabbie with his hard earned "Knowledge" and he would still tell you that no GPS system could ever replace him :-)). The profitable technology is the "property" of the few who engineered and sell it, but these profits do not get passed down to those who do the low level work in either monetary terms, or protection via conditions of employment. 

Whether we want to let the market take us there is another matter. Technology may remove the need for human skill, but is that all that a person should be paid for? What happens if we not only reduce a significant section of the workforce to drudges spending their time doing low skilled and low valued work, but also don't pay them enough for them to be able to access the same health, education and the development in technology as the "upper tier"? If a piece of software/robot can do your job then what "value" do you add by being human?1 Employment law is currently the way that we codify our acknowledgement that people matter. If we allow that to be eroded then we are effectively saying they don't.

(Also in the news this week Boris (a potential leader of the current government) told a London cabbie to "Fuck off and die" -  a very good indication of where he stands in the Uber controversy and unfortunately a strong indication of where the UK is going with all this.)

1 The "value" of being human in business terms was an idea introduced by Steve Fuller. In addition his comments in a Guardian article in 2011 are also interesting : "these developments do have the potential to create whole new deep class divisions, maybe not along the lines of the old industrial class divisions, but just as deep. Sometimes, people talk about this as the "knows" versus the "know-nots". Divisions open up along the lines of who has access to all of these potential enhancements. At the moment, the problem is that the state is dwindling away and it is becoming less of regulator of any kind of activity, so market forces are basically determining the development of all these things I'm talking about. And what that means is that the rich get access to them more quickly and the poor get left behind.

Saturday, 13 June 2015

Cashing In

At the beginning of the month I bit the bullet and sold the last of our CIS UK Funds.

With that job done we went away for a week in Babbacombe. We had great weather, consumed far too much good food and drink and made a valiant attempt to mitigate the effects by hiking up and down chunks of the South West Coast Path. We're back home now and the cash (around £10,000) is sitting in our current account. The question is what should I do with it?

The likelihood is that it will be needed late Autumn/Spring in instalments to fund my son's living costs when he returns to full time education. However this is by no means certain as he has still to secure a place on the course. He may even have to delay his plans till next year if he isn't successful this time around, in which case our whole financial situation may have changed if I do get VR/early retirement next April.

The most sensible thing to do would probably be to open another Santander 123 current account. Our joint one is (or will shortly be) maxed out. However it is possible to open individual ones as well so this option is a strong contender and would be the one that would probably produce the highest guaranteed interest. However, I'm already managing 5 current accounts and can't really be bothered with yet another set of direct debits and monthly money shuffles.

None of my existing banks offer interest rates worth having on their instant access accounts so I'm currently tending to favour Premium Bonds. I've done some reading on the subject, Monevator is (as always) an excellent resource with an additional useful link to a recent Guardian article, so I know the odds of winning big are very slim but in the absence of anything better to do with the cash I think I'm going to set up an account and see how things go. The MSE Forum thread makes interesting reading so I've been working my way through that but I'd be interested to hear about any experience/winnings in the comments.

Whilst we're on the subject of cash I have a slightly thornier problem around what to do with a big chunk of it which will be landing in my SIPP when I transfer my old CIS FSAVC in at some point soon. I've been delaying doing this because the pension has been doing OK (8% in 2014 and 5.78% so far this year) but I think the time has now come to make a move.

I'm hopeful that the transfer into my Fidelity SIPP will be straightforward and I have been assured by Fidelity that there shouldn't be a problem, but it is an old "with profits" fund with a Guaranteed Annuity Rate of 6% so I'm wondering if I might be asked to take advice before transferring out. Hopefully not. It forms a big chunk of the money that will see me through before I take my LGPS pension at 60 (if I don't get early retirement before then) and I don't really want to have to fork any of it out in advisor fees before I'm allowed to move it somewhere I can get at it in drawdown. (The transfer value on my last statement as of March 2015 was £19,270.)

In preparation for the move I've been considering the options for it in my SIPP. I could just leave it in cash which is probably the way I'll go as there's a strong chance it will be needed in 1 - 3 years time. I've yet to completely bottom out Fidelity's drawdown but the options look pretty flexible and I'm hopeful of being able to fit them around whichever scenario pans out as far as my retirement goes over the next few years. So, cash would probably do fine for the transfer in and then I'll sell the additional £15,000 worth of funds I have in there - sooner rather than later to try to avoid a big loss.

(Incidentally I did notice that Fidelity have a "Cash Fund" which I'm struggling to see the advantage of. It has total costs inside a SIPP of 0.55% and has made 0.25% max going back to 2011. Can anyone help me out by explaining why someone would use this?)

Monday, 1 June 2015

May 2015 Update

I have decided to change the format of my portfolio update this month due to the fact I'm probably going to shift some of it down into cash in the next 2 years rather than leave our ISAs fully invested and use them to draw income. This means that the "big picture" is what is important so I am going to be recording our portfolio as a whole, which includes my LGPS AVC's (but not my DB pension itself) and our cash accounts.

I have done a "best guess" on what might need to happen over the next 6 - 9 months due to the fact that we might need to pay around £7,500 in tuition fees and gift both sons £5,000  each; the eldest to help with living expenses for the period and the youngest to add to his savings. The younger one is quite happy to leave the remainder of his gift with us as at the moment.

I am hoping to limit the move to cash to what we will actually need, as it's looking more and more hopeful that VR next April is on the cards. A little investigation into the pension rules and asking a few questions has revealed that giving access to my pension unreduced could well be part of the deal. The most likely scenario seems to be that I would be let go on "efficiency" grounds which would mean that I would have access to the pension but no redundancy money. Although that would reduce my cash "hand out" it would be a far superior long term result from my point of view and I would still receive cash in the form of my LGPS TFLS (£13,600), my LGPS AVCs (around £4,500) and a TFLS from my SIPP (£8,500) which gives me £26,600. This should be more than enough cash to gift a further £5,000 to the eldest son and put the £12,500 away in an ISA for the youngest (or whatever he thinks best).

I should know by the Autumn if VR is going to happen so at the moment I'm trying to do as little as possible, but as much as possible, to secure the cash and avoid having to sell equities at a low point. As there are two legacy funds in our ISA's that I would not buy if I were starting with a clean slate this is where I intend to start selling. The funds are CIS UK Growth and CIS UK Income and Growth. Both have actually done quite well over the last year or so and are currently near (or in) the top quartile for funds of their type. Although the fees are high at 1.5% Interactive Investor has been refunding half of this so I have been happy to hang onto them as part of our UK exposure. But, as we now need cash I think it's time, or very close to time, to sell. The likelihood of a wobbly UK market due to the prospect of an EU referendum only strengthens my feeling that this is the best move to make. Between them the two funds will raise just over £10,000 and so, along with the cash in our Santander account, should give us the cash buffer we (might) need for the next 9 months.

I know selling a big chunk of our UK stock like this will completely skew my asset allocations but I will have to think about rebalancing once there is a clearer picture of our whole financial situation. At the moment there are far too many unknowns, so doing what seems best at the time is as good a plan as any. :-)