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 worse) haven'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.)

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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.

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?)

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. :-)

Gifting the Inheritance Away

I have two adult sons who have both done fairly well for themselves but have followed very different paths.

The eldest has lived in rented accommodation in London since graduating. At first he lived with a succession of house mates and then a long-term girlfriend but he is now on his own which is very expensive but at 31 he feels he needs his own place. He has a job that pays him well enough to live in London and has paid off his student loan but he has never saved beyond a few hundred for his next holiday. Recently he has become very disillusioned with his career (a para-legal job in the health services). His salary is barely creeping up, promotion prospects are poor and his pension is being down graded quite drastically. Basically he is bored, burned out and bordering on unhappy.

My youngest son has not yet ventured out of full time education after moving from a degree to an MA and then a PhD which he is just finishing. He has done some teaching work along the way but has mainly been funded via scholarships and bursaries which he has won due to hard work and excellent academic results. He actively enjoys living frugally which has helped. His friendship group is large and very supportive and he's very happy where he is.

Both my sons have a potentially life-shortening genetic illness. I mention this because it does make a difference to the decision-making process that my husband and I have just gone through. We have decided
to give/gift/pay out around half of our ISA savings to our sons now, when they need it, rather than continue to save it in case we have a "rainy day" (whatever form that might take).

As we aren't even proper "pensioners" yet we haven't really thought much about inheritance. We don't expect to end up paying any inheritance tax given that a surviving married partner also inherits their partner's unused allowance so this means that the total estate would need to be over £650,000 before any is due? Someone please correct me if this is wrong.

But in any case the timing of inheritance is something over which you have no control and doesn't fit in with anyone's plans. Why would we want to sit on cash "in case" when there is currently a valuable use for it. Waiting till we die to pass the money on to our sons makes less sense the more I think about it. We have around £70,000 in our ISAs which only form part of our retirement plan in that it would be used to provide a small amount of income (maybe about £3,000 a year) and be a care-cost buffer if we need it. In actual fact the costs of care are so astronomical that if residential care were to be needed for either of us on a long term basis, whether we had £35,000 or £70,000 would be soon become academic because it would vanish in such a short period of time. This is a scary thought but it does mean that keeping the ISA funds for this purpose doesn't make a whole lot of sense.

So we have decided to manage the money so that our sons can have around £17,500 each over the next couple of years. My eldest son can then leave his job and do a Masters in a subject he will enjoy. The change in him since we talked about this and told him of our decision is remarkable. He's full of enthusiasm and plans for the future, whereas before he seemed to be losing his naturally positive outlook on things. I defy anyone to tell me that this is the wrong thing to do.

I need to do some work on how we can do this and what would be the best way to "gift" it. I also need to bottom out which bits of our ISAs to sell and move into cash, whether to give the money as lump sum(s) or regular payments and investigate implications for taxation. In addition to the money my eldest son will hopefully be living in our studio flat for a year whilst he does the course so I also need to work around the loss of the rent for that period. Back to the spreadsheets.

In the middle of all this I'm expecting to put in my application for VR during the summer which might, or might not be accepted. Interesting times :-)

Having My Hand Forced... Probably a Good Thing?

Virtually as soon as the election result came in the managers in my section issued invitations to 1-1 sessions with all staff above a certain grade and announced the fact that we are to be offered Voluntary Redundancy in the summer to take effect from April 2016.

It has been on the cards for some time . We have been steadily bleeding staff for several years and yet more savings need to be made in order to accommodate the next round of government spending cuts. Given the fact that this government now has an overall majority there is also a strong likelihood of privatisation and/or outsourcing of services.

In order to keep a basic level of service going, front-line staff who deal directly with the public, are being protected as much as possible from the cuts, although there has been a significant drop in numbers here too. This means that those of us who look after the infrastructure are being targeted.

Don't get me wrong, it would probably be a blessing for me personally to be accepted for VR. In the past people over 55 have been given the chance to choose to go as part of "efficiency savings" rather than be made redundant, which means that they have been given access to their pension immediately and without reduction. This would be an absolute godsend to me as I would receive my pension, as accrued up to date (around £8,500 pa) from next April. Happy days :-). However there is some doubt that the same rules will apply this time round as letting people have their pensions early is very expensive when compared to making them redundant.

We are currently waiting to find out what the terms of the offer will be, but in the meantime I am left with a bit of a dilemma. If I am offered the the redundancy pay only and no pension would I accept? My redundancy payment comes in at around £20,000 but taking it would mean that I would not get that final year of work which adds £500 extra to my pension for life. I'm still running the numbers and going back through the calculations I did last Oct, with the added complication that I've now decided to take my LGPS pension early. At the forefront of my mind is the vision of what working in my small section would be like, given that we are due to lose half the senior staff. That level of stress is not attractive at all. I think I'll be able to find the money somehow :-)

Of course I may not get accepted for VR if there are "cheaper" people who would like to go, or if it's considered too much of a risk to lose me. On the other hand I may get sent down the path of compulsory redundancy anyway if not enough people take up the offer. The next few months will tell. I will certainly feel much happier when I know exactly where I stand. The uncertainty doesn't help my financial planning though, specifically around the choice of funding AVC's as against SIPP. Watch this space.

Happiness is a warm "hygge"

In case you haven't come across the word before "hygge" means coziness, friendliness, peace of mind, belonging and social acceptance and it seems to explain, at least partially, why a recent eurostat report found that retired Danish women are the happiest people in Europe.

Eurostat -  Overall Life Satisfaction.

Contributing factors which encourage this state of affairs include the fact that the Danes have the best pension system in the world (as measured by the Melbourne Mercer Global Pension Index) the existence of social support networks, affordable child care facilities, good healthcare and a strong welfare system.

Denmark's pension system comes out with an overall score of 82.4 according to the  Global Pension Index which measures schemes on adequacy, sustainability and integrity according to a points system. The UK is currently in 9th place with a score of 67.2 (2 points up from the previous year due to auto-enrolment and rising contributions.) It will be interesting to see how the new flexibilities introduced this year affect the score. Despite falling out of favour in the UK, annuities are still widely bought in some of the higher ranking countries with 85% of Danes purchasing one, although some countries such as Australia (77.8) also do pretty well on more flexible systems like those being introduced here. In any case, having a secure, regular and guaranteed income must be one of the biggest influences on a general feeling of well-being and go a long way towards explaining the contentment of retired Danes.

In addition to a reliable pension system Danes "may pay some of the highest taxes in the world but they are rewarded with generous public services and a world-renowned welfare state." and "in Denmark grandparents are not faced with a second career as a childminder, unlike in the UK, where 47% of grandparents look after grandchildren and one in four working families rely on grandparents for childcare¹."

Being female is also key to the happiness quotient. The authors of the report think this is probably because women tend to make strong and lasting friendships and are more likely to have social interests and hobbies outside the home when they retire.

Another interesting fact revealed in the report is that the poorest 20% of Danes are happier than the richest 20% of Greeks which adds some weight to the idea that social stability and a well-functioning welfare system are bigger factors influencing happiness than personal wealth.

On a global scale the World Happiness Report "reviews the state of happiness in the world today and shows how the new science of happiness explains personal and national variations in happiness. It reflects a new worldwide demand for more attention to happiness as a criteria for government policy."

The criteria used to measure the happiness of citizens can be summarised in the following way:

"The happiest countries have in common a large GDP per capita, healthy life expectancy at birth and a lack of corruption in leadership. But also essential were three things over which individual citizens have a bit more control over: A sense of social support, freedom to make life choices and a culture of generosity." ²

An extract from the report's summary of Chapter 8 caught my attention with particular reference to the recent election.

"Well-being depends heavily on the pro-social behaviour of members of the society. Pro-sociality involves individuals making decisions for the common good that may conflict with short-run egoistic incentives.... Societies with a high level of social capital – meaning generalized trust, good governance, and mutual support by individuals within the society – are conducive to pro-social behaviour."

If Mr Cameron is looking to increase the overall well-being of the nation and move us up the chart, rather than down, over the next 5 years, (which surely sums up the job of government?) maybe he should download a copy and study it well.

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1 http://www.theguardian.com/world/2015/apr/28/female-over-65-and-danish-the-three-keys-to-happiness.
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2 http://www.huffingtonpost.com/2013/10/22/denmark-happiest-country_n_4070761.html^↩

April 2015 Update

Portfolio update here.

There's been a bit of choppy water this month with a small lurch downwards in the last few days. The outcome is that my portfolio has dropped around 1.5% from where it was in the middle of April. However performance is currently looking like this  - which I'm more than happy with.

	Holdings	GBP Value	% of total	Performance
				1m	6m	1y
As ISA	16	£50,917.29	22.37	-0.40%	12.80%	17.00%
Js ISA	6	£19,028.82	8.36	-0.30%	7.40%	16.50%
Sipp Pension	7	£34,525.26	15.17	0.60%	7.60%	10.90%

Big60Million 

We haven't added much to our investments this month due to the fact that I "borrowed" from our cash reserves in the Santander account in order to boost my Sipp at the end of March and we have also spent £4,000 on a new "to us" car from the same account. My priority at the moment is therefore to rebuild our cash. This will continue next month, although I have got my eye on the Big60Million Investment Bonds which are paying 6% and look very interesting. The closure date for applications is the 27th May so I need to get my skates on if I'm going to take the plunge.

You may have noticed that I have moved the target on my Sipp tracker on the right down from £50,000 to £35,000. This is because I have decided to take my LGPS defined benefit pension at 60/61 rather than hang on till 65. So, I am virtually at target with both ISA's and SIPP. From that point of view the job is done. The only piece of the picture that is missing is the increase in my pension I gain by going to work every day. I need to work for two more years in order to add another £1,000 onto my annual pension. Because the LGPS is now a "career average" pension we earn 1/49th of our salary in pension each year so I am adding around £530 for every extra year that I work. It feels very generous (and I'm sure it is compared to how much someone would have to put into a DC pension in order to generate this amount especially as it is index linked).

I have been thinking about all this in relation to a comment ermine made on my last post about time having a "different sort of cost" and how it's a struggle to balance things up. Breaking the calculation down shows me that for every month I continue to work I am being paid, not just my salary, but £45 extra per year for every year I live after retirement. It doesn't sound a lot, and maybe it isn't. Some days it doesn't feel like it is worth it and I start to think about rerunning the figures and going earlier, especially as I am currently suffering quite badly with a trapped nerve in my neck which (according to my physio)  is due to sitting at a desk using a PC for far too many years. The physical pain of sitting at my desk is wearing me down at the moment, and that is even before I have to sit and see first hand what the next round of spending cuts will do to the service I help to provide. A prospect which wasn't made any easier by reading Paul Krugman on The Austerity Delusion.

But for the moment it's business as usual and the end of March 2017 remains the date I am heading for, I can't deny that the temptation to cut and run sooner is definitely there though :-)