Following a week of "should I or shouldn't I" angst over my pension transfer, complete with much working out of whether I could manage to leave the pension intact (should I decide it's a good idea to do so) and still retire at 58, my manager dropped a quiet bombshell at the end of last week. Apparently "letters" will be issued by the end of the month.
By this we took him to mean that redundancies of some flavour are back on the menu. There has been much speculation and rumour on the subject for the last 18 months or so. (See here , here and here) with the latest "update" a couple of months ago being that there was to be no redundancy offer in our section due to the high number of contractors we still employ. Apparently so long as there are contractors in post, permanent members of staff cannot be made redundant despite the fact that the work done by the contractors is in a specific role for which none of us are trained, and at a lower level than we are currently employed. Apparently management have now found a way round this, maybe by shuffling people around departments as they're deeply immersed in a transformation exercise at the moment. ("Transformation" being the word you use when you want to find a way of getting the same amount of work done by half the number of people :-))
I had put the possibility of voluntary (or compulsory) redundancy and how it could work for me to the back of my mind but as it might now come back to the forefront, I don't feel equipped to make any type of decision on my pension. The "Welcome" pack from Fidelity is sitting, unopened, on the shelf.
If I'm made redundant I would get immediate access to my LGPS pension, unreduced. There would be no pressing need for me to have access to the £20,000 in the FSAVC over the next couple of years (although it may still be desirable).
So, many thanks to all who left very useful comments on my last post but for the moment I'm going to park it and wait to see what the end of the month brings. Fingers crossed I either get my marching orders or can apply to be given them :-)
Monday, 21 September 2015
Tuesday, 8 September 2015
GARs, Misleading Pension Statements, Transfer Troubles and Other Gripes
After waiting for over 8 weeks I have finally heard back from Fidelity about my request to transfer my CIS FSAVC into my SIPP. It wasn't good news. Because the FSAVC (Free Standing Additional Voluntary Contributions) has a Guaranteed Annuity Rate they require me to take advice before they will accept it (even though the transfer value is less than £30,000).
They do, of course, offer this advice service themselves for the cost of £500. This fee is payable even if the advice turns to be "no, sorry, it's the wrong thing to do and we won't accept it". In which case, I am informed, the fee will have VAT added on top.
So I have a dilemma. I knew that there was a GAR attached to my pension but I didn't think Fidelity would require me to pay for advice before transferring it, and I don't think that the FCA requires them to do so either as suggested by the quotes below from a policy report released earlier this year.
"Historically there has been no need for a PTS to advise on a transfer from a scheme with a GAR and it makes sense that it shouldn't be implemented now.
They do, of course, offer this advice service themselves for the cost of £500. This fee is payable even if the advice turns to be "no, sorry, it's the wrong thing to do and we won't accept it". In which case, I am informed, the fee will have VAT added on top.
So I have a dilemma. I knew that there was a GAR attached to my pension but I didn't think Fidelity would require me to pay for advice before transferring it, and I don't think that the FCA requires them to do so either as suggested by the quotes below from a policy report released earlier this year.
"Historically there has been no need for a PTS to advise on a transfer from a scheme with a GAR and it makes sense that it shouldn't be implemented now.
"Although providers should be able to show the client what benefit they are giving up if they choose to forego these GAR even if the fund is under £30,000, where advice may not be given."
- Should I therefore look for a platform that will take my FSAVC without requiring that I pay for advice? Does one exist?
- But firstly, and importantly, should I think more carefully about the GAR and what I would actually be giving up seeing as Fidelity obviously think that this option requires £500 worth of investigation by a pension transfer expert.
A little background
I started paying into the FSAVC in 1996 because I knew I had gaps in my pension provision due to taking time out to have kids. I was working at the Council at the time but was in a fairly low paid role and wasn't sure how long I would stay, so I didn't really consider supplementing my pension there. Looking back this was possibly the wrong thing to do given that soon after taking up the CIS policy I got promoted into a job that's served me well ever since. Putting more into my LGPS at the time would have made a significant difference to the value of my DB pension now.
It could even be argued that the CIS (Co-Op) representative who sold me the pension was guilty of a mis-selling as he knew that I was in the LGPS and could/should use that to boost my pension rather than buy an independent product. However when the new pension rules were introduced this year and it looked as if there was going to be more flexibility around taking the FSAVC before my LGPS retirement age of 66 (or so I thought until I received the letter from Fidelity), I have been glad that I went the way I did and continued to pay a (very) modest amount into the FSAVC alongside my main LGPS scheme.
But what did I buy back then?
Working out the actual benefit that my FSAVC "with profits" pension carries has been quite difficult, especially for someone who knew nothing at all about pensions before I started thinking about how I could retire as soon as possible a couple of years ago, .
The policy benefit schedule looks like this:
And after doing a little research I took this to mean that it has a GAR of 6%
This was confirmed during a phone call with CIS (now Royal London) yesterday. So for every £1,000 in the fund at the time of retirement I am guaranteed £60 pa pension. As far as I am aware there is no index linking, widowers pension or any other "with profits" benefits. The transfer value in March 2015 was £19,200.
All that sounds fine but it doesn't actually tie in with the annual statement which says under the heading:
Pension you Might Get at age 60
- Your fund might be £22,200
- which could give you a taxable yearly pension of £604
I queried the discrepancy in the figures (projected fund around £22,000 with a GAR of 6% - surely the projected pension is £1,320 not £604?). The CIS representative responded that the figures quoted in the statement don't include the GAR and she couldn't say what the pension would actually be with the GAR because they didn't know what the end figure would be. This doesn't make any sense. The statement already quotes me a projection and we all understand that a projection isn't a guaranteed figure. Given that, how can it be right to send out statements for pensions with GARs that do not include the projection for the GAR. That's the whole point of it being a guarantee - if my fund is £22,000 at pension retirement age I'm guaranteed 6%. I'm guaranteed £1,320.
The conversation went round in circles with me asking for a statement that included the GAR and her saying they couldn't do it. The only thing I could get her to agree to was to send out written confirmation that the FSAVC has a GAR of 6%, as although I have the scheme schedule, I felt that I wanted something more recent especially as the fact that I have a GAR apparently can't be included in any of the workings on my statement. The only reference to the notion that the figures may simply not apply in your case is in the "General Assumptions" section, one of which is "we have ignored any guaranteed minimum amounts that may apply to your policy". No wonder people complain that they can't understand pensions.
In conclusion I now have some work to do to find out if there would actually be a benefit to keeping the pension as it is and drawing it at the scheme age of 60, when I could also draw a reduced LGPS pension. In which case I need to look at those years between 58 and 60 again and assess if there is a way my existing SIPP/other funds/extra saving could fund them.
And, if I find there is no benefit to doing this, I then have to decide whether or not I want to pay Fidelity £500 to tell me the same and accept the transfer, or, even worse, pay them £500 plus VAT to tell me it's a terrible thing to do and refuse.
Part 2 (including workings out) to follow, but any comments in the meantime would be much appreciated.
Saturday, 5 September 2015
August 2015 Update
The month has been another busy one with day trips to York and London and an overnighter up in Yorkshire for my Mum's birthday. However all this hasn't worked out too expensive in the scheme of things as we used my leave last week for a "staycation" instead of travelling further afield, so there were no expensive hotel bills as anticipated. The plan had actually been to wait and see what the weather did and take the tent somewhere if at all possible, bailing out into a hotel if necessary, but there was altogether too much rain and wind for us to be able to raise the enthusiasm to pack our bags so we bought a local footpath map, packed picnics and "discovered" the area on and around our doorstep instead.
The good news is that the final part of my husband's TFLS finally turned up. Most of it stayed in our new NationWide current account to keep the balance topped up over the £2,500 and so gaining the maximum 5% interest, but £500 was invested in the Scottish Mortgage global equities IT we hold. I just happened to make the buy on "Black Monday" , however the timing was more by luck than by design as we had planned to do it anyway. It did no harm to buy at the lower price though. (This trust is currently trading at a 2.42% premium to NAV so I do have some misgivings about buying more, but it is just about the only exposure we have to American large caps at the moment and the charges are fairly cheap at 0.51%).
My FSAVC still hasn't made its way into my SIPP. Fidelity went down somewhat in my estimation when they phoned at the beginning of the month asking why I hadn't returned a bit of paperwork they needed to progress the transfer, and then obviously came across the said form in my file half way through the conversation. I'm used to this kind of administrative fiasco with Interactive Investor but I did think (hope?) that Fidelity were a different kettle of fish. Maybe not. I'm now almost 8 weeks into the transfer (the maximum time they quote for it to complete) but not holding my breath. It took iii over 6 months to transfer in both mine and my husband's ISA, so I know full well that patience is a virtue (and the only way to stay sane) with these things.
Further administrative incompetence meant that my instruction to reduce my work's pension AVC from £500 to £200 per month was not activated in time to make the change by the time my salary was paid at the end of the month (despite my asking for it to be done on the 2nd). This, although annoying, is probably a blessing in disguise as boosting my AVC pot is a very tax efficient way of increasing my post-retirement funds and being forced to put in a little, if unplanned, extra is not such a bad thing. Hopefully payroll will manage to make the change by the end of this month though, as our monthly budget requires that my salary is at a certain level now that my husband only has his pension coming in.
The financial news this month has been dominated by the volatility in world markets sparked off by the steep drop in the Chinese stock prices and the fear that growth there is slowing down. This has meant that our combined portfolio has dropped this month despite the fact that we have ploughed in over £1,000. The total is down from £126,304 at the end of last month to £124,759 this and is recording an investment loss of 4.7% for the month. (This figure includes our ISAs and my private pension and AVCs but not our DB pensions.) However on the whole we are fairly comfortable with the turbulence as I secured the cash we will need for the next couple of years to see my son through his MA course by selling funds a couple of months ago and took some further profit from our Japanese and Bio-Tech investments at the same time. It will be interesting to see what the coming months (and years?) bring.
On a more serious note we have all been further, and tragically, reminded that we live, and act in a global environment by the ongoing refugee and migration issues. The opportunities brought by global trade and travel also bring responsibilities. Simplistic nationalism backed up by barbed wire fences just won't work for very much longer and Europe is being forced to recognise this. Escaping war at home is one of the the current drivers, but in the future mass population migration may well involve many more desperate people moving around the globe trying to escape the effects of climate change. Personally I'm pessimist about our ability to reduce carbon emissions enough to prevent very real problems. We continue to dig fossil fuels out of the ground even though the harm reduction plans we are pretending to put in place mean that we cannot possibly burn them, the UK government massively reduces subsidies for renewable energy and we continue to reward CEOs for deepening the climate change crisis. This year is set to be the warmest on record, intensifying patterns of extreme weather. In the light of all this the ongoing market "blips" and the effects they have on our portfolio pale into insignificance. Hey ho.
The good news is that the final part of my husband's TFLS finally turned up. Most of it stayed in our new NationWide current account to keep the balance topped up over the £2,500 and so gaining the maximum 5% interest, but £500 was invested in the Scottish Mortgage global equities IT we hold. I just happened to make the buy on "Black Monday" , however the timing was more by luck than by design as we had planned to do it anyway. It did no harm to buy at the lower price though. (This trust is currently trading at a 2.42% premium to NAV so I do have some misgivings about buying more, but it is just about the only exposure we have to American large caps at the moment and the charges are fairly cheap at 0.51%).
My FSAVC still hasn't made its way into my SIPP. Fidelity went down somewhat in my estimation when they phoned at the beginning of the month asking why I hadn't returned a bit of paperwork they needed to progress the transfer, and then obviously came across the said form in my file half way through the conversation. I'm used to this kind of administrative fiasco with Interactive Investor but I did think (hope?) that Fidelity were a different kettle of fish. Maybe not. I'm now almost 8 weeks into the transfer (the maximum time they quote for it to complete) but not holding my breath. It took iii over 6 months to transfer in both mine and my husband's ISA, so I know full well that patience is a virtue (and the only way to stay sane) with these things.
Further administrative incompetence meant that my instruction to reduce my work's pension AVC from £500 to £200 per month was not activated in time to make the change by the time my salary was paid at the end of the month (despite my asking for it to be done on the 2nd). This, although annoying, is probably a blessing in disguise as boosting my AVC pot is a very tax efficient way of increasing my post-retirement funds and being forced to put in a little, if unplanned, extra is not such a bad thing. Hopefully payroll will manage to make the change by the end of this month though, as our monthly budget requires that my salary is at a certain level now that my husband only has his pension coming in.
The financial news this month has been dominated by the volatility in world markets sparked off by the steep drop in the Chinese stock prices and the fear that growth there is slowing down. This has meant that our combined portfolio has dropped this month despite the fact that we have ploughed in over £1,000. The total is down from £126,304 at the end of last month to £124,759 this and is recording an investment loss of 4.7% for the month. (This figure includes our ISAs and my private pension and AVCs but not our DB pensions.) However on the whole we are fairly comfortable with the turbulence as I secured the cash we will need for the next couple of years to see my son through his MA course by selling funds a couple of months ago and took some further profit from our Japanese and Bio-Tech investments at the same time. It will be interesting to see what the coming months (and years?) bring.
On a more serious note we have all been further, and tragically, reminded that we live, and act in a global environment by the ongoing refugee and migration issues. The opportunities brought by global trade and travel also bring responsibilities. Simplistic nationalism backed up by barbed wire fences just won't work for very much longer and Europe is being forced to recognise this. Escaping war at home is one of the the current drivers, but in the future mass population migration may well involve many more desperate people moving around the globe trying to escape the effects of climate change. Personally I'm pessimist about our ability to reduce carbon emissions enough to prevent very real problems. We continue to dig fossil fuels out of the ground even though the harm reduction plans we are pretending to put in place mean that we cannot possibly burn them, the UK government massively reduces subsidies for renewable energy and we continue to reward CEOs for deepening the climate change crisis. This year is set to be the warmest on record, intensifying patterns of extreme weather. In the light of all this the ongoing market "blips" and the effects they have on our portfolio pale into insignificance. Hey ho.
Monday, 24 August 2015
Time to Switch to Auto PIlot
Personal Finance is all about control and FiRe chasers have to be the biggest control freaks in the game. If we don't have all the strings in a firm grip, know exactly how long they are and when to pull them, how else are we going make it happen?
But there are times when the best strategy is to stop trying to make things happen and sit back and ride it out. It's fast looking as if this is one of those times. I've never "seen" a market crash or bear market. Of course I've lived through them, I've even been invested through them as I've held, and regularly paid into, a S&S ISA for around 10 years. However up until 18 months ago I wasn't remotely interested in what I was actually doing or even tracking how things were going, apart from glancing at the annual statements and thinking "that doesn't seem to have gone up much" (or the opposite). I was far too busy with kids, life, work and all the rest. This time it's very different.
Letting go of control and not being able to do anything but roll with the punches, sounds and feels more than a little scary until you realise that doing so should actually be part of the plan. Exactly as a pilot trusts his instruments to know better than he does at times, so we have to trust our PF plan to work to our best advantage when we can't see what's ahead (and as Monevator said at the weekend if you haven't got a plan get one quick:-)) Leaving the plan to do what it's meant to do is the whole reason we have it, it's there to prevent us having to make decisions when we don't have the tools to be able to do so.
I recently watched a television documentary about the terrible Staines air crash in 1972 which killed 118 people. The causes of the accident were complex but at least some of the blame has been placed with the pilot who, just before take off, had had a violent disagreement with a fellow pilot and so can be presumed to have been in an heightened emotional state. It appears that whilst the plane was coming out of take off he didn't climb quite high enough and then, when problems started to become apparent, an automatic stall warning and recovery system were overridden. As a result the plane went into a "deep stall" (from which recovery is impossible) and fell to the ground. Human intervention and faulty decision making disrupted the pre-programmed routines of the take off and tragedy ensued. The parallels with investing are clear.
(Incidentally the notion of a "deep stall" during which nothing can be done to pull the plane back up seems to me to have a financial equivalent in the situation in which many people who take out pay day loans find themselves. No matter what is done, it must feel like even the possibility of control has been lost. Apparently 44% of people who take out such loans use them for everyday essentials such as food.)
Markets across the world are tumbling, and for the first time I'm watching it happen. I'm very glad that I sold our CIS UK Growth funds a couple of months ago and took out the cash that we will need for the next two years as there is no indication of when things will recover and according to some commentators we could be in for a very bumpy time.
For now I'm going to sit tight and see what happens. (Well apart from buying £580 more of the Scottish Mortgage Trust we hold in my husband's ISA which has dropped over 7% since Friday. My husband has just received the final payment from his pension TFLS due when he retired so we have a little extra spare cash). I'll also be buying my Monkey Stocks on iii's next regular investments day towards the end of Sept. Who knows, they may be very cheap indeed by then :-)
But there are times when the best strategy is to stop trying to make things happen and sit back and ride it out. It's fast looking as if this is one of those times. I've never "seen" a market crash or bear market. Of course I've lived through them, I've even been invested through them as I've held, and regularly paid into, a S&S ISA for around 10 years. However up until 18 months ago I wasn't remotely interested in what I was actually doing or even tracking how things were going, apart from glancing at the annual statements and thinking "that doesn't seem to have gone up much" (or the opposite). I was far too busy with kids, life, work and all the rest. This time it's very different.
Letting go of control and not being able to do anything but roll with the punches, sounds and feels more than a little scary until you realise that doing so should actually be part of the plan. Exactly as a pilot trusts his instruments to know better than he does at times, so we have to trust our PF plan to work to our best advantage when we can't see what's ahead (and as Monevator said at the weekend if you haven't got a plan get one quick:-)) Leaving the plan to do what it's meant to do is the whole reason we have it, it's there to prevent us having to make decisions when we don't have the tools to be able to do so.
I recently watched a television documentary about the terrible Staines air crash in 1972 which killed 118 people. The causes of the accident were complex but at least some of the blame has been placed with the pilot who, just before take off, had had a violent disagreement with a fellow pilot and so can be presumed to have been in an heightened emotional state. It appears that whilst the plane was coming out of take off he didn't climb quite high enough and then, when problems started to become apparent, an automatic stall warning and recovery system were overridden. As a result the plane went into a "deep stall" (from which recovery is impossible) and fell to the ground. Human intervention and faulty decision making disrupted the pre-programmed routines of the take off and tragedy ensued. The parallels with investing are clear.
(Incidentally the notion of a "deep stall" during which nothing can be done to pull the plane back up seems to me to have a financial equivalent in the situation in which many people who take out pay day loans find themselves. No matter what is done, it must feel like even the possibility of control has been lost. Apparently 44% of people who take out such loans use them for everyday essentials such as food.)
Markets across the world are tumbling, and for the first time I'm watching it happen. I'm very glad that I sold our CIS UK Growth funds a couple of months ago and took out the cash that we will need for the next two years as there is no indication of when things will recover and according to some commentators we could be in for a very bumpy time.
For now I'm going to sit tight and see what happens. (Well apart from buying £580 more of the Scottish Mortgage Trust we hold in my husband's ISA which has dropped over 7% since Friday. My husband has just received the final payment from his pension TFLS due when he retired so we have a little extra spare cash). I'll also be buying my Monkey Stocks on iii's next regular investments day towards the end of Sept. Who knows, they may be very cheap indeed by then :-)
Tuesday, 18 August 2015
Student Living
Last week we finally received the great news that my son had been awarded a place on the MA course he applied for at the beginning of July.
This was a tremendous achievement on his part as the Department is rated second in the country for the subject and they describe the competition for the course as "fierce", deliberately keeping the number of students down in order to preserve a high staff to student ratio. As part of the application process he had to produce a research proposal and a piece of critical writing as his degree is in an unrelated subject (Law). He worked very hard on all this and we're extremely proud of him.
Since we now have a clear plan for our retirement and are pretty sure we have (more or less) enough to do what we want to be able to do, we have decided to gift £17,500 of our ISA savings to each of our sons as an "Opportunities Fund" to be used to allow them to do something they would otherwise not be able to do, hopefully to improve their lives permanently. This may (or may not) be directly tied to job prospects as personal satisfaction and development comes in many forms. :-) The eldest is using his to go back to University and the youngest is leaving his with us for the time being until he has a good use for it.
In addition to gifting the £17,500 we have also said that my eldest son can live rent free in our studio flat for the year. Our youngest son has already made use of the flat between his MA and PhD when he was doing some intern work and applying for funding. This is, in fact, why we bought the flat, as we only own a modest semi and having an adult son live at home can get a bit "cramped" if it goes on for any length of time. :-)
(btw I am painfully aware that my sons have both been given an educational advantage by having parents who have been able to afford to supplement student loans, internships, housing and life in general. I am ideologically opposed to the idea that education is ever something that should be allowed to exclude people for financial reasons and would never have sent them to private school, but parents these days seem increasing sucked into supporting their kids through further education if they can. As this becomes the norm surely the kids of those who cannot afford to help become actively disadvantaged? One for my conscience (and vote)).
Having now got the offer of a place we have been thinking in more depth about accommodation and my son has decided that he would rather live on campus if possible. Although our studio flat is only about 30 mins by road from the University he doesn't drive and there is only one bus an hour and none after 6.30 in the evening. He had been thinking about getting a bike as there is a cycle route for some of the way but travelling home late in winter on poorly lit roads was a bit of a worry. In addition it would be good for him to be in the thick of things and we wouldn't have to give our tenant notice (something I'm loath to do as she has been very good and is obviously happy where she is despite only signing up for 6 months initially).
However the student accommodation prices came as a bit of a shock. As a postgraduate needing a 51 week rental the full range of choice of halls was not available to him and he's basically confined to a cheaper option of £5,800 (shared bathroom) and £6,700 (en suite).
Comparing these costs to the income/costs associated with him living in our studio flat works out like this:
So, taking into account the travelling costs associated with living in the flat and the fact that living on campus entitles you to 10% discount at food outlets and bars on site means that, although the university accommodation seems mighty expensive when compared to our studio flat, it would actually be more or less cost neutral for my son to live there.
This calculation was quite interesting from another point of view. If we are getting a profit of around £3,500 pa on our studio flat and it works out that it costs our son just about the same to live in what used to be called University "Halls", surely the University is raking in huge profits at these kind of prices. Their overheads must be proportionally much smaller given the scale of their service. They have a captive rental "audience" and can control their void periods (the rooms are let out for conferences and visitors during the vacations) and service the flats using their own maintenance staff.
It all seems a bit scandalous except for the fact that we have to recognise that this is yet another reflection of the ongoing trend towards the commercialisation of education. Government funding for universities has been reduced so they have to make money somewhere. What then happens is that cheap accommodation for the students without parents with the wherewithal to help becomes scarce and the poorer students are forced out into the private sector with all its attendant stresses and difficulties, things that young people leaving home for the first time do not always have the skills to manage.
Personally I'd rather pay a bit more tax, fund the universities properly so they can provide affordable accommodation and remove tuition fees for UK students, put kids back on their own two feet with a fair and adequate grant system and make sure that further education is only seen as attractive for the right reasons by the right people. Somehow, though, this all seems to be moving further and further out of reach.
This was a tremendous achievement on his part as the Department is rated second in the country for the subject and they describe the competition for the course as "fierce", deliberately keeping the number of students down in order to preserve a high staff to student ratio. As part of the application process he had to produce a research proposal and a piece of critical writing as his degree is in an unrelated subject (Law). He worked very hard on all this and we're extremely proud of him.
Since we now have a clear plan for our retirement and are pretty sure we have (more or less) enough to do what we want to be able to do, we have decided to gift £17,500 of our ISA savings to each of our sons as an "Opportunities Fund" to be used to allow them to do something they would otherwise not be able to do, hopefully to improve their lives permanently. This may (or may not) be directly tied to job prospects as personal satisfaction and development comes in many forms. :-) The eldest is using his to go back to University and the youngest is leaving his with us for the time being until he has a good use for it.
In addition to gifting the £17,500 we have also said that my eldest son can live rent free in our studio flat for the year. Our youngest son has already made use of the flat between his MA and PhD when he was doing some intern work and applying for funding. This is, in fact, why we bought the flat, as we only own a modest semi and having an adult son live at home can get a bit "cramped" if it goes on for any length of time. :-)
(btw I am painfully aware that my sons have both been given an educational advantage by having parents who have been able to afford to supplement student loans, internships, housing and life in general. I am ideologically opposed to the idea that education is ever something that should be allowed to exclude people for financial reasons and would never have sent them to private school, but parents these days seem increasing sucked into supporting their kids through further education if they can. As this becomes the norm surely the kids of those who cannot afford to help become actively disadvantaged? One for my conscience (and vote)).
Having now got the offer of a place we have been thinking in more depth about accommodation and my son has decided that he would rather live on campus if possible. Although our studio flat is only about 30 mins by road from the University he doesn't drive and there is only one bus an hour and none after 6.30 in the evening. He had been thinking about getting a bike as there is a cycle route for some of the way but travelling home late in winter on poorly lit roads was a bit of a worry. In addition it would be good for him to be in the thick of things and we wouldn't have to give our tenant notice (something I'm loath to do as she has been very good and is obviously happy where she is despite only signing up for 6 months initially).
However the student accommodation prices came as a bit of a shock. As a postgraduate needing a 51 week rental the full range of choice of halls was not available to him and he's basically confined to a cheaper option of £5,800 (shared bathroom) and £6,700 (en suite).
Comparing these costs to the income/costs associated with him living in our studio flat works out like this:
- After tax income from rental (estimated as it depends if any further repairs are required and\or the tenant gives notice): £3,700
- Estimated utilities (electricity, broadband, water) to pay if in flat - currently covered by tenant: £1,000
- Council Tax (currently covered by tenant): £1,200
So, taking into account the travelling costs associated with living in the flat and the fact that living on campus entitles you to 10% discount at food outlets and bars on site means that, although the university accommodation seems mighty expensive when compared to our studio flat, it would actually be more or less cost neutral for my son to live there.
This calculation was quite interesting from another point of view. If we are getting a profit of around £3,500 pa on our studio flat and it works out that it costs our son just about the same to live in what used to be called University "Halls", surely the University is raking in huge profits at these kind of prices. Their overheads must be proportionally much smaller given the scale of their service. They have a captive rental "audience" and can control their void periods (the rooms are let out for conferences and visitors during the vacations) and service the flats using their own maintenance staff.
It all seems a bit scandalous except for the fact that we have to recognise that this is yet another reflection of the ongoing trend towards the commercialisation of education. Government funding for universities has been reduced so they have to make money somewhere. What then happens is that cheap accommodation for the students without parents with the wherewithal to help becomes scarce and the poorer students are forced out into the private sector with all its attendant stresses and difficulties, things that young people leaving home for the first time do not always have the skills to manage.
Personally I'd rather pay a bit more tax, fund the universities properly so they can provide affordable accommodation and remove tuition fees for UK students, put kids back on their own two feet with a fair and adequate grant system and make sure that further education is only seen as attractive for the right reasons by the right people. Somehow, though, this all seems to be moving further and further out of reach.
Saturday, 1 August 2015
July 2015 Update
Things have wobbled about a bit this month but our portfolio managed to finish up in the green with combined assets up over £2,000 since last month. I haven't been doing much trading as we're in a state of limbo as regards how much cash we will need for the next couple of years (my son still hasn't heard whether he has a place on his MA course and there's been no further news on my VR).
The only investments I have made are £500 into my LGPS AVC, £57 into my CIS FSAVC (still waiting for this to be transferred into my SIPP) and a small amount of re-invested dividends ploughed back into my ISA.
All in all it's been a pretty unexciting month. However, I have been pleased to see that my Herald Investment Trust (global small companies in IT, multi-media and comms) has now made some steady progress (up just over 10% during the period I've been drip feeding it) and TR European Growth Trust seems to be hanging onto most of the profit it has made for me (19%) (don't know how long that will last though - I have been considering taking some profit from this but holding off for the time being). Globally smaller companies seem to be doing quite well currently with my FTSE 250 tracker also standing at 10% up, although Aberdeen Asian Small Companies just keeps on dropping (down 16%) and the modest amount I have in an S&P small cap tracker is refusing to make profit and has slipped into the red again.
What's not been doing so well recently is my iShares Global Clean Energy tracker.
The S&P Global Clean Energy Index offers exposure to the 30 largest and most liquid listed companies globally that are involved in clean energy related businesses, from both developed markets and emerging markets
The only investments I have made are £500 into my LGPS AVC, £57 into my CIS FSAVC (still waiting for this to be transferred into my SIPP) and a small amount of re-invested dividends ploughed back into my ISA.
All in all it's been a pretty unexciting month. However, I have been pleased to see that my Herald Investment Trust (global small companies in IT, multi-media and comms) has now made some steady progress (up just over 10% during the period I've been drip feeding it) and TR European Growth Trust seems to be hanging onto most of the profit it has made for me (19%) (don't know how long that will last though - I have been considering taking some profit from this but holding off for the time being). Globally smaller companies seem to be doing quite well currently with my FTSE 250 tracker also standing at 10% up, although Aberdeen Asian Small Companies just keeps on dropping (down 16%) and the modest amount I have in an S&P small cap tracker is refusing to make profit and has slipped into the red again.
What's not been doing so well recently is my iShares Global Clean Energy tracker.
The S&P Global Clean Energy Index offers exposure to the 30 largest and most liquid listed companies globally that are involved in clean energy related businesses, from both developed markets and emerging markets
| Key | Chart | Instrument | 1 mth | 6 mths | 1 yr | 3 yrs |
|---|---|---|---|---|---|---|
| iShares Global Clean Energy UCITS ETF GBP | -4.64% | 2.86% | 4.17% | 77.86% | ||
| Gbl ETF Commodity & Energy | -6.47% | -6.95% | -17.09% | -18.37% |
I can understand why clean energy companies in the UK could have been taking a bashing due to the fact that the government has been reducing subsidies, but what the drop says about global trends following a surge in investment in 2014 is a little worrying. Maybe it's too soon to see it as an indicator of anything.
The fact that fossil fuels reap 4 times more in subsidies from world governments than renewable energies can't help though.
Although July's been fairly quiet maybe August will bring some excitement. Today my £9,000 worth of premium bonds will be going into the draw for the fist time.
Drinks all round at York if ERNIE comes up trumps :-)
Saturday, 25 July 2015
A Musical Interlude
As it is festival season (very funny analysis here by TEA) I thought I'd indulge myself by posting up a couple of clips.
I was at Warwick Folk Festival earlier this week and will be going back over the weekend (we live very close so there's not even any camping involved :-))
Billy Bragg headlined on Thurday evening and it was a great night. He's a long time musical hero of mine, the crowd were really behind him and I thoroughly enjoyed myself. He gave a great speech about the Labour leadership battle, expressing respect for Corbyn and disdain for the Blair view of things .... followed by "UpHill - Socialism of the Heart". Wonderful evening .
(hackle alert for some out there I guess, but as weenie reminded me, it's my blog so I can post what I want, and it does sort of cater for the cyclists too :-))
- take a look (and a listen).
I was at Warwick Folk Festival earlier this week and will be going back over the weekend (we live very close so there's not even any camping involved :-))
Billy Bragg headlined on Thurday evening and it was a great night. He's a long time musical hero of mine, the crowd were really behind him and I thoroughly enjoyed myself. He gave a great speech about the Labour leadership battle, expressing respect for Corbyn and disdain for the Blair view of things .... followed by "UpHill - Socialism of the Heart". Wonderful evening .
One track he didn't get round to was "Great Leap Forward" so I sought it out on YouTube when I got home. The version below is a couple of years old so the lyrics aren't quite current but you'll get the gist.
(hackle alert for some out there I guess, but as weenie reminded me, it's my blog so I can post what I want, and it does sort of cater for the cyclists too :-))
- take a look (and a listen).
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