We begin today\u2019s Irregular Roundup with\u00a0<\/span>the state pension age.<\/span><\/p>\n A recent document from the Office for Budget<\/a> Responsibility (OBR) has revealed that the government plans to bring forward a rise in the state pension age to 68 from the originally planned 2044 to 2037.<\/span><\/p>\n The report says:<\/span><\/p>\n We assume that the state pension rises to 68 in 2037-39, and then to 69 in the 2070s.<\/span><\/p>\n<\/blockquote>\n Bringing forward the increase will save \u00a36bn a year for the seven years in question.<\/span><\/p>\n This is not a massive shock, since the state pension review of 2017 (under Theresa May \u2013 remember her?) recommended the change.<\/span><\/p>\n So far, Pensions minister Torsten Bell has refused to commit to the age increase, or its timing.<\/span><\/p>\n Star fund manager Terry Smith has dropped his \u201cdo nothing\u201d mantra in his flagship Fundsmith Equity fund, after a period of underperformance and outflows for the fund.\u00a0<\/span><\/p>\n The fund was down 3% for the period, trailing the global index by 14%<\/span><\/p>\n Over those three years, the fund has lost \u00a314 bn in assets, leaving \u201conly\u201d \u00a312 bn.<\/span><\/p>\n In his latest letter to investors, Smith bemoaned the inflows to passive funds, which support momentum<\/a> over fundamentals.<\/span><\/p>\n In the current momentum<\/a> driven market, buying shares in companies which have hit a glitch is like trying to catch the proverbial falling knife. All we are getting is cut fingers as their downward share price spiral is exacerbated by the index momentum<\/a> enhancement effect.\u00a0<\/span><\/p>\n The market could \u2018remain illogical longer than we can remain in business.\u00a0<\/span>There will be little point being proved right about the dangers of passive or momentum<\/a> investment after our fund has closed.<\/span><\/span><\/p>\n<\/blockquote>\n Passive flows have certainly changed the game, but there are very few star fund managers who have successfully navigated regime change.<\/span><\/p>\n The government has trailed some changes to ISAs. Most notably, the plan to charge tax on interest within Stocks and Shares ISAs.<\/span><\/p>\n The rules look a bit toothless to me, as you can hold 99% of your S&S ISA in a money market fund, which is essentially the same as cash.<\/span><\/p>\n And as always, simplification rather than additional complications would be preferred.<\/span><\/p>\n The government also plans to replace the LISA with a new First Time Buyer ISA (the FTBI \u2013 not a great acronym).<\/span><\/p>\n The price cap for property purchases has not been announced, but let\u2019s hope it is increased so that people in the south-east have a shot at using the FTBI.<\/span><\/p>\n At a recent Vanguard event based around their British Money Mindset Report, Gen Z investors were the focus. The report said that 68% of savers plan to start investing within the next two years, rising to 91% of Gen Z and 84% of millennials.<\/span><\/p>\n Ben Summers, head of Vanguard UK, said:<\/span><\/p>\n That intention to invest doesn\u2019t mean that they are investing. I think that begs the question: what can we do as an industry to give people the confidence to take that first step?\u00a0<\/span><\/p>\n We overstate the investment market risk; we understate the inflationary risk. People don\u2019t invest enough as a result<\/span><\/p>\n<\/blockquote>\n Steph McGovern also felt that the problem was that people misunderstand investment risk:<\/span><\/p>\n We think of money being at risk as \u2018I\u2019m going to lose it all\u2019. History tells us that\u2019s not the case and you are losing money essentially by not taking <\/span>more of a risk, but we just don\u2019t understand it.\u00a0<\/span><\/span><\/p>\n As a society we have a problem with understanding what risk really is \u201dNever do you hear, for example, on cash Isas: \u2018Oh, by the way your capital is\u00a0<\/span>at risk of being eaten by inflation.\u201d<\/span><\/span><\/p>\n<\/blockquote>\n Wise words, Smashie and Nicey.<\/span><\/p>\n I\u2019ll write more about the various crazy tax plans being floated in the future, but today I just have a couple of bad ideas that aren\u2019t tax-related.<\/span><\/p>\n The FT reported that Burnham\u2019s team want to change the UK\u2019s AI strategy, as it is too US-centric, focusing instead on British companies and, more worryingly, British workers and \u201ctech sovereignty\u201d.<\/span><\/p>\n A spokesman said:<\/span><\/p>\n We do need data centres, but we need to think about who runs and owns those data centres. There has to be a framework for accountability and making sure that 100 per cent of datacentres aren\u2019t owned by foreign companies.<\/span><\/p>\n<\/blockquote>\n A review of existing \u201cAI Growth zones\u201d is planned to make sure that projects \u201cwork for their local communities\u201d. That sounds like no data centres to me.\u00a0<\/span><\/p>\n They also want to make sure that workers who lose their jobs to AI are retrained. Good luck with that.<\/span><\/p>\n And they don\u2019t like the driverless cars trial in London:<\/span><\/p>\n What\u2019s the point and who\u2019s it for? What\u2019s your plan for dealing with the constituency of people that will be impacted by their introduction, including black cab drivers and Uber drivers?<\/span><\/p>\n<\/blockquote>\n One: never thought I would hear Labour defending black cab drivers. Two: while we\u2019re at it, let\u2019s bring back horses and buggy whips.<\/span><\/p>\n Meanwhile, Burnham advisor Andy Haldane thinks that your tax breaks should be tied to support for the has-been firms still listed in the UK. In a speech to the British Chamber of Commerce, he said:<\/span><\/p>\n The Government extends over \u00a350 billion in pension tax relief, and more than \u00a310 billion in ISA tax relief, each year. As a country we spend more on savings tax relief than on defence. Yet these benefits are conferred without any accompanying commitment to support UK growth. Most are implicitly supporting US companies and governments.<\/span><\/p>\n This means these tax reliefs deliver a very low return on investment for the UK government. Shifting them towards investment in UK companies would leave investment choices in owners\u2019 hands, while boosting significantly the returns on these investments in terms of UK business growth, jobs and productivity.<\/span><\/p>\n<\/blockquote>\n Three cheers for \u201cgrowth in every postcode\u201d.<\/span><\/p>\n I leave you with a couple of charts.<\/span><\/p>\n The first shows how much the south east (and the east, surprisingly) is propping up the rest of the country, even before the massive wealth transfer that will come from a land value tax.<\/span><\/p>\nState pension age<\/span><\/span><\/h3>\n
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Fundsmith<\/span><\/span><\/h3>\n
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ISAs<\/span><\/span><\/h3>\n
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Gen Z investors<\/span><\/span><\/h3>\n
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Burnham watch<\/span><\/span><\/h3>\n
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Charts<\/span><\/span><\/h3>\n
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