fivemack: (bok)
In 2011-12, the UK government paid out £74.2 billion of state pension, plus £8.1 billion of pension credit (figures from here; if everyone writing about benefits had these numbers at their fingertips I suspect some of the arguments would be less fervid and more useful). The only figure I can find for the number of people claiming state pension is 12.7 million, from an Institute for Fiscal Studies paper from 2003; ten years is enough for even demographics to have moved far enough that I'd like a newer figure.

A figure I can't seem to find anywhere is the total payout from private pensions. This sounds the kind of thing that a government must determine, I just can't work out where they'd put the answer ...

Legal and General (in small print on page 17 of the annual report) say their annuities paid out £1.4 billion in 2011. I suspect they have more than 5% of the pension market, which indicates that the state pension still dwarfs private pension provision, but I'd quite like to know how big the dwarf is.

Aviva don't seem to mention the figure at all ... insurer financial reports seem to devote much more space to profits ('credit spread income on our annuity portfolio increased by £125 million to £813 million') and to new-business figures ('due to a 24% reduction in [US] annuity sales to £2,839 million') rather than to the kind of flow I'm looking for.
fivemack: (Default)
Barclays in 2009 was decidedly in need of money.

So they issued a bond, which seems to be known as EB20.K22 for short and Barclays 7.125 24 Oct 2049 for long. This bond is sold in units of face value a thousand pounds, and each of these units pays its holder £71.25 on the 24th of October each year until 2048, and then £1071.25 on 24/10/2049.

The reason this is vaguely interesting is that one unit of the bond appears on a share-details site as selling for £873.50; that's an 8.1% yield which is not to be sniffed at (yes, yes, conditional on Barclays not going bust ... but I was happy to own Barclays shares and the bonds are senior to the shares)

So I rang my broker (it is not possible to buy these directly over the Internet for some reason), and made a number of mildly costly discoveries which I will list here so they come as less of a surprise to anyone else tempted by the retail bond market:

  1. Unlike shares in large companies, which tend to trade pretty close to the price that appears in the charts, there is a bid-offer spread the size of a small country house (and probably used for the purpose of acquiring small country houses for bond traders) on even this kind of vaguely mainstream bond; the price I was offered was £910
  2. The price of shares in large companies goes in a sort of saw-tooth pattern as dividends become due and are paid; but the amount that comes out of your account is determined only by the price of the share as you buy it. But a person buying a bond in the middle of the year is expected to pay to the seller the proportion of the interest that the bond has not yet paid; that is, there was an unexpected extra fee of £62.74 per bond because I was roughly 62.74/71.25 of the way through the year.
  3. Less surprisingly, there's 0.5% stamp duty and a £16.50 commission.


So this wasn't quite as good a deal as I thought; I've paid £1971.71 now for £142.50 every 24th October until I am 72, and the effect of the bid-offer spread and the compensation-for-unclaimed-interest is such that I would get only about £1800 back if I sold the bond tomorrow. Since the ECB decision made shares in Barclays soar this afternoon, I'd have been more sensible just to buy the shares. Such is life; I'm not complaining.
fivemack: (Default)
Suppose, lunatic that I am, that I wish to leave the comfortable safety of FCSC-insured cash ISAs and head, rather than to the flaming whirlpool that is the UK equity market, to the choppy waters of index-linked UK gilts, where my money is at least wrapped in Her Majesty's third-best ermine mantle against the unknown possibilities of inflation.

A neophyte attempts to figure out what information sources are telling him )
fivemack: (Default)
Halifax will sell me a 3-month bond paying 6.85%, a 6-month bond paying 6.5%, a 1-year bond paying 6.45%, a 3-year bond paying 6.4%, or a 5-year bond paying 6.2%.

I thought that longer terms were supposed to be rewarded by better interest rates; on the other hand, why shouldn't I jump at this?

If I assume that Halifax would rather borrow money on the money-markets, where LIBOR is 6.61%, than through the time-consuming process of assembling small sums from thousands of tiny savers, then I conclude that the money markets want to charge Halifax perceptibly more than 6.85%. I think that this means that they believe there is a chance of perceptibly more than 0.89% [(6.85 / 6.61) ^ (3/12)] that Halifax will be unable to repay.

On the other hand, I'm a small saver, and the regulatory framework likes small savers. If Lloyds lend Halifax fifteen million pounds, and Halifax goes bust, Lloyds get nothing back. If I lend Halifax fifteen thousand pounds, and Halifax goes bust, I get £13,700 back. So I should be more willing to lend Halifax money than Lloyds is - indeed, since the money is otherwise making 5.8%, I should lend it to Halifax if I believe the odds of Halifax still being around in mid-February are better than about 20:1 for.

This seems somehow counter-intuitive; on the other hand, I will go off to the local Halifax tomorrow with a chequebook. There is then the question of hedging: I wonder what odds the local Ladbrokes will offer on Halifax being bust by mid-February?
fivemack: (Default)
The aim is, in the further reckless pursuit of responsible frugality, to put £100 monthly into an index-tracking ISA. I presume that I can do this despite having put £3000 into a mini cash ISA this tax year.

So I google for 'index-tracking ISAs', and get the impression that these are less well-catalogued by independent sources than cash ISAs; fool.co.uk has a list of index-tracking ISAs consisting entirely of sponsored links. Google is a little better, and I come up with a few fund-management companies and grovel around further.

M&G Index Tracker A0.30% annual chargeTracks FTSE All-Share; "dividend type: distributing"; "regular saving scheme: yes"
L&G UK Index0.53% annual chargeTracks FTSE All-Share; doesn't say anything about dividends
Fidelity Moneybuilder UK Index Fund0.1% management chargeTracks FTSE All-Share; doesn't say anything about dividends; minimum investment "500, top-up 250"


This would seem to be an easy decision, so I must be missing something. I can't work out what 'dividend type: distributing' means: obviously I want dividends to be reinvested.

On a third hand, given how the pricing of computers and cameras has historically behaved just after I finally decide to buy them, and how the pricing of equities has historically behaved just after I lose confidence and sell everything, maybe I should stay in cash until the unprecedentedly well-correlated set of handbaskets that seem to be making up the international markets proceed up the roller-coaster


to that place where all handbaskets are proverbially destined.

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