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The use of wealth in retirement

Including Financial Independence and Retiring Early (FIRE)
EthicsGradient
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Re: The use of wealth in retirement

#337265

Postby EthicsGradient » August 31st, 2020, 8:56 pm

I have never seen such an ignorant load of tosh on this board as the above few posts. Some of you don''t even know what 'wealth' is, and you're posting in a thread about it!

You seem to think 'wealth' means "likely standard of living in the future". You also think that because you see Oxfam's name on reports that you don't like (or understand), they don't do anything else.

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Re: The use of wealth in retirement

#337267

Postby Stonge » August 31st, 2020, 9:03 pm

EthicsGradient wrote:I have never seen such an ignorant load of tosh on this board as the above few posts. Some of you don''t even know what 'wealth' is, and you're posting in a thread about it!

You seem to think 'wealth' means "likely standard of living in the future". You also think that because you see Oxfam's name on reports that you don't like (or understand), they don't do anything else.


Justify please.

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Re: The use of wealth in retirement

#337273

Postby SalvorHardin » August 31st, 2020, 9:38 pm

EthicsGradient wrote:I have never seen such an ignorant load of tosh on this board as the above few posts. Some of you don''t even know what 'wealth' is, and you're posting in a thread about it!

You seem to think 'wealth' means "likely standard of living in the future". You also think that because you see Oxfam's name on reports that you don't like (or understand), they don't do anything else.

Cobblers. I know what wealth is. Also income, which Oxfam regularly confuses with wealth (income is a flow, wealth is a stock).

I also know that Oxfam has a track record of producing dodgy reports about income, wealth and inequality; relying on the appalling level of knowledge of maths, science, economics, statistics, etc. in the journalistic profession to pass them off as fact.

Such as in 2019 when Oxfam reported that 26 people owned more than 50% of the world's population. From Deutsche Welle:

"Policymakers should take Oxfam's findings and suggestions with a grain of salt, however, since even after repeated criticism year after year, the report remains methodologically sloppy. Their calculation of inequality is based on "net assets" in which the assets owned by individuals, such as property and shares, is subtracted by their debt liabilities, to calculate their position in the global wealth distribution. Income is excluded from the calculation"

https://amp.dw.com/en/oxfam-releases-global-inequality-report-amid-ongoing-controversy/a-47142069

Now given these mistakes, it is reasonable to assume that similar errors occur elsewhere in Oxfam's "research". I'm not one of those people who fall for the Gell-Mann amnesia effect which is as follows:

On reading an article in a newspaper you spot many errors because you have specialist knowledge. You then read other articles in the same paper and assume that these do not contain similar errors.

Here's the quote from Michael Crichton:

"Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray's case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues.

Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the "wet streets cause rain" stories. Paper's full of them.

In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know."

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Re: The use of wealth in retirement

#337431

Postby EthicsGradient » September 1st, 2020, 3:31 pm

Stonge wrote:Justify please.

OK:
scrumpyjack wrote:I have glanced through it but rather lost interest when it started by saying it ignored pension wealth!
...
For this report to have much use it should included the capitalised market value of everyones' pension rights (state, DB, DC etc)

It's about wealth, not income. You can't sell pensions, give them away, convert them from one form of wealth to another. If you're not interested in "the use of wealth in retirement", why bother commenting on a thread about it?
lootman wrote:Agreed. It would make more sense to leave out your primary home in my view.

But how do you capitalise the market value of a pension?

But the report is significantly about what people do do with their homes - downsize, use equity withdrawal etc. - and whether that wealth is subsequently available for inheritance. Leaving out the major part of true wealth in a report about wealth would be stupid. Trying to come up with a figure that would be relevant for "what standard of living does this retiree have" or "how secure is this person" might be interesting for a different paper, but it's not what this paper is about. It's about the use of wealth in retirement. Not the use of DB or DC pensions.

UncleEbenezer wrote:The state pension entitlement alone represents a level of personal wealth that puts you round about the borderline of the global top 1%.

According to Oxfam's figures - which inexplicably exclude redistributive state actions such as pensions and other benefits.

It's not wealth. As SalvorHardin manages to get right once, "income is a flow, wealth is a stock". Pensions and benefits are income.

scrumpyjack wrote:Well not 'inexplicably'. It is part of the leftwing mindset that always wants to criticise 'inequality', exaggerating it wherever and however possible.

Now you're attributing the correct use of "wealth" and "income" to a "mindset". Well, it's the correct definition, so if you're saying that "leftwing" thinking is correct, but it's not yours ... I'd point out we've already established it's the IFS's "mindset" too.
lootman wrote:I'm not sure I'd trust Oxfam on this topic.

Well, they've got the definitions of wealth and income right, so they're already ahead of you ...
It always seems to be banging the drum of inequality rather than helping to alleviate famine. And whilst there are pockets of poverty and hunger in the UK, I don't think anyone believes we suffer from famine. Historically Oxfam looked overseas for its good-doing. I am with Jack here in that, if you focus on alleged inequality then you end up opposing a class of people and seeing them as the problem, AKA "the rich". So Oxfam has become political, straying from its core focus on charitable work.

Oxfam still does the vast majority of its work overseas. Oxfam was only mentioned in this thread because someone wanted to talk about the wealth of the "global top 1%". Not about anything it's said about the UK. It seems Oxfam only penetrates your consciousness when you think it has said something about the UK, which you take as criticism.

JohnB wrote:Many of these '1%' calculations handle education and secured debt badly. So a junior doctor aged 28 with a lot of student debt and a hefty mortgage is viewed as having net wealth well below zero, though their earning potential is much greater than some aged 60 in Africa who has $100 in savings.

Again, they are talking about wealth, not prospects, or standard of living. "Earning potential" is a subjective guess. The reports on global comparisons of wealth that I've read do point out student debt is a tricky area, since whether its repayment should be seen as a tax, and whether it may be forgiven at some age, vary between countries.

Within a country inequality is more relevant, though earning potential and future taxation/benefits makes comparisons across different ages unhelpful. Inheritance is one of the biggest distorters of the figures, as very few track possible windfalls like inheritances.

The thread is about people in retirement. The paper does talk about inheritance, quite a lot. But "possible windfalls" are just that - "possible". People don't own inheritances before they get them. They don't know when they'll get them, whether the current owner will give it to someone else, or spend it themselves. There's nothing there to "track".

UncleEbenezer wrote:https://bahumbug.wordpress.com/2015/01/20/dodgy-data/ wrote:
Oxfam grabs a headline with a report telling us the richest 1% will own half the world’s wealth in 2016.

And if we look at your blog, we find that Oxfam was mostly talking about the richest billionaires, not the 1%. So I don't think they were grabbing a headline about the 1%. We also find their figures come from the oh-so-leftwing Credit Suisse and Forbes. My god, the left-wing conspiracy is vast, everyone!

UncleEbenezer wrote:But googling “World Wealth” finds this report, which tells me total world wealth is projected to be $64.3 trillion in 2016.

The link is now dead, but it must be this that the OECD referred to:
HNWI wealth is expected to reach another record of USD 64.3 trillion by 2016
https://books.google.co.uk/books?id=38p ... AJ&pg=PA94

So, no, your calculation was useless, since that was looking at the wealth of High Net Worth Individuals (investable wealth over $1 million), not the world. Rather ironic that you tried to criticise Oxfam and Credit Suisse with a blog post titled "Dodgy Data", isn't it?

SalvorHardin wrote:Oxfam's work on inequality and poverty in the UK is laughable.

Not as laughable as UncleEbezener's, obviously ... But we're not talking about their work in the UK. They were brought in because UE made a bad calculation about global wealth and ended up thinking, thanks to not understanding what wealth is, that this meant UK state pensioners are wealthy because they have an income.

SalvorHardin wrote:Like Piketty, Oxfam places no value on welfare and social security benefits. These aren't just cash payments; there's subsided rents, free healthcare, etc. Doing so is ignorant. Or deliberate, so that they can make themselves appear more relevant.

Their "1% owns 50%, or 90%, etc." type of arguments are invariably flawed. Given that they consistently make such massive errors, why should we assume that the rest of their work is accurate?

Piketty makes other big mistakes, such as ignoring depreciation, but that's off-topic for this thread.

That's all highly contentious partisan spin. Oxfam and Piketty use the real definitions of wealth (which you later confessed to), but you, for ideological reasons, want them to put things like "free healthcare" in there. You can't sell free healthcare; you can't inherit it. The price put on it is highly disputed - people's needs vary, the amount charged for it depends on the legal situation, the competition, the profits taken in different countries - so trying to shoehorn it into a discussion of wealth would be a massive red herring.

No, it's not "ignorant" to use actual definitions. Those aren't "massive errors", and you are demanding they should be deliberately inaccurate, to fit in with your personal (and, compared to them, irrelevant) ideology.
--------------------
So, a load of tosh.

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Re: The use of wealth in retirement

#337434

Postby Bouleversee » September 1st, 2020, 4:13 pm

Doesn't it depend on what type of pension fund or pension income you have? My state pension and my fixed rate annuity certainly can't be valued and included in my wealth because only the income during my lifetime is secure and will cease on my death but if I had a SIPP, maybe now in drawdown, surely the actual current value of that could be included in my wealth calculation as with the value of my ISAs and other investments. If calculating net wealth after IHT, one must bear in mind that a personal pension can be left to heirs without being subject to IHT whereas ISAs and other investments cannot. I'm still waiting for a justification of that. Maybe that is something Sunak will turn his attention to.

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Re: The use of wealth in retirement

#337457

Postby UncleEbenezer » September 1st, 2020, 5:42 pm

EthicsGradient wrote:
UncleEbenezer wrote:The state pension entitlement alone represents a level of personal wealth that puts you round about the borderline of the global top 1%.

According to Oxfam's figures - which inexplicably exclude redistributive state actions such as pensions and other benefits.

It's not wealth. As SalvorHardin manages to get right once, "income is a flow, wealth is a stock". Pensions and benefits are income.


My reference was to the relationship between a pension pot and the annuity it will buy. Someone posted an actual current figure up the thread: something north of £300k for a £9k index-linked pension at age 67. The £300k (or whatever) is the entitlement's value measured as wealth.

Of course that only applies at one moment in life: namely, pension age. My point isn't a rigorous analysis, it's to illustrate a point about Oxfam's spin: specifically here the way it ignores very large redistribution effects. If you choose to read it otherwise, I'll call that perverse.
UncleEbenezer wrote:https://bahumbug.wordpress.com/2015/01/20/dodgy-data/ wrote:
Oxfam grabs a headline with a report telling us the richest 1% will own half the world’s wealth in 2016.

And if we look at your blog, we find that Oxfam was mostly talking about the richest billionaires, not the 1%. So I don't think they were grabbing a headline about the 1%. We also find their figures come from the oh-so-leftwing Credit Suisse and Forbes. My god, the left-wing conspiracy is vast, everyone!

The headline that drew me to find and comment on the report was precisely what I said: the richest 1% will own half the world’s wealth in 2016. I think there may have been other claims about a handful of billionaires, but that was the headline.

I think you're actually agreeing that that shock headline bears little relation to real life. Though I'll accept your criticism that it was out of place to raise it in this thread.

I think you're accusing me of right-wing nonsense. Funnily enough, it's just a week since I was accused of

https://www.lemonfool.co.uk/viewtopic.php?f=2&t=24904&start=20#p335780 wrote:Jaundiced, distorted, leftist nonsense!


p.s. You reference a US figure:
High Net Worth Individuals (investable wealth over $1 million),


The UK definition of a High Net Worth individual is just £250k. So you can be HNW here without being rich enough to buy a house in southeast England.
In fact I was myself officially HNW for a while before buying a house, and I'm in an area of house prices close to the national average: there's still no way I could afford London or several other expensive cities.

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Re: The use of wealth in retirement

#337464

Postby scrumpyjack » September 1st, 2020, 6:38 pm

Bouleversee wrote:Doesn't it depend on what type of pension fund or pension income you have? My state pension and my fixed rate annuity certainly can't be valued and included in my wealth because only the income during my lifetime is secure and will cease on my death but if I had a SIPP, maybe now in drawdown, surely the actual current value of that could be included in my wealth calculation as with the value of my ISAs and other investments. If calculating net wealth after IHT, one must bear in mind that a personal pension can be left to heirs without being subject to IHT whereas ISAs and other investments cannot. I'm still waiting for a justification of that. Maybe that is something Sunak will turn his attention to.


Well unless you die before 75 your heirs are going to pay income tax on it, so it might be thought hard to charge IHT and then income tax on top of that. Sunak might well abolish the current position where if you die before 75 your heirs get your pension fund free of income tax as well as free of IHT.

I suppose also there is some public benefit in people inheriting pensions and thus being less likely to be dependent on the state for benefits, and also it is a further encouragement for people to put money into their pension. George Osborne and the Treasury must have thought this through when they introduced it.

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Re: The use of wealth in retirement

#337468

Postby Bouleversee » September 1st, 2020, 6:55 pm

scrumpyjack wrote:
Bouleversee wrote:Doesn't it depend on what type of pension fund or pension income you have? My state pension and my fixed rate annuity certainly can't be valued and included in my wealth because only the income during my lifetime is secure and will cease on my death but if I had a SIPP, maybe now in drawdown, surely the actual current value of that could be included in my wealth calculation as with the value of my ISAs and other investments. If calculating net wealth after IHT, one must bear in mind that a personal pension can be left to heirs without being subject to IHT whereas ISAs and other investments cannot. I'm still waiting for a justification of that. Maybe that is something Sunak will turn his attention to.


Well unless you die before 75 your heirs are going to pay income tax on it, so it might be thought hard to charge IHT and then income tax on top of that. Sunak might well abolish the current position where if you die before 75 your heirs get your pension fund free of income tax as well as free of IHT.

I suppose also there is some public benefit in people inheriting pensions and thus being less likely to be dependent on the state for benefits, and also it is a further encouragement for people to put money into their pension. George Osborne and the Treasury must have thought this through when they introduced it.


As I understand it, heirs can manage their withdrawals from pensions to avoid/minimise income tax. ISAs can't be inherited as ISAs; they have to be cashed in and IHT paid on the whole sum where applicable. Pension fund contributions benefit from tax relief; ISA contributions don't. The comment about being less likely to be dependent on the state for benefits doesn't stand up as a reason for the difference. The last sentence of the quoted comment made me laugh out loud. Try again!

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Re: The use of wealth in retirement

#337475

Postby scrumpyjack » September 1st, 2020, 7:19 pm

Bouleversee wrote:
scrumpyjack wrote:
Bouleversee wrote:Doesn't it depend on what type of pension fund or pension income you have? My state pension and my fixed rate annuity certainly can't be valued and included in my wealth because only the income during my lifetime is secure and will cease on my death but if I had a SIPP, maybe now in drawdown, surely the actual current value of that could be included in my wealth calculation as with the value of my ISAs and other investments. If calculating net wealth after IHT, one must bear in mind that a personal pension can be left to heirs without being subject to IHT whereas ISAs and other investments cannot. I'm still waiting for a justification of that. Maybe that is something Sunak will turn his attention to.


Well unless you die before 75 your heirs are going to pay income tax on it, so it might be thought hard to charge IHT and then income tax on top of that. Sunak might well abolish the current position where if you die before 75 your heirs get your pension fund free of income tax as well as free of IHT.

I suppose also there is some public benefit in people inheriting pensions and thus being less likely to be dependent on the state for benefits, and also it is a further encouragement for people to put money into their pension. George Osborne and the Treasury must have thought this through when they introduced it.


As I understand it, heirs can manage their withdrawals from pensions to avoid/minimise income tax. ISAs can't be inherited as ISAs; they have to be cashed in and IHT paid on the whole sum where applicable. Pension fund contributions benefit from tax relief; ISA contributions don't. The comment about being less likely to be dependent on the state for benefits doesn't stand up as a reason for the difference. The last sentence of the quoted comment made me laugh out loud. Try again!


I'm sure successive governments have viewed it desirable to get people to save into pensions to reduce the chance of their being a burden on the state and that is why there has been tax relief on pension contributions. Also there has to be tax relief on contributions to preserve equity with schemes where the employee gets an entitlement without making a contribution. They may now think the cost is too high and it is a matter of personal judgement which incentives are justifiable and which are not.

Poor George, you obviously don't have a high opinion of him! Again a matter of personal judgement, and I am not saying I have a high opinion of him.

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Re: The use of wealth in retirement

#337486

Postby Bouleversee » September 1st, 2020, 7:49 pm

Why is someone with a pension of £500k in drawdown any less likely to be a burden on the state than someone with an ISA of an equal sum?

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Re: The use of wealth in retirement

#337490

Postby Alaric » September 1st, 2020, 8:16 pm

Bouleversee wrote:Why is someone with a pension of £500k in drawdown any less likely to be a burden on the state than someone with an ISA of an equal sum?


I doubt they are.

Increasingly ISAs and SIPPs are both personal tax shelters with different rules on how tax is applied. ISA's have to be financed from after tax income or other after tax wealth, but accumulate free of tax and can be withdrawn without tax. SIPPs on the other hand get the benefit of tax relief on both employee and employer contributions, but are mostly taxed as if they are earned income when money is withdrawn. Also withdrawal is age restricted.

Incidentally the actuarial profession solved the problem of how to place capital values on payment entitlements expressed as lifetime income at least a hundred and fifty years ago, probably longer.

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Re: The use of wealth in retirement

#337498

Postby EthicsGradient » September 1st, 2020, 9:15 pm

UncleEbenezer wrote:My reference was to the relationship between a pension pot and the annuity it will buy. Someone posted an actual current figure up the thread: something north of £300k for a £9k index-linked pension at age 67. The £300k (or whatever) is the entitlement's value measured as wealth.

It's not "wealth" at all. They can't exchange it for anything. Credit Suisse, when constructing an analysis of global wealth, would be wrong to call government's promises of future income "wealth". It would be a lie.

My point isn't a rigorous analysis

It's not an "analysis" at all. You even used the wrong figures, quite apart from your insistence that Credit Suisse should call a non-transferable government benefit "wealth". We don't call people's salaries "wealth" either.

it's to illustrate a point about Oxfam's spin

It's not Oxfam's "spin"; they quoted the figures from Credit Suisse, when talking about global wealth. They did not talk about UK pensioners at all. It was you who thought that implied something about how well off the UK retired are; this is all your fault.

specifically here the way it ignores very large redistribution effects. If you choose to read it otherwise, I'll call that perverse.

And that would be stupid. Again, the report is about WEALTH. It's in the title. It's in the press releases.

UncleEbenezer wrote:The headline that drew me to find and comment on the report was precisely what I said: the richest 1% will own half the world’s wealth in 2016. I think there may have been other claims about a handful of billionaires, but that was the headline.

Then that is the fault of the publication you read a headline in, not the Oxfam Report. The page you link to says nothing about the 1% at all. The PDF you can download from there has 1 page talking about the top 1%, and 8 pages talking about billionaires.

I think you're actually agreeing that that shock headline bears little relation to real life.

No, we've never seen a "shock headline". You said you did, but never quoted it. Credit Suisse said in 2014 that 48% global wealth was owned by the top 1%. That's accurate; it went from above 48% in 2000 to about 46% in 2008, and then started climbing again. If that "shocks" you, maybe you need to read a bit more.

I think you're accusing me of right-wing nonsense.

Nonsense, definitely; it was scrumpjack who said the Oxfam use of the Credit Suisse figure was "leftwing".

p.s. You reference a US figure:
High Net Worth Individuals (investable wealth over $1 million),

You referenced a US figure. That came from World Wealth Report, the publication you thought told you the total wealth of the world, when it told you the wealth of the world's HNWIs.

The UK definition of a High Net Worth individual is just £250k. So you can be HNW here without being rich enough to buy a house in southeast England.
In fact I was myself officially HNW for a while before buying a house, and I'm in an area of house prices close to the national average: there's still no way I could afford London or several other expensive cities.

Which is extremely irrelevant. There more than 1 definition of "High Net Worth", some just on wealth, and some on income and wealth:

In the UK, Her Majesty’s Revenue and Customs (HMRC) amended their definition of a High Net Worth Individual in 2016 and anyone with assets valued in excess of £10 million was categorised as such.

https://www.theprivateoffice.com/specia ... l-advisers

Or the FCA definitions:
In the United Kingdom, a High Net Worth Individual (HNWI) is an individual who has self-certified that:

They had, during the financial year immediately preceding the date in question, an annual income to the value of £100,000 or more; or

They held, throughout the financial year immediately preceding the date in question, net assets to the value of £250,000 or more. Net assets for these purposes do not include:

the property which is the individual’s primary residence or any loan secured on that residence;

any rights of the individual under a qualifying contract of insurance within the meaning of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;

any benefits (in the form of pensions or otherwise) which are payable on the termination of the individual’s service or on their death or retirement and to which they are (or their dependents are), or may be, entitled.

https://www.syndicateroom.com/learn/glo ... idual-hnwi

So that would be a definition that talks about income - and excludes the primary residence (so, that would have to be talking about buying a 2nd home). And, ironically for this thread, that excludes future pensions benefits. But that is for investment professional purposes. The statistic that gave the figure for HNWI wealth defined who its HNWIs were. Credti Suisse tells us what the threshold in 2019 was to be in the top 1% of global wealth: $936,430.

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Re: The use of wealth in retirement

#337599

Postby ursaminortaur » September 2nd, 2020, 11:31 am

EthicsGradient wrote:
UncleEbenezer wrote:My reference was to the relationship between a pension pot and the annuity it will buy. Someone posted an actual current figure up the thread: something north of £300k for a £9k index-linked pension at age 67. The £300k (or whatever) is the entitlement's value measured as wealth.

It's not "wealth" at all. They can't exchange it for anything. Credit Suisse, when constructing an analysis of global wealth, would be wrong to call government's promises of future income "wealth". It would be a lie.

My point isn't a rigorous analysis

It's not an "analysis" at all. You even used the wrong figures, quite apart from your insistence that Credit Suisse should call a non-transferable government benefit "wealth". We don't call people's salaries "wealth" either.

it's to illustrate a point about Oxfam's spin

It's not Oxfam's "spin"; they quoted the figures from Credit Suisse, when talking about global wealth. They did not talk about UK pensioners at all. It was you who thought that implied something about how well off the UK retired are; this is all your fault.

specifically here the way it ignores very large redistribution effects. If you choose to read it otherwise, I'll call that perverse.

And that would be stupid. Again, the report is about WEALTH. It's in the title. It's in the press releases.

UncleEbenezer wrote:The headline that drew me to find and comment on the report was precisely what I said: the richest 1% will own half the world’s wealth in 2016. I think there may have been other claims about a handful of billionaires, but that was the headline.

Then that is the fault of the publication you read a headline in, not the Oxfam Report. The page you link to says nothing about the 1% at all. The PDF you can download from there has 1 page talking about the top 1%, and 8 pages talking about billionaires.

I think you're actually agreeing that that shock headline bears little relation to real life.

No, we've never seen a "shock headline". You said you did, but never quoted it. Credit Suisse said in 2014 that 48% global wealth was owned by the top 1%. That's accurate; it went from above 48% in 2000 to about 46% in 2008, and then started climbing again. If that "shocks" you, maybe you need to read a bit more.

I think you're accusing me of right-wing nonsense.

Nonsense, definitely; it was scrumpjack who said the Oxfam use of the Credit Suisse figure was "leftwing".

p.s. You reference a US figure:
High Net Worth Individuals (investable wealth over $1 million),

You referenced a US figure. That came from World Wealth Report, the publication you thought told you the total wealth of the world, when it told you the wealth of the world's HNWIs.

The UK definition of a High Net Worth individual is just £250k. So you can be HNW here without being rich enough to buy a house in southeast England.
In fact I was myself officially HNW for a while before buying a house, and I'm in an area of house prices close to the national average: there's still no way I could afford London or several other expensive cities.

Which is extremely irrelevant. There more than 1 definition of "High Net Worth", some just on wealth, and some on income and wealth:

In the UK, Her Majesty’s Revenue and Customs (HMRC) amended their definition of a High Net Worth Individual in 2016 and anyone with assets valued in excess of £10 million was categorised as such.

https://www.theprivateoffice.com/specia ... l-advisers

Or the FCA definitions:
In the United Kingdom, a High Net Worth Individual (HNWI) is an individual who has self-certified that:

They had, during the financial year immediately preceding the date in question, an annual income to the value of £100,000 or more; or

They held, throughout the financial year immediately preceding the date in question, net assets to the value of £250,000 or more. Net assets for these purposes do not include:

the property which is the individual’s primary residence or any loan secured on that residence;

any rights of the individual under a qualifying contract of insurance within the meaning of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;

any benefits (in the form of pensions or otherwise) which are payable on the termination of the individual’s service or on their death or retirement and to which they are (or their dependents are), or may be, entitled.

https://www.syndicateroom.com/learn/glo ... idual-hnwi

So that would be a definition that talks about income - and excludes the primary residence (so, that would have to be talking about buying a 2nd home). And, ironically for this thread, that excludes future pensions benefits.


So by that latter definition would an individual in the UK aged over 55 with £1 million in a SIPP be a HNWI ? After all they can at any time they wished take out £250,000 tax free from that SIPP.

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Re: The use of wealth in retirement

#337626

Postby UncleEbenezer » September 2nd, 2020, 12:39 pm

ursaminortaur wrote:So by that latter definition would an individual in the UK aged over 55 with £1 million in a SIPP be a HNWI ? After all they can at any time they wished take out £250,000 tax free from that SIPP.


One of those questions - like going straight from HNW[1] to poverty[1] by simply blowing one's wealth on a very modest house - that highlights the absurdity of the discussion.

As that blog post was attempting to do, with one particular headline.

[1] Definitions published by UK government bodies in both cases.

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Re: The use of wealth in retirement

#337646

Postby Alaric » September 2nd, 2020, 1:10 pm

UncleEbenezer wrote:One of those questions - like going straight from HNW[1] to poverty[1] by simply blowing one's wealth on a very modest house - that highlights the absurdity of the discussion.


General reasoning would suggest that if comparing two individuals of the same age and equivalent net assets, one with a full State Pension, and one without, the one with the full State Pension would be regarded as "better off".

An entitlement to a lifetime income is not liquid or realisable, nevertheless someone with such an entitlement could be regarded as wealthier than someone without. Better off certainly.

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Re: The use of wealth in retirement

#337648

Postby hiriskpaul » September 2nd, 2020, 1:27 pm

Converting capital to income and income into capital is a bed and butter financial activity. How an income stream cannot be considered part of anyone's wealth flies in the face of everyday finance.

Person A has £100k per year pension their own £1m home and 10k savings. Person B has £10k pension, £100k savings and rents. Who is more wealthy? If it is B then there is something wrong with the definition of wealth.

If A borrows 300k and buys a second home does their "wealth" instantly rise?

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Re: The use of wealth in retirement

#337652

Postby Alaric » September 2nd, 2020, 1:43 pm

hiriskpaul wrote: Who is more wealthy? If it is B then there is something wrong with the definition of wealth.


It's a definition which restricts "wealth" to being readily realisable. If that definition is used as a basis for studies into inequality, those studies are not likely to present particularly sensible answers.

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Re: The use of wealth in retirement

#337675

Postby scrumpyjack » September 2nd, 2020, 2:44 pm

Alaric wrote:
hiriskpaul wrote: Who is more wealthy? If it is B then there is something wrong with the definition of wealth.


It's a definition which restricts "wealth" to being readily realisable. If that definition is used as a basis for studies into inequality, those studies are not likely to present particularly sensible answers.


No but perhaps the aim is not to present sensible answers but rather to present the author's desired conclusion however much that flies in the face of common sense.

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Re: The use of wealth in retirement

#337694

Postby tjh290633 » September 2nd, 2020, 4:19 pm

It is interesting to look at the maximum State Pension on could have received at various retirment dates. I retired in 1998, which happened to be the year that SERPs reached their maximum entitlement, having been started 20 years previously. I also got the full amount of Graduated Pension.

In that year the Basic State Penion was £64.70, the original SERP was £112.00, the second type of SERP was £5.04 and Graduated Pension was £6.97, making a total of £188.71 per week. That was, of course indexed by the various methods. I believe that the current value is £346.77.

I do not believe that it was possible to have achieved a higher State Pension since that date, taking indexation into account. You could only get that amount if you had not been Contracted Out from SERPs.

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Re: The use of wealth in retirement

#337770

Postby EthicsGradient » September 2nd, 2020, 11:09 pm

ursaminortaur wrote:
EthicsGradient wrote:Or the FCA definitions:
In the United Kingdom, a High Net Worth Individual (HNWI) is an individual who has self-certified that:

They had, during the financial year immediately preceding the date in question, an annual income to the value of £100,000 or more; or

They held, throughout the financial year immediately preceding the date in question, net assets to the value of £250,000 or more. Net assets for these purposes do not include:

the property which is the individual’s primary residence or any loan secured on that residence;

any rights of the individual under a qualifying contract of insurance within the meaning of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001;

any benefits (in the form of pensions or otherwise) which are payable on the termination of the individual’s service or on their death or retirement and to which they are (or their dependents are), or may be, entitled.

https://www.syndicateroom.com/learn/glo ... idual-hnwi

So that would be a definition that talks about income - and excludes the primary residence (so, that would have to be talking about buying a 2nd home). And, ironically for this thread, that excludes future pensions benefits.


So by that latter definition would an individual in the UK aged over 55 with £1 million in a SIPP be a HNWI ? After all they can at any time they wished take out £250,000 tax free from that SIPP.

Yes; it's the FCA definition, and they are looking at what investment advice can be given to such an individual, such as "non-mainstream pooled investments". It's not surprising that they wouldn't want to include the worth of a primary residence in that.


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