Abstract
In Greek mythology, Sisyphus was punished by the gods to be condemned for eternity to push a boulder up a hill, only to see it roll down again. This is exactly what happens to your savings.
In the last two chapters, I introduced the capital markets and described how they are largely determined by governments.
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Notes
- 1.
Index Mundi: http://www.indexmundi.com/taiwan/total_fertility_rate.html accessed as at 5 December 2016.
- 2.
See for example Robert Holzmann and Richard Hinz (2005) Old-Age Income Support in the Twenty-First Century: An International Perspective on Pensions and Reform World Bank.
- 3.
See for example Robert Holzmann and Richard Hinz (2005) Old-Age Income Support in the Twenty-First Century: An International Perspective on Pensions and Reform World Bank.
- 4.
Drucker (1976) The Unseen Revolution: How Pension Fund Socialism Came to America (New York: Harper & Row).
- 5.
Pensions Policy Institute: http://www.pensionspolicyinstitute.org.uk/pension-facts/pension-facts-tables/private-pensions-table-27 accessed on 5 December 2016.
- 6.
Data from Pension Protection Fund, quoted in This is Money http://www.thisismoney.co.uk/money/pensions/article-3686601/Total-deficit-final-salary-schemes-soars-90bn-384bn-Brexit-hits-funds.html
- 7.
I have used the summary provided by Rachel, L and Smith, T (2015) Secular drivers of the global real interest rate Bank of England Staff Working Paper No 57.
- 8.
Mishkin, F and Posen, A (1998) Inflation Targeting: Lessons from Four Countries NBER Working Paper No. 6126 and Fouejieu A and Roger, S (2013) Inflation Targeting and Country Risk: an Empirical Investigation International Monetary Fund Working Paper.
- 9.
The Economist 9 March 2015 “What is quantitative easing?”: http://www.economist.com/blogs/economist-explains/2015/03/economist-explains-5
- 10.
Shiller, R (2000) Irrational exuberance Princeton University Press.
- 11.
I have used Rachel, L and Smith, D (2015) Secular Drivers of the global real interest rate Bank of England Working Paper number 571 as a good summary.
- 12.
My example is taken from a recent report: RSA (2010) Tomorrow’s Investor: Pensions for the people: addressing the savings and investment crisis in Britain Royal Society of Arts. When this report came out, it was heavily criticised for using a figure of 1.5%, as most annual management charges are less than this. However, the average Total expense ratio on UK equity funds is actually higher, so this figure is conservative.
- 13.
RSA (2010) Tomorrow’s Investor: Pensions for the people: addressing the savings and investment crisis in Britain Royal Society of Arts
- 14.
RSA (2012) Seeing through Britain’s pensions Royal Society of Arts.
- 15.
Value Edge Advisors Nell Minow Interviews the Authors of “What They Do With Your Money” https://valueedgeadvisors.com/2016/06/22/nell-minow-interviews-the-authors-of-what-they-do-with-your-money/ accessed 5 December 2016.
- 16.
Financial Services Consumer Panel (2014) Investment Costs – More than Meets the Eye http://www.trueandfaircampaign.com/wp-content/uploads/2014/11/financial-services-consumer-panel-discussion-paper-investment-costs.pdf
- 17.
Lane Clark & Peacock (May 2013) LCP Investment Management Fees Survey 2013.
- 18.
Professional Pensions http://www.professionalpensions.com/professional-pensions/news/2362085/railpen-to-reduce-external-managers-over-fee-concerns accessed 5 December 2016.
- 19.
Total charges in UK from Khorana, A., H. Servaes and P. Tufano (March 2009), “Mutual Funds Fees Around the World”, Review of Financial Studies, Vol. 22, Issue 3, 1279–1310.
- 20.
True and Fair Campaign (2014) 2nd Anniversary Report – Legalised Looting http://www.trueandfaircampaign.com/wp-content/uploads/2014/03/true-and-fair-campaign-2nd-anniversary-report-legalised-looting-march-2014.pdf
- 21.
I have added the paper’s estimate of average trading cost to expense ratio Edelen, R. Evans, R. & Kadlec, G. (2013) Shedding Light on Invisible Costs: Trading Costs and Mutual Fund Performance.
- 22.
I have differed in my approach here from RSA; RSA compares funds at retirement; however, fees continue to be deducted after retirement which I have included.
- 23.
I must admit that I have been somewhat selective in my choice of index here, for example at the time of writing the main US index, the S&P 500 is soaring because of the “Trump effect”, which says a lot about the rationality of the markets.
- 24.
For example, see Lipper (2012) Beating the Benchmark.
- 25.
Financial Times 24 October 2016 99% of actively managed US equity funds underperform https://www.ft.com/content/e139d940-977d-11e6-a1dc-bdf38d484582 accessed 5 December 2016.
- 26.
UKTI (2015) Fund management in the UK https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/478378/UKTI_Asset_mgmt_broch_B5_RC_AW_DIGIAL.pdf accessed 5 December 2016.
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Silver, N. (2017). The Sisyphus Savings System. In: Finance, Society and Sustainability. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-56061-2_4
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DOI: https://doi.org/10.1057/978-1-137-56061-2_4
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