Irregular Roundup, 24th August 2026

We begin today’s Irregular Roundup with the state pension age.

State pension age

A recent document from the Office for Budget 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.

• This usually has knock-on effects for private pensions, as SIPPs follow a “state pension age minus ten years” rule.

The report says:

We assume that the state pension rises to 68 in 2037-39, and then to 69 in the 2070s.

Bringing forward the increase will save £6bn a year for the seven years in question.

This is not a massive shock, since the state pension review of 2017 (under Theresa May – remember her?) recommended the change.

• But since the convention in the UK is that pension changes require ten years’ notice, an announcement will be needed in 2027.

So far, Pensions minister Torsten Bell has refused to commit to the age increase, or its timing.

Fundsmith

Star fund manager Terry Smith has dropped his “do nothing” mantra in his flagship Fundsmith Equity fund, after a period of underperformance and outflows for the fund. 

• The original motto of the fund was “Buy good companies. Don’t overpay. Do nothing.”
• But portfolio turnover for 1H26 rose to 52%.

The fund was down 3% for the period, trailing the global index by 14%

• Over three years, the fund has returned 10%, compared to 61% for the index.

Over those three years, the fund has lost £14 bn in assets, leaving “only” £12 bn.

In his latest letter to investors, Smith bemoaned the inflows to passive funds, which support momentum over fundamentals.

In the current momentum 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 enhancement effect. 

The market could ‘remain illogical longer than we can remain in business. There will be little point being proved right about the dangers of passive or momentum investment after our fund has closed.

Passive flows have certainly changed the game, but there are very few star fund managers who have successfully navigated regime change.

• Nobody wants to kill the golden goose.

ISAs

The government has trailed some changes to ISAs. Most notably, the plan to charge tax on interest within Stocks and Shares ISAs.

• Last November, Cash ISAs were capped at £12K per year for under-65s, and the idea is to stop investors holding the extra cash elsewhere in their tax shelters.

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.

• I would also argue that wanting to hold a money market fund at certain points in the economic cycle is a valid aim.

And as always, simplification rather than additional complications would be preferred.

The government also plans to replace the LISA with a new First Time Buyer ISA (the FTBI – not a great acronym).

• The early withdrawal penalty has been removed, at the cost of the bonus being paid at the point of property purchase (which must be via a mortgage).
• This will probably save the government some money.

The price cap for property purchases has not been announced, but let’s hope it is increased so that people in the south-east have a shot at using the FTBI.

• Or perhaps Andy is relying on his Land Value Tax to splash property prices.

Gen Z investors

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.

• But 70% of investors lacked confidence and 58% felt under-informed.

Ben Summers, head of Vanguard UK, said:

That intention to invest doesn’t 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? 

We overstate the investment market risk; we understate the inflationary risk. People don’t invest enough as a result

Steph McGovern also felt that the problem was that people misunderstand investment risk:

We think of money being at risk as ‘I’m going to lose it all’. History tells us that’s not the case and you are losing money essentially by not taking more of a risk, but we just don’t understand it. 

As a society we have a problem with understanding what risk really is ”Never do you hear, for example, on cash Isas: ‘Oh, by the way your capital is at risk of being eaten by inflation.”

Wise words, Smashie and Nicey.

Burnham watch

I’ll 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’t tax-related.

The FT reported that Burnham’s team want to change the UK’s AI strategy, as it is too US-centric, focusing instead on British companies and, more worryingly, British workers and “tech sovereignty”.

A spokesman said:

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’t owned by foreign companies.

A review of existing “AI Growth zones” is planned to make sure that projects “work for their local communities”. That sounds like no data centres to me. 

They also want to make sure that workers who lose their jobs to AI are retrained. Good luck with that.

And they don’t like the driverless cars trial in London:

What’s the point and who’s it for? What’s your plan for dealing with the constituency of people that will be impacted by their introduction, including black cab drivers and Uber drivers?

One: never thought I would hear Labour defending black cab drivers. Two: while we’re at it, let’s bring back horses and buggy whips.

---

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:

The Government extends over £50 billion in pension tax relief, and more than £10 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.

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’ hands, while boosting significantly the returns on these investments in terms of UK business growth, jobs and productivity.

Three cheers for “growth in every postcode”.

Charts

I leave you with a couple of charts.

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.

The second shows that a person on £150K (3.8 times the median salary) pays ten times the median tax.

• Isn’t progressive taxation wonderful? Let’s all work harder, and then we can pay more tax.

---

That’s it for today.

• Until next time.