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Nudge, the Diet Coke investment and the 1983 pound

13/10/2017

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This week Dr Richard Thaler won the Nobel Prize for Economics. He’s the self-described ‘lazy’ behavioural finance expert who wrote the book ‘Nudge’ and has advised the UK Government (amongst others) about how to tackle the pensions savings gap. 

His work will impact many of us. The basic gist is that we can encourage better behaviour around concepts like saving by how we position people’s choice. “Choice architecture.” Here’s an example. If your workplace pension gave you the choice of a fund which aimed to return 3%, 5% or 7% over the long-term, most of us would select the 5% option. If they gave us the choice of a 1%, 3% or 5% option, most of us would probably plonk for the 3%. It’s all about how we frame the question and position the defaults. It's a bit like choosing the wine which isn’t the cheapest but second from the bottom!
 
He also talks about the ‘Save More Tomorrow’ concept.  Investing has always been a hard gig to sell because you’re essentially selling deferred gratification. It’s bit like asking a 5 year old if they want one Chupa Chups now, or two Chupa Chups in an hour.
 
However, we’re much more likely to agree to good behaviour in the future. So if we get the choice to say, “yup, when I get a pay rise next time, stick 10% of that into my pension automatically” – well that doesn’t hurt so much. I recommend his books for some insights into how our flawed minds make decisions!!
 
The £1 investment
 
Next up, Aviva has been shopping. Last week they took a majority stake in tiddler Wealthify (a so-called ‘robo adviser’). When we’ve tested Wealthify, lots of people have loved it (not for your traditionalists, mind) but felt nervous about the small new brand behind it. Well that fear is largely alleviated now. Here’s why I mention it. Wealthify are so keen to build a customer bank that they will let you open an investment account with just one pound. One measly quid! Now there ain’t much downside risk in that! For any nervous bystanders to the stock market, that is the best possible way I can think of to get the investor experience whilst limiting the downside risk to the cost of a bottle of Diet Coke! We get asked a lot by parents with young adult kids how they can get them started – here’s an option. Frankly, everyone in Britain who doesn’t have an investment account should go and open an account there today until the new Board ups that minimum!
 
Adios round pound
 
Now talking of pounds (did you like that smooth transition!?) from midnight on Sunday the old round pound which has been with us since 1983 will cease to be legal tender. You can either adopt my daughter’s suggested approach and “spend it all on chocolate on Saturday” or just take 5 minutes to sort through the coin jars/ piggy banks/glove box in the car, and use up the coins over the weekend. If you don’t get to this, you should be able to take old coins to a branch of your bank and exchange them there after Sunday’s deadline. Given that not every supermarket trolley/parking meter/ticket machine has been adapted yet, it’s probably not a bad thing to keep a few old ones rattling around.
 
Trustpilot
 
Finally we threw ourselves on your mercy this week and opened up a Trustpilot account. With the hope that most of you would say nice things about us and help to spread the word. Thank you so much to everyone who did – so far so good! If you have enjoyed our stuff/learnt anything/been helped, we’d really appreciate a review.

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Pension freedoms explained in 60 seconds

Georgie challenges Holly to explain all about pension freedoms in 60 seconds!

Pension freedoms explained in 60 seconds

Related Questions

Got a Question?

  • I'm thinking of moving into a drawdown SIPP, taking my 25% and leaving the rest invested until I need a regular income in my mid 60s. I am trying to find a financial adviser willing to review my plans, but they all want an ongoing relationship. Where can I find an adviser who will do a one off review? Also I am unsure whether financial investment protection is per fund or per SIPP.

    Susan | London | 16/07/2019 | 0

    • Private Pension
    • Pension
    • Workplace Pension
    Catherine Morgan's Response

  • I have an inheritance to invest of £150,000. I am not paying into a pension at the moment but have £125,000 in my pension pot, and have fairly substantial money in Stocks and Shares ISAs. Should I put more into stocks and shares over a 10 year period, add to my pension funds, or invest in bricks and mortar with no mortgage?

    Mark | West Midlands | 12/07/2019 | 3

    • Stocks and Shares ISA
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    Simon Bullock's Response

  • I am looking at consolidating my different pension pots. My main concern is - will I lose out by transferring my Civil Service pension to a new place? By the way, I am loving Boring Money! I’m really keen to start taking control of my finances and it’s proving so helpful... not making me feel like a clown for not understanding all the financial faffery! Thanks!

    Hannah | Herefordshire | 08/07/2019 | 0

    • Private Pension
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    Helena Wardle's Response

  • I am thinking of setting up a SIPP to diversify my investments and spread the risk. I'm nervous about doing my own investments, so I don't really know where to begin. Are there SIPPs which do it for you? Or if not, should I continue investing in my previous workplace pension?

    Holly | Sussex | 03/07/2019 | 0

    • Private Pension
    • Stocks and Shares ISA
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    Lesley James's Response

  • I work for my company which funds my SIPP directly. I will be receiving compensation in the coming months - is it possible to pay SIPP contributions from the compensation payment? If pension significant contributions are not possible, what might we consider when looking for a tax efficient home for the compensation?

    Andy | Lancashire | 12/06/2019 | 3

    • Private Pension
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    David Stone's Response

  • I have two pension pots, one of which is a stakeholder - this one is currently worth £120,000 - the other is approximately £50,000. I will be 60 in 4 years time and am anxious that my pots may not be growing fast enough. I currently input £300 per month into the Stakeholder. I do not intend to access either of these accounts until I am 65. Can I combine both these pensions, or should I leave them as is? I would appreciate an opinion on this. Many thanks, Maggie

    Maggie | Gloucestershire | 29/05/2019 | 0

    • Private Pension
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    Helena Wardle's Response

  • Hello, I already have a workplace pension. Can I also have a private pension? If so, I have a LISA as well. Can I have all three in place?

    Precious | Surrey | 23/05/2019 | 0

    • Private Pension
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  • I am a self-employed 55 year old, with only a state pension. What can I do to increase my money for retirement?

    Sandra | Dumfries and Galloway | 21/05/2019 | 1

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    Helena Wardle's Response

  • I'm a 30 year old woman earning a reasonable salary with a low cost lifestyle. I have saved almost £8,000 and want to start investing. I like the idea of using a robo-investor like Wealthify, but I'm not sure if it's better to start with a Stocks and Shares ISA instead? Should I go with a Stocks and Shares ISA or a Robo Advisor, or both?

    Kate | London | 29/04/2019 | 4

    • Stocks and Shares ISA
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    Pete Matthew's Response

  • I am a British/Irish citizen living in Malta and have between £5k-£10k to invest for 5 years. Clearly, ISAs are out as there is a requirement to be a UK resident. I am happy to accept a medium level of risk, and would appreciate some info on where to put this to maximise returns.

    Phil | Malta | 25/04/2019 | 4

    • Stocks and Shares ISA
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    Zoë Dagless's Response

  • I am a beginner investor and would like to invest in a "socially responsible" Stocks & Shares ISA. I have looked into the Nutmeg and Wealthify funds. Is there information about any other such providers on your website? And do you have any advice about how to compare the "socially responsible" criteria on the different funds?

    Joy | Glamorgan | 16/04/2019 | 1

    • Stocks and Shares ISA
    • Robo Adviser
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    Phoebe Smith's Response

  • I'm in my very early 20s, and earning well. I have no debts or dependants. I have a Stocks and Shares ISA, and am weighing up the pros and cons of a General Investment Account vs a Private Pension. What should I keep in mind?

    Cecily | Berkshire | 08/04/2019 | 0

    • Private Pension
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    Tommy Watson's Response

  • I have two separate company pensions from previous employers. For the last 12 years I have not contributed to a pension. I am now 44 and know I need to put money into one. I'm not financially aware and the robo providers sound tempting but, obviously, I want the possibility for the best return at medium risk. Your Q2 2018 results update showed Nutmeg’s Portfolio 10 as returning different figures than the Best Buys page for Nutmeg says. Why are these figures so different? Is Vanguard Lifestrategy 60 a good choice, though they don't have a SIPP.

    Dave | West Yorkshire | 26/03/2019 | 0

    • Private Pension
    • Robo Adviser
    Lesley James's Response

  • For the last 9 months I've drip fed just over £10,000 into a Moneyfarm Investment ISA... it has been a very volatile year as you know. Moneyfarm seem to have done a good job of protecting my capital... however I haven't really made much in the way of gains... If I wanted, would I be able to transfer the whole lot to another platform where the fees are lower? I know you're not allowed to give regulated advice - but I'm uncertain if I should transfer the whole lot in one go, or drip feed.

    Robert | UK | 14/03/2019 | 3

    • Stocks and Shares ISA
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    Holly Mackay's Response

  • I am in my mid 20s & earning a regular salary. I have decent savings and am toying with the idea of Wahed Invest (I am looking for shariah compliant funds). I am also dabbling with the idea of property. If I have no financial commitments (living at home for next 2 yrs), is it worth using 90% of my savings for a house deposit for buy-to-let purposes? I am thinking this would reduce my loan to value?

    Zara | West Midlands | 12/03/2019 | 0

    • Lifetime ISA
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    David Stone's Response

  • I have about £100 monthly extra I want to invest, but I am not sure if my ISAs represent good value. I thought I could put the money in a higher risk investment, as it is money I can invest over 5-10 years, and had thought Nutmeg might be a good option as I have little investment experience. Am I right in thinking I can only contribute to one Stocks & Shares ISA at a time in my name? I could just put more money into my existing ISAs. What do you think?

    Colin | Lothian | 11/03/2019 | 0

    • Stocks and Shares ISA
    • Robo Adviser
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    Holly Mackay's Response

  • My 60 year old mum is not very financially literate and has has no private pension. She has approximately £900k to invest, from which she will need to draw down c.£40k a year for life. She is not very financially literate and would not be able to proactively manage the money herself. Would you favour an Independent Financial Adviser or a Robo Adviser for someone in her position? Thank you!

    Harry | Kent | 11/03/2019 | 1

    • Private Pension
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    • Online Investment Platforms
    Holly Mackay's Response

  • I am 47 and I would now like to open an investment ISA for growth for at least 10 years. I am tempted by the Vanguard LifeStrategy 80 due to the low fees and strong reputation. I would also consider investing in a couple of other Vanguard funds as well. Would this be advisable or relatively unnecessary, if I'm already investing in the LifeStrategy fund? I have also been looking with interest at Nutmeg, Wealthify, IG and AJ Bell Youinvest. Is there any provider that would stand above the others as most suitable in my circumstances?

    Matt | South Yorkshire | 11/03/2019 | 0

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    Holly Mackay's Response

  • I am 65 and still working. I have a workplace pension, which was closed and replaced with a retirement saver pension. I contribute to this via salary sacrifice. I also have a personal pension serviced by an IFA. Should I move my personal pension fund to a SIPP provider at this late stage of my life? I would like to consolidate the workplace retirement saver and personal pension fund together and manage it myself.

    Den | South Yorkshire | 27/02/2019 | 0

    • Private Pension
    • Pension
    • Workplace Pension
    Helena Wardle's Response

  • Trying to get a bit more pro-active with my pension. If my money had been in an online managed fund like Nutmeg for example, is it reasonable to assume that as the markets fell last year the funds would have been managed in real(ish) time to limit the damage? If so, is it therefore a no-brainer to transfer my pension to an online managed pension or is it not quite as simple as that?

    David | London | 08/02/2019 | 2

    • Private Pension
    • Robo Adviser
    • Pension
    Lesley James's Response

  • I recently came across your blog and it has been a great introduction to learning about my personal finances. I was wondering if you could recommend any additional resources (websites, books, online help) for beginners and that are tailored to the UK market. I am in my early 20's and I'm looking to further my knowledge of money, and foster a greater relationship with it. In addition to that, I'd like to know your opinions on how the possible outcomes of Brexit will affect the market and potential personal finance investments.

    Rita | London | 23/01/2019 | 0

    • Stocks and Shares ISA
    • Robo Adviser
    • Online Investment Platforms
    Phoebe Smith's Response

  • With a SIPP in drawdown would a company like Netwealth whose investment management fees are of the order of .66% of the value of the portfolio, be a better option compared to companies like Hargreaves Lansdown or Investec? What are the relative benefits of Netwealth over the more traditional wealth managers?

    Steve | Lancashire | 22/01/2019 | 6

    • Private Pension
    • Robo Adviser
    • Online Investment Platforms
    Helena Wardle's Response

  • Is there a Robo Investor who provides both income and growth for those who are retired? (There must be a large market for this?) It seems to me that at the moment all the Robos focus on long term growth and reinvesting dividends - which is fine if you are younger.

    David | 18/01/2019 | 1

    • Robo Adviser
    Dr Richard Bradley's Response

  • I’m new to investing and in my late 30's. I'm actually stuck in a dilemma whether to invest using DIY platforms like Interactive Investor, A J Bell or Hargreaves Lansdown OR invest using robo advisors like Nutmeg, Moneyfarm or Pensionbee. I have compared the fees and they are not significantly different. Do robo advisers have a better return rate? I can dedicate some time to DIY investing but not a significant amount of time. Please advise. Thank you.

    Victor | Kent | 14/01/2019 | 1

    • Robo Adviser
    • Online Investment Platforms
    Phoebe Smith's Response

  • I have an old pension and they have written to me saying that they are going to enhance my pension if I transfer it out. The company is also offering free independent advice. I have £117,000 in the pension at the moment, which would give me £6400 a year at 65. I am 61 in April and would like to finish work at that point. I am not sure how much extra they will give me. Have you any ideas or suggestions to help me decide? Thanks.

    Nicholas | Carmarthenshire | 04/01/2019 | 0

    • Pension
    • Workplace Pension
    Lesley James's Response

  • From my retirement I received a lump sum of money and a monthly pension. I have £100,000 that I do not need for the foreseeable future... One of my main concerns with Financial Advisers are their costs... All I want is simply to see this money grow to its potential, sensibly and above inflation... Therefore my next thoughts are Stocks and Shares ISAs... My only concerns here are the current Brexit problems - I saw the FTSE drop this past week. I cannot find any information out there to assist with my decision making if this is certainly a good time to invest... I am aware that I can place £20,000 for this year. Come April 2019 I place another £20,000 and so on until the £100,000 has been utilised. Do I have to place it into the same fund or can I choose another different fund with a different company?... Please can you help to ease some of this burden, which has proved an awful part of my retirement and made me frightened to spend any money.

    Katherine | Derbyshire | 02/01/2019 | 0

    • Private Pension
    • Stocks and Shares ISA
    • Cash
    • Robo Adviser
    • Online Investment Platforms
    • Workplace Pension
    Helena Wardle's Response

  • I’ve been investing in Nutmeg’s Risk 10 profile for three years which helped my deposit for my house. I am now wondering whether to use Nutmeg again, or should I use LifeStrategy for my £1000 per month? Is there a difference between Vanguard's LifeStrategy option and let’s say a well known robo adviser like Nutmeg? I am still a beginner and would like to keep things simple, but happy to take risk and prepared to leave my investments for a long time.

    Jordan | Surrey | 26/11/2018 | 9

    • Robo Adviser
    • Online Investment Platforms
    • Funds
    Phoebe Smith's Response

  • Do you have any recommendations for books that I can buy my 18 year old daughter for Xmas on the subject of pensions and investments so she can start to understand the subjects? She's young I know but I would like to get her started. Many thanks!

    Nicki | Devon | 15/11/2018 | 2

    • Robo Adviser
    • Online Investment Platforms
    • Other
    Catherine Morgan's Response

  • I am a 30 year old British expat living and working in the Netherlands. I worked in the UK for 5 years but to my knowledge I did not have a work pension of any sort. I've been working in the Netherlands for the last 4 years, and again have no pension (my company does not provide anything). I'm getting increasingly worried about my future retirement and my lack of any kind of pension. Firstly, I am not sure what - if any - state pension I could receive (either from UK or Netherlands) but I assume not much. Secondly, I'm ready to start investing on a monthly basis into a private pension fund, but I have no idea what the best option for me would be. Really lost and confused, and would really appreciate any advice you might have.

    Lucinda | Kent | 09/10/2018 | 0

    • Private Pension
    • State Pension
    • Workplace Pension
    David Stone's Response

  • My wife, 56, is still working but has a final salary scheme which she is drawing as well - currently £26k per annum. Her current employer's pension scheme is defined contribution, and her fund stands at £1.050m. Therefore, her total pension is around £1.57m. We protected her Lifetime Allowance at £1.25m, but all growth will now be taxed at the excess rate. My idea is to take the 25% tax free amount out of the defined contribution pot, and reinvest it in the same funds as the pension. This will then remove growth on the 25% from the excess tax rate to a capital gain when sold, thereby saving a considerable amount of tax. Am I right?

    Rod | Hampshire | 05/09/2018 | 1

    • Private Pension
    • Workplace Pension
    Danny Cox's Response

  • I'm 24 and would like to begin investing. Am I better off using a robo advisor such as Wealthify/Wealthsimple or a fund such as Vanguard LifeStrategy?

    Amanda | Greater London | 06/08/2018 | 6

    • Shares
    • Robo Adviser
    • Online Investment Platforms
    Holly Mackay's Response

  • I am 73 and cautious. There are two areas that your advice would be helpful..what if you just spend thousands on buying the gold standard footsie companies like shell and the rest and keep them for five years and then cash them in ?

    DB | UK | 24/07/2018 | 6

    • Robo Adviser
    • Online Investment Platforms
    • Funds
    • Pension
    Holly's Response

  • Nutmeg require a minimum investment of £5,000. As I have less than £5,000 per annum income I am a bit confused about how much I can put into a pension. I know the government will only gross up a maximum of £2,880 per year but can I put more than this in and forgo the gross up?

    Barbara | Hertfordshire | 10/07/2018 | 1

    • Robo Adviser
    Richard Allum's Response

  • We have a portfolio of ISAs/PEPs worth around £250k, currently invested via Cofunds, managed by Chelsea and Bestinvest. I'm told this is quite an expensive option regarding platform charges. Are there better options?

    John | Berkshire | 08/05/2018 | 6

    • Robo Adviser
    • Online Investment Platforms
    Helena Wardle's Response

  • Do you have information on taking your pension pot before retirement? My husband is 62, on a final salary scheme & is trying to get clear information on it.

    Jo | 17/04/2018 | 3

    • Pension
    • Workplace Pension
    Helena Wardle's Response

  • I am looking for a fund for myself (54 yrs old) but also my son (19 yrs old). Is this fund suitable for either of us with an investment strategy of 10 years +.

    | 29/05/2018 | 3

    • Robo Adviser
    • Funds
    Holly Mackay's Response

  • I use H&L and although they are a bit 'plumy' on the phone I quite like their website and the costs are OK. So I was thinking of H&L for [my son]. I would be telling him to open these two funds and regularly invest and forget about them for 10 years!

    R | Greater London | 29/05/2018 | 1

    • Lifetime ISA
    • Robo Adviser
    • Online Investment Platforms
    • Funds
    Holly Mackay's Response

  • Can I sort a pension out myself online?

    Sharon | Greater London | 07/09/2017 | 0

    • Pension
    • Workplace Pension
    Danny Cox's Response

  • What's this Auto Enrolment thingy?

    Derek | Greater London | 06/09/2017 | 0

    • Workplace Pension
    Holly Mackay's Response

  • How can I find out how much my State Pension is likely to be?

    Abigail | Greater London | 06/09/2017 | 0

    • State Pension
    • Workplace Pension
    Holly Mackay's Response