I want to make my money work for me. I dont mind having a side project - such as a buy to let - but would appreciate some thoughts. Should I just pay more into my pension? Should I pay off my mortgage quicker? Invest in stocks and shares?
Answers - No. No. Yes. Possibly - but ONLY if you REALLY know what you are doing and understand that sector of the market! Tip - subscribe to a good stock-ticker and share analysis service like Simply Wall Street. Try that one for free, but others are available!
I'll expand on that -
Back in 1923, you could buy a nice, four-bed house with a big garden in Lichterfelder - a really desirable part of South Berlin - for four ounces of gold or for about $100. I have on my desk a 5 million Reichsmark note from 1923. I paid €1 for it; the most value it ever achieved!
But back to the OP's topic - pensions and calculating the true value of any pension. This is important!
When comparing value over time, it is vital to
compare values of anything in terms of work-hours and true money - i.e. gold.
Let's look at houses and the annual pay for unskilled labour (aka modal gross income).
1970 House - £3667. Pay - £1400. Gold - £36 per oz.
So a 1970 house cost 102 ounces of gold or 2 yrs and 8 months labour.
2025 House - £268,000. Pay - £26,000. Gold - £2,300 per oz.
So a house today costs 115 ounces of gold or 11 years labour.
Conclusion
Nominally, you've never had it so good!
Realistically, you've lost about 75% of your income.
You've never had it so bad!
Why?
Because fiat currencies are failing. Gold and labour are the true currencies you must measure things in!
When the ONS or the government are talking about the average (mean) income or the median income (as many earing more as do earn less)
they are being deliberately misleading.
It is the mode or modal income you must look at - but that is the one figure they have to hide. It is the figure the largest number of full-time employees receive. The income you are most likely to get!
It is also the one figure the ONS is careful to not collect or publish! Were they to do so (and they used to until about 1980) it would show just how extreme inequality has become. While Fork-Lift Fred is on £26k gross, the top 5% are on £90k and that makes the average nearly £40k.
Until 1975, the government published annually the price of unskilled labour and this figure was recorded in Hansard. By 1980, the pound had lost so much value that houses went (average) from £9,036 to ££19,213 and gold went from £160 per oz. to £615 per oz. and everyone in government kept quiet about the price of unskilled labour - for fear of frightening the horses!
What happened was the various inept and incompetent governments (both left and right) had managed to destroy the true purchasing power of the currency.
We are now watching Trump do the same for the dollar.
I, for one, am quite enjoying the spectacle! This is where I get to gloat and say "Suck it up kids! I told you so!" Well, not just me, but every mainstream (i.e. Austrian School) economist has been saying the same for the past umpteen years. Or as Milton Friedman said
"There's no such thing as a free lunch!"
So whilst I bask in the joys of unearned Schadenfreude, those are the lessons you must take into account when planning your pension.
Just don't hoard today's equivalent of the Reichsmark. (Pound, Dollar, Euro, etc.)
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