Bullworker
by Doug Brodie
/1. Ageing: from a Bullworker then to a Garmin watch now – things change.
Planning your retirement when you are 28 is laudable; mapping out your retirement lifestyle when you’re in peak Bullworker mode is probably going to be somewhat inaccurate. What you saw as important at 28 is likely to be less so now you’re 62 which is evidenced by the fact that you are reading this today and not sitting in a field in Glastonbury.
(Far Out / Steve Dean)
“How much???!!”
From the original £1 per ticket in 1970, to £16 in 1985, £185 in 2010 the price per ticket has now climbed to £378.50. In the last six years the price has climbed at twice the UK rate of inflation. By way of reference, a bottle of Louis Roederer champagne is ‘only’ £250 and the top price for Il Trovatore at the Royal Opera House this July is ‘just’ £270, - or spend a weekend exploring Istanbul for £245 with Easyjet.
Your inflation is not the same as that for those below 40 – you’re not likely to be buying as many Nintendo Switches (no, they’re not real switches, I already asked). Your money is going to be spent in different ways and your attitude to money will be very different: the all enthralling optimism of you, when money is something to be earned rather than cared for, has given way to the opposite where the curating is all due to the fact that the earning has stopped (pretty much).
Over the past two decades, the cost of living in the UK - as measured by the Consumer Price Index (CPI) - has risen substantially. In 2005, the CPI index stood at 78.11; by 2024 it reached 133.85, a cumulative increase of roughly 71% (133.853 ÷ 78.112 ≈ 1.7146). To maintain the same purchasing power that £1,000 afforded in 2005, a household would need about £1,714 in 2024.
Back then, you’d have needed 5,556 shares in Merchants Trust, at a cost of £21,323. Last year the income you’d have received was £1,616, a yield to cost of 7.6%. And your shares are now worth £31,280. It all started in 1889, so it’s got legs and a very, very long track record:
“ ……. the present day Merchants has a very different investment strategy to the one of 1889, the Trust was set up to deliver something very similar to what it does today: to invest in a diverse group of investments in order to provide investors with an opportunity to benefit from some of the growth industries of the era.
Merchants’ initial objective was to deliver healthy dividends of perhaps 5 to 6% plus capital growth, by investing in North American railway expansion, as well as in other continents, countries and industries. This approach proved robust enough for the Trust to survive various panics in its early years, when it had experienced all manner of market conditions but still managed to pay out to its founding investors healthy and gradually increasing dividends.”
Inflation is the increase in the selling price of goods, services, commodities and utilities – as those prices rise so does the unit revenue of the sellers, so the turnover increases, then the profits and hey presto the shares rise too. The better straight line though is the free cashflow increase caused by the price increases of products being sold.
/2. MSCI World, 10-year annual returns – 14.5% or 0.9% for exactly the same investment.
From +14.5% to +0.9% the annualised return from the markets is a moving target and is never fixed. Mr Angry who bought his investment in 2000 was pretty much still out of pocket by 2012. Ms. Chirpy who invested in 2012 thinks investing is dead easy, nothing to it, look how much money she’s made, clearly passive investing is the way.
The point is that the markets are permanently unpredictable, which is why we do not advocate using total return as a method of pension investing – in the UK you don’t have to, because the investment trusts do all the heavy lifting for you. Look at the annual returns in the table above – how would we plot predictable, reliable growing pension income from year to year? As the man said: ‘I wouldn’t start from here…’.
/3. Why the FT wrote about Chancery Lane.
In their edition of 13th June the FT ran an article talking about a pensions webinar that Moira O’Neill hosted the previous week – the top concern was beating inflation. This is every pensioner’s biggest single risk.
Helpfully provided by Fidelity, the purchasing power of a £1m pension pot would fall to £820k with 2% inflation and £660,000 with 4%. As we’ve just seen, inflation spikes – the 2022 jump to 11% was followed by 2023 with 9%. It’s consecutive years that bury us, not one event. After 2022, the price of a £120 shopping basket jumped to £133, and after 2023 it had climbed to £145. The juniors will read about it in economics books, but you and I lived through the 24% inflation of 1974, the three-day week and the power cuts.
You’ll nod as you read the stats, this is something you know, something you remember; well don’t hold long term sums of cash, as that is simply guaranteed to fall every year and the compounding of the numbers above will simply decimate that £ dans ta poche. If you need further evidence, you can swap all your pension money for a level annuity at age 60 and get a yield of 6.6%; or you can add RPI linking to that and the rate 4.3% - a rate that is 35% lower.
You choose!
If you allow inflation to compound and cut the real value of your investment, the other huge problem is that the amount of growth required to return your pot to par grows faster – the arithmetic is asymmetrical, and works in the same as if you were actually spending that money:
/4. The data on gold – should you?
No, probably not (unless it’s for jewellery).
In the current UK environment, gold can play a useful - but limited - role in a pension portfolio. As a traditional “safe-haven” asset, gold offers diversification benefits thanks to its low correlation with equities and bonds: during periods of market stress or rising inflation, gold prices often move in the opposite direction to risk assets (royalmint.com).
For example, gold rallied by 27% in 2024 and a further 28% by mid-2025 amid geopolitical tensions and inflationary pressures, underscoring its hedge qualities.
However, gold does not produce income - unlike equities (through dividends) or bonds (through coupons) - and holding physical bullion entails storage and insurance costs, which can erode overall returns. In contrast, a balanced pension fund may hold UK gilts or corporate bonds yielding 4–6% per annum, plus dividend-paying equities, improving cashflow and retirement income.
In the UK, individuals can hold physical gold within a Self-Invested Personal Pension (SIPP) since 2006, subject to minimum purity and storage requirements (thepuregoldcompany.co.uk).
Yet, most default DC pension schemes currently have no gold exposure, and recent policy reviews (e.g., the Pensions Investment Review) have not mandated allocations to precious metals, focusing instead on infrastructure, private markets, and diversification across equities and bonds.
Given gold’s volatility and lack of yield, at most someone could have a modest allocation - often between 3% and 10% of the total portfolio - to capture its downside protection without sacrificing income or growth potential, although allowing shares to flex means you don’t have to give up the income stream that pays your bills. A small allocation can smooth capital returns over market cycles, but increasing exposure beyond 10% would definitely undermine long-term growth and pension income needs.
In summary, for UK pension investors facing uncertain inflation and geopolitical risks, a limited gold allocation can enhance diversification and protect purchasing power. However, it should complement - not replace - income-generating assets within a broadly diversified retirement portfolio. (We don’t recommend it, it doesn’t pay income).