Estimating the value of an inflation-capped pension from market data

The University Superannuation Scheme (USS) is planning to introduce a cap of 2.5% for inflation adjustments to its members’ accrued pensions. The effect of this cap is to increase new accrued pension benefits in line with official consumer prices (CPI) but only up to 2.5% per year. If inflation runs hotter than 2.5%, that year’s …

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Inflating away your pension — 2021 update

This is an update to my earlier estimate of the effects of an inflation cap on USS pensions. I have added the two most recent years of CPI data and extended the time series of inflation by added earlier years from 1971, the year of the Nixon shock and the de-facto end of the Bretton …

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Tax simplification or entrepreneurship tax? Founders vs investors in the OTS report

The recent report by the Office of Tax Simplification (OTS)[i] recommends a range of policy adjustments to simplify the administration of the capital gains tax (CGT) and remove biases and distortions of behaviours.[ii] One of the recommendations suggests to align CGT and income tax (recommendation 1), in particular for owner-managers who may have a choice …

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The smooth double Pareto distribution – A model of private equity returns

New working paper: Whether returns of venture capital and private equity investments exhibit fat tails, particularly in the upper tail, affects how entrepreneurs and investors view the attractiveness of such investments. Using fund performance data, we propose and test a random growth model with a random initial valuation of funds to explain the observed distribution …

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Endogenous financial constraints and innovation

with Andrea Mina Industrial and Corporate Change, 2020, full version available from the journal. Abstract: We investigate which indicators of a firm’s innovation activities are associated with financial constraints and analyze the nature and direction of causal links between innovation and financial constraints. By estimating simultaneous bivariate probit models on data from the UK Innovation …

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