Aurelia Butler

In this column last week, I speculated how stock market volatility might spook younger investors. However, comments from readers in their 20s and 30s demanded answers to a different investment dilemma. “Could somebody answer how on earth young people are going to buy a house AND save for retirement?” asked 22-year-old Scott Wijayatilake.Voted “top comment” by dozens of other readers, he outlined how his generation faced huge student debts, higher taxes plus an asset bubble that has pushed property prices out of reach, and inflated equity valuations to ridiculously expensive levels. Add slow wage growth and soaring global inflation to the mix, and Scott fears the traditional 60:40 portfolio, split between equities and bonds, is no longer going to cut it: “How you can you build anything resembling wealth with such low returns?”For many young investors, the answer has been to target higher-risk investments.More than one million UK adults bought or increased their holdings of high-risk investments such as crypto during the pandemic, according to research from the Financial Conduct Authority this week.

Video: Where crypto ‘anarchy’ will end | Lex Megatrends

With limited cash to invest and ballooning asset prices, you can see the allure of betting on high-risk assets with the hope of hitting the jackpot. Crypto, peer-to-peer and using trading apps and spread betting platforms to make short-term punts on stocks and foreign exchange are closer to gambling than investing — but given the pedestrian returns elsewhere, young people are tempted to take an “all or nothing” approach. Even those who invest in more traditional ways are moving up the risk curve. Michael, an FT commenter in his 20s, has spent the past 18 months building a tech-heavy portfolio. This initially performed well, but has suffered in recent months: “I bought some dips, but the dips kept coming.”Again, taking a long-term view has been complicated by his twin goals of investing for a house deposit, as well as for retirement (note the average first-time buyer deposit is now over £57,000, and more than double that in London).

A risky strategy, but the length of time to save up leaves cash at the mercy of rising inflation. The government tacitly encourages this route with the Lifetime Isa, which offers a 25 per cent bonus on money saved or invested towards a first property (watch out for the £450,000 property price cap). Rather than invest for both property and retirement, many young professionals select one to target. Deciding which to prioritise is difficult, but at least they have a choice. For many young workers on lower incomes, it may well be neither, as the cost of living squeeze continues.The recent decision to freeze the student loans repayment threshold at £27,295 will cost post-2012 graduates in England and Wales an extra £110 a year, on top of national insurance increases. There’s been no word from officials about when the link with earnings might be reinstated. Because of the way the system works, it’s estimated three-quarters of university leavers will never fully repay their debts. Instead, they will pay an extra 9 per cent tax on everything they earn above the threshold for 30 years until their loans are written off. For grads who are basic-rate taxpayers, every pound they earn above that frozen threshold from April will be taxed at 42.25 per cent (income tax of 20p, national insurance of 13.25p and a further 9p to repay the loan).For those who can afford to get on the property ladder (most with parental help) the rise of the 40-year mortgage is yet another generational shift. Mattcan, an FT reader in his early 30s, confessed to creaming off the returns from the index trackers in his Isa, and using these to overpay his home loan. He took some flak for this risk-averse strategy, but this week’s interest rate rise reminds us that the era of cheap money cannot last for ever. The financial juggling act is further complicated by the high cost of starting a family (note that half of women in England and Wales do not have children by age 30). FT reader Tench finds it impossible to save anything at all since having children: “The nursery fees consume most disposable/ investable income . . . our retirement seems a laughably distant dream.” Recent research by the Institute for Fiscal Studies offers some hope, suggesting those who reduce retirement saving in their 30s but contribute 15-25 per cent of pay in their 40s and 50s could achieve broadly the same result.A hefty sum, but the IFS reasons higher salaries and the tailing off of childcare costs means it’s possible. As student loan debts are written off after 30 years, graduates in their early 50s could be nudged into saving that 9 per cent slice of their salary into a pension instead.

However, constant tinkering with rules governing pensions and the student loans system makes it impossible for young people to plan with any degree of certainty. There are no guarantees that the 30-year cut-off will not be extended in the future. Furthermore, readers grappling with the nightmare of the annual allowance taper (which gradually reduces what higher earners can save into a pension from £40,000 to just £4,000 a year) will laugh at the idea of ramping up their contributions in later life. Plus, if your employer pension contributions are more generous than the basic levels assumed in the IFS study, you might wince at leaving this money on the table. Don’t forget that pensions are a valuable source of tax relief — and that includes the “graduate tax” of student loans. At present, only the highest earners will clear their entire student loan debt within 30 years. Graduates on lower incomes who take a career break or work part-time while they raise a family are much less likely to do so — and the IFS makes an important point for them. If your employer offers “salary sacrifice” arrangements, you have an additional incentive to save into a pension. Because this has the effect of reducing your gross earnings, it will also reduce the amount sliced off by those 9 per cent student loan repayments. In the words of the IFS, this is “analogous to reducing your total lifetime tax liability”. As helpful as these suggestions might be for some young readers, the widening intergenerational divide means this is fiddling around the edges for most — yet this sort of “levelling up” is not on the political agenda.I’ll give the last word to 22-year-old Scott. “Are young people just hoping to inherit, or simply not thinking about it? My bet is on the latter.” Claer Barrett is the FT’s consumer editor: [email protected]; Twitter @Claerb; Instagram @Claerb More

The opening pageantry of the Beijing Olympics at the Bird’s Nest stadium on Friday marks the start of serious business for two Latin American presidents making their own unusual bids for success during the Winter Games.Argentina’s Alberto Fernández and Ecuador’s Guillermo Lasso are in China seeking support for national economic priorities — a sign of how Beijing’s influence is growing in Latin America.Fernández will meet China’s president Xi Jinping on Sunday, where he is expected to sign Argentina up to the Belt and Road Initiative. Argentina will become the largest Latin American nation to join China’s flagship investment and infrastructure project so far.Lasso, who will also meet Xi as well as China’s premier Li Keqiang, is on a two-pronged mission. He wants to renegotiate the terms of $4bn of Ecuadorean debt, while launching talks with China on a free trade agreement (FTA).The 2022 Winter Olympics has been surrounded by controversy, with countries such as the US, UK and Australia launching diplomatic boycotts and refusing to send their representatives to the Games because of China’s human rights record.The two Latin American leaders will join leaders from the likes of Russia, Qatar and Thailand in choosing to attend.For the Argentines in particular, the timing of the Beijing trip is delicate. The Fernández administration has just reached an outline agreement with the IMF to restructure $44.5bn of debt, but a final staff-level agreement is still pending and the IMF has said it was still working with its counterparts in Buenos Aires.Some observers are worried that by going to Beijing now and meeting Xi, Fernández is sending the wrong message to the fund and its principal shareholder — the US.“This is not the time to go,” said Patricio Giusto, director of the Sino-Argentina Observatory, a think-tank in Buenos Aires. He said the trip could potentially deal “a big blow” to Argentina’s hopes of wrapping up the IMF deal.But the leftwing Peronist government has shrugged off those concerns, saying the trip had been in the works since Fernández took office in early 2020. Its purpose “is not to offend anyone”, but to promote Argentina’s national interests, a source close to the president told the Financial Times.As well as signing up to Belt and Road, the Argentines may seek more lending from China. The two countries have a $19bn currency swap arrangement in place that dates from 2009 and Buenos Aires wants to expand it by around $3bn.Argentina’s net foreign reserves are almost exhausted and estimates suggest that they fell below $6bn in December, while the country must make a $2.8bn payment to the IMF next month. If the agreement with the fund falls through or is blocked by Argentina’s congress, Fernández might need a back-up plan to avert a debt crisis.Debt is also an issue for Ecuador. During the leftwing government of Rafael Correa from 2007 to 2017, the Andean nation became heavily indebted to China and agreed to repay many loans with oil. Lasso has said Correa agreed unfavourable terms for Ecuador and wants to repay in cash instead, freeing up more oil to sell on the spot market, where prices are high.Lasso’s other stated aim is an FTA, after years of steadily rising Ecuadorean trade with China. China absorbed 15.8 per cent of Ecuador’s exports in 2020, up from just 3.9 per cent in 2015. The Chinese buy oil, shrimp, bananas, cut flowers, cacao and timber from Quito.The shrimp industry has grown particularly quickly and Ecuador, a nation of fewer than 18mn people, is now the largest exporter of shrimp in the world. Half of those exports go to China, where an expanding middle class is acquiring a taste for a seafood once seen as a luxury.But Ecuador’s shrimp farmers pay a tariff of 2 per cent on exports to China, while its banana growers pay 10 per cent. Lasso wants an FTA to abolish those penalties.“The government’s proposal is to have an agreement signed within a year,” said Gustavo Cáceres, head of the Ecuadorian-China Chamber of Commerce. “It’s a very ambitious goal, but China is really important for us. It’s our second biggest trade partner after the US.”Sebastián Hurtado, head of Ecuadorean political risk consultancy Prófitas, said Lasso’s trip to China could act as “a pressure mechanism” to remind the Biden administration that Quito wants an FTA with Washington too and that it was a small but important partner in the region.With Peru and Chile having turned leftward in recent elections and Colombia possibly about to do the same later this year, Lasso’s government could be only right-leaning administration in the Andes by the end of 2022.“Ecuador is in an interesting position geopolitically at the moment,” Hurtado said. “It has some leverage with the US.” More

Xi Jinping had yet to assume power when the bidding process for the 2022 Winter Olympics formally began a decade ago. Three years later, as Beijing beat Almaty for hosting rights in 2015 by just four votes, it still appeared Xi would be a “normal” Chinese president who would preside over the Games as his second and final term neared its close.In the intervening seven years, however, Xi has transformed Chinese politics and international geopolitics. He is widely expected to embark on an unprecedented third term as head of the Chinese Communist party, state and military at a congress that will probably convene in October or November. As a result, Friday’s Olympics opening ceremony marks not the beginning of the end of his political career, but rather the start of a new chapter for China’s most powerful ruler since Mao Zedong.While the Xi administration’s contentious policies in Xinjiang and Hong Kong, as well as the Covid-19 pandemic, have made the Games far riskier than envisaged, Chinese officials and analysts also believe the event offers an opportunity to show off what they maintain is their country’s superior governance system, especially compared with the US.The Chinese government has interned more than 1mn Muslim Uyghurs since launching a mass campaign of repression in Xinjiang in 2017 and crushed Hong Kong’s pro-democracy movement with national security legislation imposed on the territory three years later.Chinese president Xi Jinping, right, meets with International Olympic Committee president Thomas Bach in Beijing, last week © Zhang Ling/Xinhua/ReutersBoth have drawn condemnation that has led human rights activists and some US lawmakers to label the Games the “Genocide Olympics”, with Washington and some of its allies staging a diplomatic boycott.“China wanted to enhance its global influence and international prestige by hosting the Olympics, and also to show the Chinese people that it has become one of the world’s great powers,” said Shi Yinhong, a Beijing academic who advises the Chinese government on foreign policy issues.“China was in a very different situation when it was bidding to host the Winter Olympics than it is now, especially with Covid and the overall deterioration in US-China relations,” he added. “But China has no choice but to host them well. There was no way to back out.”In private, Chinese officials said they were not worried about any embarrassing podium protests by foreign athletes. Domestic TV feeds will be broadcast with a slight time delay, allowing them to be cut off before reaching Chinese viewers. Officials were also confident that the Games would shine a much brighter spotlight on their success battling Covid than on human rights controversies.The Games are being held within a “bubble” designed to contain any cases brought into the country by overseas participants. Chinese athletes, officials and other staff who enter the bubble will also have to serve a lengthy quarantine before being allowed to return home.Covid-related deaths in the US will probably exceed 900,000 during the Olympics — and then pass the 1mn mark when China’s parliament, the National People’s Congress, convenes its annual session next month. China, by contrast, has recorded fewer than 4,700 Covid fatalities even though the virus first erupted in Wuhan in January 2020.“The control of the epidemic shows the superiority of the socialist system with Chinese characteristics,” said Wang Yiwei, who teaches international relations at Renmin University in Beijing. “China has adopted a tough zero-tolerance attitude towards Covid because in China we put people’s lives first.”

Unlike the Summer Games, which Beijing hosted in stunning fashion in 2008, a Winter Olympics was — and remains — an incongruous event for Xi to seize on as a vehicle for glorifying China’s economic and other achievements during his first 10 years in power. In contrast with its repeated success at the Summer Olympics, China has only made the top-10 medals table at one winter event: Vancouver 2010, when its 94-member team won 11 medals.This year, China will field 171 athletes and has hired more than 50 foreign coaches as it tries to top its finish 12 years ago in Canada. But Mark Dreyer, a Beijing-based analyst who has written a book about China’s sporting ambitions, noted that Xi had downplayed the importance of this month’s medal count. Dreyer said that China’s original campaign to host the Games was probably intended as “a set-up bid for 2026 or even 2030 because it took them a couple of times before they won 2008”.“They have gamed the system pretty well at the summer games in terms of focusing on the less competitive sports and spending a lot of money on bringing in foreign coaches,” Dreyer added. “There are only about 100 elite-level athletes doing sliding sports [such as luge and bobsledding] so, with China’s resources, it feels it can quickly catch up. It’s realistic that China can become a top-five [Winter Games] nation eight or 12 years from now.”Additional reporting by Emma Zhou in Beijing More

WASHINGTON (Reuters) – President Joe Biden will sign an executive order on Friday requiring “project labor agreements” in federal construction projects over $35 million, a potential boost to construction workers and unions that negotiate these deals, and a shift the administration says will speed up building times. The order will apply to $262 billion in federal construction contracting and impact nearly 200,000 workers, according to a draft of the executive order seen by Reuters. Project labor agreements are collective bargaining agreements between building trade unions and contractors, which set wages, employment conditions, and dispute resolution on specific projects. Democratic presidents in the past have typically supported applying such agreements to the massive U.S. federal contracting budget, while Republican presidents have rescinded them.The order, which will go into effect immediately, comes on the heels of a $1 trillion infrastructure bill signed into law by Biden that invests in the country’s roads, ports and bridges. Much of that money will flow through federal agencies to states and local governments. The new executive order excludes projects funded by grants to non-federal agencies, a senior administration official said, adding that will make up for a bulk of the projects under the bill. But it will apply to billions of other federal spending on waterways, military bases and other areas.Biden will visit Ironworkers Local 5 in Upper Marlboro, Maryland, Friday to sign this executive order, the White House has said. Details on the contents of the order have not been previously reported.The U.S. construction industry – including workers, owners, developers, contractors – has been one of the hardest hit during the COVID-19 pandemic, due to a slowdown of available goods and labor and the termination of entire projects.Biden has vowed to strengthen unions and increase membership in the United States after years of steady decline, and to increase salaries for hourly workers in construction, health care and other jobs. “Contractors who offer lower wages or hire less qualified workers will need to raise their standards to compete with other high-wage, high-quality companies,” the order says. Earlier executive action by Biden requires federal contractors in new or extended contracts to pay a $15 per hour minimum wage.Biden’s move also found support from some contractors.”This streamlines the negotiation process and gives employers access to a highly skilled pool of craftworkers,” Daniel Hogan, chief executive of the Association of Union Constructors, that represents 1800 contractor companies, told Reuters. More

WASHINGTON (Reuters) – The head of the International Monetary Fund on Thursday said an agreement reached in principle with Argentina on a new standby loan was “pragmatic” but “hard work” still lay ahead.Managing Director Kristalina Georgieva told reporters that details of the program were still being worked out, and the global lender recognized the limitations of what could be done, citing political opposition immediately after the announcement.The main focus, she said, was to get Argentina out of “this very dangerous path of high inflation,” adding that the staff agreement being worked out now would also include structural conditions aimed at ensuring Argentina raised its tax revenues and boosted transparency of public spending.Argentina and the IMF on Friday said they had reached an understanding about a new $44.5 billion standby deal, a major breakthrough that came after over a year of tense talks about restructuring loans the country cannot repay.The new deal has been sharply criticized, including by Maximo Kirchner, a prominent Argentine lawmaker and son of Vice President Cristina Fernandez, who broke ranks with the ruling party on Monday.Argentine President Alberto Fernandez and his government have been negotiating with the IMF to revamp debt outstanding from a failed $57 billion loan deal from 2018, the fund’s largest ever.Argentina’s dollar bond prices fell slightly on Thursday, hanging on to most gains since the understanding was announced, but not far from record lows and in deeply distressed territory. The bond maturing in 2029 is priced at 35 cents on the dollar, with a yield of 24%.Asked if the IMF was repeating mistakes made in 2018 by accepting conditions on deficit reduction and a lack of firm commitment to phase out energy subsidies, Georgieva said: “As you can imagine, this is something we are debating, we have been debating and we will continue to debate at the fund.”But she said the agreement in principle had factored in lessons learned from the failed 2018 deal, and IMF staff were focused on lowering inflation.”We are confident that this is a pragmatic program that … provided it is implemented, and if necessary, adjusted as we go … would help Argentina to deal with the most significant structural problems,” Georgieva said.Further structural adjustments could be agreed later, she said.The IMF’s objective was to reduce Argentina’s deficit to zero by 2025 and support the government to “finally take a key step on energy subsidies that have been quite generous,” with additional conditions to be included in the staff agreement on the deal now being worked out, Georgieva said.”We also recognize the limitations of what can be done over the next years,” she said. “So we have to calibrate the program to be implementable.”The government did not immediately respond to a request for comment. More