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Premium bonds – do you feel lucky punk?

Dominic Thomas
March 2025  •  2 min read

Premium bonds – do you feel lucky punk?

You may remember the character portrayed by Clint Eastwood – Harry Callahan – aka Dirty Harry, who regularly had shoot outs with villains.  As he faced them after a shootout and everyone had lost count of the number of bullets that had been fired, he aims his magnum 44 pistol and utters the words “do you feel lucky punk?”. Such was the ‘enlightened policing’ of the 1960s and 1970s …

Like many of you, I have a bit of a soft spot for premium bonds. There is something nostalgic about them; they feel safe (you are essentially depositing money with the UK Government). You have a bit of a monthly gamble, which unlike other forms of gambling, you do not lose your money if you don’t pick the winner (or place). The winnings are also tax-free and frankly who wouldn’t want to win a million British pounds? Besides, a Premium Bond is only £1 – and you can have up to 50,000 of them.

But let’s be honest with ourselves.

There are around 129 billion bonds in the draw each month. Two will win the £1m jackpot. Your chance of holding the winning bond is 1 in 64 billion.

There are a total of 5,902,600 prizes or winners each month. The chance of winning any sum from the smallest of £25 to £1m is 0.004%. Whilst that looks like a lot of winners (nearly six million) the vast majority (98.77%) win £100 or less. There are only 20,371 that win £1,000 or more.

As most people won’t win, they tend to get out of the habit of checking. At the last time of checking since October 2024, there are unclaimed prizes to the tune of more than £92m.

Yes you get to stay in the monthly draw, but chances do not improve unless you hold more than £24,500 of premium bonds; as the chance of winning any prize is 24,500:1 – in other words £25 winnings for £24,500 – each month – so expected winnings of £300 a year or 1.2%. This is not exactly an inflation-beating rate.

The annual prize rate is 1.4% – that’s the total amount of prizes paid in a year across all the deposits. So if inflation is at 3% or more in the real world, then you are going backwards, more so if you hold less than £24,500.

Meanwhile – deposit rates can be achieved of 3-4% without too much fuss at the moment (March 2025).

Do you feel that lucky? 1 in 64 billion lucky? – they haven’t even inflated the £1m winnings. Perhaps like Harry Callahan, you may not really know why you keep “doing it”, but it certainly isn’t about the interest.

Premium bonds – do you feel lucky punk?2025-03-14T16:16:13+00:00

Will Reeves Slash Cash ISAs?

Dominic Thomas
Feb 2025  •  2 min read

Will Reeves Slash Cash ISAs?

Hopefully you will know that I am a fan of having cash, we all need it for ‘liquidity’. In plain English – that means having money easily available without needing to sell anything. This is usually best for your emergency fund. This is a number (sum) that helps you to sleep well at night and quite frankly depends on your life stage. A measure of 3, 6 or 12 months of normal spending is helpful plus planned spending projects (not normal spending) over the next three years.

Keeping more than this in cash will likely erode the value of your spending power. You are likely to be going backwards. You might say “backwards, but at least with certainty – compared to investments” well, that is true in the short term but in the long term, whilst nothing is certain, we have yet to see a period when cash beats shares over 10 years or longer.

So, the news that the Chancellor (Rachel Reeves) is contemplating either scrapping or reducing the Cash ISA allowance from £20,000 to £4,000 may be a surprise for some of you. It’s because in theory holding cash doesn’t really serve anyone very well, least of all the economy, but investing in businesses … well that helps create wealth. That’s why she is considering it.

It would seem that this will only start from the new tax year (if at all) and nobody is expecting her to tell us that you can only hold £4,000 in total in Cash ISAs – which would be highly unlikely. Whilst you may find this an unwelcome change, it’s worth remembering that Cash ISAs always had a lower allowance until the 2015/16 tax year when the allowance became £15,240.

As we are still in the 2024/25 tax year data isn’t up to date, honestly in this digital age, I don’t understand why HMRC are so behind. Anyway, interest rates obviously improved over the last couple of years and more people used Cash ISAs, 63% of contributions to ISAs in 2021/22 were into Cash ISAs. People forget the impact of inflation which is still not within range, and Cash ISAs continue to provide a negative return. Quilter did some research and found that £10,000 into a Cash ISA in December 2012 would now be worth £11,955 but when adjusted for inflation that’s really £7,918. In contrast, the same amount invested into a global shares index fund would be worth £33,526 (£22,221 after inflation).

You may have seen my inflation diagram about a first-class stamp, something we can all relate to and perhaps why there are fewer Christmas and Birthday cards being sent.

  • 1985: 17p
  • 1995: 25p
  • 2005: 30p
  • 2015: 63p
  • 2025: £1.65

Your money has to keep pace with inflation.  10 years races by, but holding your hard-earned money in cash that provides a negative return is only good for short-term projects and emergency funds.

The current ISA allowance for 2024/25 is £20,000.  The Junior ISA allowance (for those under 18) is £9,000.

Will Reeves Slash Cash ISAs?2025-02-27T11:05:24+00:00

Geopolitics and Market Volatility

Matt Loadwick
Feb 2025  •  3 min read

Geopolitics and Market Volatility

The stability, or otherwise, and volatility of global stock markets can be affected by a number of factors, which can be both economic and political in nature. In terms of economic factors, both UK and US economies are currently experiencing well-documented inflation, the result of rising costs of goods and services. This leads to increased borrowing costs, and to market uncertainty, as investors get spooked by high costs, and have a tendency to wait for prices to drop before investing.

In the UK, a glimmer of light appeared when the rate of inflation dropped by 0.1% in December compared to November, easing the pressure on Chancellor Rachel Reeves, and going some way to improve market confidence as the odds increase of the Bank of England reducing interest rates early this year. That said, it does feel like the current news cycle in the UK will provide reasons to be cheerful one day, followed by reasons to despair on the following, fuelling further volatility as markets react.

Global stock markets are also influenced by geopolitical events, where often the unpredictability surrounding such events can lead to increased volatility. As an example, the Russian invasion of Ukraine resulted in firms that had strong ties to Russia experiencing a significant fall in share prices.

It is also worth pointing out that politics and economics clearly do not exist in a vacuum, with both influencing each other symbiotically – as politicians drive their economic agenda, markets respond accordingly depending on the success (or otherwise) of their policies …

As the 47th President of the United States was sworn in for the second time earlier in January, the world is braced for increasing geopolitical uncertainty with a Trump administration once again at the helm. Indeed, they have taken little time to give us a taste of what is to come over the next four years, creating headlines through divisive policies, such as the proposed mass deportations of illegal immigrants, withdrawal from the Paris climate agreement (compounded by plans to increase drilling for oil to promote as a key US export), pardoning the circa 1,500 Trump supporters who were charged over the 2021 US Capitol riots, and far-fetched rumours (we hope) of an interest in invading Greenland.

Such examples certainly give the impression that this administration may cause something of ‘a bumpy ride’ for markets in the coming years, particularly in the context of ongoing conflicts in the Middle-East and Ukraine. This is reflected in research undertaken by Scottish Widows, which suggests that geopolitics and volatility are likely to be among the top concerns for advisers in 2025.

If at some point you were to watch the value of your investments take a temporary drop, it is only human nature to feel a sense of nervousness. In the face of this expected volatility, we at Solomon’s are here as ever to encourage calm, and to ensure that our clients do not lose sight of the importance of planning for the long term.

Geopolitics and Market Volatility2025-02-10T10:02:08+00:00

The Rule of 72

Dominic Thomas
Dec 2024  •  2 min read

The Rule of 72

In the finance world we sometimes use the rule of 72, in truth it’s mainly for examination questions. The purpose of the rule is to establish how long it would take to double your money given a set investment return.

Those with a keen sense of maths will appreciate that returns are very rarely fixed, so the formula has limitations for real-life application.

So let’s take an example of a cash deposit paying 3% a year

72/3 = 24 (years)

An investment with a return of 9% a year would take  8 years (72/9 = 8).

As we enter 2025, those of you holding cash of £100,000 would need to wait until 2049 to see this become £200,000. For those investing and achieving 9% a year, your £100,000 becomes £200,000 in 2033 and £400,000 by 2041 and £800,000 by 2049.

Now for those of you working within financial services, or if you work for the FCA, I am not suggesting investments are 9% a year, this is merely designed to demonstrate the point of the maths and yes I am ignoring inflation. In this theoretical world with predictable results of compounding annual returns we might observe the values over time as shown below. The orange line being a 3% annual return and 9% being the blue line.

So whilst theoretical, there are obvious inferences. Investments offering low returns are often deemed as having less risk… but less risk of what? In the same way that higher returns are considered higher risk. For most people building wealth over time, holding too much in ‘low risk’ / low growth investments will have a detrimental effect over time.

So the questions you need to consider are the timeframe for your goals and how much you need to allocate towards growth (genuine growth assets).

The Rule of 722025-01-21T15:53:23+00:00

A Widow’s Ruin?

Dominic Thomas
Sept 2024  •  4 min read

A Widow’s Ruin?

The summer often produces plenty of occasions to open a bottle of bubbly as we celebrate various events or are simply enjoying ourselves. Perhaps this summer you have celebrated something, maybe a wedding, an anniversary, a big birthday or one of your family graduating. Champagne is invariably linked with celebration.

Living in the Surrey Hills, a short walk from Denbies, I have come to appreciate some of the English attempts to create Champagne – though of course we cannot call it such as it’s from Surrey not the Champagne region. I’m informed that the geology of the Champagne region of France is shared with Dorking (probably not news to the geologists amongst you). Anyway, perhaps you have your favourite – English, French, Spanish or Italian.

When it comes to naming things properly, I was intrigued by the story of Veuve Cliquot  (in French meaning Widow Cliquot) which has now made the transition from a 2009 book by Mazzeo to a musical and now to film and is being retold at selected cinemas, so may be one to catch at home for most people.

The story is of the woman behind this now historic and luxurious brand. Business owners will relate to some of the struggles that she faced and conquered, not least of which were the weather, Napoleonic wars and general misogyny of the day.  Women will relate, frankly because things have not moved on anything like as much as they should!

Quite how much is fact or fiction isn’t really that important; the messages of the film are there to be taken. Tenacity, optimism, acknowledgement of an inability to control the things you cannot, acceptance of the reality of things; stoic fortitude ushers in change by remaining true to principles and high standards. This is all beginning to sound a lot like the qualities that investors need to attain isn’t it.

I did not know the story and I was unaware of the meaning of ‘veuve’ – my O’ Level French has never been tested beyond very enjoyable trips to France.  Whilst I am a regular consumer of wine, I wouldn’t regard myself as an expert; but I have come to enjoy Champagne over the years!

What I find generally inspiring are the stories behind many well-known companies. The original ‘Founder Story’ has been an often neglected element of most marketing, including our own.  As Solomon’s celebrated our silver anniversary this summer, I was reminded that perhaps this is a little more than simply reminiscing. Of course there are many Founders and characters that are entirely unpleasant, which is often a subjective opinion, but sometimes … well not so much. Today, we are in a highly inter-connected world and we are all aware of particular billionaires or multimillionaires who are lacking any of the attributes that demonstrate much humanity.

I will never meet Barbe-Nicole Ponsardin who died in 1866 and I am highly unlikely to meet Mr Musk; but I have formed an opinion about both, based on the values that I hold. Yet this is perhaps the heart of the complexity of ethical, socially responsible or ESG investing. The world is complex, people are many things. To some, holding shares in an alcoholic beverage company is unethical, yet holding shares in Twitter (or whatever he wants to call it) invariably will not be screened out of portfolios.  The focus is based on the product rather than those behind them.

How we use or minds, tools, resources, time and money are our unique choices and important to each of us being true to ourselves – however many selves we might each be, have or become. I can tell you that I shall be favouring (revealing my biases) the widow’s Champagne. A young woman who was widowed at 27, took on an embryonic vineyard, battled social norms and obstacles, fought for her own financial independence, eventually turning it into a legacy of quality, used in moments of joy and celebration. Now, that’s something that I think is worthwhile.

Here is a trailer for the new film produced by and starring Hayley Bennett, along with Tom Sturridge, Sam Riley and Ben Miles:

A Widow’s Ruin?2024-09-23T12:32:17+01:00

Abu Dhabi D-I-Y

Dominic Thomas
Sept 2024  •  4 min read

Abu Dhabi D-I-Y

Those who read the financial press may have observed that Bristol-based DIY investment platform Hargreaves Lansdown, which has made the founders incredibly wealthy, has agreed sale to a private equity group. It will give shareholders cash up front and if the buyers are to be believed (careful Dominic), the investment will be long-term (meaning longer than the typical three to five years that a private equity group would normally wait before scuttling the ship). At an eye-watering £5.4bn, there will be plenty to go around for the brokers of the deal.

A shareholder in HL will be offered £11.40 for each share which was described by the Board as “fair and reasonable” (the share price reached a peak of £24.19 in May 2019 and had shrunk back to 2013 levels by April 2024 to £7.18.

Managers at HL will of course now be looking over their shoulders, particularly if they haven’t secured shares in the company themselves. HL is the largest DIY investing platform in the UK, but still three times the price of our favoured platform. Technically it is a DIY service with all risk residing with the investor (unlike an adviser relationship). Meanwhile HL’s own latest data suggest that revenue is up 4% but operating costs have increased rather more (by 14%) and profits are down. They hold over £155bn on their platform, with growth largely coming from market returns (remember this is investor selected funds).

I am sure that the consortium of CVC, Nordic Capital and Platinum Ivy will help many people to invest for their futures, I simply remain unconvinced that this will generally benefit the staff or ‘clients’.  Certainly technology is expensive, check that again for regulated technology as AI becomes ever more embedded into trading structures and report generation.

Competition that will likely focus on speed and cost reduction is the logical path ahead and one that HL will need in order to persuade its DIY investors to stay on board. This is probably the crucial aspect that platforms tend to forget. Those who are motivated by low price will always seek a lower price. Those that do not see or understand the value of advice will not pay for it, but may inadvertently pay rather more in the end.

Personally I quite like HL, they enable a lot of people to start investing. They are expensive, often having somewhat questionable ‘relationships’ with some investment companies who are then proffered as “Best Buys”; but nevertheless offer a nice, slick DIY service. The staff I have met all seem perfectly decent. Whether the culture changes and cost-cutting becomes particularly deep remains to be seen. Private Equity firms generally look for a lucrative return for owners not customers.

In summary, if you really want to spend your time fretting about Sharpe ratios, alpha, beta, OCF and the right asset allocation, you can continue to do so. Alternatively, we can do all that and take responsibility for a sum that I can assure you doesn’t even buy me a trip to Abu Dhabi, though perhaps Bristol. Of course I’m simply envious that I didn’t think of it 40 years ago!

Abu Dhabi D-I-Y2024-08-30T15:05:10+01:00

Your loss is your gain

Daniel Liddicott
July 2024  •  3 min read

Your loss is your gain

You may recall from my recent piece in Spotlight that capital gains tax exemptions have fallen yet again for the 2024/25 tax year. As a reminder, you can now realise gains of up to £3,000 before having to pay capital gains tax (CGT). This allowance was £6,000 last tax year and £12,500 the tax year before that. The reduced £3,000 capital gains exemption affects those of you with General Investment Accounts (GIAs) in particular, as these are not sheltered from CGT, unlike your ISAs and pensions.

It is now more likely than ever that moving funds from your GIAs into your ISAs and/or pensions may result in the need to pay some CGT, at 10% or 20% dependent upon whether you are a basic, higher or additional rate taxpayer. It is important to understand that you only “realise” a gain if investments in your GIA are sold, which is the case if the funds are being withdrawn or moved into an ISA, for example.

The reason for carrying out this strategy year upon year has been to gradually move funds out of the less tax-efficient GIAs into the tax-efficient ISAs and pensions, which are sheltered from paying tax on any future capital gains.

A key factor that we can use to help you to reduce or, in some cases, completely remove the need for you to pay CGT on gains within your GIAs is to register any losses made in previous tax years. You can actually register losses made in any of the previous four tax years, to be used to offset against any gains that you make in future. And you can carry these valuable losses forward indefinitely until used. Example incoming:

You can now “realise” gains of up to £7,000 without any CGT payable.

Unfortunately, these losses are not automatically registered with HMRC. You can do this either in your tax return for 2024/25 if you usually submit these, or you can write to HMRC instead. We are putting together a guide and letter template that you can use to send to HMRC to register losses to make the process as easy as possible.

We are currently looking back through the previous few tax years to determine who has made losses that can be registered and used moving forwards – if this is you, you should expect to hear from us in the next few months.

Whilst, generally speaking, falling valuations of your investments is a negative experience, we can help you to make the most of these. Your past loss can become your future gain.

Your loss is your gain2025-01-28T10:03:08+00:00

Are you taking too much?

Dominic Thomas
June 2024  •  3 min read

Are you taking too much out of your pensions and investments?

It would seem that many people are. According to research conducted by NFU Mutual, over half of people accessing their pensions for the first time cleaned the entire pension pot out. If that is even half-true, it’s a concern.

A dig into some of the data suggests that 739,535 pensions were accessed for the first time in 2022/23 up from 420,727 the year before. The research found that over 75% of people taking their pensions were not advised, so will have no recourse. Many will likely have paid emergency tax and failed to reclaim it if they had been over-taxed.

It seems that on one hand the former Chancellor Mr Osborne (I cannot now remember how many we have had since) would be pleased that people are using their own money to fund their lifestyle. However, this sort of data, when viewed in conjunction with the regulator’s concern about ‘retirement income’ and a heavy, detailed questionnaire that seeks ‘big data’ rather than the nuance of real life, leaves me concerned. Osborne made pensions rather like a bank account.  Prior to his changes, there were limits on how much people could access, which whilst often seemingly at odds with reality, at least was a sense check. Today you can blow your life savings as quickly as you can say Ferrari.

The problem is that this might lead to a return to restrictions, in a world where pensions are already ludicrously complex. I hope not, but certainly some reimagining of what a pension pot could and should do for us all is required.

Here at Solomon’s, we plan income withdrawals very carefully for our clients. Many people are lucky enough to have decent old-style final salary pensions (NHS, Teachers, Local Government and old large companies) which provide a good base income.  For all its problems, the State Pension begins at an individually specific time and often there is a gap in the need for income between retirement and the State Pension starting. Of course, some will need and want more and so we plan with all the options in mind on an individual basis.

We model scenarios, attempting to build a plan that has a very high chance of success, which in plain English simply means ‘not running out of money’. However, we don’t know how long you will live and what the future holds (we are neither magicians nor fortune tellers). We use historic data and run multiple scenarios. We stress-test the plan and just as importantly review progress and make adjustments. There are no absolute certainties, but we do our best to ensure that your plan is set up to pay minimal fees and taxes, so that your money has the best chance of lasting as long as you do.

If you know someone who could use our help with this, please send them along. We specialise in working with people approaching retirement and those in it, who have two key questions – will I have enough? And will I run out? (which are much the same).

There are limitless things to spend money on, but not having enough to turn the heating on is a problem no-one should ever have.

Are you taking too much?2025-01-28T10:03:18+00:00

Probate delays

Dominic Thomas
May 2024  •  2 min read

Probate Delays

I suspect you are familiar with the Probate process. In essence, this is accounting to HMRC the value of someone’s estate upon death. The process is often tedious and full of unhelpful jargon and bureaucratic forms. In order for beneficiaries to inherit, probate needs to be agreed or more accurately granted.

Those of you who have experienced the process at any point will have a sense of the time that it takes and the scale of the task. Often the task is delegated to a solicitor and this can be both liberating and beneficial; but not necessarily any faster.

Aware of the growing number of delays, a Freedom of Information request revealed that the number of cases taking over a year has increased by 65% according to the Ministry of Justice. Some have been as long as 23 months, some even longer. It is generally agreed that the process should take around four months.

Death is a stressful time for the survivors; and handling an estate can be very time-consuming (close to a full-time job in some instances). There are things that can be done to reduce the impact, such as placing life assurance policies into Trust. There is a degree to which we can each even ‘plan’ for our own deaths, but of course this is not something that most do; many people have not prepared their finances nor kept their affairs in good order.

We help our clients make this arduous and stressful task a little easier for their loved ones when the time comes – and rest assured they will be grateful to you for it.

Probate delays2025-01-21T16:32:38+00:00

ISAs are being ”Simplified”

Dominic Thomas
April 2024  •  5 min read

ISAs are being ”Simplified”

I don’t like sounding (or being) cynical (there’s a but coming isn’t there!) … but – when a Government or HMRC use the word “simplification” they seem to merely describe their own thought process and nothing else. The intention is usually good, the real-world working, well … not so much.

There are some rule changes, announced by the Chancellor in the Autumn statement, that are designed to simplify the scheme and encourage more people to invest tax-free, allowing for a more ‘balanced’ investment portfolio. There are too many ISAs being used as cash deposit accounts by ‘nervous’ investors. Our clients tend not to fall into this trap, but of course millions of people do. Inflation is best beaten over time by investment into assets that grow (holdings in companies listed on the world stock markets). Cash is simply giving banks your money so that they can invest it for their benefit.

Here are the six reforms from HMRC:

The Government announced a package of ISA reforms and will make these changes to ISAs from 6 April 2024:

  1. Increase the age for opening Cash ISAs from 16 to 18 and over. This is consistent with the age requirement already in place for opening Stocks and Shares, Innovative Finance and Lifetime ISAs.
  2. Allow subscriptions to multiple ISAs of the same type, with the exception of Lifetime ISA, within the tax year, removing the limit on subscribing to one ISA of each type per year. All subscriptions must remain within the overall ISA limit of £20,000.
  3. Remove the requirement for an investor to make a fresh ISA application where an existing ISA account has received no subscription in the previous tax year.
  4. Allow Long-Term Asset Funds to be permitted investments in an Innovative Finance ISA, which does not require access to funds within 30 days.
  5. Allow open-ended property funds with extended notice periods to be permitted investments in an Innovative Finance ISA.
  6. Allow partial transfers of current year ISA subscriptions between ISA managers.

The government also plans to hold discussions with industry on allowing certain fractions of shares to become permitted ISA investments.

Most of this will not impact you, everything we do here at Solomon’s is flexible and one of the benefits of regular reviews is that we can assess and check ongoing suitability of the financial products we have arranged for you and the portfolio being used.

If you have any questions at all, please get in touch. If you need a review sooner than normal or feel one may be overdue, please drop us a line.

ISAs are being ”Simplified”2025-01-23T10:50:33+00:00

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