NFT – NEW FAIRYTALE

TODAY’S BLOG

NFT – NEW FAIRYTALE

Perhaps you haven’t heard about NFTs, if not give yourself a pat on the back. However, it’s possible that you have seen something online or had a younger person mention it to you and perhaps it left you a little perplexed. I am not a fan. To me this is yet another of “The Emperors’ New Clothes”. I am concerned that a lot of people will say goodbye to their hard earned savings for fear of missing out and not understanding investing, in a culture that appears to tell us not to invest in the stock markets. Give me a moment and I will try to explain why.

One of the main reasons for people being scammed is due to a fear and lack of understanding about the stock markets. The market volatility is regularly reported by what passes as news, keeping you informed about the latest FTSE100 movement. “Billions were wiped off the markets today” is a phrase that regularly rolls off news presenters’ tongues, yet rare is the day (have I ever?) when we hear the “billions wiped on”. We are all kept in a state of anxiety about impending doom and it is quite deliberate. It gets your attention.

SO WHAT… HOW DOES THIS ENCOURAGE SCAMS?

Well, fearing the investment of your money in the most regulated, scrutinised exchange, where data is published and reviewed every day of the year and has been for decades, it seems that the volatility and the anecdotal “I lost money” or “my dad lost money” triggers the big red panic button that most of us have. So many turn to alternative forms of investing in the mistaken belief that they are less ‘risky’ (in fact some seem to be a ‘sure thing’). Oh, and for good measure, we humans are impatient, we love a happy ending and have a tendency to ignore the hard work that went into creating one (if it even is an ending). Or to put it another way, to approve of and want successful investments once they have happened.

INVESTING IN REAL COMPANIES

When you invest money into the stock market or funds of equities (as is more likely) you buy shares in companies that trade internationally. They do so by making or providing goods and services that we want, need or require. As markets are generally competitive, they strive to improve what they do to ensure their own sustainability. Where companies often go wrong is cutting corners to reduce costs and increase profit rather than improving what they do and communicating this properly. On occasion, you may have an objection to the company, or its sector or the people that lead it. So you can (we can) screen out some of these based on ethical, environmental, social or governance standards. At the same time, you know that ‘cheap’ is unlikely to be high quality, but you also know that we don’t all need our weekly shopping from Harrods. There is a range; a spectrum. Sometimes we pay more for things because of the feelings that it evokes, sometimes we do so because we instinctively know it to be better.

Your investment appreciates in time as the company you invest in grows. You also receive a share of the profits made (dividends). Quite how much and how well these companies ‘perform’ is largely down to how well they run and… luck. By luck I mean – the right place at the right time, for example being a PPE manufacturer and a pandemic arrives.

You get your money back when you sell your investment. In the interim, you’ve hopefully had some dividends and an improvement in the value of the share. If you hold a handful of companies and one or two fail (such as the Kodaks of the world) then you have a proper loss. If you hold thousands, perhaps an entire market, then the impact of any failure is significantly reduced.

INVESTING IS NOT GAMBLING

Placing a sporting bet or a stake in a casino, you are hoping for a win, or something close to that to get your money back, plus the incentive to make the bet in the first instance. You may get back nothing – which is far more likely. That’s gambling – the risk of complete loss. For some people this is a small bit of fun (I can think of many better things, but I won’t judge), for others it becomes an addictive habit that can destroy families.

When you consider investment in proper companies (shares in them) over time, going back to the start of your lifetime, there is only one direction of travel for the combined value of your investments. Upwards. Yes there are bumps along the way (volatility) but you own real assets (companies) making and providing real products and services.

THE NEW CLOTHES

The digital world and our obsession with it, has given some people the idea that a digital image is worth something. These NFTs (Non-Fungible Tokens) are in my opinion the equivalent of the Emperor’s new clothes. The value is talked up by nefarious online forums and chatrooms and ‘traded’. I would not touch them with the proverbial barge pole. If in the event I am wrong about this in say three decades time, that’s fine with me as I will be holding assets that provide regular income from actual profits from making real products and services. I can and will happily live with that and until proven otherwise, I will not aid anyone into deliberate folly.

HMRC’s NFT SEIZURE IS A WARNING TO ‘INVESTORS’ AND TAX CHEATS

The UK tax authorities have confirmed their first ever seizure of a non-fungible token (NFT) following a probe into an alleged £1.4million VAT fraud. Her Majesty’s Revenue & Customs (HMRC) said it had confiscated three NFTs, along with £5,000 in other crypto-assets, and arrested three people as part of a fraud investigation concerning around 250 sham companies. It claims the three suspects, who have not been publicly named, used a variety of ‘sophisticated methods’ to try and conceal their identities, such as false invoices, pre-paid unregistered mobile phones and virtual private networks.

NFTs are tokens representing the ownership of a digital asset, which could be an artwork, an image, music, or even a tweet that have their own unique signature and cannot be exchanged for another asset of the same type. But there has been increasing worries that these digital tokens, as well as cryptocurrencies, are being used by criminals to hide their illicit financial gains. Nick Sharp, the Deputy Director of Economic Crime at the HMRC, said: “Our first seizure of a Non-Fungible Token serves as a warning to anyone who thinks they can use crypto-assets to hide money from HMRC.”

Understand the real risk and buy real assets. You have been warned.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

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NFT – NEW FAIRYTALEDominic2023-12-01T12:12:53+00:00

THE SKY’S THE LIMIT

TODAY’S BLOG

THE SKY’S THE LIMIT

This is an increasingly common tale. It is one about a scam, one that you really should be aware of. Scammers generally take two basic guises – a confidence trickster and an expert in a subject you do not understand enough about. This scam is the latter. It is about technology, something that you and I use, but probably have vague or general understanding of, because we do not really know how it works – simply that it does work.

The scam takes the form of a phone call from someone working at your broadband supplier. The truth is probably that you are with one of a handful of broadband companies, there is a high chance of mentioning any one of them that you are a customer. At this point the caller can either effectively politely end the call or has reassured you that you are dealing with an existing supplier.

HELPFUL HARMFUL AND HORRENDOUS

The caller informs you that your broadband is not working as well as it should, and they can help make it faster. Who of us does not want faster broadband? (irrespective of the inaccurate promise on the tin). Help is at hand if you download an app and place your phone near your router so that the performance can be monitored (how helpful right!). You comply and are informed that you are due a refund for poor performance (good news) so a code is provided to enable payment to your bank. You are kept on the phone, which whilst you think to yourself is a little frustrating and a little ironic in the age of high technology, you are of course getting something in exchange – a refund and faster broadband. You wait. At some point you are insulted as a muggle or something similar, and the caller hangs up. You have an immediate rush of realisation and call your bank to discover that it has been emptied. Emptied! Just hold that feeling a moment before reading further. Your bank account emptied….

You did not authorise a withdrawal, you were expecting a credit. Your bank may or may not be impressed and act accordingly. It is international fraud and not within the FCA jurisdiction.

NOT MERELY BASED ON A TRUE STORY, IT IS A TRUE STORY

The above is an abridged true story that another adviser shared with me, it happened very recently. Please do not accept the information that a caller provides you with. Anyone calling from one of your suppliers should know some rather basic information from you, be that your name, address and account number (for the service). Do not give them any of your time. Do not download anything that you have not understood sufficiently. Never reveal your bank information over the phone, guard it as though you would your prized possessions.

**#*&^(:jh:d!!**

There are many words for scammers, if you are ever victim of one, you will think of many of them. You are not a fool. You have been fooled and we all can be (look at how we vote!). However, you must act. Most scams offer the promise of more money or improved service. Rare is the day that these come without cost. They are never free.

Dominic Thomas
Solomons IFA

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THE SKY’S THE LIMITDominic2023-12-01T12:13:13+00:00

HOW PERSONAL IS PERSONAL BANKING?

TODAY’S BLOG

HOW PERSONAL IS PERSONAL BANKING?

We all know (I think) that the days of the traditional bank manager are long gone, these days banks dress their offering with “personal banking” (as though it has been anything else before!). This is meant to be the main reason for staying with your traditional bank (and most will have done so since their teens) as opposed to using a new bank – a disruptor.

It seems to me that there is a significant degree of lip service paid to the idea of personal banking. You may have the luxury of perhaps having the name and email address of your “relationship manager” but there are some inherent problems. Each new year brings the prospect of yet another letter explaining that my personal relationship manager has altered… again. The best of intentions is re-established. I would not like to guess at how many “clients” these relationship managers have responsibility for – but let us assume it is way too many to have time to form any that are meaningful.

A RELATIONSHIP YOU SAY?

Today I was emailed by my personal relationship manager about the latest (standardised) investment offering that they have. Apart from not being a good offer, but a very similar (yet still more expensive) cost to a proper advised investment, it was a bit of a pity that nobody had thought to ask what I did for a living. This is a bank that I have been with for 4 decades.

I will not bother naming the Bank – they are all much the same. You will recall that in the past most mis-selling scandals were directly to do with poorly trained and badly incentivised advisers within Banks. The gaping hole of adequate planning and saving for the future has been noted for many years. The regulator is hoping for the Banks to fill some of that with algorithms and rather good bits of IT plugging the rest. Financial planners generally deal with people that are already engaged with planning ahead or have recently started to do so – and there are not that many of us anyway – about 24,000 for a population of around 66m.

NOT ON THE HIGH STREET

I suspect that the Banks will continue to disappoint. Heck you cannot even rely on them to be on your local high street if you should ever need to “pop in”. Imagine how difficult this is for elderly people that have little appetite for the internet or online banking and are not able to easily get to their new nearest branch. Personal it most certainly is not, hopeful yes, but I also suspect the outcomes are also predictable.

WE CAN DO ALL THIS BETTER

If you are someone with a few hundred thousand in cash, then of course the Investment Banks are now interested in you, but you will quickly discover that to them personal means treating you to sports events and corporate hospitality in exchange for some over the top fees. We can arrange investments better; we can arrange cash savings accounts better. Personal is what we do because what we do is all about your plan.

Dominic Thomas
Solomons IFA

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HOW PERSONAL IS PERSONAL BANKING?Dominic2023-12-01T12:13:14+00:00

AVOID MINI BOND SCAMS

TODAY’S BLOG

AVOID MINI BOND SCAMS

Following on from my piece about cash management services I mentioned the problem of a growing number of scams. Cash savers looking for better rates of interest are regularly duped into believing that rates of 4% or more are currently achieved for cash. THIS IS NOT POSSIBLE for deposit accounts UK Banks or Building Societies when the Bank of England rate is 0.1%. Of course a few years ago such rates were common, but not since the credit crunch. So be warned that something that says it is the equivalent of cash when it is nothing of the sort. Genuine interest rates will not be much better than the Bank of England rate – perhaps 2% more, but very little else.

Accounts offering “interest” of more than this are not genuine cash. They could be legitimate, but not cash. The rise of peer-to-peer lending is often a touted as an alternative to a regular bank. There might be some good ones (they may be) but on the whole this is a new business taking your deposit and lending it out to other businesses or individuals at a higher rate than they pay back to you. No different from a traditional Bank, except that a traditional Bank has been doing this for years and has learned the hard way that lending needs to be done carefully… and whilst I am no fan of Banks, just think about who might borrow from such a lender… someone that cannot, for whatever reason borrow from a high street bank. Hey presto, higher risk of default.

MINI BOND SCAM

Mini Bonds are yet another layer of this, except they dont have to relend the money to legitimate borrowers (people trying to fund their business or enterprise where a mainstream bank won’t play ball). They can lend the money to anyone, sadly often to the Directors of the company running the mini-Bond. Thousands of savers have got into problems with these mini-bonds. Tempted by higher rates of “interest” which was then passed on to some pretty despicable humans. These were banned in January, but this month made permanent after mini-bond firm London Capital & Finance collapsed with £237m of savers’ money.

WHAT IS A MINI BOND?

There is no legal definition of what a mini-bond is in the UK. Most companies that have offered them, including London Capital & Finance, borrow money from ordinary savers, promising them a fixed return well above the rate available on most standard saving products. The mini-bond firm is then largely free to do what it wants with the money. Many have lent investors’ cash to third party companies (which sometimes has the same directors), bought other risky investments such as race horses or wine, or funded property construction. A number of companies that raised money in this way have collapsed with millions of pounds of savers’ money unaccounted for. The FCA claims that mini-bonds are not within its remit, while criminal investigations for fraud are rare and prosecutions even rarer. As a result, investors generally have no protection if things go wrong, and fraudsters can operate with little fear that they will be punished.

ONLINE ACCOUNTABILITY

One of the many problems with google and facebook is that they carry advertising and seem unwilling or unable to vet adverts for authenticity, though I find this very hard to believe as whenever I have attempted to run even the tiniest marketing initiative on Facebook, my “advert” has to get “approved” before it can run. So… no I don’t believe that more cannot be done. Anyway, savers who are not as sophisticated as the scammers invariably google interest rates and are faced with adverts offering higher rates… what’s not to like? Well just the fact that risk isn’t really explained and its all framed to look, smell, sound and taste like any other Bank. You need to know the real risks that you are taking. A mini-bond is a great way to part with your cash on a permanent basis, something that the stock market does not do until Armageddon (as you will not get to a £zero value if you have invested in an index unless everything is worth nothing – and I can only imagine one scenario where that could occur… the sort of scenario where a Blofeld Bond-like villain (hence the cat picture…) is holding the world to ransom, or the actual obliteration of everything we know. If this ever happens, you won’t be worried about your ISA or pension.

In the meantime, please beware of scams, watch out for the villains, they are rarely as easy to spot as Mr Blofeld. This reminds me of an element of my work which is to act as a type of bouncer to your finances. Some have asked me about my photo, suggesting I look a little “mean” (perhaps they meant grumpy). It is deliberate – anyone that has engaged with me knows that I am having a little joke. As a bouncer, or gate-keeper part of my role is to ward off those trying to part you from your money. Its meant to be a little amusing, (ok not hilarious) whilst holding a very valid truth – that I am on your team as a defence against the rubbish that inevitably comes in your direction, its not if, but when…

As for the calibre of the villains, well the fictional ones are best left to the likes of 007, those that are actual criminals, well… I have to leave them to the authorities whilst doing what I can to prevent them coming anywhere near you.

As for Mr Bond, from the perspective of 2020 there are many aspects of 007 that hang heavily today. A friend of mine recently mentioned that he had rewatched the entire Bond collection with his children, he reappraised his favourite Bond and saw the films in a different light. When it comes to cash accounts, please appraise with care – make sure you know your Bonds from your Mini-Bonds. Here’s a trailer for 007 in “You Only Live Twice” (1967) who, let’s face it, has probably lived more than twice already.

Dominic Thomas
Solomons IFA

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AVOID MINI BOND SCAMSDominic2023-12-01T12:13:16+00:00

Business Owners – Banking on the good times?

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Banking on the good times?

When I meet most business owners and help them to think about their future, I am often told that “my business is my pension”. This is a perfectly reasonable thing for many business owners to say if they have a business that has a value and someone else will pay cash for it. In fact, one can make a very strong case for a business to act like a pension – with the option of providing an ongoing income for life and/or a capital sum.

Of course there is a “but”.

Life doesn’t always work out as planned. Business owners have more financial options to consider than most people, but there is a still a genuine limit on what they can control. Technology and competition can make life very difficult for the business owner, particularly for those competing on price. If the technology pundits are to be believed many jobs will give way to “errorless” computers. So the challenge will always be to not simply keep up, but stay ahead – which requires some insight and probably some luck.

Stress is the normal

Then there are the normal real world problems of economics, taxation, changing political policy and also changing consumer sentiments and behaviours – just consider what has happened to retailers over the last 20 years. These are very real concerns for business owners and many will reflect on the implications of Brexit as it begins to unfold, some will survive and some will not.

Are you being squeezed?

So the news that RBS has been squeezing businesses who are vulnerable, experiencing stress and you can add another problem to the growing list. Banks are of course meant to make money and have a responsibility to their shareholders (currently most of us) to do so, however a deliberate attempt to squeeze the life (and assets) out of small businesses is arguably not what most shareholders require. Certainly badly run businesses should be allowed to fail (that’s simply the law of capitalism) but those merely experiencing a temporary cash flow problem could be nurtured back to health. The saying that a bank lends you and umbrella when its sunny and wants it back when it’s raining, is sadly very much the case.

Reality bites optimism

Most business owners are optimistic, believing that their own hard work will reap returns. Few think that their venture will end is disaster and even fewer plan for such an event. When things are going well it is easy to forget or overlook the risks. All business owners insure their own cars, but very few insure themselves or key staff – without whom the car payments and everything else quickly grinds to a halt and don’t’ expect the Banks to rush to the rescue.

You are your biggest asset

Of course planning your retirement is part of the process – being able to sell your business at the right time for the right amount requires a lot of preparation. Don’t leave it to chance and above all, don’t rely on Banks being supportive to your own plans.

If you own a business or are married to (or know) someone that does, why not arrange a meeting at our expense to help you fully understand the risks within your business so that they can be addressed, just send me an email or pick up the phone.

Dominic Thomas
Solomons IFA

Business Owners – Banking on the good times?Dominic2023-12-01T12:19:06+00:00

Hell or High Water

A cursory glance of any media and it is hard not to conclude that there appears to be high degree of disappointment, disengagement and dislike of the way things are. One of the latest releases “Hell or High Water” exposes the cracked surface of the American dream and perhaps the end of the American empire.

Whilst, by no means a “revelation” we are shown the harsh reality of life in mid-Texas, of the small-towns that have reverted to outposts, now desolate from the financial collapse of 2008 and an obvious lack of opportunity. The only reassurance being the constant nodding oil pumps that imitate the heart monitors that reflect the State of being yet alluding to a deeper malaise.

To my mind the image of Texas already feels like an echo of the past. The gun-loving, property protecting, villain chasing, all seem like a throw-back to watching black and white cowboy films, (which were dated even then). Add a dash of more enlightened native American history, the mess of “How the West was Won” and men in cowboy hats look like pastiches of a past that was never terribly glorious… being a cowboy is of little appeal to a younger generation, who has almost as little “support” now as he did 200 years ago. This is of course, cultural and one of those many moments that someone from Britain is left with the sense of something got lost in translation – we sound similar enough, but there clearly are profound differences, which can only presumably explain the rise of Donald Trump and his call to “Make America Great Again”… I wonder when he has in mind and for whom.

Cops and Robbers…

Hell or High Water is set in the context of 2016, but it could be 1816 or 1916. Bank robbers, chased by a local law-man (Jeff Bridges) and posse and just for good measure an Indian guide (Gil Birmingham). Perhaps the writer (Taylor Sheridan – who also wrote Sicario) is pointing to the fact that little appears to have changed (for some). There is still the same degree of desperation and whilst the land was once that of the native Indians and taken from them by white people, now the Banks have taken the land from the white people. All of course within the law, written by those it serves.

Justice is just this…

So it is with some degree of poetic justice that the central character Toby (Chris Pine) decides to rob the very banks that are trying to repossess his late mother’s ranch, in essence, trying to repay the outstanding money with the banks “own” money. To cover his tracks, he even elects to appoint the same Bank to act as the investment adviser to the resulting Trust, a perfect “stick it to the man” using their own systems against them. He enlists the help of Tanner, his elder brother (Ben Foster) who has a deep disregard for anything different, yet clearly yearns for a something much different.

It is possible to simply see this movie as yet another in the chase genre, but my sense is that this is rather more profound, reflecting the desperation in the State of the Nation, which has seen the supposed freedoms that wealth can bring, merely usher in another form of slavery and clusters of circled wagons, requiring ample supplies of guns.

As for a financial planning angle – beware of banks offering umbrellas when the sun is shining, invariably they want them back when it starts to rain. In short, debt in any form needs to be mastered and repaid, the account always needs to be settled…. oh and I guess, have a plan with the end in mind… which includes how your estate is handled.

As for the movie, I really enjoyed it, wonderfully directed by British, David Mackenzie. Here is the trailer.

Dominic Thomas
Solomons IFA

Hell or High WaterDominic2023-12-01T12:19:09+00:00

Pensioners Broke the Website

Today is the launch of the NS&I Pensioner Bonds and the demand has been so great for them, that pensioners broke the website for NS&I… or more accurately, the site has had a significant amount of technical problems today coping with the rush to buy pensioner bonds.

As mentioned before the rates are very good by comparison, whether you want to tie up cash in a Bond for these periods is another matter, but if you do and you are seeking very low risk (not no risk) then this can be suitable (note I did not say that it is suitable – as ever context and your circumstances are everything).

The one year bond is 2.8% and the 3 year bond is 4%. Details can be found here at NS&I.

Dominic Thomas

Pensioners Broke the WebsiteDominic2023-12-01T12:39:52+00:00

NS&I Pensioner Bonds

Her Majesty’s Treasury announced the new rates for the NS&I Pensioner Bonds last week. These look incredibly competitive for fixed interest rate cash deposits (bonds). These will be offered in the new year at some point in January. There will be a 1 year fixed rate of 2.80% and a 3 year rate of 4.00%. There is a maximum investment of £10,000 into each. You can have both (£20,000 in total). The interest will be added at each anniversary.

The World Is Not Enough… well £20,000 isn’t

When comparing Bond rates for cash against market equivalents, they are incredibly good – but clearly restricted to a maximum holding of £20,000 per person, I expect that there will be a high demand and as a result the offer could be withdrawn fairly quickly. Blink and you may miss it.

If you would like more information about this please consider the NS&I website. Remember that this is for cash balances that you can afford to lock away for 12-36 months. If you expect to have this money longer than that, then please consider proper investment advice as despite the fact that these rates are “good by comparison” they would be an unwise use of your money as a long-term investment plan (5 years or more). Cash is for your emergency safety net and planned expenses in the 0-48 month window.

Pensioner Bond

The “Pensioner Bond” is only available to those aged 65 or over… which if you are interested would enable 4 of the living 6 actors that played James Bond, 007 to apply.

Timothy Dalton (70); George Lazenby (75); Sean Connery (84), Roger Moore (87). The current James Bond Daniel Craig is 46 and his predecessor Pierce Brosnan is currently 61. The other Bond story is that the new 007 film “Spectre” is scheduled for release in November 2015.

Dominic Thomas

NS&I Pensioner BondsDominic2023-12-01T12:39:44+00:00

Cash for ISA Questions

Let me be very clear – I LIKE CLIENTS TO HAVE CASH… its VITAL. The real question is “what is a sensible amount of cash to hold?” This will be different for everyone. Cash should really be available for planned expenses within the next 0 to 3 or 4 years, that way you know its there ready for your use. Thereafter, cash is vital to run any business and any personal finances. Whilst budget calculators and spreadsheets suggest nice neat twelfths, many costs are not monthly. As thoughts turn to Christmas – this is something we all know happens annually, once the presents have been unwrapped and you start looking forward to the potential of the new year, thoughts turn to summer holidays… and so on. So having cash on deposit is a very good and wise thing and don’t forget that some expenses are unplanned – such as repairs or replacements due to loss or damage.

Interest rates are so low is it worth bothering with a Cash ISA?

The short answer is “maybe” – it rather depends on your circumstances and when you need the money. Sadly, despite ISA allowances never being higher, interest rates haven’t been lower in living memory. Many if not most, deposit accounts are paying less interest than the rate of inflation (1.3% according to ONS). So your pound is declining, slowly, in purchasing power. This is an unfortunate reality that we currently live with. I would also take issue with official figures about inflation which bears little resemblance to the spending patterns of various people (think of the price increases in gas, electricity and rail).

Just to be clear… what is a Cash ISA?

A Cash ISA is simply a deposit account where interest is tax-free. Interest is taxable normally and should be reported on your HMRC self-assessment tax return. The amount you can put into a Cash ISA is linked to tax year allowances and the ISA rules (all of which are within our free APP or you can look them up). These changed in July 2014, lets stay brief and current, the new allowance is £15,000 each for the current tax year. You can now hold all of the allowance as cash or as investments, or any combination between the two within an ISA (previously you could only contribute 50% of the ISA allowance towards cash). As a result of the new rules, you can have a more suitable balance between cash and investments within your ISA to suit your requirements.

Should I just pick the best rate?

A word or warning, picking a cash ISA (or any deposit account) based entirely upon the headline rate, may not be wise. Perhaps you will remember the Icelandic banking crisis in 2008, which ought to provide some cautionary tales.

It is worth the effort?

It depends on your current rate of interest within your ISA and what the alternatives are. Remember that an interest rate of 1% will be worth 0.8% to a basic rate taxpayer and 0.6% to a higher rate taxpayer. Within an ISA you get the full untaxed amount. However if the sums are small or modest, say £10,000 then shopping around for an extra 0.5% is only going to provide £50 over a year, which given that if the better new rate is with a different Bank (or Building Society) you have to go through the ususal opening an account procedures – demonstrating your identity and UK residency and so on.

If this cash is just a part of my portfolio, should it now be mixed within my investment ISA?

Maybe. If you have a modern investment ISA on a “platform” which holds lots of funds, shares etc, then the platform may well have cash deposit options too. However be warned that platforms generally charge for their adminstration based on the balance on it, so you may well (probably) get charges for cash holdings too. If its ok at your Bank/Building Society then as long as your adviser knows that you have it and therefore not “too much” in cash, that should be OK. However for long-term wealth I would encourage people to use an ISA as an investment vehicle, rather than a place to dump cash as savings. Context is everything and needs thoughtful assessment with an adviser.

So where can I find current ISA rates?

Try looking here at Moneyfacts. However, I suggest doing a proper search using their search engine or any other that is widely available. Remember fixed rates are lock-in’s. If you think rates will rise, then you may wish to question the wisdom of locking into a low rate that is fixed for ages and if you are really locking away cash for 4 years or more, then perhaps you should be thinking about investment instead.

Anything else I should know?

Well, the age old one about bias. Financial advisers and financial planners like me are in part remunerated based upon the amount of money we look after, so if you invest more, we earn more. Of course the hope and expectation is that this is a very worthwhile exercise for you – getting better returns etc (but more importantly getting your money right for you). However it needs to be clear that its not free. Of course a Cash ISA with a Bank/Building Society can appear free – there are rarely any charges, but that doesn’t make it free. This is part of the problem with the delusion that the retail banking system maintains – that banking is free. It isn’t. The bank invariably pay bonuses to their staff for new accounts opened. They lend the money back out at far higher rates of interest and make profit as a result. However that money is at risk (of not actually being repaid to the Bank) and possible Bank collapse – hence the £85,000 FSCS protection and of course there is the inflation to also consider, you may actually be losing money – as many people are if their rate of interest is less than the rate of inflation (which is the majority of current accounts and many savings accounts).

A final point – this (the above) is not advice. You should naturally always plan with your own goals and context. A Cash ISA can be a very good tool in your financial box, but it may also be a rather blunt instrument – it all rather depends on the job at hand and the degree of skill you have using it. Here is a decent little video from Nationwide which is pretty clear. I’m not promoting Nationwide and depending on when you read this the information may be out of date. However the principles are right… oh yes, Nationwide do not pay me to mention them… so no cash for promotions.

I hope this is helpful.

Dominic Thomas

Cash for ISA QuestionsDominic2023-12-01T12:39:41+00:00

FSCS Compensation Scheme

FSCS Compensation Scheme – TV Advert

The FSCS are about to launch a new TV advert to remind everyone that the first £85,000 of savings are protected. This is per person per Bank – however please be aware that some banks share banking licenses and as a result you are only covered per person per Banking license. There are a few obvious ones that you will know, but there are several that you might not, so do check.

The FSCS £85,000 limit applies to cash, not investments, which are protected under different rules. Anyway, here is Fearne Cotton, talking about her earlier financial life, I imagine that £85,000 of protection is probably rather small beer for her these days. So if you have an account with a large sum in it, say £500,000 you are only protected for the first £85,000. I don’t wish to be alarmist, but this is really little more than a comfort blanket. Whilst FSCS has protected some investors with large payments (I’m thinking of the Icelandic banks) in practice if one of the big four UK banks collapsed, I don’t really think it is going to be much of a guarantee.

If you would like to check banking licenses for Banks, click here. If you wish to check licenses for Building Societies please click here. Don’t forget, unless you are an existing customer, each Bank or Building Society will need to verify your identity and residency. For the record, the FSCS is funded by financial advisers and financial institutions as part of our annual fees and levies. So for those that are minded to lobby for higher levels of protection (than £85,000) be advised that ultimately it is the saver that pays.

Dominic Thomas

FSCS Compensation SchemeDominic2023-12-01T12:39:31+00:00

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