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JN Bank UK hits £300million in customer deposits as more savers snap up top rates
Martin Lewis urges savers to ‘hold off' as NS&I ‘likely' to release better deal in days
I can’t lose what I’ve saved in this type of account and come rain or shine I will get whatever the current interest is, so it’s a safe place to park some cash. But I’m looking at what I can earn, and in that regard, I see two big problems here.
Firstly, interest rates change all the time. It’s not like I can lock in my Cash ISA so that I earn that much for the next 10 years. Instead, what I actually get depends on what the Bank of England does. And with its target for inflation being around 2%, I’d expect lower interest rates over the long run.
https://www.msn.com/en-gb/money/other/interest-rates-at-5-25-can-i-now-earn-more-in-a-cash-isa-than-in-a-stocks-and-shares-isa/ar-AA1eTFD3?ocid=msedgntp&cvid=f20d8d2650e2444eb78cf484e5be93e3&ei=90
I can’t lose what I’ve saved in this type of account and come rain or shine I will get whatever the current interest is, so it’s a safe place to park some cash. But I’m looking at what I can earn, and in that regard, I see two big problems here.
Firstly, interest rates change all the time. It’s not like I can lock in my Cash ISA so that I earn that much for the next 10 years. Instead, what I actually get depends on what the Bank of England does. And with its target for inflation being around 2%, I’d expect lower interest rates over the long run.
https://www.msn.com/en-gb/money/other/interest-rates-at-5-25-can-i-now-earn-more-in-a-cash-isa-than-in-a-stocks-and-shares-isa/ar-AA1eTFD3?ocid=msedgntp&cvid=f20d8d2650e2444eb78cf484e5be93e3&ei=90
Comments
You can't take it with you.
Because its not true.
I have been looking at fixed term cash ISAs, over the last few weeks.
I know you can fix them for 7 years, not sure if any longer terms are available.
So if you thought that interest rates were likely to fall in the longer term, you could fix your ISAs at rates that are available today, for maybe 5 or 7 years.
So if interest rates do fall you are guaranteed rates that are available today.
I recently did a deal with the Principality B S, fixed at 5.2%, for five years.
Some higher rates are available, but with banks I have never heard of.
Although you can get a guarantee to cover 85k per customer, if they bite the dust.
I calculated the compound interest over the 5 years, and it comes to almost exactly one third of your investment.
If you got the same rate over 7 years the return would be over 40%.
The Principality deal has already gone.
I fell out with my Financial Adviser over this.
He fired me.
He claimed that he couldnt be advising people that didnt follow his advice.
He may be right of course, and I have made an error.
His main point was that if you fix the rate at a lower rate than inflation, you effectively lose money.
I understand that.
What convinced me was that my ISAs have been in stocks and shares, and havent moved in the last 5 years.
I understand that this may have been a difficult time, with covid, and Liz Truss, etc.
I prefer the thought of them guaranteed to grow by a third, rather than take a chance of the stock market picking up.
Although I do have a SIPP invested in stocks and shares, so if it does pick up, all is not lost.
I understand that this may have been a difficult time, with covid, and Liz Truss, etc.
I prefer the thought of them guaranteed to grow by a third, rather than take a chance of the stock market picking up.
Although I do have a SIPP invested in stocks and shares, so if it does pick up, all is not lost.
Get a Stocks and Shares ISA and select your own stock picks. You will probably do better than the so called professionals.
It's difficult to know what to do at the moment. FTSE100 returns havent been great the past 5 years. Property isn't a good investment now after tax changes. Fund manager and territory performance fluctuates a lot and has generally been low return the past 5 years.
My own approach now is to have a stocks and shares ISA that has enough cash in there to pay off our mortgage, should we need to when our fixed deal ends in a couple of years. I select the funds and shares myself, which are a mix of regional funds and some shares. Otherwise, I pile the majority of my cash into my private pension and the immediate return via tax breaks is insane.
I can highly recommend James Shack on YouTube if you need some free FA.
And he is 100% correct about the differential between Cash ISA deposit rates, and the real rate of inflation which has been running in double figures for much of the last few years. All very well making 40% over 7 years, when in real terms inflation has actually eroded the purchasing power of your money even with interest added.
Saving/Investing money is about having a diversified approach that falls in line with your investment horizon and attitude to risk. No one invests in the FTSE100 any more, they usually look at overseas investments as well as UK. US tech has done very well this year, but so has energy stocks over the last few years that have given dividends comparable with cash ISA's and capital growth as well. The key with wealth creation is let compounding be your friend. And you need a medium term time horizon to start to feel the benefit of that.
At the end of the 5 years I will be free to have a rethink.
The one thing that is guaranteed is that I will see some growth in my ISA account.
It will be interesting, as I have similar amounts in both accounts.
So if the SIPP grows more than the ISAs, I will look like an absolute mug.
Any arguments that you put forward about certain markets, doing badly, or very well, are irrelevant, as the facts are that I have had no growth in either account for 5 years.
Interest rates for savers have only reached a decent level fairly recently.
I remember the time when every Financial Adviser in the country argued that the best mortgage available was an endowment mortgage, and we all know how that turned out.
I can even remember them selling pension mortgages.
Your investments can do badly due to outside factors, and may not be the fault of the company that hold them.
I would suppose it would be fair to say that in general a Financial Adviser will favour stocks and shares ISAs, as if everyone went for cash ISAs the industry would lose a fortune.
So they have a vested interest.
I think that cash ISAs have only become an option fairly recently.
As in years gone by the rates were so low, they werent worth considering.
If I were a younger person I would be tying my money up for a long as possible, and hoping that inflation came under control.
This would mean that interest rates would fall, and the value of your money would be protected.
If interest rates did fall, many people may choose to revert to stocks and shares, when their fixed term ran out..
That would be stupid.
I am only saying that I know what is better for me.
I dont know the first thing about stocks and shares.
I just think that at my time of life, I would prefer a guaranteed return.
Your SIPP and ISAs have not grown at all in the last 5 years? Well that's not good either. Yes we have had COVID, where markets dropped significantly very quickly, but they also recovered very quickly, Many investment markets topped out at the end of 2021, with 2022 being very poor. Raising interest rates, the end of quantitative easing in the US and UK, a tech bubble bursting, Russia invading Ukraine with the resultant oil and gas crisis causing huge supply problems and cost increases and kicking off the inflationary spiral, Liz Truss as PM and her awful mini budget, which cost the UK £60 billion in trying to shore up the gilt market and the longer term affects of COVID and even Brexit have all put stress into the market. It has been a very difficult 3-4 years. Yes, I have clients who are down over the last 3 years (so am I), but I certainly haven't reviewed any who are down over the last 5 years.
Cash represents the best value it has for decades but, as @ACEGOONER states, it is simply a guarantee that your money loses it's buying power against inflation, although a 5 year fix at the peak of interest rates will look very good IF inflation is brought under control and rates are reduced significantly, which is one of the Government's main stated aims. Hindsight is 100%, many who locked into fixed rate cash ISAs thought they got good deals at 2,3 or 4%.....
If you're investing it should be for at least 3 years and generally 5 years plus. The general public tend to make the wrong investment decisions as they react to recent events more than they should e.g. running scared of investing as the markets drop/bottom out and then deciding to go back in when the markets have had a good run - bonkers but you see it happen a lot. It's generally not a case of timing the markets but TIME IN the markets (an old saying but as true now as it's always been). Part of your job as an IFA is to see clients through the tough periods.
If you want a guaranteed return then you may well have done the best thing FOR YOU and your FA should certainly be experienced enough to know that sometimes you and clients will disagree, that's life. They may well have ended the relationship because they are not longer 'adding value', I have certainly made that decision in the past.
Sorry for the long post and I need to get back to work!
I will try to address your issues. 5 years is a decent amount of time to assess how well the portfolios that have been recommended performed. However, the last five years in terms of Geopolitics and the Global pandemic have been unprecedented. Both of these have been major factors in stoking a round of inflation that we haven't seen for decades, the response a significant rise in interest rates inevitably would hit the value of stocks and property which don't generally do as well when interest rates are higher.
Interest rates are now nearing or have hit their peak, as long as inflation is under control then we can expect them to fall again. So the interest on your cash ISA may (or may not) fall, that depends on how the economy fares.
Will you make more money on the stock market than in a Cash ISA over the next five years, who knows. But you can look back at history the S&P 500 has produced an average return of 11.57% since its inception in 1957. I appreciate a FA won't recommend a fund that will necessarily match these figures, but it is a good benchmark and verification that investing in stocks over the longer term will always be a better wealth aggregator than cash.
And your reference to misselling of Endowments etc in the 90s, Financial Advisors are much more highly qualified than they were back then, and subject to much more regulatory scrutiny.
1. The S&P 500 figures (or, to use a UK example, the FTSE 100) are extremely misleading in relation to investment return. Simply because the index uses hindsight to manipulate the figures. Suppose you invest in a FTSE 100 Company. And it either goes bust, or performs disastrously. It is dropped from the Index, and replaced by someone doing better. Index does well. While the Investor loses money.
2. There is an ever-increasing amount of regulatory scrutiny. But not necessarily by people who have the first clue what they are doing. Financial Advisors are certainly more qualified than they were. Whereas the Regulators are increasingly politics-driven.
I think you're making more at Poker these Days Tony ........
WELL DONE on winning the Sunday Major .......AGAIN
We had a bloke in the office to answer any questions that we couldnt.
Needless to say we all passed.
I remember thinking how ridiculous it was that every financial adviser had to quote the same 3 rates of growth on an endowment.
So if you worked for a really good company with a terrific track record, or a sh1t company that had shocking results, you had to quote the 3 rates of growth.
I wish.
I havent drawn any money out of savings until this year.
When we had our annual phone call this year, I informed him that I wished to draw 8k out of my ISAs.
He informed me that he would have to do his annual report which was likely to take two weeks, plus a week for typing.
He would then send it to me.
I would approve it and send it back.
He would arrange my withdrawal.
The stocks and shares would be sold, and I could expect the money in about 6 weeks.
I wasnt desperate, but I wasnt wearing that.
I was under the impression that it was my money.
I followed my comments up with an email, but he was determined to pursue this course of action.
It came to a head when I told him to f...k off, and that I had no intention of reading his report, never mind approving it.
I then decided to draw the tax fee lump from my SIPP, and invest that in cash ISAs.
I have access to my accounts online, and could see that nothing had happened to the ISA account.
As I was withdrawing from the SIPP, I asked him to cancel the 8k ISA withdrawal.
He gave me some bs about why this was not possible, as the computer would automatically send it off to my bank.
This was the last straw, and we parted company.
My wife has had 2 recent monthly statements, and has lost 2k on her ISAs in a month.
I was faced with a choice of a guaranteed 70k, or take a chance on the stocks and shares.
We had a bloke in the office to answer any questions that we couldnt.
Needless to say we all passed.
I remember thinking how ridiculous it was that every financial adviser had to quote the same 3 rates of growth on an endowment.
So if you worked for a really good company with a terrific track record, or a sh1t company that had shocking results, you had to quote the 3 rates of growth.'
OK let's cover the points you raised.
I have been in the industry for 35 years, you are right the tests used to be easy. At that time I worked in an office with 50+ sales people, Other than me, I would have trusted two or three of them, maximum. The industry is very, very different now.
The tests have since changed, they are now exams set by external companies and subject to full exam conditions. To advise on pensions and investments you now need to be qualified to at least level 4, which is first year degree level, they are not easy exams to pass, especially if you are working full time too. This change, combined with a change from commission to fees, came about as a result of the Retail Distribution Review in 2012. If you couldn't pass the exams you couldn't continue to advise clients. These changes apparently led to 70% of the bank's advisers leaving the industry.
We asked the FCA what proportion of their staff were qualified to level 4, the answer at the time was 15%. We asked if they intended to ensure that all staff became qualified to level 4, their answer was 'no, because we don't advise clients'! The fact that they regulated those that did advise clients seemed to not be important.
Maximum growth rates quoted on illustrations are set by the FCA, companies can and do now use lower growth rates if they think they are more applicable to their product. In some cases now negative growth rates are used, that needs some explaining to clients!
Working for a 'good' company or a 'sh1t' company? Make sure whoever you get advice from is an Independent financial adviser (IFA), we don't recommend 'sh1t' companies.
Finally, you mentioned endowment mortgages and pension linked mortgages earlier. Well endowments haven't been used for decades (well not by me) as ISAs are much more tax efficient. Most mortgages are repayment basis nowadays, not sure that that is necessarily a good thing but it's the way the industry, as dictated by the lenders and FCA has moved. Pension linked mortgages? Definitely has pros as well as cons, there can sometimes be reasons to recommend a savings vehicle that can result in tax relief of up to 60% to fund retirement AND repay a mortgage.