National Savings & Investments (NS&I) has announced changes to some of its savings rates, with a mix of good and bad news for customers. While some rates are being cut, there is also a slight boost for those with the cash ISA.

The bad news is that from 5th March 2025, NS&I will lower the interest rates on its Direct Saver and Income Bonds easy access accounts. Direct Saver will drop from 3.50% to 3.30% AER, while Income Bonds will see a reduction from 3.44% monthly (3.49% AER) to 3.26% monthly (3.30% AER). Additionally, the prize fund rate on Premium Bonds will decrease to 3.80% from the April 2025 draw.

However, there is some positive news. Effective immediately, the Direct ISA rate has increased from 3.00% to 3.50% for both new and existing customers. While this is a welcome boost, it is worth noting that better rates are available elsewhere – and you are not able to transfer in previous ISA allowances.

Why is NS&I cutting rates now?  

One key factor behind the cuts is likely to be the recent base rate reduction of 0.25% in early February, from 4.75% to 4.50%.

But it could also be that NS&I is already on track to meet its net financing target for the tax year – the amount of money it needs to raise each year.  

In the Spring Budget of March 2024, the UK government set NS&I’s net financing target for the 2024-25 financial year at £9 billion, with a leeway of plus or minus £4 billion.  

This is quite a range and as of the second quarter of the 2024/25 tax year, it had raised £3.3 billion. While this is within the target range, it is slightly below the ideal figure, making the decision to cut rates even more disappointing.

Are Premium Bonds still worth hanging on to?

Premium Bonds remain a popular choice, especially for taxpayers, as winnings are tax-free. Rather than paying interest, Premium Bonds give holders the chance to win prizes ranging from £25 to £1 million each month. The odds of winning remain at 22,000 to 1, but in order to keep the odds the same, NS&I has increased the number of £25 prizes while reducing some of the larger payouts. However, the two £1 million jackpots will still be available each month.

Despite the rate cut, many savers are likely to keep their Premium Bonds because of the ‘what-if’ factor – the excitement of potentially winning big.

And for those who pay tax on savings interest, Premium Bonds could offer particularly competitive returns. For example, a tax-free win of the new prize fund interest rate of 3.80% is equivalent to a 4.75% return for basic-rate taxpayers, 6.33% for higher-rate taxpayers, and 6.91% for additional-rate taxpayers in a taxable savings account. No savings accounts currently offer anything close to these rates for higher and additional taxpayers.

Of course the risk is that you win either less than this or even nothing at all, although the latter is highly unlikely if you have a larger holding in Premium Bonds.

How do the new easy access and ISA rates compare?  

For those looking for better easy access savings rates, alternatives exist. Some banks and building societies are currently offering rates as high as 4.57% AER on accounts with no restrictions. Others, like Monument Bank’s Limited Access Saver, is offering 4.75% AER on £25,000 plus, although only three penalty free withdrawals can be made per year and it must be opened via the bank’s mobile banking app. If you are looking for monthly interest, this account allows you to choose this option paying a rate of 4.65% gross monthly.  

Kent Reliance offers an unlimited access account that can be opened in branch or online paying 4.56% AER/4.47% monthly.  

There are plenty of easy access cash ISAs paying more too.  

Take a look at our best buy tables to see what else is on offer.

Why some still choose to stay with NS&I

With better rates available, some savers may consider moving their money to earn more. However, NS&I remains a trusted option due to its government backing. Unlike other banks and building societies, which are protected by the Financial Services Compensation Scheme (FSCS) up to £85,000 per person per institution, NS&I guarantees 100% security for all savings, no matter the amount. So for short term needs, NS&I can be an obvious and simple option.

But for those with smaller balances or who are willing to spread their savings across multiple institutions paying higher rates, it might not be the best choice.

The rise of the cash savings platforms has also added another option for those with larger amounts of cash.

Think of a cash savings platform like a savings supermarket, where with a single application and log-in, you can pick and choose multiple competitive savings accounts - from easy access to fixed term bonds - and providers at the click of a button. Whilst not whole of market, cash platforms often do offer competitive and some market leading accounts. But the real benefit is that they make it easier to spread your cash, so that it can be better protected by the Financial Services Compensation Scheme (FSCS), whilst earning more.

You can now open, access and switch between multiple competitive savings accounts via a single log-in with the our  Savers Hub, powered by Insignis.  

While NS&I’s rate cuts are disappointing, the appeal of Premium Bonds and the security of being able to deposit very large sums securely remain strong. However, savers looking for better returns should explore alternatives, as the current market offers more competitive rates. 

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate cash advice.

The accounts and rates mentioned in this article are accurate and correct as of 27/02/2025.

The financial landscape has shifted dramatically over recent decades, leaving Generation Z (those born between 1997 and 2012) facing a unique set of challenges compared to their parents and grandparents. From soaring house prices to student debt and an increasingly complex job market, young adults today must navigate financial hurdles that previous generations may not have encountered at the same stage of their lives.

At the same time, there is an unprecedented transfer of wealth underway, known as the Great Wealth Transfer (or even Bank of Mum and Dad), with many parents and grandparents holding significant financial assets that could play a vital role in supporting the next generation.

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For parents, the question is no longer just how to leave a financial legacy but also how to equip their children with the knowledge and confidence to manage their money effectively. The right conversations and early financial planning can make all the difference in helping Gen Z establish a strong foundation for their future.

A New Set of Financial Challenges

Every generation faces financial pressures, but Gen Z has grown up in an economic environment where stability can feel increasingly out of reach.

Homeownership, once considered a realistic milestone for young adults in their twenties or early thirties, has become far more difficult to achieve. House prices have surged ahead of wage growth, with deposits requiring years of disciplined saving. For many young people, renting well into adulthood is the only viable option, meaning they have less opportunity to build wealth through property ownership.

Sadly, rental costs have soared in recent years, meaning many young adults are forced into living with their parents for longer than they might ideally like, pushing independence further down the road.

Student debt is another significant burden. While previous generations could attend university with minimal financial strain, tuition fees and the cost of living now leave many graduates starting their careers already saddled with considerable debt. At the same time, traditional career paths are changing. The rise of the gig economy and short-term contracts means that many young workers experience financial instability, making it harder to plan for the future or save consistently.

Beyond these direct challenges, there is also the issue of financial education. Many young people enter adulthood with little understanding of saving, investing, or managing debt, leaving them vulnerable to financial mistakes. The earlier they develop financial literacy, the better positioned they will be to navigate these challenges with confidence.

The Role of Parents in Financial Education and Support

One of the most valuable things parents can do for their children is to normalise conversations about money. Many families shy away from discussing finances, whether due to cultural norms, discomfort, or simply a lack of knowledge about how to approach the topic. However, fostering an open dialogue about money from an early age can set children up for long-term success.

The family dinner table is an ideal place to introduce these discussions. Talking about budgeting, saving, borrowing or even explaining financial decisions in real time helps children develop a natural awareness of financial matters. For younger children, this could be as simple as discussing how pocket money is spent and saved. For teenagers and young adults, conversations might focus on the realities of student loans, credit scores, or the importance of building an emergency fund.

Crucially, these discussions should not be one-off lectures but ongoing conversations that evolve as a child grows. Encouraging Gen Z to ask questions and think critically about money can help them make informed financial decisions rather than relying on trial and error.

The Great Wealth Transfer and Its Impact

While Gen Z faces significant financial pressures, they are also poised to benefit from what is being called the largest wealth transfer in history. Over the coming decades, trillions of pounds are expected to be passed down from the ‘baby boomer’ generation to their children and grandchildren, reshaping the financial landscape.

For families with significant assets, careful planning is essential to ensure that wealth is transferred in a way that is both tax-efficient and beneficial for the next generation. Parents and grandparents should consider whether gifts or inheritance might help their children achieve financial security, such as contributing to a house deposit or assisting with university costs. However, support should be accompanied by financial education and know-how. Without the right knowledge, sudden financial windfalls can be mismanaged or even create unintended dependencies.

This is where financial advice plays a crucial role. Whether navigating inheritance tax (IHT), structuring financial gifts, or setting up trusts, working with a financial adviser can help families manage their wealth in a way that benefits both the current and future generations.

Encouraging Smart Financial Habits Early

While parental support can make a significant difference, it is equally important that young people take ownership of their financial future. Encouraging Gen Z to start investing early can be one of the most impactful steps towards long-term wealth building. The power of compounding means that even small investments made in their twenties can grow significantly over time, providing a strong financial foundation for later life.

Many young adults perceive investing as risky or complicated, often assuming it is only for those with substantial wealth. However, with modern investment platforms making it easier than ever to get started, there has never been a better time for young people to explore their options. Even modest contributions to a stocks and shares ISA or a tax-efficient pension scheme can set them on the path towards financial independence.

Parents can support this by demystifying the investment process, encouraging their children to start early, and, if necessary, introducing them to professional financial advice.  A financial adviser can provide tailored guidance on saving strategies, tax-efficient investment options, and long-term financial planning, helping young investors build confidence and clarity about their financial goals. 

Why Seeking Financial Advice Matters 

For parents, working with a financial adviser can help create a structured plan for passing on wealth while ensuring their children are prepared to handle financial responsibilities. For Gen Z, seeking the right financial advice early can provide clarity on how to budget, save, and invest effectively, setting them up for long-term success. 

At TPO, we help individuals and families build a secure financial future through tailored advice and strategic planning. Whether you are a parent looking to support your children or an adult looking to maximise your wealth, our team is here to provide the expertise you need. 

If you want to take control of your financial future, contact us today to learn how we can help you make informed, confident decisions.  

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The details in this article are for information only and do not constitute individual advice.

The Financial Conduct Authority (FCA) does not regulate tax advice or estate planning.

Investment returns are not guaranteed, and you may get back less than you originally invested. Past performance is not a guide to future returns.

UK inflation unexpectedly jumped to 3% in the 12 months to January 2025, marking a ten-month high and catching many analysts off guard. The rising cost of living is up from 2.5% in December and above analyst’s forecasts of 2.8%.  

The increase has raised fresh concerns about how long the Bank of England (BoE) will need to keep interest rates higher, meaning potentially the pain will be prolonged for borrowers – but could signal better news for savers  

The rise in inflation has been driven by several key factors. Airfares, which typically drop sharply after the holiday season, didn't fall as much as expected, keeping travel costs higher. On top of that, the introduction of VAT on private school fees has pushed up tuition costs, adding to the pressure. Food and non-alcoholic drink prices have also edged up, squeezing household budgets even further. Meanwhile, core inflation, which strips out volatile items like food and energy, has also climbed to 3.7%, and services inflation is now running at 5%. All of this suggests that inflation is proving more stubborn than the BoE might have hoped.

This latest inflation surprise makes the BoE’s monetary policy strategy more complicated. The Bank had been moving toward cutting interest rates this year, particularly given the weak economic growth seen in recent months. But with inflation coming in higher than expected, policymakers may have to hold off on rate cuts for longer to ensure inflation doesn’t start climbing again. Some experts still believe rate cuts are on the way, but this inflation spike could slow things down and force the Bank to take a more cautious approach.

Whilst bad news for borrowers, for cash savers this uncertainty around interest rates has some important implications. If the BoE keeps rates higher for longer, that could be good news for those with savings as banks and building societies may also be slower to cut rates – particularly on fixed term accounts. However, inflation at 3% means that unless you’re earning at least that much interest on your savings, the real value of your money is being eroded over time.

For example, if you have £10,000 in the Lloyds Easy Saver account which is paying just 1.10% AER on balances of between £1 and £25k, after a year the real value of your money would have fallen to £9,816, assuming inflation were to remain at 3%. If you were to move that £10,000 to an account earning 4%, your cash would have actually increased in value, even after the effect of inflation, to £10,097 in real terms.

Check if your savings are keeping ahead of inflation with our inflation calculator below:

Now more than ever, it’s important to make sure your money is working as hard as possible. Shopping around for the best interest rates is key, as banks are still offering a mix of competitive and disappointing deals. Fixed-rate savings accounts might be worth considering if you want to lock in a good rate before any potential cuts in the future. Meanwhile, cash ISAs remain a great way to shield your savings from tax, helping you to maximise your returns.

With inflation still proving unpredictable and interest rates in a state of flux, keeping an eye on the financial landscape and the interest rates you are earning on your savings is essential. By staying informed and being proactive with your savings, you can make the most of the current situation and ensure your money is working for you.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate cash advice.

The accounts and rates mentioned in this article are accurate and correct as of 20/02/2025.

As expected, the recent news from the Bank of England has delivered a blow to savers, as the base rate was cut to 4.50%, from 4.75%. 

Following this news we would expect to see cuts to both the savings accounts currently available, but also existing variable rate savings products.

However, this could also serve as a timely opportunity for savers—a reminder to review and optimise their savings before rates decline further.

Analysis by Yorkshire Building Society and data consultancy CACI found that nearly £400 billion is languishing in savings and current accounts earning 1% or less! Savers who are willing to shop around could easily boost returns and secure rates of over 4%, even if they need to retain easy access to their money.

On a balance of £10,000 that means earning in excess of £400 instead of nothing! It’s effectively free money.

For those who can afford to lock up some of their funds, there are still highly competitive inflation-beating fixed-term savings accounts available, which could protect against further rate cuts.

While inflation currently stands a little above the Bank of England’s 2% target, it’s expected to rise slightly further before settling back to around 2% by the end of the year. The good news is that many top savings rates are paying well above inflation at its current level — even after tax — giving savers a chance to protect and grow their money in real terms.

So, locking some cash away into a longer-term fixed account could be a prudent strategy.

If inflation falls back to 2% as projected, savers will be pleased to have locked into rates that comfortably outpace the rising cost of living, for longer. But it’s crucial to ensure you won’t need access to these funds before the fixed term bond matures, as early withdrawals aren’t allowed.

And don’t forget fixed term cash ISAs – which do allow early access, although with a hefty penalty. With tax free interest, the returns are likely to be better than from the bond equivalents.

Although the headline rates on bonds look as though they will provide more, they may not if you pay tax on your savings. For example, if you were to deduct basic rate tax from the top 1-year bond paying 4.66%, the net rate is 3.73%. In the meantime, the top 1-year fixed rate cash ISA is paying 4.45% tax free. So, on £20,000 you would take home £746 from the bond, but £890 from the ISA!  

That’s why for many the cash ISA allowance is not to be disregarded.

The bottom line is that with rates still attractive, now is the perfect time for savers to take control, avoid dormant cash traps, and maximise returns and tax-efficiency while they can.

Take a look at our whole of market, independent and unbiased Best Buy tables.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

The Financial Conduct Authority (FCA) does not regulate tax advice. 

The accounts and rates mentioned in this article are accurate and correct as at the time of writing.

 

Who deals with the finances in your household? Would your family know where to look should something happen to you?

In the past, having a will would be how your final wishes were granted for the distribution of your assets after death…

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But is it enough in the new digital world?  

As the financial industry transitions towards increasingly using technology, your loved ones are unlikely to unearth your financial information by searching through a physical filing cabinet. Finder, a global fintech, estimates that in the UK alone, 47 million people use some form of online or remote banking – that’s 87%!  In the last decade especially, each of our digital footprints has grown exponentially. With multiple logins, passwords, usernames and accounts held across different websites and portals it’s hard to keep track yourself. The question is, how would your loved ones cope with this should you pass away?

No one can dispute that navigating the death of a loved one is one of life’s biggest challenges. To further complicate things, a recent survey by consumer group Which? has indicated that 76% of members surveyed had left no plan for what to do with their digital assets should they die.

Removing the additional complexity of trying to locate relevant documents to settle your estate can only be of benefit to those you leave behind. Although you can name a ‘digital executor’ in your will, this does not extend to consolidation of your financial affairs into one accessible place. TPO Wealth solves this problem for you.

What is TPO Wealth?

At The Private Office, all our clients have access to a digital filing cabinet, at no additional cost, through our secure online portal TPO Wealth. As with a physical filing cabinet, here documents can be stored safely and securely. By leaving behind instructions for family members on how to access this, the painful process of settling your estate can be expediated and enhanced.

With your consent, your solicitors and accountants can also access information you deem appropriate, such as tax returns. This capability allows for a seamless and effortless experience for you. You can have confidence that your information is safe, whilst allowing trusted contacts to have access to relevant documents.

Our clients use TPO Wealth to file personal financial documents and those they choose to share with professional contacts, such as their:  

• Tax Information 
• Will 
• Invoices 
• Details of professional contacts 
• In case of emergency details 

This can be particularly useful for the self-employed. As of October 2024, the statistical agency Statista estimates that 4,383,000 people in the UK are self-employed. That’s 13.1% of the workforce! Granting your accountant access to secure documents on TPO Wealth could substantially speed up the arduous process of filing tax returns and completing annual accounts.

With all the information neatly stored in one place, the need for time consuming back-and-forth is reduced. You’re free to get on with life’s more important things.

What about if you become incapacitated? 

Beside from the death of a loved one, information may be required, in other instances. Consider critical illness or incapacity. Should something happen to you, access to your TPO Wealth account and those within the remit of your Power of Attorney rights can be granted. Ministry of Justice data from 2024 indicates just how slow the Lasting Power of Attorney process can be – in fact, one application was finally processed in 2024 after a total of 2,777 working days!  

Would you like to take control of your finances?

Beyond secured storage of important files, with TPO Wealth you can track investment performance and the growth of your savings, across various accounts with different providers, all in one place. Using clear graphics, our clients can track the value of their net-worth in real time. Features such as an in-built property value calculator contribute towards overall peace of mind, as you can get a clear picture of the state of your finances, all at your fingertips.

If you’d like to learn more about how TPO Wealth can help to consolidate your financial affairs into one simple, easy-to-use place, we would be happy to help.

So why not get in touch?

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

TPO Wealth is only available to clients of The Private Office.

The Financial Conduct Authority (FCA) does not regulate estate planning or tax advice. 

Multiple City Investment firms are lobbying for Chancellor Rachel Reeves to ‘scale back’ incentives like cash breaks for Cash ISAs in an apparent effort to boost UK financial services and the economy by encouraging savers to ‘invest’ instead of ‘save’.

Companies including Insurance group Phoenix and the London Stock Exchange Group have urged the Chancellor to consider that the £386bn held in Cash ISAs (according to the Bank of England) could deliver higher returns for savers if invested in stocks and shares, while also boosting the declining equities market.

Our recent article on the Lifetime ISA under threat covered the discussion around scrapping the popular Lifetime ISA, something that is also currently being considered by the Government. With the Cash ISA now under threat too, it’s clear that savers may soon be facing turbulent times.

Unsurprisingly, consumers and personal finance experts have pushed back against the proposals. For many savers, these basic and straightforward products form an invaluable part of their personal finances, owing to their lack of volatility and risk compared with investments, including the ability to withdraw money at short notice.

According to 2021/22 data from HM Revenue & Customs (HMRC), roughly 14 million of the UK’s 22 million ISA holders only use Cash ISAs, meaning that the potential changes will significantly impact millions of people who are simply trying to save responsibly.

What is an ISA?

An ISA, or ‘Individual Savings Account’, is a scheme that allows anybody to hold cash, shares and unit trusts free of tax on dividends, interest, and capital gains. Essentially, it’s a savings account that you don’t pay tax on.

A Cash ISA is a tax-free savings account that allows people to save cash without incurring income tax on interest. They have become more popular over the past two years due to rising interest rates increasing the competitiveness of savings products.

You can save up to £20,000 each tax year and receive tax-free interest payments, so when the value of your Cash ISA increases, you get to keep all of it tax-free.

While there is a £20,000 allowance in place for how much you can put in a year, there is not a cap on how much you can accumulate in an ISA over your lifetime.

When choosing a style of investment to suit your needs, you may want to consider how long you plan to invest for and how much you would like your money to grow. It is also important to understand what movement in value you may or may not be happy with because of investment ‘risk’ and any potential losses that may happen if you have to withdraw or ‘sell’ before you are ready. That is why soliciting professional advice can be crucial for understanding how to take those first steps towards a secure financial future.

If you want to find out more, why not give us a call on 0333 323 9065 or book a free non-committal initial consultation with one of our chartered advisers to see how we can help.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate tax and cash flow planning.

Investment returns are not guaranteed, and you may get back less than you originally invested. Past performance is not a guide to future returns.

Question: I’ve just filed my self-assessment tax return, and once again I’m paying tax on the interest from my savings. I already max out my ISA allowance each year, but I’m tired of handing over part of my earnings to HMRC. What else can I do to make my savings more tax-efficient? 

Whilst it’s encouraging to see interest rates staying higher than expected, allowing savers to earn more, it does come with a downside: many of us are now paying more tax on our savings.  

The problem is that the tax allowances for savers haven’t changed in years. They simply don’t reflect the fact that interest rates have climbed significantly from the rock-bottom levels we saw for over a decade.  

Take the Personal Savings Allowance (PSA), for example. Introduced in 2016, it allows basic rate taxpayers to earn up to £1,000 in interest on non-ISA savings before paying tax, while higher rate taxpayers have a £500 allowance. Additional rate taxpayers do not have a PSA. But with rates rising, these thresholds are being breached with much smaller savings pots.

In December 2021, before rates started to increase, the best easy access account was paying 0.75% AER, meaning basic rate taxpayers needed over £133,000 in savings to exceed the PSA. Fast forward to today, and with top easy-access rates at around 4.75%, you’d breach the allowance with just £21,053.  

This is one reason that cash ISAs have become so popular once again. They allow savers to protect their interest from the taxman. However, the annual ISA allowance—currently £20,000—hasn’t increased since 2017.

Another tax-free option for savers is NS&I Premium Bonds, although it’s a different type of savings account. Rather than paying a rate of interest to Premium Bond holders, the interest rate is applied to the amount held in the prize fund, and this funds the monthly prize draw that pays out prizes of between £25 and £1m each month.  

The maximum you can hold in Premium Bonds is £50,000 per person and each £1 purchases one Premium Bond and all the bonds you own are placed into a random monthly prize draw. So, you might win something, or you might win nothing at all! The opportunity to potentially win a bigger prize – and tax-free, means that Premium Bonds have remained very popular even though the interest rate applied to the prize fund, and therefore the amount of cash available for prize money has fallen recently.  

One other allowance that is available for those with a lower income is the starting rate for savings. If you earn less than £17,570 each year in total either from employment, a pension income or rental income you can earn up to £5,000 in savings interest before paying any tax on it.  

It can be quite complex to calculate though and if you earn more than the Personal Allowance - which is currently £12,570 - but less than £17,570, the £5,000 allowance will be reduced by £1 for every £1 you earn over the Personal Allowance.  

For example: 

If your income is less than £12,570 then you have the whole £5,000 starting rate for savers to make use of as well as any remaining Personal Allowance.  

Couples can also benefit by shifting savings between partners. If one earns less than the other, it might make sense to transfer savings to the lower earner to maximize tax-free allowances. However, it’s worth seeking advice from an accountant or financial adviser to ensure you’re making the best decision for your circumstances.

With rates where they are, making the most of tax-free options like ISAs, Premium Bonds, and the starting rate for Savings can help you keep more of your hard-earned interest out of HMRC’s hands. 

If you’ve found this article helpful and have a question relating to savings, investments and general financial planning that you would like to ask, please get in touch.  

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions. 

The Financial Conduct Authority (FCA) does not regulate tax advice. 

The accounts and rates mentioned in this article are accurate and correct as at the time of writing.

According to studies by the Financial Conduct Authority, there is a staggering number of people in the UK who do not seek financial advice. This is known as ‘The Advice Gap’ and the number has been put at 39 million.

As an adviser with nearly 40 years in the business it does not necessarily surprise me that there is a great deal of reluctance. Much of the UK’s wealth resides with the Baby Boomers, many of whom can remember what financial advice used to be like in the 70s and 80s. The high levels of professionalism which exist in the industry today, were a thing of the future. Even as late as the mid 80s (when there was no regulation) one insurance company rep (I will desist from mentioning any names) cited that in his first job (in Swansea) one of his best producing ‘advisers’ was a butcher who also sold life insurance policies to his customers, presumably in conjunction with two pounds of mince!

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I have witnessed the complete transformation of this industry. The advisers of today are well educated and highly qualified people with, perhaps most importantly, a high degree of integrity. There is no resemblance to the ‘wild west’ of old but, of course, I have sympathy for any individuals (and there are many) who had a bad experience in the past.

But baby boomers with unhappy memories aside, there is still a great deal of misunderstanding about the value an adviser can add.

In 2022 the Financial Conduct Authority (FCA) conducted research and found that 60% of people with investable assets of £10,000 or more considered that they wouldn’t benefit from financial advice. Another survey by the Financial Services Compensation Scheme (FSCS) indicated that 23% of people felt they didn’t have sufficient wealth to warrant advice and 38% considered advice to be too costly and didn’t represent value for money.

What does value for money represent?

In stark terms this can be viewed as asking the simple question “would I have more money at the end of the day with or without and adviser?” and this is a fair question. Most ‘sceptics’ will simply look at portfolio returns only. Of course, performance returns are very important but in the context of holistic financial advice, it is only one factor.  

This point can be illustrated well by an experience I had with a client I had just acquired back in 2017, who was drawing down money from a pension and paying 40% tax for the privilege. The same client had considerable wealth held outside of the pension and by running cashflow projections, I was able to demonstrate that by directing the income away from the pension and taking it from pension investments, at the end of his life (assumed to be the life expectancy given his age) his estate would be over £300,000 better off. This was simply a tax observation and had nothing to do with the performance of underlying portfolios.

We would all be great investors if we had a crystal ball!

On the subject of portfolios there is also a tendency for would be clients to look at performance in the rear mirror and conclude that self-investing would result in a higher net return. We would all be great investors if we had a crystal ball! The most common trait of the amateur investor, particularly when markets are doing well, is to increase the risk of the portfolio and then, when a market crash comes, all of a sudden, those high performing investments are often the first to fall off a cliff.  

One of the responsibilities of a good adviser is not only to ensure that your money grows well but to ensure than when times are tough, you are sufficiently protected. This is particularly true for retired clients who are in the ‘decumulation’ stage, the point at which you start to draw on your retirement funds. They have worked hard all their lives to build up a pot for retirement and it must be structured in such a way that, if there is a market crash (and there will be one sooner or later), they can continue to draw an income without losing sleep. This can only be done by managing the overall risk and making sure there is sufficient ‘low risk’ investment in the short term to ride the market turmoils.

How to quantify the Value of Financial Advice

In 2019 the International Longevity Centre (ILC) conducted a survey to quantify the value of advice in monetary terms. Over the course of a 10-year period, on average, those who sought advice saw their wealth increase by a whopping £47,706, twenty-four times higher than the average initial fee for the advice.

It is not only the hard benefit of pounds and pence. A Royal London study examined the emotional benefits of having a trusted adviser on board. Peace of mind scored highly. Most people want to enjoy their lives without feeling anxious about their finances. 

A good financial adviser can often provide reassurance, particularly if a projection of finances (using cashflow tools based on cautious assumptions) indicates that life goals can be achieved.

Achieving one’s goals is like climbing a mountain. It takes preparation, equipment, skill and determination to get there, and I don’t know about you, but if I were taking on Everest, I’d rather do it with a good sherpa by my side!

Ultimately, it hinges on trust, and the industry has created a landscape populated by well-equipped advisers who are highly regulated, and duty bound to work in the clients’ best interests. According to the Langcat Report 91% of people considered their advice to be helpful and valuable.  

Some readers will be old enough to remember Red Adair. A colourful character, Red was the only person in the world capable of extinguishing raging fires on oil rigs (an alarmingly regular occurrence back in the 70s). He also charged accordingly and when challenged on his fees he replied “If you think it’s expensive hiring a professional, you should try hiring an amateur!”.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

Investment returns are not guaranteed, and you may get back less than you originally invested. Past performance is not a guide to future returns.

The Financial Conduct Authority (FCA) does not regulate cash flow planning, estate planning, tax or trust advice.

Nine years after the popular Lifetime ISA (also known as LISA) was created, the Treasury Committee has now launched a review to determine whether it is still ‘fit for purpose’ among other considerations.

Some points being reviewed include whether the deposit limits should be increased, whether the withdrawal penalty should be removed, whether the Lifetime ISA is ‘value for money’ for the Government, and the overall efficacy of the product.

Introduced in the 2016 Budget by former Chancellor George Osborne, the idea behind the Lifetime ISA was to provide an alternative method of tax-free saving for retirement while simultaneously encouraging people under 40 to save for a property by offering incentives which could help people get on to the property ladder.

However, in the nine years since it launched, there have been next to no adjustments despite house prices and living costs going up. The maximum savers can spend on a house using the Lifetime ISA is still £450,000.

According to figures from HM Revenue & Customs (HMRC), more than 1.5 million people are currently using Lifetime ISAs to save for their first property, with 230,000 people having already benefitted from the ISA.

The deadline for information gathering is 4 February, after which the Treasury Committee will deliberate on the best way forward for the Lifetime ISA, and even whether it should continue at all.

What is an ISA?

An ISA, or Individual Savings Account, is a scheme that allows anybody to hold cash, shares and unit trusts free of tax on dividends, interest, and capital gains. Essentially, it’s a savings account that you don’t pay tax on.

You can save up to £20,000 each tax year and receive tax-free interest payments, so when the value of your cash ISA increases, you get to keep all of it tax-free (source: gov.uk). 

The Lifetime ISA explained

You can only save up to £4,000 a year in a Lifetime ISA, and the Government guarantees that 25% of your investment will be matched. That means if you put the max amount of £4,000 in your Lifetime ISA each year, the Government will add £1,000.

The caveat is that the money accumulated in a Lifetime ISA can only be used to either buy your first home, or to be withdrawn after the age of 60, or in the exceptional case that you are terminally ill with less than 12 months to live. Withdrawal under any other circumstances incurs a 25% penalty to the entire pot. 

If you have £100,000 or more in pensions, savings and investments and would like to receive a free initial cash flow forecast, up to the value of £500, please arrange a chat here.  

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The Financial Conduct Authority (FCA) does not regulate tax and cash flow planning.

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

2024 ended with inflation at slightly higher than the Government’s target of 2%, although a little lower than expected, the latest figures from the Office for National Statistics (ONS) show.

In the 12 months to December 2024, the headline inflation rate as measured by the Consumer Prices Index (CPI) was 2.5% - slightly lower than 2.6% in November – and below the forecast which was for the rate to remain unchanged.

Possibly more importantly though, core inflation fell to 3.2% from 3.5% in December, and services inflation fell too, from 5% in November to 4.4% in December. These latter inflation measures are reviewed closely by the Bank of England when they consider interest rate decisions. And what these figures mean is that a base rate cut could well be on the cards at the next Monetary Policy Committee (MPC) base rate meeting on 6th February 2025.

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Michael Saunders, a former member of the Bank of England's MPC, told the BBC, "if it stays like this, we will be "en route" to slightly more interest rate cuts"

The key drivers of the unexpected fall in inflation in December were the slowing price rises of restaurants and hotels. The ONS reported “The annual inflation rate for restaurants and hotels was 3.4% in December 2024. This is down from 4.0% in November and is the lowest annual rate since July 2021. On a monthly basis, prices fell by 0.1%, compared with a rise of 0.5% a year ago.”

However, Rob Wood, the Chief UK Economist at Pantheon Macroeconomics said that “Both will reverse in January, so the dovish news today [15/01/2025] is a temporary reprieve.” He added that “inflation is still heading above 3% in April.”

So, the Bank of England policy makers are likely to remain cautious and it’ll be interesting to see what the January inflation figures look like, which will be announced ahead of the next MPC meeting.

We‘ll have to wait and see, but the good news for savers is that while we do so, there are other economic forces at play, that are causing fixed term bond and ISA rates to increase!

It’s been widely reported that UK gilt yields have been soaring, and this is a concern as the Government has to offer higher interest rates to attract investors to new bonds.  

Governments generally borrow money by selling bonds (known as gilts in the UK) to big investors, such as pension funds. The higher yields increase the cost of borrowing, potentially straining public finances, especially if the government has a large debt.

But on the plus side for savers, rising gilt yields is linked to rising fixed term savings rates, and that is what we have seen recently, especially on the best rates for longer term bonds and ISAs. Increasing savings rates and slowing inflation is a great combination for savers and means that there are many accounts available that are paying an interest rate that is higher than the current level of inflation, even if you now pay tax on your savings interest.

Take advantage while you can

At the beginning of this year, the top 5-year bond was paying 4.50%, but at the time of writing, this has leapt to 4.78% - and even more interestingly, this rate is higher than the top 1-year bond, which is currently 4.77%.

It’s been quite some time since you could earn more when locking your cash up for longer – so it’s a good opportunity to get a top rate that should provide an inflation beating return over the next few years, even though interest rates are expected to continue to fall, although more slowly and to less of a degree than previously expected.

Rates on the top fixed term cash ISAs have increased too this year, but the longer term are still paying less than the short-term accounts. The average of the top five 1-year ISAs is now 4.53% up from 4.50% at the beginning of the month, although the best rate is only 0.01% higher at 4.54%, up from 4.53% on 2nd January.  The top 5-year ISA is now paying 4.21%, up from 4.18%. Regardless of how small, increases are welcome, nevertheless.

But things may already be settling down.

The yield on the 10-year gilt - the interest rate at which the government pays back a decade-long loan to investors – dropped to 4.72% on Wednesday, having risen to nearly 4.9% on Monday, its highest level for 17 years.

Meanwhile, by Wednesday, the 30-year gilt yield stood at 5.30%, below Monday's peak of 5.46%.*  

As a result, if you are thinking of locking up some of your cash, you might want to strike while the iron is hot, as we don’t know when things may reverse.

Take a look at our Best Buy tables to find the right account to pay you the most interest.

Check if your savings are keeping ahead of inflation with our inflation calculator below:

If you have £100,000 or more in pensions, savings and investments and would like to receive a free initial cash flow forecast, up to the value of £500, please arrange a chat here. 

Arrange a free initial consultation

This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The Financial Conduct Authority (FCA) does not regulate cash advice.

The accounts and rates mentioned in this article are accurate and correct as of 16/01/2025.

* Source: FT & MarketWatch