Latest news with #BuildingSocieties
Telegraph
a day ago
- Business
- Telegraph
Don't be duped by Reeves's Isa reprieve – get your money out of cash now
Banks and building societies are thrilled that Rachel Reeves has temporarily shelved plans to cut cash Isa allowances. But that doesn't mean you should top up cash holdings. Whatever eventually happens with allowances, holding too much cash is a real and big risk called 'opportunity cost'. Forget the politics here, and whether Reeves's goal – getting more money into stocks and shares Isas to boost investment and returns – would work. This is all about your needs and whether your finances will meet them. Tax allowances aren't solely why Britons hold nearly £300bn in cash Isas. It's because cash feels safe. It doesn't swing short-term like stocks and sometimes gilts. But cash quietly hampers long-term returns, risking a brutal, underfunded retirement poverty. Few investors fully fathom this. Here's how you should balance your portfolio. Holding some cash, maybe six to 12 months' expenses, is sensible as an emergency fund. It can help you invest better by avoiding forced securities sales at inopportune times. Or, if you have a home purchase or other major expense in the next few years, setting cash aside is wise. But if that's not the case? Cap your cash. Numerous studies show that asset allocation – your mix of stocks, bonds, cash and other securities – determines most of your long-term return. Not market timing. Not stock picking. Not perceptions of 'safety'. Asset allocation dominates. Your goals, needs and time horizon should largely determine your allocation. The longer your time horizon and the more growth you need, the more you need long-term in high-returning stocks. Maybe those who need income or who can't stomach volatility hold some bonds. But cash? Keep it minimal. Why? Minimal returns. Over the past century the FTSE All-Share index annualised 10.1pc through to 2024. Gold? 7.7pc. Ten-year gilts? 5.2pc. Cash? Short-term government bills (a cash proxy) returned the lowest, just 4.7pc a year since 1924. It's been even lower since 2000 at 2.4pc. Meanwhile, over the past century, inflation has averaged 4.3pc, eroding your returns. Since 2000 inflation has averaged 2.5pc, devouring cash returns entirely. If your goals require any real returns, cash is unlikely to deliver it. So, how much cash do you hold? What is your asset allocation? Too few investors know. Start thinking about asset class. Total up what you hold in all your accounts, any current account, savings account, pensions or Isa. Stocks, tracker funds, all of it. If you own funds that blend stocks and bonds, calculate it this way: if you have £100,000 in a 60pc stock, 40pc bond fund, chalk £60,000 to stocks, £40,000 to bonds. Then subtract funds earmarked for known, near-term expenses or emergencies. Once you have that total, divide each category – stocks, bonds, cash and other – by the total. The resulting percentages are your allocation. Now what share is your cash? Consciously or not, your allocation reveals an implied forecast. If you hold piles of cash, you imply history's lowest-returning asset class is more future-fit than historically higher-returning ones, like stocks. In other words, if you're holding lots of cash you are implicitly being mega-bearish. That is a huge risk, maybe the biggest one you can take if you need growth to finance your goals. If it is intentional, you must see big negatives others don't (that markets haven't priced in) to justify it. Many say they hold cash 'in case' stocks tumble. But at what cost? The best buy-the-dip opportunities, like early April 2022 or Covid's 2020 crash, come with huge fear. Precious few seize them. Did you? Your 'dry powder' turns into a long-term drag. The truth is, big cash holdings feel good but they hurt overall returns. Since 2000 (a cyclical stock market peak), £1m invested in 70pc London-listed stocks and 30pc long-term gilts grew by £2m through 2024. Stash even 20pc in cash, and you wound up with £233,351 less. And that is despite a big, multi-year bear market starting that stretch. If you had invested globally, that gap would be far wider. You may say, 'but that is over 25 years!'. Surely shorter horizons bring many more periods when stocks sink, right? But consider this. Since 1924, using monthly returns, the FTSE All-Share rose in 75pc of rolling 12-month periods. Not bad! It climbed in 91pc of rolling five-year periods – even better. No rolling periods greater than 10 years were negative. Not one. Moreover, while even rising deposit rates can't make cash beat inflation, stocks can and do. UK stocks averaged 73pc over those five-year rolling periods and 215pc over the rolling 10-year stretches. Similar patterns hold for global stocks. Don't get duped by cash's supposed safety. Think total holdings and asset allocation – and cut your cash to the core.
Telegraph
16-07-2025
- Business
- Telegraph
Cash Isa reforms still on the table, Reeves confirms
Rachel Reeves has left the door open to cutting the cash Isa allowance at the Budget later this year. The Chancellor told City financiers at her annual Mansion House speech on Tuesday that she would 'continue to consider further changes to Isas' over the coming months. Ms Reeves had been expected to use her speech to announce a reduction in the amount savers could put into cash Isas in a bid to encourage more people to put their money into British stocks. Reports suggested this could see the annual cash Isa allowance fall from £20k to as low as £4k or £5k. However she was forced to delay any announcement amid fierce backlash from some of Britain's biggest lenders. The likes of Yorkshire, Coventry and Skipton building societies all opposed the reforms, which they said could restrict their ability to raise the funds needed to provide loans to homeowners. While the Chancellor did not announce any concrete reforms to the cash Isa, Ms Reeves made clear the option was something she was still considering. She said: 'I have confirmed that long-term asset funds can be included in stocks and shares Isas, allowing long-term Isa investors to benefit from this innovative product. 'And I will continue to consider further changes to Isas, engaging widely over the coming months and recognising that despite the differing views on the right approach, we are united in wanting better outcomes for both savers and for the UK economy.' Ms Reeves, who is under pressure to raise taxes in the autumn following a number of government about-turns, urged the financial industry to change its 'negative' narrative around savers investing money in stocks and shares in order to help grow the economy. She said: 'For too long, we have presented investment in too negative a light, quick to warn people of the risks, without giving proper weight to the benefits. And our tangled system of financial advice and guidance has meant that people cannot get the right support to make decisions for themselves.' Nearly a third of people in Britain have a cash Isa – with around £300bn in savings used by building societies to lend to homeowners. Building societies have warned that reducing Isa deposits could make mortgages more expensive and harder to access. Chris Irwin, Yorkshire Building Society's head of savings, said: 'Cash Isas make up 39pc of all building societies' retail savings balances. This provides a vital source of funding to allow us to offer more mortgages to those that need them.' Skipton Building Society and Leeds Building Society were among 49 lenders that wrote to the Treasury last week urging ministers to maintain the current allowance. Other signatories included Debbie Crosbie, Nationwide's chief executive, as well as Hargreaves Lansdown.
The Herald Scotland
24-04-2025
- Business
- The Herald Scotland
Historic Scottish mortgage provider doubles in size
The company said total assets have more than doubled since 2020, now at £866.5 million, which it said is 'the strongest organic growth of any building society in the UK'. The firm said the growth trajectory mirrors the time Paul Denton, chief executive, joined the organisation with a new leadership team in 2019. The firm said: 'Having cultivated a positive, inclusive, and engaging workplace environment, the building society continues to invest in its people to deliver consistently high levels of customer service to its members. 'In 2024, the mortgage market remained subdued due to high interest rates and ongoing affordability challenges. Despite this, Scottish Building Society's mortgage portfolio grew by seven per cent.' Savings members benefited from an additional £7.6m in interest - 1.45 per cent above the market average – which it said highlighted 'the value of mutual ownership'. Mr Denton said: 'From the moment I joined this historic organisation, I could sense something special. For over 175 years, our commitment to the communities we serve has never wavered - if anything, it feels more vital today than ever. 'Our ethos of offering simple, easy-to-understand products has stood the test of time—especially through today's economic challenges. While others close branches and shift to digital-only services, we remain focused on choice—offering what truly works for our members. 'You see this in our continued investment in relationship centres, passbook savings, and a personal approach to mortgage underwriting. At the same time, we're enhancing our digital tools to give members secure, convenient access to their savings and their documents online. The steady growth in our membership reflects the real value offered by Building Societies.' It posted pre-tax profits of £2.8m, mortgage balances at £577.2m, and retail savings balances of £588.3m. Researchers produce life-saving new test for developing countries A Scottish university has helped produce a new blood test that can help identify infectious diseases and save lives across the developing world. Abertay University has teamed up with Bangor University in Wales and they have produced the prototype flow through assay test that can detect up to five infections, and the results are able to be analysed and communicated via a specialist smartphone app. The group used tuberculosis as a pilot case with researches using serum samples provided by the World Health Organisation (WHO) from countries where the disease is common. The process has the potential to speed up diagnostics that would have previously taken weeks and is also far more affordable than the current testing model, which requires analysis in a lab. New Moray wind farm will get UK 'off the fossil fuel rollercoaster' A Scottish wind farm hoped to power up to 1.3 million homes will help the UK in 'getting off the fossil fuel rollercoaster', Energy Secretary Ed Miliband has said ahead of it being switched on. The Moray West development – built by Ocean Winds – employed 1,500 people during its construction and is hoped to reach an output of 882 megawatts at full capacity. The development also included building the largest turbines in British waters, with some of the 60 structures rising up to 257 metres above sea level. Mr Miliband said the wind farm will contribute to the UK 'getting off the fossil fuel rollercoaster' in the coming years as the UK Government aims to increase offshore wind outputs to between 43 and 50 gigawatts.
