Blog

What is tax relief?

Tax relief is a government scheme designed to help you plan and save for your retirement.

Depending on the type of pension, tax relief can be a reimbursement of the tax already paid on a pension contribution or it can be the ability to put away for your pension straight out of your wage, before paying any tax.

Tax relief is one of the key benefits of investing in a private Pension such as our Self-Invested Personal Pension (SIPP) but often it can be confusing. I’ve answered some of the key questions we get asked about tax relief and how it works…

How does tax relief work?

Tax relief on employer pensions

For most employer pensions, you will receive a form of tax relief known as tax relief ‘at source’.

The government allows your Pension contributions into an employee Pension to be made before any tax is deducted from your pay packet. Given employer Pension contributions are a percentage of your wage, the amount you contribute is larger than it would be had you already been taxed!

Tax relief on private pensions

Tax relief on a private Pension acts as a top-up to your Pension pot – it essentially reimburses the tax you have already paid on the contributions you make. How much you’ll receive depends on your tax bracket.

Basic-rate tax payers, and those who don’t pay tax, will earn 20% tax relief. Higher-rate tax payers earn 40%.

So, for example, a basic-rate tax payer will have been taxed £20 on every £100 they earn, leaving them with £80 after tax. If they then contribute this £80 to a pension, they will receive £20 tax relief, giving them back the tax they paid on that £100.

Higher-rate tax payers paid 40% tax on their £100, and so receive £40 back for every £60 they contribute to a pension.

For additional-rate income tax payers, who earn more than £150,000 a year, tax relief is 45%, so they get £88.81 for every £100 they pay into their Pension. There are other rules that apply for additional-rate payers depending on specific circumstances.

How can I claim tax relief?

For tax relief at source into an employee pension, you don’t need to do anything to claim tax relief regardless of your tax rate.

Similarly, if you’re contributing to a private Pension such as a Self-Invested Personal Pension (SIPP) and you’re a basic-rate tax payer, you shouldn’t need to do anything to receive your top-up of tax relief – it gets automatically added to your Pension pot.

However, if you’re a higher or additional-rate tax payer, you may have to fill out a tax return to receive tax relief on a private Pension.

What about claiming back tax relief on Pension contributions from previous years?

If you’re a higher or additional rate tax payer and you didn’t claim tax relief on past contributions, there may be something you can do.

The government allows you to claim back tax relief you missed within four years of the end of the tax year you are claiming for. This can be done through a tax return.

Is there a limit to how much I can claim tax relief on?

There is an annual limit on the amount of money that you can pay into a pension and earn tax relief on.

The limit is currently 100% of your earnings up to a maximum of £40,000 a year, and a lifetime limit of £1 million.

If you earn £3,600 or less, the limit is £2,880 (excluding the tax relief you receive).

You will have to pay income tax on any payments into your pension that are over these limits.

Tax relief can make a huge difference to your retirement income and it’s important to be aware of what relief you can claim, so you make the most of what’s available to you for free!

If you’re considering investing into a private Pension and you want to know how and what’s best for you, you can try out our online journey and we’ll give you a personalised recommendation to suit your goals.

• The UK tax system includes breaks for savers and investors.
• This tax relief amounts to free money.
• Make the most of all the savings available.

There’s no such thing as a free lunch, or so they say, but there are ways that savers and investors can enjoy government tax breaks that amount to free money.

We aren’t talking about shady tax avoidance deals, these are incentives that the government has included in the tax system to encourage people to save and invest for the future.

These incentives are known as tax relief.

Paying money into a pension

You can make the most of tax relief when planning for your retirement.

Every time you pay into a personal pension, you get money back from the government in recognition of the tax you’ve already paid on those earnings. How much tax relief you get depends on how much you earn. Think of it as a reward for planning ahead and saving for your future.

For basic-rate income tax payers – that’s anyone who earns between £11,501 and £45,000 every year - the level of tax relief is 20%.

That means that if you put £100 into a pension, the government will give you £25 back as tax relief.

Higher-rate income tax payers, who earn between £45,001 and £150,000 a year, get tax relief at 40%, so get £66.66 from the government for every £100 they pay into their pension.

And additional-rate income tax payers, who earn more than £150,000 a year, get tax relief at 45%, so get £88.81 for every £100 they pay into their pension. There are other rules that apply here depending on specific circumstances.

That’s free money, straight into your pension pot, and you don’t have to make any special arrangements – depending on how much tax you pay and the type of pension you have, your pension company will automatically claim the basic level tax relief of 20%, back from the government for you. However, if you are a higher or additional rate tax payer, you will need to claim your additional tax back from the government yourself.

Either way, it’s free money in your pocket, so it makes sense to take full advantage.

There is an annual limit on the amount of money that you can pay into a pension and earn tax relief on, which is currently 100% of your earnings up to a maximum of £40,000 a year, and a lifetime limit of £1 million. You will have to pay income tax on any payments into your pension that are over these limits.

Before you contribute to a personal pension, it’s important to check whether you can get free money through your workplace pension!

The minimum employer contribution to a workplace pension is currently 3%, however, some employers may offer to match more than the minimum. It could be worth your while to check whether your employer will match additional workplace pension contributions you make.

Getting money out of a pension

Once you retire, you will have to pay tax when getting money out of your pension.

Your state pension, workplace pension, personal pension and any other money you have coming in during your retirement, (for example from investments or a property you own) all count as income, so you have to pay 20% income tax on any payments you get that are over your £11,500 personal allowance. However, there are still ways you can take advantage of tax relief on this money.

If you have a personal or workplace pension, when you retire you can take 25% of your pension pot as a one-off lump sum without paying any tax on it – and it doesn’t count towards your £11,500 personal allowance.

So, for example, if you are a basic rate taxpayer who has contributed £100,000 into your pension pot, you will have received £25,000 tax relief, leaving you with a £125,000 pot.

Once you retire, you can then take £31,250 of that pension pot as a tax free lump sum!

As a basic rate tax payer, the remainders of the pot would be taxed at 20% as and when you take it out. So, if you are thinking of taking any portion of your pension as a lump sum, or a few big payments, it’s always worth taking advice to make sure that you are doing it in the most tax efficient way as you could end up paying more tax than you have to.

Saving with an ISA

An ISA or ‘Individual Savings Account’, is a way to save or invest that is tax free. There are two main types of ISA: Cash ISAs and Stocks and Shares ISAs.

A Cash ISA is essentially the same as putting your money in a bank or building society account, except that any interest earned is protected from the taxman.

A Stocks and Shares ISA, like the one offered by OpenMoney, means your money is invested in assets such as shares in companies and investment funds. Any income or capital gains from investments, including dividends, is sheltered from the taxman. The potential returns from a Stocks and Shares ISA can be much higher than with cash ISAs – research by Moneyfacts found that the average return during 2017 was 11.75%, compared to the 2.15% that the best cash ISA currently pays.

You can pay money into one of each kind of ISA each tax year, up to a total £20,000. The tax year runs from 6th April to 5th April the following year. So, if you haven’t already, you could still use this year’s ISA allowance.

A big benefit of ISAs is that they offer tax breaks but are still very flexible and usually don’t tie your money up for long periods of time. You can switch providers at any time and you can transfer your money from one type of ISA to another, all without losing any tax benefits.

But bear in mind that often, when trying to achieve higher returns you may end up taking more risk, and the value of a stocks and shares ISA could go down as well as up.

If you’re thinking about using this year’s ISA allowance before it’s too late, our online financial advice platform assesses your appetite for risk and capacity for loss to help work out what kind of investment will suit your circumstances best.

You can also book a free appointment with one of our Financial Advisers who are always on hand to help.

Whether you’re making the most of free money through saving or investing, planning for the future shouldn’t be too taxing!

• More people than ever now have one pension pot.
• Consolidating them into one pot can have many advantages.
• We explain why and how it works.

Some interesting research was released recently, which found almost two thirds (64%) of Brits now have more than one pension pot.[1]

And the introduction of automatic enrollment on workplace pensions means this figure is likely to grow.

Whether you have pensions worth £1,000 or £100,000, we can review your current pensions and tell you honestly whether you’re better off consolidating and transferring to us, or staying where you are.

That’s a service that a traditional financial adviser could charge hundreds or even thousands of pounds for, but which we offer for free.

Here, OpenMoney financial advisors Hayley and Will explain why you might want to consolidate your pensions, and what the process is.

Advantages

There are a few strong reasons why consolidating could be right for you.

Hayley Millhouse, our Head of Advisory Services, said: “Probably the biggest advantage is that some pensions have better investment options than others, so your pot can grow bigger and you can have more money when you retire.

“Every pension provider also charges fees, so consolidation can be cheaper - because you only have one pension pot, you only pay one set of fees.

“The amount of fees you pay can be one of the biggest factors affecting the long-term growth of your pension.

“With modern pension providers, you can also track the value of your pot online and see how it is performing at any time.

“And pensions taken out many years ago may no longer be suitable for your circumstances now, so consolidation is an opportunity to get advice and make sure yours suits your current goals and the level of risk you want to take.”

Disadvantages

It’s worth mentioning that consolidation might not always be in your best interest.

Will Lenehan, one of OpenMoney's financial advisers, said: “If you’re lucky enough to have a pension that will pay you a guaranteed income, you may be worse off if you move your money elsewhere, so we wouldn’t recommend that.

“We’d also always advise you to stick with your current workplace pension, as your employer pays in to that too, and you’d miss out on their contribution if you opt out.

“High exit fees might also be a reason not to move money out of a pension scheme, and it could be that your current arrangements are already well suited to your retirement ambitions and provide good value for money, so there’s no great advantage in switching.”

But, if you do decide to look into consolidating your pensions, what happens next?

How it works

Hayley said: “First you need to go through your drawers and find your most recent pension statements.

“HMRC has a really useful free service that can help you track down any pensions you may have forgotten.”

With your permission, we can then contact all your pension providers to get the details of your current schemes.

Will said: “We use that information to write you a personal report that clearly explains if we think consolidating your pensions with us would be in your best interests, as well as any potential drawbacks you should be aware of.

“It gives an overview of your current arrangements, and the investments we’d recommend instead, based on the information you’ve given us about your personal circumstances and your appetite for risk."

“We’ll include a like-for-like comparison of the fees charged by your current plans versus OpenMoney, so you can see which is the cheapest option.”

The report also considers any extra services your current pension providers may offer, like advice. With OpenMoney you get free advice, but most pensions just offer guidance, which means they lay out your options, but don’t make a recommendation.

The next step

Hayley said: “There’s a lot of work involved, so once we have all the information from your current providers, it takes us about a week to create every report. Our review service is free and we’ll only recommend a transfer if we’re absolutely confident it’s in your best interest.

“Then it’s completely up to you what you choose to do next.”

We know that consolidating your pensions can appear complicated and intimidating, which is why we’re trying to make the process as simple as we can.

And the benefits can ultimately mean that you have a pension that gives you peace of mind and the retirement you’ve always saved for.

• Statistics show a worrying gender pension gap that could leave women struggling in retirement.
• Women have significantly less pensions savings than men - £32,950 on average compared with £54,409 for men*.
• Women leave it a lot later in life to begin saving – 21 is the median age for men but it’s 29 for women.

The pay gap is a hot political issue, one which is often in the headlines following releases of pay information from organisations like the BBC and the Bank of England.

While there is still a long way to go before men and women are paid equally, the long-term trend seems to be heading in the right direction. The median UK gender pay gap has almost halved since the government began collecting data on it in 1997 and it now stands at 9.1%*.

But there is another important area where women are less well off than their male counterparts - saving for their retirement.

According to YouGov figures from August last year, men have a lot more money held in pensions, with the average male pension pot reaching £53,409 compared with just £32,950 for women.

That’s the mean average, at least. The median (imagine everyone lined up in order of how much they have saved and looking at the person right in the middle) reveals a much more startling difference. Half of men have more than £37,000 invested in a pension, while half of women have less than £17,000.

While much of this disparity can be explained by men’s higher earnings, the statistics reveal another worrying difference – women tend to leave it significantly later in life to begin paying into a pension.

Again, according to YouGov, the median age at which men start saving for retirement is 21, while for women it is 29. That means that millions of women are leaving it very late in life to begin putting away any pension savings at all, risking significant financial challenges as they grow older.

Never too soon

When it comes to building up a pension, the sooner you start, the better. This is just as true and arguably even more important for those with more modest incomes, as it is much easier to build a large saving by putting away smaller amounts over a long period of time.

Of course, it’s vital to choose an investment strategy that is right for your circumstances, and pensions are a long-term saving that must be balanced against short and medium-term financial goals. At OpenMoney, we always take your specific circumstances into account before making any recommendations.

It’s also important to regularly review your contributions to ensure they reflect your circumstances as they change. For many people, income tends to increase as they progress in their career, and it’s important that pension contributions grow alongside this. Checking in every 12 months will ensure you don’t neglect your fund and that it keeps growing at the right rate for you.

There is clearly an awareness-raising job to do in encouraging young people, and especially young women, to think carefully about saving for their future. If the gender pension gap doesn’t begin to close, we risk a generation of women reaching retirement age without the financial support they need.

*According to a YouGov poll of 2207 adults conducted in August 2007. The results figures have been weighted and are representative of all GB adults (aged 18+).

• It’s never too early to start saving for your retirement – the sooner the better.
• How much you need in retirement depends on the lifestyle you want to live.
• We explore how much you might need for your golden years.

Long story short - there is no set amount of money you need to retire. Many factors contribute towards how much you’ll need to live comfortably in later life but having a plan from early on can help reduce stress and money worries later down the line.

In this blog, we’re going to look at what you might need to do to prepare for the life you want to lead after you retire and explore how every situation is different.

When do you want to retire?

Data published by the DWP (Department for Work and Pensions)[1] tells us that the average retirement age in the UK for men and women is 65 and 63 respectively. However, the age you decide retire is down to personal choice.

If you have enough money to tide you over until you can access your SIPP at 55 or State Pension at 65 (increasing to 68 years old by 2039), then you can technically retire at whatever age you decide to. Although, just because you can, doesn’t mean that you should.

Planning when to retire is a balancing act between when you want to retire and how much you can comfortably afford to save for your retirement. If you want to give yourself extra time to save or reduce your monthly contribution to take the pressure off, you could choose to move back your retirement date.

How much will I need for my retirement?

How much you need in retirement depends on the lifestyle you want to live.

Keeping up the same lifestyle as you have when you’re fully employed might seem a little farfetched, but it may be achievable if you plan ahead. Your outgoings are likely to go down quite a bit. You may have paid off your mortgage, have no dependants and cut down on work-related costs like commuting, lunches or your morning coffee.

According to consumer group Which?[2], a couple who are retired would need a household income of £26,000 per year to cover basic living expenses, such as groceries, utility costs, European travel and more. However, if you plan to live a more luxurious lifestyle with comforts like a new car every 5 years or an annual long-haul holiday, you’d be looking at a yearly household income of £39,000.

How much are you able to save before retirement age?

You can decide when you want to retire and how much money you’d like to save for your retirement, but ultimately, how much you have comes down to how much you’re able to save.

It’s a good idea to think about how much you can save each month now and think about how much you may be able to save in the future. It won’t be concrete, but you to give yourself an idea of what could be achievable for you – rather than bury your head in the sand!

Calculated by research company CLSA [3], people who put £2500 per year into a pension from the age of 21 and 30 years of age (10 years) and then leave their pension pot untouched until they reach 70 will have a bigger pension pot than those who begin saving £2500 into their pension each year at 31 and carry on contributing the same amount until 70 years old (40 years) – all because of compound interest. No wonder Albert Einstein called it “the 8th wonder of the world”!

It’s not just how much you can save, it’s more about how soon you start saving into a pension.

How to get more from your pension

That’s what we all want to do – make our pension go further. There are couple of ways you can do this.

1. Get free money from the tax man Every time you pay into a personal pension like our Self-Invested Personal Pension (SIPP), you get money back from the government in recognition of the tax you’ve already paid on those earnings. How much tax relief you get depends on how much you earn. That’s free money, straight into your pension pot!
2. Combine and conquer If you've worked for various employers over the course of your career, you’ve probably have several different pension pots. Consolidating them all into one place could help you better manage monitor and manage your money, and it could also help to reduce the charges you pay.
   Rather than paying various fees for different pots, your whole pension pot can be managed by one low cost provider, like us – a win-win! If you’re not sure whether you’d benefit from consolidating your pensions, we can also review your pots for free and tell you whether it’s in your best interest to transfer them to us.

• Consumer debt is a growing worry.
• Don’t ignore it – it won’t go away!
• There are five simple ways you can take control.

Statistics about consumer debt are always popping up in the media and with over £1.5 trillion owed by individuals in the UK as of last year there’s no wonder it’s a talking point.[1a]

Cconsumer credit is up to £207 billion as of December 2017, with research suggesting per household this is £2,567 of credit card debt. [1b]

But the easy availability of products like credit cards, with low minimum repayments but high credit limits, make it all too easy to become trapped in cycle of debt.

A shocking 276 people are declared insolvent or bankrupt every day. [1c] So it’s never too early to reassess our attitude towards debt.

Borrowing money isn’t necessarily a bad thing, but if you find yourself borrowing to pay your monthly bills – and that includes using your credit card or dipping in to your overdraft – that’s not going to be sustainable in the long run.

So how can you burst out of the debt bubble?

Don’t be complacent or bury your head in the sand - persistent debt can be hard to move on from, but the earlier you address the situation, the less painful it will be.

Here are five rules to live by that can help you take control of your debt:

1. Borrowing and bills.

We believe you shouldn’t borrow money to buy something that doesn’t last as long as it takes to pay for. So, borrowing to buy a new kitchen could work well, but try not to take on debt to pay this month’s gas bill, which should usually be covered by your income.

2. More than the minimum

If you really are serious about getting out of debt, you should really try to pay more than just the minimum amount needed on your credit or store card every month, even if it’s just by small amount. Pay as much as you can realistically afford.

3. It’s best to budget

Set yourself a budget by analysing all your outgoings to make sure you are living within your means. If you are getting into debt because you’re spending more than you’re earning, it’s time to reduce your costs.

Maybe take a packed lunch to work, or make your own coffee? Our free OpenMoney app can really help you stick to your budget.

4. Don’t act on impulse

If you have money in your pocket, it can be all too easy to give in to temptation and overspend, but you should always try to plan your purchases and compare prices online to make sure you get the best deal, especially on big ticket items like appliances or furniture.

5. No excuses

If you’re going to get serious about getting out of debt, it’s going to take discipline. A few months of denying yourself some small pleasures will all seem worth it when you can enjoy the peace of mind of being debt free.

Good luck!

The new tax year begins today, 6th April 2020, which also marks the day your personal Individual Saving Account (ISA) allowance resets.

We know that the investment world can be a confusing place for potential investors, particularly with the current turbulence in the markets, so we’re answering the most common questions about ISAs for those people who are looking to begin or continue investing to achieve their medium to long-term financial goals,  

If you want to learn more about how the recent market changes could impact decisions around investing, head to our Q&A blog here

What is my 2020/21 ISA allowance?

Your personal ISA allowance for 2020/21 is £20,000, which has remained unchanged from the previous year.

‍
What types of ISA are available to me?

There are several types of ISAs available to adults. However, the four most common types of ISAs are;

• Cash ISA,
• Stocks & Shares ISA
• Innovative Finance ISA
• Lifetime ISA (LISA)

All these ISAs will count towards your yearly personal allowance, so it’s important to know how allowances work.  

Parents can also contribute to a Junior ISA (JISA) for their children, but this doesn’t affect their own personal ISA allowance.

Is my ISA allowance split across all types of ISAs? Or is it £20,000 per ISA?

Your ISA allowance can be split across the other different types of ISAs and the total amount that you can contribute into your ISAs collectively is £20,000.

To explain this a little better, read our examples below.  

Method 1 – Go all in
‍

Use up to the full £20,000 ISA allowance in one type of ISA - This can be within a Cash ISA, Stocks & Shares ISA or an Innovative Finance ISA. You cannot invest your full allowance towards a LISA as they have a maximum allowance of £4,000 per tax year due to the 25% government bonus you receive on contributions. ‍

Method 2 - Mix and match your ISAs
‍

Split your allowance between different types of ISAs. You can invest a maximum of £4,000 towards a LISA and the remaining £16,000 can be split between the other types of ISAs. For example, that could look like - £10,000 in a Stock & Shares ISA, £6,000 in a Cash ISA and £4,000 in a LISA.

Here at OpenMoney, we know that the majority of people don’t have £20,000 to invest each year! So, you can invest in a Stocks & Shares ISA with us from as little as £1! You can find out more about our investments here.

Can I contribute more than one ISA of the same type within the same tax year?

Unfortunately, you can’t. If you invest in a cash ISA in the 2020/2021 tax year, you will then not be able to contribute into another cash ISA in the same tax year. The same rule applies for other types of ISAs also.

You can contribute to several different types of ISAs in the same year. ‍

What are the tax benefits of a Stocks & Shares ISA?

When investing into a Stocks & Shares ISA there are several tax benefits that come with it:

• Any interest or returns (sometimes referred to as ‘capital gains’) you make on an ISA are always tax free
  
• The money in your ISA won’t be subject to any tax when it’s withdrawn
  

Can I transfer my ISA to another provider?  

Yes, although there are some restrictions when it comes to transferring ISAs. If you’ve already contributed towards an ISA during the current tax year and you wanted to transfer to a different provider, you must transfer all the contributions made in that current tax year.

For the money you invested in previous tax years, you can make a choice on whether you wish to transfer all or part of these savings.

To switch your providers, contact the ISA provider you want to move to and fill out an ISA transfer form.  

Remember, some providers may charge you a fee when transferring.  

Here at OpenMoney we offer a free transfer review and we will only tell you to transfer to us if it’s in your best interests - then we’ll manage the whole process for you.

When does your allowance restart?

An ISA allowance resets on a yearly basis at the start of a new tax year, which is always the 6th April. For the 2021/22 tax year the maximum ISA allowance will remain at £20,000.

If I don’t use my allowance, can I carry it forward to next year?

When your ISA allowance resets on the 6th April, you can’t carry over any unused allowance from the previous tax year, so it’s important to make the most out of your annual allowance before the deadline.  

That’s our round-up of the most asked ISA questions for the 2020/21 tax year. If you want to read more about ISAs, you can check out our ISAs explained blog series!  

If you’ve ever considered saving your money for the future - whether that be for a house, wedding or a car - you’ve probably heard the term ‘ISA’. ISA stands for ‘Individual Savings Account’ and is exactly what it says on the tin – a financial product designed to help individuals save.

Before opening an ISA, it’s important to understand what they are and how they can affect your financial situation. Continue reading our blog to find out the answers to questions like; how many ISAs you can have, what are the benefits of an ISA are, and what types of ISA there are.

How do ISAs work?

 ISAs are like savings accounts but come with additional benefits like tax allowances and bonuses, depending on the type of ISA you open. For example, Lifetime ISAs (LISAs) give individuals a 25% bonus on contributions made up to the value of £1,000, but they can only be used towards a first house or retirement.

The main benefit of an ISA product is the annual tax allowance you receive when saving. Any interest or gains made in an ISA is not subject to taxation, meaning you get to keep any money you make as long as you stay within your allowance.

ISA Allowances

 Each individual has an ISA allowance of £20,000 in the 2019/20 tax year. This means between your ISAs, you can’t deposit more than £20,000 in a tax year. However, you are able to split your allowance between different types of ISA. This means you could deposit half in a Cash ISA and half in a Stocks & Shares ISA, but you couldn’t split the money between two Stocks & Shares ISAs.

For a Junior ISA (JISA), the allowance is lower at £4,368. This does not affect your personal ISA allowance of £20,000 as the product is held against a child’s name.

How many ISAs can you have?

You can open and contribute to more than one type of ISA in each tax year, but you’re not able to contribute to another ISA of the same type (confusing, we know). So, if you contributed to a cash ISA in 2019/20, you couldn’t contribute to another until 2020/21 tax year, but you could contribute to a stocks & shares ISA in 2019/20.

JISAs are held against a child’s name which means you can also contribute to that without affecting your allowance, but that money is only accessible by the child once they reach 18.

What are the different types of ISA?

Cash ISA

Cash ISAs are often offered by bank and building societies. They are similar to normal savings accounts and offer a fixed rate of return on your contributions.

Cash ISAs can be good for short-term savings as they come at no risk. However, be careful of which type of Cash ISA you choose as some may have charges for withdrawing. For Instant Access ISAs, there should be no penalty, however for Fixed Rate ISAs you may face some penalty if you withdraw before the set period.

Stocks & Shares ISA

With a Stocks & Shares ISA your money is invested in company shares, investment funds and sometimes cash. They are riskier than Cash ISAs as you could get back less than you invested, but they do have the potential to have higher returns.

Stocks & Shares ISA are more suited to long term goals as you’re able to balance out the ups and downs of the stock market over time.

If you invest with OpenMoney, you’d be investing in a Stocks & Shares ISA. Find out more here.

Lifetime ISA (LISA)

Lifetime ISAs were introduced in April 2017 so are relatively new in the world of ISAs. Lifetime ISAs are a little different to cash and stocks ISAs as they’re designed to help first time home buyers and those wishing to save for retirement.

A LISA can be either a cash or stocks and shares ISA and can be opened by people ages 18 to 40. The limit for a LISA is lower at £4,000 but the government add a 25% bonus to any contributions up to the value of £1,000.

The bonus must be used against your first home or can only be accessed when you’re 60. If you use the money for anything else, you will be charged and are likely to get less money back than you put in.

Junior ISA (JISA)

Junior ISAs are designed to let parents invest for a child below the age of 18. The limit is £4,368 per child for the current tax year.

As with a LISA, a JISA can be cash or stocks and shares, with any interest paid tax-free.

JISAs are a great way to save long-term for your children, but parents and adults should be aware that the account belongs to the child and can only be accessed by them at the age of 18.

OpenMoney ISA

It’s important that you understand the impact an ISA will have on your financial situation before you open one.

If you’re interested in opening a Stocks & Shares ISA, you can take the OpenMoney financial questionnaire to find out if you’re currently in a healthy position to invest.To take the quiz, click Get Started.

‍

• The UK tax system includes breaks for savers and investors.
• This tax relief amounts to free money.
• Make the most of all the savings available.

There’s no such thing as a free lunch, or so they say, but there are ways that savers and investors can enjoy government tax breaks that amount to free money.

We aren’t talking about shady tax avoidance deals, these are incentives that the government has included in the tax system to encourage people to save and invest for the future.

These incentives are known as tax relief.

Paying money into a pension

You can make the most of tax relief when planning for your retirement.

Every time you pay into a personal pension, you get money back from the government in recognition of the tax you’ve already paid on those earnings. How much tax relief you get depends on how much you earn. Think of it as a reward for planning ahead and saving for your future.

For basic-rate income tax payers – that’s anyone who earns between £11,501 and £45,000 every year - the level of tax relief is 20%.

That means that if you put £100 into a pension, the government will give you £25 back as tax relief.

Higher-rate income tax payers, who earn between £45,001 and £150,000 a year, get tax relief at 40%, so get £66.66 from the government for every £100 they pay into their pension.

And additional-rate income tax payers, who earn more than £150,000 a year, get tax relief at 45%, so get £88.81 for every £100 they pay into their pension. There are other rules that apply here depending on specific circumstances.

That’s free money, straight into your pension pot, and you don’t have to make any special arrangements – depending on how much tax you pay and the type of pension you have, your pension company will automatically claim the basic level tax relief of 20%, back from the government for you. However, if you are a higher or additional rate tax payer, you will need to claim your additional tax back from the government yourself.

Either way, it’s free money in your pocket, so it makes sense to take full advantage.

There is an annual limit on the amount of money that you can pay into a pension and earn tax relief on, which is currently 100% of your earnings up to a maximum of £40,000 a year, and a lifetime limit of £1 million. You will have to pay income tax on any payments into your pension that are over these limits.

Before you contribute to a personal pension, it’s important to check whether you can get free money through your workplace pension!

The minimum employer contribution to a workplace pension is currently 3%, however, some employers may offer to match more than the minimum. It could be worth your while to check whether your employer will match additional workplace pension contributions you make.

Getting money out of a pension

Once you retire, you will have to pay tax when getting money out of your pension.

Your state pension, workplace pension, personal pension and any other money you have coming in during your retirement, (for example from investments or a property you own) all count as income, so you have to pay 20% income tax on any payments you get that are over your £11,500 personal allowance. However, there are still ways you can take advantage of tax relief on this money.

If you have a personal or workplace pension, when you retire you can take 25% of your pension pot as a one-off lump sum without paying any tax on it – and it doesn’t count towards your £11,500 personal allowance.

So, for example, if you are a basic rate taxpayer who has contributed £100,000 into your pension pot, you will have received £25,000 tax relief, leaving you with a £125,000 pot.

Once you retire, you can then take £31,250 of that pension pot as a tax free lump sum!

As a basic rate tax payer, the remainders of the pot would be taxed at 20% as and when you take it out. So, if you are thinking of taking any portion of your pension as a lump sum, or a few big payments, it’s always worth taking advice to make sure that you are doing it in the most tax efficient way as you could end up paying more tax than you have to.

Saving with an ISA

An ISA or ‘Individual Savings Account’, is a way to save or invest that is tax free. There are two main types of ISA: Cash ISAs and Stocks and Shares ISAs.

A Cash ISA is essentially the same as putting your money in a bank or building society account, except that any interest earned is protected from the taxman.

A Stocks and Shares ISA, like the one offered by OpenMoney, means your money is invested in assets such as shares in companies and investment funds. Any income or capital gains from investments, including dividends, is sheltered from the taxman. The potential returns from a Stocks and Shares ISA can be much higher than with cash ISAs – research by Moneyfacts found that the average return during 2017 was 11.75%, compared to the 2.15% that the best cash ISA currently pays.

You can pay money into one of each kind of ISA each tax year, up to a total £20,000. The tax year runs from 6th April to 5th April the following year. So, if you haven’t already, you could still use this year’s ISA allowance.

A big benefit of ISAs is that they offer tax breaks but are still very flexible and usually don’t tie your money up for long periods of time. You can switch providers at any time and you can transfer your money from one type of ISA to another, all without losing any tax benefits.

But bear in mind that often, when trying to achieve higher returns you may end up taking more risk, and the value of a stocks and shares ISA could go down as well as up.

If you’re thinking about using this year’s ISA allowance before it’s too late, our online financial advice platform assesses your appetite for risk and capacity for loss to help work out what kind of investment will suit your circumstances best.

You can also book a free appointment with one of our Financial Advisers who are always on hand to help.

Whether you’re making the most of free money through saving or investing, planning for the future shouldn’t be too taxing!

• It’s always good to know what your investments consist of.
• Busting the jargon can help you get your head around the world of investing.
• We delve into what you need to know about your portfolio with OpenMoney.

Our investors often ask what their investments are made up of or what they’re actually investing in. The short answer for this is that your money is invested into different ‘asset classes’ - but what actually are ‘asset classes’?

Investing and the world of financial advice can be confusing, especially for first time investors. Many companies try to overcomplicate things even further by using lots of unnecessary jargon and complex fee structures.

Here at OpenMoney, we want our investors to feel confident and comfortable with their investments.

In this blog, we’ll break down your investment portfolio with us.

Let’s start with our funds

When you invest with OpenMoney, your money is put into something called an “index fund”.

Essentially, an index fund is one big pot of different investors’ money all pooled together that tracks a certain index. Depending on the type of fund, the money is then used to invest in the 4 main different asset classes; cash, properties, bonds and equities.

What is an “asset class”?

The official definition [1] of an asset class is “a broad group of securities or investments that have similar financial characteristics”.

As simply as we can put it, it’s a type of investment. With OpenMoney, there are 4 asset classes your money will be invested into:

1. Cash The “safest” of all the asset classes. Holding your money in cash is almost risk free, but it has limited returns. We use cash as part of our investors portfolio to control the risk level of the portfolio. A higher risk portfolio will have less cash investment, and a low risk portfolio will have more.

2. Properties A misconception here is that you are investing in the brick and mortar of an actual house. Instead, the property fund invests in equities of leading property companies listed on exchanges all over the world.

3. Bonds Bonds can be quite a confusing asset class until you break it down.

A bond is a loan or a debt issued by governments and companies. When an investor buys a bond they are essentially loaning money to a company or government for a fixed period.

In exchange, the company or government may pay interest payments called coupons or give the investor more money than they paid for the bond when the fixed period is over.

4. Equities Equities are considered to be one of the highest risk assets our portfolios invest in. Owning an equity, stock or share (which are all the same thing) means you own a small part of a company.

Equities can go up and down in value, depending on how well the company is doing (or is expected to do) and some of them pay their investors dividends which is like interest, but not always guaranteed. Some of the companies that you’ll be investing in with OpenMoney could include; Amazon, Facebook, Vodafone and many more household brands from around the world.

How does risk level impact my investment?

At OpenMoney, we have 3 different investment portfolios, going from lowest risk, medium risk and then highest risk.

With each portfolio, the investment is split across different funds which in turn invest in different asset classes.

With the lowest risk portfolio, we keep 22% of your investment in cash, which does have the lowest potential for returns but it also lowers the overall investment risk. Equities take 24% of the investment and fixed interest bonds take 54%. Our lowest risk portfolio doesn’t invest in property.

You start to see changes when you look at our medium risk portfolio. Cash is lowered to 6%, as this can free up more of the investment for the higher risk asset classes. We start to invest in property with it taking 5% of the money. The amount invested in fixed interest bonds almost halves to 28%, and we push the remaining 61% into equities. That’s almost triple of what we would invest with our lowest risk portfolio. This gives our investors a more balanced investment of low and higher risk assets.

Our final portfolio is the highest risk. It invests the lion’s share of the money at 89% into equities. The remaining 11% is shared between property (5%), cash (3%) and fixed interest bonds (also 3%).

What is diversification?

“Diversification” is another piece of jargon that is quite simple when you break it down.

In the simplest form, it’s spreading your money into different investments so you’re not putting all your eggs in one basket. With shares for example, it can mean spreading the investment between companies in different industries or investing in businesses in different markets across the globe.

Diversification within investment helps to minimise and control risk. For example, if you invest £1000 into one company and then it dips, your total funds take a dip. However, if you split that in 2 and have £500 in two different companies, one may dip but the other could prosper, meaning that your total fund may not suffer as much from the loss.

If you think you might be ready to start investing, we can tell you whether investing is right for you. You cna also check out our blog where we answer more common questions about investing.

ISAs (Individual Savings Accounts) have proved incredibly popular with savers since they were first launched in 1999, with hundreds of billions of pounds now squirrelled away in these tax-exempt accounts.

There are many different types of ISA, including Help to Buy, Lifetime and innovative finance ISAs. But the two main types are Cash ISAs and Stocks and Shares ISAs.

A Cash ISA is just like putting your money in a bank or building society account, except you don’t pay tax on any interest earned.

With a Stocks and Shares ISA, like those we offer at OpenMoney, your money is invested in companies and investment funds, and again you pay no tax on any profits.

Whichever kind of ISA you choose, you can only pay in up to £20,000 a year.

ISAs are a fantastic resource for savers, but, more recently, the economic climate has shifted and Cash ISA holders have seen their appeal start to fade. There is one big reason for this.

Interest rates were at a record low for a long time, so Cash ISAs weren’t earning very much money. 2017 was the worst year on record for Cash ISAs since they launched, with some accounts paying just a few pennies interest on savings of £1,000.[1]

However, Stocks and Shares ISAs have bucked that trend. According to industry data from Lipper, the average Stocks and Shares ISA generated a return of 11.75% in 2017 - more than 10 times what the average Cash ISA earned.[2]

It’s important to point out that last year’s strong performance is no guarantee of more growth in the future, and that a Stocks and Shares ISA could even lose money in any given year if the stock market performs particularly badly.

But, for those saving for the long term, a Stocks and Shares ISA can be a flexible and profitable option.

So, with so many people looking for alternatives to Cash ISAs that may offer a better return, we look to answer some of the burning questions they are asking about Stocks and Shares ISAs.

Is a Stocks and Shares ISA worth it?

Looking back on 2017, it’s hard not to conclude that a Stocks and Shares ISA represents good value for money, especially when compared with a Cash ISA or bank savings account, but it’s important to look at what charges are attached.

The costs of investing into a Stocks and Shares ISA varies from provider to provider, and most will either charge you a flat annual fee or a percentage of the total value of your investment.

At OpenMoney our charges are less than 0.50%, with no upfront fee, which could mean you keep more of your money than with other investments. Better still, this 0.50% fee covers everything, so there’s no hidden charges in the small print for you to worry about.

Is a Stocks and Shares ISA tax free?

In short – yes! You don't pay capital gains tax on gains made within a Stocks and Shares ISA, dividend income from stocks and shares held in this type of ISA is tax free and interest paid on corporate bonds or bond funds held in a Stocks and Shares ISA is tax free too.

‍

Is a Stocks and Shares ISA safe?

Any investment in stocks and shares comes with risk. The value of stocks and shares can go up and down every day.

But, looking at the last 20 years, the value of the UK stock market has grown by 68%, or 3.4% a year on average. [3]

And, with an OpenMoney Stocks and Shares ISA, your money is invested in companies around the world, as well as other assets like property, so the risk of any one investment performing badly and pushing you into a loss is reduced.

Here at OpenMoney we offer three portfolios with different levels of risk, so you can find one that’s right for you.

Can you withdraw money from a Stocks and Shares ISA?

One of the most useful features of a Stocks and Shares ISA is their flexibility. You're not locked in and you can withdraw your money whenever you need it.

However, a commonly quoted rule of thumb is that you shouldn’t put any money into a Stocks and Shares ISA that you think you will need to withdraw within five years.

That gives you enough time to ride out any peaks or troughs in the market that could see you make a loss on your investment.

Can I transfer from one ISA to another?

Yes, with some restrictions. If you already have a Stocks and Shares ISA or a Cash ISA with someone else, you can transfer it to OpenMoney – or any other provider – at any time.

You can also transfer your money between a Cash ISA and a Stocks and Shares ISA at any time, and vice versa.

But if you want to transfer money you’ve invested in an ISA during the current year, you must transfer all of it.

For money you’ve invested in an ISA during previous years, you can choose to transfer all or part of your savings.

To find out if investing your money into an ISA is right for you, just answer some quick questions.

• It’s never too soon to think about investing.
• But it’s worth thinking about what you want to achieve.
• We’ll ask about your goals to help create an investment strategy that’s right for you.

So, you’re thinking about investing?

It’s never too soon to start, but it’s helpful to consider why you want to invest first.

You might just want to build up your savings in an investment that’s suitable for you or you might have financial goals for yourself or for your loved ones in mind, such as buying a house, getting married or just having a comfortable retirement.

If your recommendation from us is that you could be investing your money then we will be able to guide you through the process. This includes asking you about these goals and when you might want to achieve them buy. This helps us to create an investment strategy that’s right for you.

Do the right thing

One of our core values is to always do what’s best for our customers and one of the ways we stick to that principle is by only recommending investing if it's right for your circumstances and you can afford it.

If you have expensive debts we might tell you investing with us isn't right for you right now, as we think you’d be better off paying what you owe first.

We might recommend that you hold a "rainy-day" fund of at least three months’ wages, just in case of any unsuspected events, like illness or unemployment.

We also won’t recommend that you invest with us if your goal is within the next 5 years. Whilst you can withdraw your investment at any time, we consider investing with us to be a medium to long term solution (at least 5 – 10 years).

How it works

When you register as an investor with us, we’ll ask you a few questions about your financial situation and attitude such as your income, outgoings, debts and attitude to risk. This information helps ensure we recommend an investment portfolio that’s right for you, by balancing your appetite for risk with your desire for returns.

If you register as an investor with OpenMoney, we’ll ask you about these goals and when you might want to achieve them to help us create an investment strategy that’s right for you.

Foresight with flexibility

Before you commit any cash, we’ll show you how your investments could perform by calculating the projected annual return, after fees and inflation, so you can imagine what your investment could be worth for years to come.

As all of our funds are tracker funds, we’ll monitor how they perform against the relevant benchmark and, if we need to, we’ll buy or sell some of the investments to maintain your original allocation – which is known as ‘rebalancing’. This will help ensure that your investment remains suitable for you.

We want to make sure we’re doing the best we can for you. So, if your situation or investment goals change, or if you just want to check your investment is still working for you, you can book an appointment with one of our qualified financial advisers for free.

You’ll also pay less than 0.50% in fees annually; a fee which includes as many adviser appointments as you need, at no extra cost.

As with most investments, we can’t guarantee your returns and your capital is at risk, however by continuing to make sure your investments are suitable for you and the amount of risk you’re willing to take, we will try our best to help you achieve your financial goals.

We've answered the most common questions when it comes to investing in our blog.

• Consumer debt is a growing worry.
• Don’t ignore it – it won’t go away!
• There are five simple ways you can take control.

Statistics about consumer debt are always popping up in the media and with over £1.5 trillion owed by individuals in the UK as of last year there’s no wonder it’s a talking point.[1a]

Cconsumer credit is up to £207 billion as of December 2017, with research suggesting per household this is £2,567 of credit card debt. [1b]

But the easy availability of products like credit cards, with low minimum repayments but high credit limits, make it all too easy to become trapped in cycle of debt.

A shocking 276 people are declared insolvent or bankrupt every day. [1c] So it’s never too early to reassess our attitude towards debt.

Borrowing money isn’t necessarily a bad thing, but if you find yourself borrowing to pay your monthly bills – and that includes using your credit card or dipping in to your overdraft – that’s not going to be sustainable in the long run.

So how can you burst out of the debt bubble?

Don’t be complacent or bury your head in the sand - persistent debt can be hard to move on from, but the earlier you address the situation, the less painful it will be.

Here are five rules to live by that can help you take control of your debt:

1. Borrowing and bills.

We believe you shouldn’t borrow money to buy something that doesn’t last as long as it takes to pay for. So, borrowing to buy a new kitchen could work well, but try not to take on debt to pay this month’s gas bill, which should usually be covered by your income.

2. More than the minimum

If you really are serious about getting out of debt, you should really try to pay more than just the minimum amount needed on your credit or store card every month, even if it’s just by small amount. Pay as much as you can realistically afford.

3. It’s best to budget

Set yourself a budget by analysing all your outgoings to make sure you are living within your means. If you are getting into debt because you’re spending more than you’re earning, it’s time to reduce your costs.

Maybe take a packed lunch to work, or make your own coffee? Our free OpenMoney app can really help you stick to your budget.

4. Don’t act on impulse

If you have money in your pocket, it can be all too easy to give in to temptation and overspend, but you should always try to plan your purchases and compare prices online to make sure you get the best deal, especially on big ticket items like appliances or furniture.

5. No excuses

If you’re going to get serious about getting out of debt, it’s going to take discipline. A few months of denying yourself some small pleasures will all seem worth it when you can enjoy the peace of mind of being debt free.

Good luck!

• Investing should be open to all, and we believe everyone should be able to do it with confidence.
• But we understand that the investment world can be intimidating.
• We’re answering some questions that you might be afraid to ask.

For a long time, it may have seemed that investing was only easily accessible to wealthier people with more disposable cash than the average household.

It’s still estimated that only around 20 per cent of UK households invest in shares [1], but at OpenMoney, we want to make investing accessible and affordable, giving everyone the power to make the most of their money.

We recognise that committing your cash to something new requires confidence, so we’ve gone back to basics to answer some of the not-so-stupid questions that first-time investors might be embarrassed to ask.

How much money should I invest?

How much money you decide to invest depends on what your investment goals are and what your current financial situation is. With some online investment platforms such as ours, you can invest anything from £1 so there really is no amount too small.

When you join OpenMoney, our dedicated financial advisers are on hand to help you make the right choices on your investment journey.

We can advise you on how to best manage and grow your money to achieve your goals, and we won’t recommend investing unless it’s right for your current circumstances.

How long should I invest for?

There’s no right or wrong answer here, but broadly speaking, investing your money should be a medium to long term commitment. We recommend that you invest for at least 5 years without dipping into or withdrawing your funds.

Any shorter than that, and you may be better off leaving your funds in cash savings where they will be easily accessible and won’t be subject to short term market fluctuations.

Don’t worry though, if something unexpected happens and you need access to your funds, here at OpenMoney we don’t have a minimum term, so you’re never locked-in.

Of course, the longer you can invest for the better. Your funds will have more potential to grow, benefit from the magic of compound interest and will have a better chance at riding out any market fluctuations that might occur.

What am I investing in?

At OpenMoney we invest your cash into funds (if you’re not sure what a fund is, or find financial terminology generally confusing, take a look at our handy jargon buster).

These funds own shares in various companies across the globe. They spread your investment across a large number of businesses to reduce the risk to you - think of the phrase ‘don’t put all your eggs in one basket’.

If those companies grow and become more valuable, so does your investment. When you exit your investment, the shares may be sold for more than you originally paid for them and you would make a profit.

We work with three of the five biggest asset management companies in the world: Vanguard, Fidelity and Blackrock. -they manage assets worth nearly £8 trillion!

To give you peace of mind OpenMoney is covered by the Financial Services Compensation Scheme which may provide protection to consumers up to a certain limit.

How much profit will I make?

That is impossible to tell.

No one can predict how the stock market will perform in the future, but we know that you can maximise your profits by minimising the cost of investing.

Why do I pay fees?

All investments come with costs. They are usually in the form of annual fees, calculated as a percentage of the total amount you have invested.

Some investments are far more expensive than others, and can include management charges, administration charges, platform fees, entry and exit fees, and advice fees. These charges can really stack up.

We have no up-front costs, so you keep more of the money you invest from day one. Furthermore, our charges are capped at no more than 0.5% a year, whereas a traditional financial adviser might charge more like 2.5%. [2]

This means, if you had £10,000 to invest, after 10 years you would have saved almost £2,000 in fees with OpenMoney, compared to traditional adviser.

Can I lose money?

With any investment, although you may stand to make a healthy return, there’s always the chance that you may get back less than you put in.

For example, if you had £1,000 in 1997, you could have put it in a bank savings account, where it would have earned interest every year. By now it would be worth £2,088. Not a bad return at all. [3]

However, if you had invested that £1,000 in shares on the UK stock market, and reinvested your profits every year, after 20 years it would return over twice as much - £3,172! [4]

Should I get financial advice before investing?

Decisions about your long-term financial future are important, so it’s a good idea to get advice.

When you join OpenMoney, we’ll ask you questions about your financial situation, your attitude to risk and investment experience to help us work out the best financial plan to achieve your investment goals.

We offer restricted advice, so depending on your answers, we might suggest you open a pension, put money in an investment fund or we might advise you not to invest, and to pay off any debts first.

You can then book an appointment with one of our financial advisers to talk through our personalised advice and answer any questions you might have - at no added cost.

Did you know, your child could have a long-forgotten trust fund set up by the government?

According to Moneywise there are currently over one million missing Child Trust Funds (CTFs) that need claiming! It’s important to check if your child has a trust fund, otherwise they could be missing out on hundreds of pounds when they turn 18.

These government funded CTF accounts were set up with an initial amount of up to £500 - with £250 being the average. That’s a sizeable chunk of money that could make a difference to your children’s lives, so it’s worth tracking the accounts down to see what is available to your child.

How to track down your lost CTF –

If you’re unsure if your child had a CTF or where it was held, you will be able to find out by following the steps that HMRC have set out:

- Log in with your government gateway user ID and password. If you do not have one, then you will need to sign up.

- You’ll be asked a few personal questions to determine if you are the trustee of your child’s trust fund.

- HMRC will send you details of who your child’s trust fund provider is via post within 3 weeks of them receiving your request.

- HMRC will contact you for more information if you’ve adopted a child or if a court has given you parental responsibility for them.

It’s a very simple and straightforward process that could give your child’s savings a boost when they turn 18! If you would like to know more about CTFs, you can read our blog on Child Trust Funds and what they are here. If your child does have a CTF, you can read more about what to do with it once it has matured, here.

‍

If you became a parent between 2002 and 2011 you could claim your child’s lost Child Trust Fund. Over 6 million CTF accounts were opened by the government in a bid to encourage saving for a child’s future (source: Halifax - https://www.investments.halifax.co.uk/get-inspired/news/article/198869), but what are they?

What is a Child Trust Fund (CTF)?

CTF accounts were created by the government in 2002 to kickstart and encourage parents to save for when their children turn 18. The government initially deposited money into the account and then the parents or guardians of the child were able to add to it on the child’s behalf, up until they turn 18. There is a limit as to how much you could deposit each tax year which has increased from £1200 in 2002, to £9000 in 2020.

A CTF is also tax-free. Yes, you heard right, tax-free! This means that whatever money you deposit won’t be taxed when it’s withdrawn in the future.  Once the child has turned 18, they  will have access to the money to use they wish. This is when the product ‘matures’.

When will my Child’s CTF mature?

CTFs begin maturing in September 2020 when the first child reaches 18 years of age.

When a child turns 16, they can take control of the CTF if they wanted to. They can change how their money is invested and change provider by transferring their account and signing up to a new provider. If the child decides not to manage their fund, it remains with their parent or guardian until their 18th birthday.

Who was eligible for a Child Trust Fund?

CTFs were set up by the government for children who were born in the UK between the 1st of September 2002 and the 2nd of January 2011.

Types of CTF accounts

There are three different types of Child Trust Fund accounts that parents could choose for their children. These were Stakeholder, Shareholder and Cash accounts.

• Stakeholder account - This allows you to own a percentage of shares within a company. With a Stakeholder CTF, any money which is still invested in shares when the CTF matures will be sold automatically and the cash will be passed on to the child.

• Shareholder – This account allows you to leave a contribution of the money invested into the stock market. By investing into the stock market, your money could potentially grow or fall depending on the outcome of your shares.

• Cash account - The Cash CTF account is where you can leave any contributions, providing they don’t go above the yearly maximum allowance and earn interest on it. This tends to be the safest and most popular option.

Can I still get a Child Trust Fund?

The government stopped offering Child Trust Fund accounts after 2011 and they replaced them with the Junior Individual Savings Account (JISA). However, anyone who still has a CTF can carry on depositing money into their account until their child turns 18.  

JISAs are also a tax-free savings account for children and many of the same rules apply. However, if you were to open a JISA today, the government does not contribute and the only money that goes into the JISA is the money which you deposit.

What can my child do with a matured CTF?

Once a child turns 18 and the CTF matures, they have a decision to make about what to do with the money. But what are their options?

• Celebrate and spend - As the money is now theirs, they can spend it however they like!

• Become a savvy saver - Some children may choose to carry on saving their money in a cash savings account or cash ISA. Both will offer interest on the money and they are often easily accessible, so the money can be withdrawn at any time.

• Invest it - Although most 18-year-olds won’t be familiar with investing, they could invest their savings in a Stocks & Shares ISA to potentially grow their money further. We would always recommend that if they were to invest their money, they do so for at least 5 years. It’s also worth remembering that when investing your money is at risk and you may get back less than you put in.

That’s our round-up on Child Trust Funds. Did you know that it’s been estimated that more than one million child trust funds are ‘lost’ and haven’t been claimed? In most cases, this is due to HMRC opening the account because the child’s parent or guardian failed to do so. If you think your child may have been eligible, it's worth checking. More details on how to find a lost CTF can be found on the HMRC website.

We are delighted to partner with Bury AFC as their new front of shirt sponsor for the 20/21 and 21/22 seasons.

Sharing a set of similar values between ourselves and the club, we’re just as excited as the fans that football is coming back to Bury.

Bury AFC are putting the fans at the heart of everything they do with the ambition of changing the way football clubs are ran, in the same way we are disrupting the financial services industry to make financial advice affordable and accessible to everyone.

Anthony Morrow, OpenMoney Co-founder, said “We are delighted to be supporting Bury AFC for the next two seasons. I’m sure that with a fresh start for the club it will win round not just Bury fans of old but hopefully some new ones.

There are a lot of shared values between OpenMoney and Bury AFC and as a business committed to long term, safe investing we hope that we offer a stark contrast to football’s unhealthy association with predatory gambling and Forex trading advertising. We are democratising access to financial advice, making it available to everyone and not just the affluent few, and are committed to transparency, simplicity and affordability. These are all values we saw in Bury AFC, and we hope we can work together over the next couple of years for the benefit of all Bury fans.”

Chris Murray, Bury AFC Chairman said “We’ve had a lot of interest from sponsors but it was apparent that OpenMoney was a perfect fit for us. We wanted a sponsor that was inclusive and embraced the same ideals as ourselves, and I feel that we have found this in OpenMoney. A two-year deal not only offers certainty, it allows us to deliver on our promise to fans to change the kit every two years rather than one. We are keen to reward their loyalty rather than exploit it. With a number of our key sponsors in the bag we can now focus on getting a squad ready to challenge for promotion in this forthcoming season.”

You can follow Bury AFC on twitter @OfficialBuryAFC

We look forward to working with Bury AFC and wish the club success both on and off the pitch for the upcoming season.

‍

We recently celebrated the OpenMoney family’s third birthday! As well as sharing a toast (via video call), we took the chance to reflect on the last three years and what we have learned along the way.

Customer service is key

Since we launched back in 2017 we’ve seen how much our customers value the ability to speak to us about any financial issue, at no extra cost. As a result we will be introducing all of our customers, current and new, to their own personal support specialist and financial adviser here at OpenMoney. We know that a friendly face and expert voice can give reassurance as and when needed. Your dedicated adviser will be on hand to answer any questions that you may have and help with any issues, as well as keeping you up to speed regarding any new services or features that we’re launching. To make sure you can make the most of this,we’re extending our support and advice hours to include weekends!

Your Feedback makes a difference

Earlier this year we launched our new app and whilst we were happy with it, we’re firm believers that there is always room for improvement. So, we turned to your reviews to find the gaps and make a few tweaks. Since then we have joined forces with Moneyhub which means that our customers will benefit from a wider range of provider integrations, faster transaction refresh times and accurate spending categorisation while continuing to receive our expert advice on their finances. As well as this, we are also making further improvements to the app including savings and budgeting tips, and our partnership with Uswitch will be expanding later in the year. When our customers speak, we listen. We’ve also invested in user research and we will keep using the feedback we receive to make ours the very best possible service for you.

The financial advice gap still exists

Back in August of last year we released a report that we complied with YouGov on the financial advice gap in the UK. We found that 19.8 million people* across the UK would appreciate a bit of financial advice, but not everyone knows how to get it or that it’s even an option for them. This report, which you can download for free here, was put together off the back of a 2015 study by Citizens Advice[1].They identified the four types of advice gap: the affordable advice gap, the free advice gap, the awareness and referral advice gap and the preventative advice gap, and we were interested to see if much had changed in four years.

Our findings showed that a great deal had changed in that time, such as an increase of over 5 million people* who would benefit from financial advice but are not aware of public financial guidance. As we are trying to bridge the advice gap in the UK, we didn’t want to wait another four years to re-evaluate and so we have decided to make this an annual report with the help of YouGov. Our 2020 report will be released later this year, so watch this space!

‍

‍

*Where figures like this are shown, OpenMoney has extrapolated the YouGov findings from our sample to represent GB population estimate of 50,644,094 (source ONS, June 2018).

[1] Citizens Advice

‍

We’re really excited to announce our new partnership with the Open Banking platform Moneyhub.

Moneyhub were one of the first services to offer secure Open Banking integrations globally, and this accessibility aligns perfectly with our mission of making financial advice accessible and affordable to everyone.

When you come to OpenMoney, whether that’s online, through our app or chatting to one of our financial advisers, we know it’s really important that you have a great experience with us.

The relaunch of our app back in January led to some exciting new features, but it also highlighted some ways in which we can improve the experience for customers downloading and registering on our app.

In partnering with Moneyhub to offer our account aggregation service, our app should become faster and more reliable as well offering new features.

This partnership will bring full Open Banking capability to our app, helping customers to get a complete view of their finances.

Users will be able to connect their bank accounts, saving accounts, investments, loans and other financial products at the touch of a button, now including full integration with Monzo and Starling.

Users can also look forward to instant balance and transaction information, as well as intelligent categorisation on items they buy.

Anthony Morrow, our CEO and co-founder, said: “We want to ensure that our customers can make the most of the new Open Banking rules by having a complete picture of their financial circumstances through the OpenMoney app. Customers will benefit from a wider range of provider integrations, faster transaction refresh times and accurate spending categorisation while continuing to receive our expert advice on their finances.”

Samantha Seaton, CEO of Moneyhub said: “The advice and engagement gap remains a significant challenge. In combining Moneyhub's Open Finance platform and OpenMoney’s technology, we can provide an innovative solution that is both intuitive, impactful, and cost effective for all. Open Banking changed the rules of the game, but Open Finance which in addition to current accounts also covers pensions, mortgages, investments and loans, will truly transform how everyone thinks about money. I'm inspired by what the OpenMoney team has achieved, so the opportunity to collaborate with them and develop our shared goal of promoting greater financial awareness and insight is exciting. OpenMoney firmly believe in making financial advice accessible to all - and I couldn't agree more. What an absolute treat to partner with such a like-minded team.”

We’ll be rolling out more new exciting features in the future through our partnership with Moneyhub.

‍

We have some exciting news to share!

We have reduced the total cost of our investment portfolios, and this reduction will be passed directly to our customers, and the investments they hold with us. This change sees our fees drop from between 0.50% and 0.52% to between 0.46% and 0.49% depending on which investment portfolio is chosen. You can see a breakdown of these changes by portfolio in the table below.

‍

Almost three years after launching our service to bring affordable and accessible financial advice to all, we’re pleased to be able to reduce our fees even further. We’re committed to ensuring that our investment fees are as low as possible, while still offering a spread of investments across different assets, markets and geographical locations to try and minimise risk for our customers where possible.

We worked closely with Finalytiq to review our portfolios prior to the impact of Covid-19 and whilst it has caused turbulence in the markets, our investment strategy hasn’t changed. We do not try and time the markets and therefore our reasons still stand for making the changes to the portfolios.

We understand that with the impact of Covid-19, people will naturally have questions about their investments. We offer ongoing advice and appointments with our financial advisers at no extra cost, so people can continue to get the support they need during these unsettling times.

You can contact our team with any questions you have using our Contact Us page.

The recent Apple advert plays on the notion that our phones hold a lot of data about us, even seemingly irrelevant information like your heart rate. ‘Privacy. That’s iPhone’. The fact that Apple are using privacy asan emotive subject to promote their product as opposed to its flashy new camera shows the importance that we put on keeping our data safe.

It’s hard to know what data about you is out there and it’s increasingly important to know it’s in safe hands. Here at OpenMoney, keeping your data safe and secure is our priority. Here’s the steps we take to make sure your data and investments are safe with us.

SSL Certification

Our websites have SSL certificates. Like many, I didn’t know what that meant apart from the website has a green padlock in the URL bar – for most of us, this visual cue is enough. But what does it actually mean?

SSL stands for ‘Secure Socket Layer’. An SSL is a small data file that establishes a secure connection between the browser and the website. Any communication or data passed is encrypted.

Still sound confusing? Encryption looks something like this… 

As the image shows, the output of encryption is a load of gobbledygook that humans can’t read or understand!

Bank level encryption

Now that we’re all encryption boffins, it’s useful to explain the level of encryption we use.

Our data is encrypted using 256 bit SSL encryption, which is the same level as most banks. If it’s good enough to protect your money, it’s good enough to protect your information too!

A 256-bit key can have 2256 possible combinations, that’s 2 x 2, x 2, x 2… up to 256 times.

It is one of the most secure methods of encryption available and according to this article, it would even take the fastest supercomputer inthe world thousands of years to crack.

Data Protection Training

As well of all of this fancy technology to keep your data safe from external threat, we also make sure that our staff are trained and educated in the world of GDPR (General DataProtection Regulations) to keep your data safe internally. GDPR practices are regulateand enforced by the Information Commissioner’s Office (ICO) and any breach in the legislation means we as a business - and sometimes as individuals - are held accountable for the misuse of data.

We’ve all had training from our Data Protection Officer - he doesn’t wear a police uniform if you were wondering – and we have strict procedures in place when it comes to accessing customer data.

There are other things we do to ensure your data is safe too. We’re very selective as a business over the technology we use and we don’t access public with our work computers WIFI in case of any threats posed by the network.

FCA regulated & FSCS protection

As well as your data, it’s important to know that your money is safe with us too.

We’re regulated by the Financial Conduct Authority who set the rules and regulations for financial providers in the UK. If we breach any of these rules, we’ll be held accountable and will potentially face fines from the FCA. This also means that we’re not a scam and we won’t be transferring your money into our private pension pots!

If you do invest with us, you’re also protected by the Financial Services Compensation Scheme (FSCS).This means that your money is protected up to £85,000 if anything does go wrong. The FSCS is an independent fund set up by the government to help protect people’s money. If we go bust, it means you won’t be left out ofpocket.

There’s more things we do to protect your data but unfortunately some are too technical for me to write about! If you do have any questions or queries about our processes, you can contact our support team on live chat Monday – Friday, 9am – 5pm or via email at hello@open-money.co.uk.

‍

New and improved for 2020

Our brand new app has just gone live on the app store, we are really proud of it and believe it’s  a great tool to help you get more from your money. Product Analyst Adam Briggs-Dawson talks you through what’s new and the thinking behind the new features!

Here at Open Money we have been working on a new and improved app to make managing your money work better  for you.

As a product team we have spent a lot of time putting ourselves into our customers’ shoes to figure out what the most important and helpful features in a money management app should be.

We’ve been working really hard on making an app that goes one step further than money management. We’re excited to also offer financial recommendations within our app.  

We believe that financial advice should be accessible for all, that’s why our app is designed to guide you towards your financial goals. Whether you have £10 or £10,000 - our app could help you make your money work harder for you.

The new app is a real progression from our pioneer app and we are really proud of the result. We’ve improved the on-boarding process, making it very simple to link your accounts and there are lots of new features we didn’t have before.

Better Budgeting

First of all, we feel that visibility is key. The OpenMoney app allows you to see all of your money in one place. This sounds like a basic concept, but with many people having accounts with different banks, alongside loans, credit cards and investments,  it ’s a simple, but sometimes overlooked element, we didn’t want to miss out.

Secondly, saving money should be simple, easy, even fun! We wanted to create a way for you to set up savings goals for yourself and track your progress – and we have done just that!

Our app also gives you the option to set your own budgeting period, specific to your schedule. We know not everyone gets paid on the same day of the month, so set your custom budgeting period and get rid of second guessing.

If you are looking to work down debt, the app has a feature to allow you to set this up as a goal and allows you to track your progress.

You can also see a predicted forecast for the month based on your current spending, allowing you to plan ahead and adjust your spending if needed - so you’re not caught short at the end of the month.

You can also group your transactions together into categories such as dining out, bills etc. This allows you to see what you are spending your money on each month.

Ongoing Advice

The app is more than just money management, it also offers advice based on your spending activity. For example, if you’ve told us that you want to save money, the app will notify you of areas you could be saving. Such as letting you know you’ve spent £20 on takeaway coffees this month.  

We also have a new and exclusive partnership with uSwitch, where we are able to proactively tell you if you could be saving money on your bills – starting with energy. This way, we are constantly analyzing your finances for you and you can have the peace of mind knowing it is being taken care of, without you having to lift a finger.

There are lots of great features on this app and we believe it is going to make managing your money, easier, simpler and more efficient than ever.

I am really proud of what our team has created and hope that it will make managing your money easier for you. Let us know on our social media channels what you think of the new app if you’ve tried it, we love to get feedback and new ideas!

You can download the app on the App Store or Google Play now.

‍

We’re really excited to announce our acquisition of respected employee benefits platform Jargonfree Benefits.

Our mission at OpenMoney is simple: To make financial advice accessible and affordable to everyone, and the work Jargonfree Benefits does complements this perfectly.

Jargonfree Benefits was set up in 2013 with the aim of helping the estimated 16.3 million workers[1] employed at UK small or medium-sized companies (SMEs), gain access to the same standard of workplace benefits as those enjoyed by workers at larger firms.

It currently provides services to almost 40,000 employees and over 500 employers. We want to enhance these services and build on this platform. Whilst there is a lot of work to closing the advice gap, we believe it is absolutely possible and are excited to play our role in doing that. Steve Bee, founder of Jargonfree Benefits, said: “This is a hugely exciting moment for the business, our existing clients and the millions of employers up and down the country who care deeply about the people who work for them.

“It makes sense to me that the tools people need to both understand and control their own finances should be readily available in the workplace. “We’ve got a long way to go, but I’m confident that as part of OpenMoney we can make huge strides in building the benefits market for SMEs and in doing so ensure high quality affordable financial advice might one day become accessible to every worker in the UK.”

This is just the first of many exciting announcements we have planned over the next few weeks and months.

[1] House of Commons Business Statistics Briefing Paper, 12 December 2018

‍

Buying a house is likely to be the biggest financial decision most of us will make, but many people are struggling to get onto the property ladder at all. For those who do, the process is often confusing, expensive and time consuming, with multiple parties to contact and chase.

As part of the continuing work we do to make your financial life easier, we have taken the first step to expand our offering into the mortgage space and we are really pleased to announce that we have recently hired James Brocklebank as our Head of Mortgages.

James’ experience as a mortgage broker and developing fintech mortgage solutions will be so valuable as we begin to shape our mortgage advice process over the next few months. We can’t wait to get started, and we’ll be sure to keep you updated along the way.

We aim to make the entire home-buying journey easier and less stressful with clear, continuous, communication and at a low cost. From setting deposit goals and providing mortgage, insurances and mortgage protection advice, to linking to conveyancing, we want to support customers all the way through to their final repayment.

We have always strived to help people make the most of their money, and by adding mortgage advice to our growing list of services is the next step in our ambition to become a one-stop-shop for people’s financial affairs.

• New partnership announced with uSwitch.com.
• Giving customers more ways to make the most of their money.
• Offering comparison services on utilities, broadband and more.

We’re really excited to announce our new partnership with price comparison and switching service uSwitch.com!

Our ambition is simple: To help people make the most of their money, and this will allow us to do just that.

Our new service will launch this year and we will be the first company to partner with uSwitch on this unique offering.

You will be able to see your finances in one place using our app, and we will offer recommendations on how you can make the most of your money.

Rather than the traditional comparison services where you have to input the information and make the decision on which is the best option, we will recommend personalised deals when it is in your best interest.

This will include the comparisons of utilities, broadband and mobile, with credit cards and insurance products coming early 2019.

Kushal Ghuwalewala, Head of Partnerships at uSwitch, said: “At uSwitch, we're passionate about helping as many people as possible save on their household bills. We're excited to be working with OpenMoney and look forward to helping more households pay less for their everyday bills.”

We’ll be sharing more details on our partnership with uSwitch as we add more features to the app and service.

Figuring out the best ways to use your money isn’t always easy, so it makes sense to seek advice from professionals. But that advice usually comes at a price and can be time consuming.

At OpenMoney we want to help you make the right decisions with your money, and make sure that these services are accessible to everyone!

We will give anyone who comes to us honest and expert advice, and because of our extensive use of technology we’re able to keep costs very low.

How it works

We’ve tried to make our advice process as quick and simple for you. Firstly, we’ll ask you a few questions on our website to determine how we can help you.

These are all simple questions such as your age, how much you earn each month, what your monthly outgoings are and how much you might pay towards short-term debt every month, plus what you have in savings.

This step should only take a few moments and we will use this information to guide you towards the next best step for you.

Depending on your situation we may be able to help you to start managing your money better – such as cutting down your spending and working down any debt you might have.

Or we could help you to start saving and building up a cash buffer.

Your answers might even mean we’re able to help open you up to the world of investing or get more from the investments you might already have.

But we will never recommend something that isn't right for you!

How we can help you will depend on your answers to the above. But whatever we recommend the next step is for you to provide us with more information so we can understand your situation and figure out what's best for you.

In some cases, this includes requesting access to your bank details. This can scare some people (and we totally understand) but be assured that your privacy and security are our number one priority.

We have all the legally required and rigorous data privacy and security provisions in place to protect your data.

Our app will be able to use this information to analyse your finances and to help us to provide you with advice advice on how to manage, save or invest your money.

‍

‍

‍

‍

Helping you to manage your money

Our new OpenMoney app will be able to help you see your income and outgoings clear as well as help you manage them better.

Due to our app’s technology we will be able to analyse your financial situation, including your spending and debts. We will help you reduce them so you cna save to meet your goals.

Saving your money

We always recommend that you have at least 3 months’ worth of outgoings saved. If you haven’t already got this cash buffer saved up, we will point you towards our OpenMoney app.

One of our key features on the app is a service we have developed in partnership with uSwitch.

It will allow you to look at your outgoings for utilities and household bills and provide you with ideas on where you can save money.

In the past you’d have to actively search for cheaper deals on your utilities but now you’ll be able to receive information on potentially cheaper alternatives though our app.

Investing your money

After answering the questions at the start of the process it might be clear that investing your money could be an option for you.

If investing is right for you then we can guide you through your investment choices on our website and recommend a diverse portfolio to suit you.

In order to shape our recommendations to you we will ask you further questions about your existing assets, how much you want to invest and your appetite for risk

One of the biggest barriers to investing for some people is the cost involved. But our charge for your investment is a market-leading 0.50%*.

Personal advice

As well as offering you advice through our website and app our team of qualified financial advisers are available to speak to if you have any questions.

We offer a web and app chat option for any general queries. If you need a more detailed conversation about your recommendation you can book a free phone appointment with them.

Our team are on hand between 9am and 8pm and you can make as many appointments with them as you like – even on weekends and evenings!

*based on the maximum charge payable across all evestor/openmoney portfolios as at 16/08/2018. Fees may vary and may be higher than this stated amount.

You may have heard in the news that the UK is now officially in recession as a result of the coronavirus outbreak and how it has impacted our economy since earlier this year. 

Back in May, Chancellor Rishi Sunak said the country is facing “a severe recession, the likes of which we haven't seen”[1], but admitted the “jury is out” on how much long term impact coronavirus will have in on our economy. As those of us who experienced the 2008 financial crisis and recession might remember, the economy took 5 years to recover.[2] 

I wanted to help to demystify what we really mean by a recession and how you can help to protect yourself against the possible effects. ‍

What is a recession?  

A recession is commonly described as a significant decline in an economy, continuing for at least six months.  For an economy to be considered ‘in decline’, there needs to be a drop in 5 key areas:  

• Employment, 
•  Retail sales, 
•  Manufacturing, 
•  Income 
•  GDP. This stands for Gross Domestic Product and is the value of all goods and services made by a country within a specific period. GDP is usually calculated annually but can be calculated quarterly too.  

Recessions are a difficult time for both businesses and the public. With sales dropping and manufacturing slowing, businesses be forced to close or downsize which causes unemployment. Unemployment means less consumer spending and, along with a potential for the public to reduce spending due to the worry of how a recession will impact their finances, this can then fuel the recession further. 

An economic decline also has an impact on the investment markets, which can be worrying for investors. Some will withdraw their funds out of fear, and this causes a further decline in the markets. 

However, there can also be positive impacts of a recession. Prices of goods and services can lower and some businesses closing can mean more opportunity for the surviving businesses to grow sales and strengthen their position. 

For consumers, a recession can spark a change in mindset. A sudden awareness or concern over your individual financial situation can mean people spend less, save more and learn to live within their means, as opposed to relying on credit or overdrafts to get by month-to-month. ‍

How can you protect yourself against a recession? 

There are ways you can lessen the impact of a recession on your personal financial situation.  

‍Review your incomings and outgoings  

Reviewing your spending is a great first step to understanding and streamlining your finances. Some of you may already have reviewed your budget since the coronavirus outbreak due to a redundancy or changes in income. 

We’d recommend:  

• Reviewing the past few months expenditure and create a monthly budget including mortgage/rent, bills, groceries, transport costs, spending money and savings. Understanding where every penny goes can help you identify where you’re overspending. 
• Money management apps (like ours) can help you to understand where you’re spending your money without the hard work. Our app will continually analyse your finances and give you advice on where you can cut costs and save too! 
• Review your bills and subscriptions to see if you can cut costs – perhaps by cancelling a streaming service you don’t use or switching energy provider. 

‍Avoiding using credit 
If you’re planning on taking out an overdraft or credit card for a large purchase, it might be best to hold off these plans or save up instead to avoid tying yourself into a monthly payment moving forwards. 

‍Save a cash buffer  

We often talk about the importance of a cash buffer for your financial security. Think of it as a cushion to fall back on should you lose your job or be put on a scheme similar to what we have seen with the furlough schemes the government have offered during coronavirus.  

As a rough guide, we recommend a cash buffer of 3 months outgoings kept in accessible savings. 

‍Make yourself more valuable at work  

As we know, recessions can mean redundancies and job losses. If you feel your employer would be impacted by a recession, it’s a good idea to try and protect yourself from redundancy by aiming to make yourself as valuable as possible at work. 

Taking on extra responsibilities, working overtime shifts or picking up knowledge in other specialist or business areas could make you more valuable to your employer, depending on your role and industry. 

‍Review your investments  

If you’re an investor, it might be a good time to review your investment portfolio. While you should be cautious of making any investment withdrawals, you may want to ensure you’re comfortable with the level of risk you’re currently taking. 

If you have a financial adviser, reach out and discuss any concerns or explore any questions you have. We think it’s really important to be able to speak to someone when you have worries, this is why we offer unlimited appointments with our financial advisers (at no extra cost) to all of our investors. 

‍

Capital at risk

[1] telegraph.co.uk

[2] ons.gov.uk

We have some exciting news to share!

We have reduced the total cost of our investment portfolios, and this reduction will be passed directly to our customers, and the investments they hold with us. This change sees our fees drop from between 0.50% and 0.52% to between 0.46% and 0.49% depending on which investment portfolio is chosen. You can see a breakdown of these changes by portfolio in the table below.

‍

Almost three years after launching our service to bring affordable and accessible financial advice to all, we’re pleased to be able to reduce our fees even further. We’re committed to ensuring that our investment fees are as low as possible, while still offering a spread of investments across different assets, markets and geographical locations to try and minimise risk for our customers where possible.

We worked closely with Finalytiq to review our portfolios prior to the impact of Covid-19 and whilst it has caused turbulence in the markets, our investment strategy hasn’t changed. We do not try and time the markets and therefore our reasons still stand for making the changes to the portfolios.

We understand that with the impact of Covid-19, people will naturally have questions about their investments. We offer ongoing advice and appointments with our financial advisers at no extra cost, so people can continue to get the support they need during these unsettling times.

You can contact our team with any questions you have using our Contact Us page.

The coronavirus is impacting all of our lives, whether that is physically, mentally or financially. Things are changing every single day, and that is the same with mortgages. Whether it is the Bank of England reducing the base rate to 0.1%, lenders announcing mortgage payment holidays or lenders announcing they won’t lend anymore money. There are changes every single day.

Whilst there are some great things coming out of this from mortgage lenders, there are also several pitfalls which we'll explore below.

Payment holidays

Let’s start with the big news: lenders allowing you to take payment holidays. Almost all mortgage lenders have risen to the challenge. They have agreed to allow you to take up to three months off from paying your mortgage and have also said this may be extended depending upon external circumstances. This is a great step by lenders, but there are a couple of things to consider.

·       Do you need it? Whilst we appreciate this is a great boost to thousands of people, only apply for this Mortgage holiday if you need it. Don’t take it for the sake of having three months off your payments. Despite your payments being paused, you will continue to be charged interest. This interest is then added to your mortgage meaning you will pay more over the term of your mortgage. If you do need it, please speak to your lender.

·       How will it affect your credit file? Lenders have said they will try to stop it impacting your credit file, but that doesn’t mean it won’t. When you come to re-mortgage in two years’ time and there are three missed mortgage payments on your file, you may find that it could stop you moving lender, moving to a new house or getting a better rate.

If you are struggling, we wholeheartedly recommend speaking to your lender and seeing if you can have a break from your mortgage payments. Please consider all the risks of this, as your payments are going to increase after the holiday, and there are a lot of unknowns.

There are also other alternatives to having a break from your payments. Why not consider extending your term? The impact of this virus is likely to be far longer than three months, which could allow you to make this more affordable for the future. Why not convert to interest only temporarily? This will mean the interest isn’t building up on your mortgage. Or even paying some of the mortgage.

Whatever you are considering doing, please speak to your lender first. Don’t stop paying your mortgage!  

Interest rates

Don’t worry, it’s not all doom and gloom, there are some positives too. We are seeing the Bank of England base rate at an all-time low and as a result of this, mortgage rates are low, with some below 1%. If you are currently on the Standard Variable Rate, or on a tracker deal it might be worth considering re-mortgaging. We understand now might not be a great time to review your finances with everything going on, but it is worth getting some impartial advice to make sure you are on the best deal for your circumstances.

Purchasing a home

I have had a lot of people get in touch with me asking whether they should continue with their House purchase. Here at OpenMoney, we know how much goes into buying a home - the planning, the finances and most importantly the emotional impact on you. With these factors in mind, the answer is different for everybody.

The government is urging people not to move house during the outbreak to avoid breaking social distancing protocol, but this does not mean you should stop buying your dream home. It means you need to consider your options, such as delaying the purchase.

When deciding to buy a home, you will have put months of planning in place, and spoken to mortgage advisers, estate agents, solicitors, and family about the process. You will have saved for months and months to put your deposit down. You shouldn’t therefore stop buying your house without taking some time to thoroughly consider key factors such as the below:  

·       What does your financial situation look like? A lot of businesses are under enormous financial pressure with thousands at risk of losing their jobs, what is the chance of you losing yours? Are you self-employed, will your income be affected by everything going on? Whilst the government is doing its best, their help won’t last forever. Once that stops will you be able to afford those monthly mortgage payments for the next 40 years?

·       How could you be affected if you already have a mortgage offer? If you have lost your job and you have a mortgage offer, you must tell your mortgage lender. It is vital you do so. If they find out after you purchase the property, they can repossess it, and you could find yourself in a lot of trouble. If you have any potential issues, please speak to your mortgage provider or adviser.  

·       Will your options be limited? Some providers have stopped lending to help people purchase homes, and others have reduced what they offer. This may mean your choice is limited. However, it doesn’t mean there aren’t still thousands of mortgage products out there, it simply highlights the huge benefit of getting independent advice.  

The reasons for you buying a home aren’t going to disappear overnight. Whether it is buying your first home, your family needs more space, or you want to move to a nicer area. These reasons will still be there in two months or two years’ time, so don’t give up your dream of a new home. Take time to assess your situation and make an informed decision.  

One thing that this has reinforced for me, is the need for our country to have the right insurance and protection. Everyone in the office is sick of me saying this, but as a country we do not have enough protection in place if the worst is to happen. If you do one thing once we have recovered from this, and we will, please speak to someone and get the right insurance. Naturally, we don’t like talking about people passing away, or not being able to work for months at a time due to ill health, but it does happen and you need to have insurance in place to protect both you and your family.

I hope this has shown you a few of the options available to you, and has also given you few things to consider. Most importantly speak to your lender if you are in trouble, they are on your side and are there to help you.

‍

Now that we have found ourselves confined to the comforts of our own homes for the next few weeks, it’s a normal reaction to try and sooth one’s soul through the medium of online shopping. No judgement here, we’re all in this together (but did I really need that cactus?). Whilst we’re likely to save a bit of money by not going out, buying coffee, ordering takeaway etc, it wouldn’t be realistic to advise you to not spend a penny, we can offer a nudge in the direction of mindful spending. Below is a roundup of the apps, services and activities that are perking us up at the moment – most of them are free, but any costs involved, we believe contribute to feeling a bit brighter and we have detailed all information.

Top 5 free trials

Now is the perfect time to ‘try before you buy’, and these are our favourite free trials at the moment. Top tip: set a reminder on your phone to cancel your subscription, as most companies will sign you up and charge you automatically.

1.    Amazon Prime[1]

Terms: 30 days. £7.99p/m or £79p/a

This is the perfect option for those who has already exhausted all that Netflix has to offer. This streaming service has a whole host of original TV series and films available that you may not be able to find elsewhere. Here are a few TV recommendations from the team to get you started:

The Boys
Outlander
The Marvelous Mrs Maisel
This is Us
Vikings

2.    Spotify Premium[2]

Terms: 30 days free (for new Spotify members only) and then £9.99p/m.

To quote Plato, music gives a soul to the universe, wings to the mind, flight to the imagination, and life to everything. If ever there was a time that our minds needed wings it’s now! Your premium membership will give you endless hours of uninterrupted tunes to help you concentrate, chill you out or cheer you up.

3.    Audible[3]

Terms: 30 days free plus one free audio book (If you're an Amazon Prime member, they'll bump this up to two books). Plans start at £7.99 p/m.

If a busy social calendar has gotten in the way of reading, now’s a good time to get stuck in. Audio books are a great step back into the world of books and they’re great company for your walk of the day! You get one free audio book with this trial, so choose wisely. May we suggest one of the Harry Potter books? Even if you’ve read them several times over, there’s something comforting about Stephen Fry reading these well-loved tales in such tricky times!

4.    Duolingo Plus[4]

Terms: 7 days free. £80 p/a for continued premium use

If you’retaking time to learn a new skill, maybe a new language is the way to go. The free version of Duolingo is pretty good, but you might as well enjoy seven days of no ads and unlimited attempts at words and phrases as you progress.  

5.    My Heritage[5]

Terms: 14 days free. Packages starting at £79 p/a (£59 for the first year).

A good bit of research to get your teeth into could be just the thing to keep you busy and interested over the coming weeks. Maybe you’ve binge watched all episodes of Who do you think you are and want to know how find out if you’re distantly related to royalty. This 14 day trial can send you down a rabbit hole of history and is bound to bring up new things to chat about!

Top 5 ‘feel good’ services

No one really likes change, but we’re all having to adapt to a new way of living, and pretty quickly. Below are a few things that we’re finding useful to get us through mentally as well as physically. 

1.    Hello Fresh[6]

Whilst the tendency might be to pop a pizza in the oven for comfort, spending (a lot) more time at home could offer the opportunity to experiment in the kitchen. Recipe boxes such as Hello Fresh (meals starting at around £3.50 pp) can be a good way of trying new things and being relatively healthy at the same time. When some form of normality does resume, you will have learned new recipes and be able to recreate them at any time.

2.    Free full body workouts from Barry’s Bootcamp[7]

Now that gyms are closed, the normal treadmill and floor schedule of a Barry’s class has been stripped back and adapted to 30 minute hardcore sessions that can be done from the comfort of your own home. These are broadcast on the Barry’s Instagram page and the schedule is released daily on their Instagram stories.

3.    Free yoga and Barre with FLY LDN[8]

To bring a spot of zen into your lives, FLY LDN are holding 45 minute yoga and barre sessions live on their Instagram page. Unlike many others, they are also posting each session on their Youtube[9]channel so that you needn’t worry about missing any part of the live broadcast.

4.    Calm app[10]

With stress and anxiety being at an all time high, having a toolkit to practice mindfulness and set yourself up for a restful night’s sleep is a great thing to have. This app offers everything from breathing exercises to bedtime stories. It’s free to download with an optional subscription so you can see how you get on with the basic package to begin with.

5.    Let’s Day Out App[11]

This popular app that focuses on bringing people together through experiences, is thoughtfully re-branding to ‘Let’s Day In’. They will be hosting lots of virtual group activities from cooking demonstrations to art classes. All the sessions are free, but there is the option to donate £1 to the World Health Organisation’s COVID-19 Solidarity Response Fund.

5 things to jazz up home schooling

For many parents, the thought of having to home school their children is daunting and stressful. We’ve listed a few things below to bring some educational fun to your new school days.

1.    Joe Wicks PE lessons[12]

Joe Wicks aka The Body Coach, is hosting daily 30-minute PE sessions live on his Youtube channel at 9am. They’re great for waking everyone up, engaging the brain and getting into some form of routine when everything is so out of sorts. Although aimed at children, it’s a great way for the whole family to spend some time together being active, and if we’re honest it’s left some of us adults out of puff too.

2.    The Maths Factor[13]

Carol Voderman has announced that she is removing the paywall on her tutorial website for children, The Maths Factor. This is aimed at children of primary school age and will be freely available for as long as children are having to stay away from schools.

3.    Printable Pages

Many illustrators such as Matt Richards[14] and Jacqueline Coley[15] have started producing artwork that parents can print off for their children to colour in. It’s the perfect down time activity to break up a curriculum based timetable.

4.    David Walliams Audio Stories[16]

Just as audio books are great for adults, children can really benefit too. A huge part of school life is shared reading and being read to. David Walliams, author of Gangster Granny and Mr Stink (to name but a few) has announced that he will be releasing an audio story for school children every day at 11am for the next 30 days for free. These can be found on his website, under ‘Elevenses’.

5.    Family Baking

Studying at home needn’t purely revolve around times tables and literacy, there’s a lot to be gained from fun activities at home such as baking. Getting the family involved teaches measurements, elements of time keeping, the science behind baking, the importance of a clean kitchen…and patience from all involved! Little Cooks Co’s Instagram[17] has many recipes that little hands can get involved with, but there’s no reason they can’t get stuck in with your day to day cooking routine!

[1] Amazon

[2] Spotify

[3] Audible

[4] Duolingo

[5] My Heritage

[6] Hello Fresh

[7] Barry’s Bootcamp Instagram

[8] FLY LDN Instagram

[9] FLY LDN Youtube

[10] Calm

[11] Let’s Day Out

[12] PE With Joe

[13] The Maths Factor

[14] Matt Richards

[15] Jacqueline Coley

[16] David Walliams Audio Stories

[17] Little Cooks Co Instagram

‍

The Coronavirus has been eye opening in all aspects of our lives and has made many of us take a close look out our personal situations including how we stand financially when the going gets tough. Our latest research with YouGov has highlighted the nation's precarious financial position as we entered the uncharted territory that is this global pandemic.

We found that a fifth (21%) of British adults have no immediately accessible savings; and just under a fifth (18%) only have enough to cover essential outgoings, like mortgage and rent payments, utility bills and food, for two months or less if they had no income coming in.  

The research, conducted earlier this month among 2000 British adults, shows that a huge number of households were already struggling financially and may need even more help to survive the additional economic difficulties stemming from COVID-19. Our other key findings were:

• Over the last two years, of those that have experienced financial difficulties, 12% have been behind on paying essential bills and 10% have missed a debt or loan repayment.
• In the last twelve months, over two fifths (44%) have run out of money before their next pay day at least once and over a third (34%) have relied on short-term credit to pay for something.  
• Three fifths (60%) of households have some form of debt. Credit card (32%) and mortgage debt (29%) are most common but many also have unsecured loans (20%), authorised overdrafts (14%) and car loans (9%)2.
• Only half (51%) of people are keeping up with their financial commitments without any difficulties.
• Almost a third (30%) are rarely or never able to put aside any of their income into savings.

Our research makes it clear that many households were already in a fragile financial position and the additional economic uncertainty created by Covid-19 may push people into further difficulties. The ongoing response by the Government and banks to help vulnerable customers with mortgage payment holidays and extra protection for credit card users is to be welcomed, but more may need to be done to support those in financial distress as the crisis continues and as we come out the other side.  

If you are struggling to pay essential bills, or with making debt repayments, contact your provider as soon as possible to discuss delaying or reducing payments. Prioritise paying off debt with the highest interest rates first and if you do need to take on more short-term credit opt for the form with the lowest paying interest. Look at your outgoings to see if there’s any services you can stop or reduce given the current circumstances. As always, if you are concerned, we’d recommend contacting the Money Advice Service for guidance.

These findings were from OpenMoney’s annual research into the UK financial advice gap and will form part of a larger report later this year. The 2019 report, The UK Advice Gap: Are consumer needs for advice and guidance being met? can be downloaded here.

‍

What should I do with my Pension? Is now a good time to invest? Should I sell my investments or buy more? 

These are just some of the questions we’ve been helping our customers to answer. There is so much uncertainty at the moment, and not just for your money. We asked Hayley Millhouse, our Head of Advisory Services here at OpenMoney, to shed some light on our most frequently asked questions.  

Is now a good time to invest?  

With the markets in a dip, you might hear that it’s a good time to invest new money. While investing in a market downturn can offer the potential to make returns on your money when the market does pick back up, we don’t advise our customers to try and time the markets in this way.  

This is particularly important in the current circumstances, when the outcome and timescales for economic recovery are so unpredictable. No one can say how long the markets will take to recover. If you are considering investing, thinking about your goals is a good starting point.  Are you considering investing to help you achieve your medium to long-term goals, such as retirement, or because of what you’ve seen or heard in the press? 

Investing money is a way to help you achieve your long-term financial goals and shouldn’t be thought of as a quick way to try and make some extra money and capitalise on what’s going on in the markets. 

Here are three things we advise our customers to consider first before making a decision to invest: 

• Are your debts manageable? We only recommend investing if you’re paying less than 15% of your salary each month to manage unsecured debts. 
• Do you have a cash buffer to cover you in emergencies? We recommend you have at least 3 months outgoings to keep in accessible cash savings for an emergency. This is more important than ever, as many people’s incomes might be uncertain over the next few months.  
• Are you happy to leave your money invested for at least 5 years? We only recommend investing if you’re happy to leave your money invested for at least 5 years. This helps you to ride out any short-term market fluctuations. This is particularly important now, as the next few years for the market are so hard to predict. 

If you want to know whether investing is right for you, you can take our financial health check to find out and we’ll advise you on what’s best for you. 

Should I sell my current investments? 

We know that changes in the market can be unsettling at any time and particularly now, with the wider impact Coronavirus is having on our day-to-day lives. However, it’s important to remember that volatility is all part of the investing journey. It’s really important not to panic and make decisions led by emotion - although we know that’s easier said than done.  

We all have an emotional attachments to our hard-earned money, and it can be worrying to see the value of our investments fall, but investing is for the medium to long-term, and we tell our investors to stay focused on their long-term goals throughout these periods of uncertainty.  

If you have access to a financial adviser, we’d recommended speaking to them about your concerns before you sell down any investments you hold.  

If you’re an OpenMoney customer, you can book an appointment with one of our advisers at no extra cost, through your OpenMoney online portal. 

I am close to retiring – should I be worried about my Pension? 

If you’re close to retiring, it could be a particularly scary time for your Pension. If you have a plan for retirement it’s a good time to review it – we always recommend reviewing your retirement plan on an annual basis, or when there have been any specific changes for your circumstances.  

If turbulence in the markets have impacted your Pension and retirement plan, you might need to look at your options on how and when you take your retirement income. For example, is it necessary to take your tax-free cash right now? Do you have other savings you can take income from? Is there an opportunity to delay or phase retirement or take a part-time job for extra income?  All of these options could give the markets opportunity and time to recover. 

If you don’t have a plan yet, there is help out there for you: 

• The government’s Pension Advisory Services offer a range of guidance and planning tools and they’re free to use 
• Pension Wise offer free and impartial government guidance for over 50s on retirement options 
• You can also speak to a financial adviser, although there may be additional cost associated with this 
• We’ve partnered with GUIIDE [1], who offer a free tool to help you build a plan for your retirement and save money too 

If you’re an investor with OpenMoney and you have any questions or just want to chat to our support or advice team for some support and reassurance, please reach out to us. Our team are ready to help: 

• Email hello@open-money.co.uk 
• Reach out through our webchat between 9am – 8pm on weekdays  
• Call us on 0101 204 3200 
• Book an appointment with one of our qualified financial advisers through your OpenMoney portal  

We’re all in this for the long term and we’ll get through these challenging times together! 

[1] Guiide

There are lots of different political and global events that can cause uncertainty and have an impact on markets – Brexit, elections and the recent breakout of Coronavirus are some of the more recent examples. 

We understand that people have an incredibly emotive attachment to their hard-earned money, and rightly so! We understand it can be very unsettling when markets dip, especially in times like this where we are hearing headlines about the ‘worst day since 2008’ [1] for the stock market.

So, we wanted to explore how our core principles of investment strategy and getting your financial foundations in place before investing can help to minimise the impact of these changing markets and support our investors in achieving their long-term investment goals. 

‍
Diversification  

When we talk about diversification, we often refer to the phrase ‘don’t put all your eggs in one basket’.  

When you diversify your investments, you’re spreading your money across several different types of assets, and we also diversify across geographical locations and industries too. This helps to minimise the risk involved.  

Different assets, like equities, bonds and property, do not react in the same way to a market event – often when some investments fall in value others will rise. It’s often the same with markets across the globe or different industries such as technology or retail.  

Diversification can’t protect you from losing money entirely, but it does help to manage and balance risk. 

‍

Regular investing  

Although making a big lump sum upfront could boost returns as your money is in the market longer, ‘pound cost averaging’ highlights the benefits of making regular monthly contributions to your investment.  

Regular contributions mean that some fund purchases will be made when the markets are up, and some when the markets are down, averaging out over time. This reduces the risk of trying to ‘time the market’ if you’re making a big one-off deposit.  

There can be emotional benefits to investing on a monthly basis too.  

The natural rise and fall you will see in the value of your investment returns will not be as harsh as when investing a large one off, lump sum. This may help reduce the emotional bias that can get in the way of effective and sensible investment decisions.[2]  

Emotions and investing is something we often talk about. Money is incredibly emotive, but it’s important to stick to your plan and try and avoid making decisions due to fear, panic or excitement – we know it’s easier said than done! 
 

Cash buffer

We recommend that our investors keep three months outgoings in accessible savings, to act as a cash buffer for life’s emergencies. Investing is for the medium to long term (at least 5 years), and so having a cash buffer to draw on will take some of the worry out of seeing your investments rise and fall in the short term. 
 

Ongoing advice and support

 
We know that seeing the value of your investments fall can be worrying – especially for new investors. That’s why we think it’s so important to have access to help and support from real people! 

We offer ongoing advice and appointments with our financial advisers at no extra cost. 

If your circumstances change, or even if you just want to have a chat with one of our advisers for a bit of comfort, we’re here to tell you what’s best for you and your investments and answer any questions or worries you might have about your money.  

You’re not alone – we’re here if you need us!  

[1] independent.co.uk

[2] barclays.co.uk

‍

You may have heard the media or popular social media influencers discussing terms such as ethical investments, ESG (Environment and Social Governance) portfolios or SRIs (Socially Responsible Investments). They differ very slightly in the areas that they cover, however a running theme throughout them is the premise of using your money to invest in industries that are not damaging to the environment or members of society. Naturally the growing popularity of this type of investment has brought questions to the surface regarding the products that we offer and the impact that these are having on the planet. Ethical portfolios are not currently something that we actively promote or provide for our customers, so let’s take a look at why.

On trend investing

The world of investing is slowly becoming more accessible and therefore possibly less daunting for the masses. Conversations about money are beginning to take place on platforms that were once reserved for aspirational lifestyle content as well as within mainstream press. Breaking down the barriers surrounding the topic of money and how we choose to manage it is a huge step forward, so we are glad that our customers are interested in progressing with their portfolios.

According to the 2018 Ethical Consumer Markets Report, the UK spends roughly 80 billion pounds on ethical goods (green energy, fashion, ethical food choices) every year[1]. This is no surprise given the spotlight that has been shone on our ethical conscience throughout traditional, digital and social media. With this move towards a more sustainable and responsible way of life, we are seeing an increase in customers wishing to invest in a more ethical manner.

Our stance on ethical investment portfolios

Hannah Cole, our Support Team Lead & Financial Adviser is often first on hand to look after queries such as this from our customers.

“We are often asked to look into ways that our customers can make their portfolios more ethical such as avoiding certain industries (American tobacco, Oil and Gas etc), or even how they can withdraw their money altogether to place it into an ethical portfolio...

... At OpenMoney and our investment site, evestor, we operate by offering model investment portfolios comprised of Mutual Index Funds as opposed to Exchange Traded Funds which is where you will mostly find ethical portfolios. The mutual funds that we use, aim to track specific market indexes such as the FTSE All Share and the S&P 500.”

This means that the only way our portfolios will exclude companies deemed to be unethical is if they are removed completely from the indices. As we don’t actively manage our own funds, we don’t pick the individual companies that they are made up of. Instead, we favour a passive investment approach, which you can read more about on our Jargon Buster page.

What are the ethical boundaries?

As well as being a functional decision, it is also worth taking a look at how far other providers go in terms of being ethical and are we really a lesser option because of our seemingly limited products? When looking to invest, it’s common to be averse to harsher industries that could have a negative reputation such as weaponry, alcohol, gambling etc and support a more sustainable, environmentally friendly portfolio.

However, Hannah raises a strong point in that we need to look at where the boundaries lie. “Where do we draw the line? There are respected companies that we know of, who boldly offer ethical investment opportunities despite having faced fines due to various misdemeanors.” Would investors be happy to invest in an ethical fund, but with a provider who has a somewhat tarnished track record?

Moving forwards

Our current opinion on how we operate within the realms of the ethics is not set in stone. We are constantly researching ways in which we can keep up with political and cultural climates at the same time as maintaining our extremely competitive costs and levels of service. However, if we are going to involve ourselves in the world of ethical investments, it needs to be for the right reasons rather than as a reaction to the media. If we cannot offer a justified rate of costs and returns, then we would be doing our valued customers a disservice which is not an option for us. As the market develops over time, ethical investment is of course something we would like to incorporate within our proposition, and our Investment Committee continue to assess the benefits and risks involved for those choosing to invest with us. As these conversations progress, we will keep our customers updated with developments.

[1] UK Ethical Consumer Markets Report

‍

You might have heard in the media about Neil Woodford’s investment fund ‘Woodford Equity Income’ and the plans to close it down after months of hardship.

This is obviously a stressful and confusing time for investors and it’s important to learn from what has happened to Woodford Equity Income.

Difficulty for Neil Woodford’s fund (which is essentially a pool of lots of different investors’ money) began after a period of underperformance caused investors to withdraw their money in big numbers back in June of this year. This flood of withdrawals caused Woodford to ‘suspend’ his fund. This means that to avoid the fund from falling further in value and investors losing out, Woodford stopped investors from removing their money.

News has now come that Woodford will soon be ‘winding down’ his fund – meaning that he will begin the process of selling off the investments, returning investors’ money and closing his fund for good. We explore some of the learnings we can take from what’s happened with Woodford Equity Income...

Active and passive investment – what does it all mean?

Neil Woodford is an active fund manager. Active managers use their own research, judgement and experience to make investment decisions on what assets to buy and sell. This differs from a passive investment.

A passive investment strategy, like ours, is one where investments are bought and sold to mimic something called a market index. An example of a market index is the ‘Financial Times Stock Exchange (FTSE) 100’.

The FTSE 100 tracks the top 100 companies with the highest share values publicly trading on the London Stock Exchange (LSE). The FTSE 100 represents roughly 80% of the value of all the companies on the LSE!

A passive fund could track which companies fall within the FTSE 100 and buy and sell the stocks of those companies.

There are lots of assumptions made about active management bringing in higher returns for investors than passive, but research has shown that more often than not, active management does not outperform passive management. The charges however are certainly higher and this difference in fees can mean thousands of pounds over the life of your investment.

As an active manager like Woodford enjoys early successes, the media can fuel their growing ego - often heralding them as having some kind of stock-picking superpower! But, just as easily as this media hype builds, it can quickly fall apart.

Active managers will naturally experience losses in their investment funds, much as any investment goes up and down in the short term – they can’t get it right all the time. When this happens for any extended period, the industry and media will pounce, and the sentiment can begin to turn on these managers, picking at their reputation. The media will then find someone else to build up as the new Woodford.

When you invest in an actively managed fund, you should be fully aware that you’re trusting these managers and relying on their experience and research to look after your money. You need to understand the risks associated with active management so you can make a sound decision that you feel comfortable with – don’t fall for the hype around active managers.

Diversification

No matter whether you’re invested in active or passive funds or a mixture of both, you should always make sure your investments are diversified. This means investing across funds in different markets and industries so you can spread your risk across all your investments – think of the old phrase ‘don’t put all of your eggs in one basket’.

If you’re making your own investment decisions and choosing your own funds, you should always make sure you diversify. If you get advice, your adviser should diversify your investments for you.

While it’ll be a worrying time for those invested in Woodford’s fund, hopefully they’ll have diversified portfolios and will be invested in a selection of other funds which have performed better, off-setting any loss.

Get advice

If you’re not sure, the best way to make sure you’re making the right decisions with your money is to get honest financial advice. As an online advice company, we talk a lot about the importance of asking an expert what the best thing for your money is.

It’s also really important to know the difference between ‘best buy’ tables and regulated financial advice. Lists and tables in articles online, telling people which investment funds are ‘the best’ can be dangerous. People may not fully understand the investment decisions they’re making when they follow these tables and have no protection if these decisions are wrong for them.

We really hope that what’s happened doesn’t put investors off completely. There are ways you can manage the risk you take with your investments and feel comfortable and confident even if you’re not a seasoned investor – diversify your investments, keep costs low, understand where you’re investing and, above all, get advice from a person or company regulated by the Financial Conduct Authority (FCA).

‍

Depending on where you live in the UK, your relationship with money may be different. Every one of our interactions with money will help form our understanding and confidence in dealing with financial situations.

In our recent Advice Gap report, we discovered some interesting statistics on each region’s relationship with money and financial decisions. Here’s what we found…

Londoners lack confidence

People living in London often face higher living costs in comparison to those living elsewhere in Britain[1] , which could leave them feeling less confident in making financial decisions. This was backed up by our research as we found that people living in London have the lowest confidence when it comes to selecting financial products.

54% were confident in choosing an appropriate mortgage in London, against the UK average of 60%. Scotland were the most confident, with 65% being able to confidently select a mortgage.

This lack of confidence also spread to more essential financial decisions such as choosing an appropriate current account. 81% of Londoners felt confident enough to do this against the UK average of 87%.

Our CEO, Anthony Morrow commented “Our research shows that the picture in terms of people’s confidence in choosing financial products is mixed across Britain, but those in London consistently come out as least confident. This may be due to the lower average age of Londoners compared to Britain as a whole[2]. Many Londoners have yet to deal with mortgages, energy tariffs and insurance and taking income from a pension is not yet on their radar.

“However, having an appropriate current account and savings product should be essential for all adults and it is concerning that those in the capital feel particularly ill-equipped to deal with these important financial decisions. We need to make sure that information around financial products is simple and easy to understand to make sure these crucial products are accessible to everyone that needs them.”

The East is struggling

Adults living the East of England were found to be struggling with their finances more than the rest of the UK. Although the East Of England is not a generally poor area of the UK, some of the most deprived neighbourhoods are located there[3].

In our Advice Gap research we discovered that 53% of the Eastern population ran out of money before payday at least once in the last year, with the average 46% across Britain.

Less than half (45%) said they were keeping up with their financial commitments without difficulty, less the UK average of 51%.

Finally, less than a third (32%) of those living in the East said they never experienced financial difficulties with the UK average at 36%.

It’s clear that these results show the East of England is struggling to stay on top of their finances and manage their financial situations confidently which can have a wider impact on their wellbeing.

Our CEO, Anthony Morrow commented on the issue saying “Our research shows that the picture in terms of people’s financial security is mixed across Britain, with those in the South of England generally faring better than their neighbours in the East of the country.

Financial services companies need to improve the financial confidence of the nation by ensuring that information is simple and easy to understand. Plugging the adult advice gap by making support and advice around good financial management and planning accessible to all areas of the UK is crucial to improving the wealth of the nation as a whole.”

What can we do to change this?

Education is very important when giving people the right tools to make the correct financial decisions for their personal situation.

There are plenty of websites available that have information on everything from current accounts, to mortgages. Check out Money Saving Expert or the Money Advice Service if you want more information on a specific financial product or issue.

We recommend researching as much as possible before making a financial decision as it can have a long-lasting effect on both your financial and mental wellbeing.

If you’re not sure of your next step, get some advice. OpenMoney was created to help people who aren’t sure what the next step is for their finances – after all, our research revealed that 19.8 million people would appreciate a bit of advice on their finances! So, if you want clear and honest advice, we’re here for you.

If you would like to read more about the Advice Gap report we produced in partnership with YouGov, you can head to our blog here and download the report at the bottom.

[1] - https://www.investopedia.com/articles/personal-finance/091415/how-much-money-do-you-need-live-london.asp

[2] - http://bit.ly/37F7jof

[3] - https://www.eadt.co.uk/ea-life/four-maps-show-some-of-suffolk-and-essex-s-poorest-and-richest-neighbourhoods-sit-side-by-side-1-5100441

‍