Domus Financial Services

Mind the Gap

A series on how to manage your cash effectively

Chapter 6 – How safe is my money?

Some would argue that the biggest banks offer the greatest level of protection, considering them to be the most secure place for our money.

The Financial Services Compensation Scheme (FSCS) offer protection up to £85,000 per person, per institution should the bank become insolvent. For most of us, this is sufficient protection and larger capital sums can be spread across multiple providers.

However, we may find ourselves at times holding large amounts of cash, even if only temporarily until we are able to allocate it elsewhere. For example, after a business sale, receiving inheritance, between moving home or from an insurance claim.

In these circumstances or for those higher-net worth individuals, a cash portfolio of £1m would require 12 different banks to ensure it remain fully protected.

Not only is this level of complexity unappealing but depending on the size of the cash portfolio or the type of accounts needed, it simply may not be possible to fully protect the entire amount. This is where professional advice can be invaluable in determining whether cash is the most suitable approach and what possible alternative solutions might be available.

An adviser can also look into the financial strength of each institution and factor this into their recommendations, helping to significantly avoid the risk of capital loss. This is extremely useful where a fully protected cash portfolio is not possible or when a smaller number of accounts is preferred over FSCS protection.

When the FSCS limits are exceeded, your capital is not protected and the financial strength of the banks you use becomes an important factor, more important than the underlying interest rate itself.

This is a series that looks at how you can manage your cash effectively. You can find the full article https://www.domusfinancial.co.uk/single-post/mind-the-gap.

Mind the Gap

A series on how to manage your cash effectively

Chapter 5 – Should I still be invested in the markets when I can achieve 5% risk free in savings accounts?

The decisions we make in life are usually driven in some part by our underlying emotions, but when it comes to our money, our emotions play a much bigger role. When markets are rising and the news is optimistic, we tend to be risk takers but when markets are falling and doom and gloom is everywhere we tend to avoid risk.

Going further than that, a basic feature of our psychology as humans is negativity bias - in that we are more affected and naturally inclined towards the negative than we are the positive. It means we dread losses more than we enjoy equivalent gains and remember bad events longer than good events. We usually see in opinion surveys our assumptions are systematically more pessimistic than the reality on key topics such as poverty or crime.

This natural emotional response means we are tempted to sacrifice our long-term priorities for immediate emotional comfort. When it comes to investing, this usually means exiting the markets and selling when prices are low only to return and buy back into the markets when prices are high.

Understanding these natural emotional responses and how we react to them is key in helping us to make logical, clear and pragmatic decisions when it comes to our money.

Putting emotions aside, we can look at the data to better understand the role that cash plays in your overall portfolio.

Cash as an asset, is there to provide liquidity in the short-term or a low-risk portfolio which preserves its value over the long-term. We know from the data above that the value of cash doesn’t grow in real terms, however in order to achieve your goals whether that is to enjoy a better retirement, leave a bigger legacy, pay for school fees or buy a bigger house, some level of growth is needed. This is the role of other types of assets.

This is a series that looks at how you can manage your cash effectively. You can find the full article here https://www.domusfinancial.co.uk/single-post/mind-the-gap

The value of pensions and investments and the income they produce can fall as well as rise and you may get back less than you invested.

The level of past performance is not indicative of any future potential performance. All performance figures can fall as well as rise. There are no guarantees to any level of future performance.

The levels of personal and commercial taxation are subject to change, at any time, which would affect future returns available.

We accept no liability for any inaccuracies or mistakes in any of the figures. The representation of the information obtained is purely based upon our interpretation of the data provided to us.

Mind the Gap

A series on how to manage your cash effectively

Chapter 4 – What are the benefits of managing my cash?

At the time of writing, the highest instant access account is offering 5.25%, whereas the highest five year fixed rate account will offer 5.50%, just 0.25% extra and not much incentive to tie up your money for the long-term. The reason for this is that there is just as much uncertainty over the short-term as the long-term and banks have priced this in.

However, although it appears inflation will continue to outstay it’s welcome for some time yet, it will slowly reduce and interest rates, including those paid on instant access accounts, will duly follow. Once a sense of security and stability has returned, you will see the appropriate level of premium applied to longer-term accounts and cash left dormant in instant access accounts will quickly begin to erode against the effects of inflation.

Adopting a portfolio and actively managed approach to your cash, will ensure your accounts never become dormant.

This is a series that looks at how you can manage your cash effectively. You can find the full article here https://www.domusfinancial.co.uk/single-post/mind-the-gap

The value of pensions and investments and the income they produce can fall as well as rise and you may get back less than you invested.

Mind the Gap

A series on how to manage your cash effectively

Chapter 3 – Simplifying the process of managing your cash

For those with smaller pots of money under £50,000 and who only need personal accounts, the most straightforward approach is to research online to find the accounts paying the highest rate of interest. Each month, our blog releases the latest top interest bearing accounts so you can use this as a starting point.

If your circumstances are more complex or you don't have the time, resources or willpower to do your own research then your financial adviser will be able to carry out the research on your behalf while taking account FSCS protection limits and the financial strength of the bank looking after your money. You will then need to apply to the banks directly to set up the accounts. Each year, you will need to renew any accounts that have matured. This is particularly useful for those who need to set up cash and savings accounts within their pension, ISA, business, trust or charity as information about these accounts is not as readily available online.

It is clear setting up new bank accounts and moving your savings each year is rather inconvenient and probably the main reason why so few do so. Fortunately, there are now solutions available to tackle with this inertia.

For those who prefer a completely hands off approach of managing their cash or where there is a significant amount of cash that needs to be spread over several accounts to maintain FSCS protection, cash platforms are available. A Cash Platform provider can set up, manage and renew maturing accounts on an ongoing basis, on your behalf. Only one application form is required at outset and once setup, your cash will be automatically moved into the highest paying accounts each year. The provider will charge a small proportionate fee for the service.

This is a series that looks at how you can manage your cash effectively. You can find the full article here https://www.domusfinancial.co.uk/single-post/mind-the-gap

The value of pensions and investments and the income they produce can fall as well as rise and you may get back less than you invested.

If you're looking for the top savings accounts, you can earn over 5% on an easy access account which gives you freedom with withdrawals, or nearly 6% if you're prepared to fix for a year.

More Information below on this months top savings accounts -

https://domusfinancial.co.uk/single-post/decembers-top-savings-accounts

We've created a Choosing a Care Provider Fact Sheet which is a brief summary of the options and help available to those looking for a care provider.

https://www.domusfinancial.co.uk/copy-of-who-we-are

Mind the Gap

A series on how to manage your cash effectively

Chapter 2 – The 6 principles of managing your cash effectively?

We feel our approach to cash differentiates us to most other financial advisers. We understand the important role cash plays in a wider portfolio and appreciate that not everyone needs nor wants to be fully invested in the markets. This is our starting point and has helped us in developing clear and simple strategies for our clients to deploy.

To take control of your cash and maximise its value, you must follow these simple principles:

1. Have a plan – and understand what you want and need from your cash and savings.
2. Do not be over loyal – and research the entire market to maximise your rates of return.
3. Protect your capital – Banks and Building Societies can go bust and you can lose your money. Do not leave this to chance and ensure you stay within FSCS limits and checking the financial strength of the banks you are using.
4. Meet your short-term needs – and only retain the amount you need available to use over the next 12 months on Instant Access.
5. Save for the longer term – by building a portfolio of Fixed Term accounts, spread up to five years, with the balance.
6. Make a financial decision every year - Interest rates change and become dormant. Ensure you review your accounts every 12 months, just like you do with your home insurance, your energy bills, your car insurance etc. With an account maturing each year, you will never be more than 12 months away form a new tranche of capital.

This is a series that looks at how you can manage your cash effectively. You can find the full article here https://www.domusfinancial.co.uk/single-post/mind-the-gap.

We've created a care guide which is designed to give you all the important information you will need when thinking about finding the right care for yourself or a loved one.

Please find our care guide in the insights & Resources section of our website - https://www.domusfinancial.co.uk/copy-of-who-we-are

Savings rates have remained strong this month despite the base rate being held and the best easy-access ISA even increased to 4.90%.

More information below on this months top savings accounts..

https://www.domusfinancial.co.uk/single-post/this-months-s-top-savings-accounts

The UK is now the most difficult place in the developed world to find a home according to a report by the Home Builders Federation.

Out of 38 nations that were reviewed through the Organisation for Economic Co-operation and Development (OECD), the UK has the lowest rate of available properties, these are in worse condition than most other nations and it is some of the oldest housing stock in the developed world.

In terms of age, only 7% of British homes built are after 2001 which compares to other countries such as Spain (18.5%) and Portugal (16%). In terms of cost, we spend more than 40% of our post-tax income on housing - more than anywhere else in Europe.

Homeownership in the UK has now fallen from 71% to 65% from 2004 to 2021, whereas during the same period homeownership grew in France by 10% and in the Netherlands by 15%.

There are lots of tested theories and policies that can be implemented to help towards resolving some of the issues highlighted, a common solution everyone agrees with is more housing stock is needed. Nevertheless, we remain a long way off delivering the government target of 300,000 new homes per year with only 233,000 new homes completed in 2021-22 and delivery in 2023 down by 10%.

Are you worried about what your mortgage payments will be when your fixed rate ends? Don't forget about the Mortgage Charter.

A government scheme which a number of lenders have signed up to which offers flexible, short-term support for those who are facing difficulties paying their mortgage amongst the cost of living crisis and increasing interest rates. In summary, you may be able to:

1. Receive help & guidance from your lender without an impact on your credit file
2. Switch to a new mortgage rate without an affordability check.
3. Switch to a new mortgage rate up to six months ahead of the end of your fixed rate
4. You wil not be forced to leave your home within a year of missing your first mortgage payment without your consent unless in exceptional circumstances.
5. Switch to interest-only payments for six months or extend your mortgage term to reduce your monthly mortgage payments.
6. Reapply to a lower rate if the rates reduce before your fixed rate ends.

Some of these measures have been offered as standard by lenders for many years, however the Mortgage Charter helps to reiterate these.

You can find more information about the scheme and which lenders have signed up to this on the government website. https://www.gov.uk/government/publications/mortgage-charter/mortgage-charter

Your home may be repossessed if you do not keep up repayments on your mortgage.

Mortgage Charter We’d like to set additional cookies to understand how you use GOV.UK, remember your settings and improve government services.

A study by deVere group shows the majority of brits, 54% in fact are uncertain about the amount the capital they should save for a comfortable retirement. Probably more worrying is 43% are not consistently contributing to a pension offered by their employer.

More of us are living longer but this involves spending more. We must appreciate that we will be retired for 30-40 years, if not more and this is why planning for your retirement as early as possible is so important.