Monthly Archives

February 2021

Red mug with post its on reading Retirement Plan and Pension

Why every personal pension needs an annual check-up

By | Pensions

It doesn’t matter the size of your pension pot, it’s important to review your personal pension on a regular basis, to ensure everything is still on track to give you a retirement to look forward to.


There’s no hiding from the fact that pensions are uninteresting. Not only are they a guaranteed conversation killer at parties (remember those?), just thinking about pensions makes you feel older than your years. It doesn’t help that the pensions industry as a whole has made dealing with pensions unnecessarily complicated. People are put off by the technical jargon, and find dealing with the whole world of pensions a bit overwhelming.


So, it’s very easy to understand why even the most financially-aware people still view looking after their pensions as an unwelcome chore. It’s far easier to pay them minimal attention, and to simply let them chunter on in the background of our lives, isn’t it?


The problem is that for most people, their personal pension is the biggest financial investment of their lifetime, second perhaps only to their home in terms of the amount put in and the value it should accumulate. At FAS, we’ve been advising people on their pension arrangements for 30 years. Throughout this time, we’ve been reminding people that it’s not enough just to start a pension and then ignore it – just as you wouldn’t buy a house and then refuse to maintain it. You need to give your pension attention, and make careful adjustments every now and then. In other words, if you look after your pension, your pension will look after you.


Why is it important to regularly review any existing pension plans?

When clients ask us to review their existing pension arrangements for the first time, it can sometimes be quite an eye-opener, for them and us. That’s because of three reasons. First, the sheer number of different investment options available within a pension has increased dramatically in the last couple of decades. Second, how you choose to take your pension benefits has changed, and third, the pensions industry itself has become more sophisticated, more transparent, and far more competitive, meaning that pension management charges are fairer and conspicuously lower.


Are you paying the price for staying put?

Often these older pensions are invested in ‘balanced’ or ‘mixed asset’ portfolios that simply haven’t kept up with more modern investment strategies or techniques and therefore aren’t optimised to suit your individual needs and attitudes towards investing. Alternatively, you could be saving into a pension that is performing reasonably well, but where the fees being charged are taking a large bite out of your gains.

As with many products in modern day life, it sometimes feels as if you get penalised for being a loyal and long-standing customer. People in their 20s or 30s are most likely to be benefitting from paying into a pension that has low annual management fees (around the 0.5% mark), whereas people in their 40s, 50s, and 60s stand a greater chance of paying higher pension charges on older, less competitive products. Some of these pensions are charging closer to 2.0% annually. That might not sound like much, but those percentage points can add up to several thousands of pounds. And every pound paid in fees reduces the value of your overall retirement fund.

Poor returns and high fees can really act as a double whammy on a pension, eating into returns and leaving customers with a much smaller pension pot than they could have built up elsewhere. Of course, pensions companies have no incentive to lower the fees on these older, uncompetitive pensions, choosing instead to rely on the inertia from their customers.


Are new pensions always better? Not necessarily

Yet while some old-school pension providers are hoping to cling on to their customers through inertia alone, there’s more competition within the pension industry than ever before. In some respects, it has become almost too easy to transfer your pension from one provider to another. That’s why we think it’s so important to treat the new crop of online pension companies with a healthy dose of scepticism.

These online pension providers might promise a no-nonsense service that comes with low charges as standard, but this also means there’s little or no advice available on whether transferring your pension is the best thing to do. When it comes to pensions, it’s vital to remember that cheap isn’t always the best option. It’s far more important to get value for money, and to talk to a financial adviser who knows the right products to suit you.

Expert advice is particularly important when dealing with older pensions, which often come with lots of potential traps you could inadvertently step into. We can do the work to make sure you aren’t hit with costly exit penalties, or where transferring means you risk losing valuable benefits that are no longer available from today’s pension products, such as a guaranteed annuity rate. We can help to determine whether it is worth merging some or all of your older pension pots with your current one, and to find the right pension to suit your retirement plans and need for income or capital.

Final thought

Spending time to think about your pension might feel like something you want to put off indefinitely, but it really doesn’t have to take long and it could end up saving you thousands of pounds in fees and lower returns. If you think your pension would benefit from a review, the first step is to get in touch and book an initial telephone pension consultation with one of our pension experts. Let us do the hard work, because helping sort out pensions is something we love to help our clients with (even if we usually don’t talk about it at parties).


If you are interested in discussing your current pension arrangements with one of our experienced financial planners at FAS, please get in touch here.

This content is for information purposes only. It does not constitute investment advice or financial advice.

Red and yellow paint being mixed with a paintbrush

Passive funds or active funds? Here’s why you need a blend of both

By | Investments

Active fund managers outshone passive equivalents during 2020. Here, we look at the pros and cons of active and passive investing and explain why a well-diversified investment portfolio should contain elements of both.


The reputation of the active fund management industry has taken a bit of a pasting in recent years, although active fund managers fought back strongly in 2020. According to research carried out by Quilter, active funds outperformed their respective markets in seven out of the ten major investment sectors, including the UK Smaller Companies and UK All Companies sectors, as well as the indices for Japan, Emerging Market Equities and Global Equities.


What are ‘active funds’?

As a quick reminder, ‘active fund management’ is when a fund manager, or a fund management team, is in control over the investment and takes responsibility for the performance of the portfolio overall. Active funds usually aim to outperform a benchmark such as the FTSE All Share Index and will build a portfolio comprising those companies it thinks are worth holding.

Active fund management is all about decision-making. We are talking about real human beings, making real-time investment assessments, and changing their portfolios accordingly. Active fund management, as the name suggests, is a full-time, 24-7 job. And it is expensive, with all those costs reflected in the charges that investors can expect to pay in management fees. Therefore, it comes as no surprise that active fund managers face heavy criticism when they fail to outperform their benchmarks. Because even with the best available fund managers, there is no guarantee that the fund itself will deliver a better return.


And what about ‘passive funds’?

As the name also suggests, a passive fund does not have a decision-maker at the helm. Instead, passive funds usually aim to match the performance of an index or a particular sector of the market. The most common types of passive funds are index trackers or exchange traded funds (ETFs). In the case of a FTSE All Share tracker, for example, the fund will hold shares in every single company listed in that index, and its performance will fall or rise in line with the entire market.

Because there are no fund manager salaries to pay, and no research or trading expenses, it means that passives are much cheaper to invest in over the long term. Furthermore, you are achieving the same level of performance as the index, which is great news when markets are in positive territory, but less welcome when markets are experiencing periods of heavy volatility.


Active managers responded well to coronavirus

That is precisely what happened in 2020. In the early weeks of the coronavirus pandemic, stock markets across the world fell dramatically, as the potential implications of extended lockdown started to be felt. But over the course of the year, it soon became clear that the pandemic would lead to some companies emerging as ‘winners’ and other less-fortunate companies would be ‘losers’. This resulted in a sharp recovery in equity markets, with tech companies doing particularly well.

Successful active managers were able to react to the stock market falls and move their portfolios away from owning those stocks less likely to do well during lockdown, and at the same time increase their investments in those companies capable of making big profits – in some instances buying them up at bargain prices. Passive funds, on the other hand, had no such opportunity. In a market sell-off, passive funds will simply follow the market lower, unable to get rid of those unfortunate ‘losers’ that are dragging overall returns down.


So, which is better?

Of course, one poor year doesn’t make passive funds a bad investment, just as one good year doesn’t necessarily mean you should only own active funds from now on. At FAS, we believe well-diversified investment portfolios should feature a blend of both active and passive funds. But it’s important to look for those funds that offer value for money.

For example, passive investments offer the potential for better returns when shares are generally moving together in the same direction. So, they can be used as a cost-effective way to gain broad investment exposure to particular markets, acting as essential long-term building blocks in a portfolio.

However, sometimes the stock-picking skills of an experienced and well-researched fund manager can give the fund a definite edge over its competitors – helping to generate valuable risk-adjusted returns. Plus, the ability for these fund managers to adapt to changing events and swiftly ‘change course’ can prove invaluable during periods of market turbulence. In these instances, additional returns achieved by the best fund managers can more than justify the fees they charge.



Low-cost investments might seem like a sensible choice, but good investments are usually worth paying that bit extra for. The good news is that you do not need to make a choice between active or passive funds, and we can help you to decide on the best way to capture the benefits of both within your portfolio.

If you think now might be a good time to review your investment holdings, and to take a more ‘blended’ approach, please get in touch with one of our advisers who’d be happy to discuss some investment options with you.


If you are interested in discussing your investment portfolio with one of our experienced financial planners at FAS, please get in touch here.


This content is for information purposes only. It does not constitute investment advice or financial advice.

Piggy bank looking at timer running out

Time to switch your Cash ISA into a Stocks and Shares ISA?

By | Savings

The rate of interest paid by Cash ISAs has been dismal for the last decade. If you’re disappointed with the return you get on your Cash ISA, perhaps it’s time to transfer into a Stocks and Shares ISA instead?


The humble ISA (Individual Savings Account) was launched back in 1999, as a way for anyone over the age of 18 to save, without paying tax on interest earned or income and capital gains from the growth of the investment. The ISA concept has proven so popular that new versions have been introduced, including Junior ISAs, Innovative Finance ISAs, and Lifetime ISAs. As a reminder, you can save or invest up to £20,000 in a Cash ISA or Stocks & Shares ISA every tax year (the current 2020/21 tax year closes on 5 April and the 2021/2022 tax year begins on 6 April).

It’s easy to understand why Cash ISAs are so popular with UK savers. For starters, they are easy to set up. And there’s no lock-in period, meaning you can access your cash almost instantly when you need to. Another important feature is that Cash ISAs worth up to £85,000 are protected by the Financial Services Compensation Scheme.


No signs of savers losing interest in ISAs

There’s no sign that this popularity is waning, either. According to 2018-2019 government statistics, the number of people subscribing to Cash ISAs increased by 1.4 million from the previous tax year, while the number of Stocks and Shares ISA subscriptions fell by 450,000. In fact, more than three-quarters (76%) of open ISAs are Cash ISAs.

Clearly, most people prefer to hold cash than take bigger risks with their money. While investing in stocks and shares offers the potential for higher returns, people are often put off by the risk that they could lose all their money, and stock market volatility over the past two decades has underlined this concern. Back in 2000, the split between people opening new Cash ISAs and new Stocks and Shares ISAs was roughly 50/50, but since then, the number of people opening Stocks and Shares ISAs has fallen substantially.


The hidden cost of saving into Cash ISAs

People don’t like losing money, which means they are prepared to accept lower returns in exchange for the reassurance that their money is ‘safer’ left in cash. But the painful truth is that for the last decade, the majority of people who hold Cash ISAs have been losing money year-in, year out.

Last year, research from ‘Which?’ revealed that out of the 10 biggest ISA providers, six were paying just 0.01% AER (annual equivalent rate) on their instant access ISAs. The list included Bank of Scotland, Halifax, Nationwide, NatWest, RBS, and Santander. This means a large proportion of UK savers are earning just 10p for every £1,000 saved over the course of a year. With Cash ISA savers earning such a low rate of interest on their money, they’re not even benefitting from their ISA’s tax-free status. The Personal Savings Allowance introduced back in 2016 allows basic rate taxpayers to earn £1,000 of interest from ordinary savings accounts each year without paying tax. For higher rate taxpayers, the interest limit is £500.


Another hit to the pockets of Cash ISA savers

Even those Cash ISAs paying a higher rate of interest are still losing money for their owners. Inflation measures the rise in the cost of living. Or, in other words, it tells you whether the pound in your pocket (or Cash ISA) is worth more or less than it was previously. In the UK, the Consumer Prices Index recorded the 12-month inflation rate at 0.6% in November 2020.

If you’re saving money, you want the future value of that money to grow. But if the savings in your Cash ISA are not keeping up with the rising cost of living, and are growing by less than the rate of inflation (0.6%), the value of your cash savings is effectively shrinking. We think it’s time that Cash ISA holders asked themselves whether it’s time to say “enough’s enough”, and put away their fears of investing in the stock market.


Take another look at Stocks and Shares ISAs

Whether you decide to call “time” on your Cash ISA really depends on what you plan to do with your ISA pot, and when you need it. If you expect to withdraw your ISA savings within six months or a year, then investing might not be the best option. Stocks and shares are best considered as long-term investments that you are prepared to hold onto for years. This way, your money stands a better chance of overcoming any short-term periods when markets are not doing so well. Shares tend to yield more impressive inflation-beating returns over the long-term.


Helping you to make investment decisions

Investing in stocks and shares doesn’t have to be intimidating. At FAS, we have a dedicated specialist investment team that can make sure your Stocks and Shares ISA matches your own personal attitude towards risk, and that your money is invested with your personal needs and objectives in mind. This means helping you to use your annual ISA allowance most effectively, as well as building a Stocks and Shares ISA managed in a way that you feel most comfortable with. Our team will also regularly review your portfolio to make sure your investments remain on track.


How to transfer your existing ISAs

Under current ISA rules, you can transfer your savings into the same or a different type of ISA without losing any of the tax benefits you have already accrued, and arranging a transfer doesn’t affect your annual tax-free ISA allowance of £20,000. So, it’s no problem to transfer your savings from your Cash ISAs into a stocks and shares version.

But don’t just withdraw the money in your Cash ISA, because if you do, you’ll lose the tax benefits. Instead, you need to contact your current ISA provider (or providers) to request an ISA transfer, or we can arrange to do that for you, as well as finding the Stocks and Shares ISA provider that best suits your investment needs. ISA transfers should take no more than 30 working days.

Cash ISAs used to be a great way to save for the future, but money only grows if you put it to work. Nothing ventured nothing gained, as they say. The good news is that you don’t have to settle for earning next to nothing on your savings – there are plenty of ISA options available that offer the potential for higher returns, while still keeping all of the tax benefits already gained.


If you are interested in discussing your ISA or investment strategy with one of our experienced financial planners at FAS, please get in touch here.


This content is for information purposes only. It does not constitute investment advice or financial advice.

Man and woman in hard hats pointing towards wind turbines

Building back better: why everyone’s talking about infrastructure investing

By | Investments

With countries all over the world determined to recover from the pandemic, infrastructure looks likely to be a prominent investment theme over the next few years. We look at some of the biggest areas of infrastructure investing and assess the positives and negatives for investors.


The building of bridges, railways, and motorways are all examples of high-profile infrastructure developments, while schools, prisons, and hospitals are all just as essential to a functioning society, and the demand for infrastructure spending may well increase as a result of Coronavirus. Governments in developed markets, including the UK and the US, have promised to “build back better”, and see infrastructure projects as a way to create more jobs and boost long-term economic growth. As a result of this, we can expect more announcements of projects that move away from ‘traditional’ concepts of infrastructure, and towards next-generation projects, such as smart motorways and intercity transit, 5G base stations and renewable energy installations, and electric vehicle charging points.


Infrastructure as an investment

It’s no surprise then, that there has been growing interest from investors who see infrastructure as an excellent long-term investment opportunity. But there are other benefits too. Just like property, infrastructure is a tangible asset to hold, which makes it altogether easier to understand, and therefore easier to invest in.

It is also worth noting that the infrastructure sector has also proven to be a reliable source of investment returns. Again, the tangible nature of infrastructure means it can provide investors with a predictable and regular stream of cashflows over several years – often linked to inflation. And, because infrastructure projects are backed by government public sector spending, the project risk is usually shared.

Investments that offer a reliable repeatable cashflow are very appealing, but many investors are only starting to recognise the role that infrastructure investments could play as part of a diversified mix of portfolio investments.

Within the investment universe, infrastructure is considered as part of the ‘alternatives’ sector, sitting alongside property investment, renewable energy, bonds, debt, and specialist finance, as well as the less accessible but well-established areas of private equity and hedge funds. All of these are considered ‘alternative’, as they are expected to produce returns with very little in common with the returns available from equity investments. Because of this, a ‘diversified’ portfolio is likely to feature an allocation towards alternatives that aim to achieve returns in periods when equity markets perform less strongly.


A move away from traditional investments

Alternatives have surged in popularity as more investors (of all shapes and sizes) have grown frustrated with the old-fashioned ‘balanced’ model of investing, where the belief is that holding both higher return/higher-risk equities and lower return/lower-risk investments in bonds effectively gives investors lower volatility and smoother returns throughout the investment journey – regardless of any stock market ups and downs.

The biggest problem with that approach is that with government bond yields stuck at historic lows, bonds are offering little or no return for investors, and are therefore not really justifying their place within portfolios. So, at a time when we are all questioning the old ways of doing things, it might be time to rethink those traditional labels of ‘mainstream’ and ‘alternatives’. Infrastructure could then be viewed as overtaking bonds as an asset class capable of providing useful portfolio diversification – with little correlation to riskier equities, but capable of providing inflation-linked returns and a steady stream of positive income.


Infrastructure trends to think about

So, if you are considering investing in infrastructure, are there any specific areas worth focusing on? You might want to start with infrastructure investments that focus on renewable energy. Back in 2015, 193 countries signed up to the United Nations General Assembly’s Sustainable Development Goals (SDGs). If governments across the globe are serious about achieving some or all of these goals, they will need to implement infrastructure spending covering areas such as solar and wind projects designed to help accelerate the transition towards a low-carbon future.


Digital infrastructure

Another fast-growing area involves digital infrastructure. If 2020 has taught us anything, it is that people have become increasingly dependent on digital access. Working remotely, shopping through e-commerce, and spending more of our leisure time at home (and in front of our computer or TV screens) has accelerated the global demand for fibre-optic networks, telecommunication towers, and data centres.

You may think that internet activity – whether that means using emails or streaming films on Netflix – is these days mostly carried out ‘in the cloud’. But data centres are the buildings used to house computer systems, servers, and storage. These data centres and exchanges rely on a largely unseen network that requires millions of miles of fibreoptic cable, cellular base stations, towers, and countless signal transmitters. Demand for data centres and associated components has increased dramatically over the last 12 months, and this demand only looks like increasing in the future.


How to invest in infrastructure

As an asset class, infrastructure used to be the preserve of big money institutional investors. But today there is a range of different investment vehicles that offer infrastructure exposure to individual UK investors, either in the form of open-ended funds or investment trusts. Investment trusts tend to own the physical assets (such as wind turbines, data centres, or toll roads), whereas open-ended funds invest in the equities of the companies that operate in these sectors. These include the major engineering and construction firms that are contracted to plan and deliver on large infrastructure projects, as well as companies that supply the tools and equipment.

As a result, we expect the number of funds – focusing on all different aspects of infrastructure – to increase from here. But as with any type of investment, it is important to understand the structure of the investment (particularly whether it is an investment trust or an open-ended investment), where it expects returns to come from, and to determine whether the risk is appropriate for the available reward. We would also argue that now infrastructure investing is becoming more fashionable, it is even more important to choose those investments managed by companies with a good track record, who manage risks appropriately, and who do not promise returns that are too good to be true.



The coronavirus pandemic may well present an opportunity to “build back better”, and to replace old ways of living with new ones. As a result, infrastructure looks like becoming an important investment trend for years to come, and we expect it to play an increasingly prominent role within investment portfolios.


If you are interested in discussing your financial plan or investment strategy with one of our experienced financial planners at FAS, please get in touch here.


This content is for information purposes only. It does not constitute investment advice or financial advice.