Welcome to week two! There’s just as much going on in the world of personal finance, from government crackdowns to more pensions drama, and we’ve been all over it. Here’s the latest.

Top Stories

POT LUCK FOR PENSIONS: 93% of popular pensions not meeting performance benchmarks

Our research found 93% of funds in the most popular fund category, Global Equities Pensions, failed to match basic industry performance standards, while 55% of all default funds underperformed against the FTSE All-Share Index.

Many of the biggest pension providers – some of which recently signed up to a new agreement to invest more in the UK and private markets – have underperforming default funds, including Nest, The People’s Pension, Aviva and Legal & General.

✔️The good news: The government is cracking down on pension returns. In other good news, you can check your own pension funds’ performance with our handy tool(!).

❌The bad news: Reforms are dragging and returns are still poor.

💡The takeaway: Pension returns have been lacklustre for a long time…but the government is finally taking this seriously, so hopefully funds’ performance will be forced to improve.

THE POINT OF NO RETURNS: Most investors hold 75% in cash

A recent survey by the FCA found 61% of people with more than £10,000 held at least three-quarters in cash rather than investments… and one third of people didn’t have £10,000 in their pension savings. Yikes!

✔️The good news: The FCA is also getting serious about getting us better returns – it’s working with finance firms to introduce ‘targeted support’, AKA free guidance on your investments.

❌ The bad news: Actually getting most savers to engage with their investments is still an uphill battle, and we don’t know if targeted support will actually work.

💡The takeaway: If this is you – don’t hold so much in cash! It’s a great idea to keep some cash aside, but the returns on investments have historically hugely outperformed money sitting in cash, so you are actually losing out by doing this.

Five-Minute Market Fix

The FTSE 100 hit a seven-year high this week after Sir Keir Starmer struck the biggest UK-EU deal since Brexit, but have fallen slightly on the back of rising inflation in April.

European shares are also down slightly on the back of inflation data, US tax talks and tensions in the Middle East. 

Regulator / Government Latest 

BUY NOW, PAY LATER CRACKDOWN: Sector to FINALLY be regulated

The government has finally laid out its confirmed plans for regulating the buy now, pay later sector. It’s only been five years in the works…

🤓In a nutshell: Basically, regulation means that the BNPL sector (Klarna, ClearPay etc) will have to follow the same rules as other finance companies when it comes to transparency, due diligence and customer service. 

Crucially, it will open up the right to complain to the Financial Ombudsman Service about BNPL firms/products and potentially get compensation if you were lent money you couldn’t afford or are treated poorly.

BUT: Unfortunately, it WON’T cover e-commerce firms like Amazon launching their own BNPL products, which, obviously, kind of undermines the point. Our advice? If you have to use BNPL in future, stick to regulated firms so you’ll be protected if something goes wrong. 

Chart That Made Us Look Twice

Source: Morningstar

While things have been going a bit south in the US, other markets have been doing surprisingly well. 

Morningstar data this week shows European stocks, Latin America, and real estate investment trusts (REITS) – all areas that have somewhat underperformed over the past few years – have thrived so far this year. 

Wait, what are REITS? Companies that own or operate income-producing real estate. Historically pretty underloved by investors. They let you invest in property like you would in a stock, without the hassle of being a landlord.

Platform Watch 👀

SPOILER: Watch out for transfer fees! 

Before you take up a switching offer from a platform, check to see what both your existing provider and the new firm would charge you to transfer out – it could override the benefit of switching.

Insider Edge: What Smart Money Is Watching

You could turn your child benefit into £45,000 by the time your child reaches 18 with a simple trick. Investing the £1,331 you currently get a year for your first child into a Junior ISA earning an average return of 7% per year would give you £21,300 in growth, just from compounding returns! Watch us explain this in more detail here.

Rate Of The Week 💵

Principality Building Society is paying 7.5% AER (fixed for six months) on its regular saver. 

The catches: The monthly deposit limit is £200, you can’t make any withdrawals during the term, and early closure is permitted. The account also isn’t tax-free, but would be ideal for anyone who has already used up their ISA allowance & wants high returns over a short period. T&Cs here.

Your Questions Answered

We’re keen to answer any and all of your burning finance questions – drop us a message to info@teamnda.co.uk and we may feature your query with our response in our next newsletter.

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