Investing Insiders Weekly #3

Top Stories

PUSHY ABOUT PENSIONS: Government could enforce where pensions are invested

The government has published its final Pensions Investment Review. TL;DR: It will keep a back-stop option to mandate where pension schemes have to invest if they don’t play by the rules.

A few weeks ago, 17 of the biggest pension providers agreed to commit to invest 5% in the UK, 10% in private markets. It is so far ‘voluntary’, but the government has now revealed it’s going to check where they are investing – and set targets if firms aren’t meeting them.

The actual wording is: “The Pension Schemes Bill will include a reserve power which would, if necessary, enable the government to set quantitative baseline targets for pension schemes to invest in a broader range of private assets, including in the UK, for the benefit of savers and for the economy.”

Hmmmm. Sounds like government interfering to us. And if that’s the case, are our pension managers still working solely in savers’ best interests? The government and those pension providers who have already signed up to this accord still have questions to answer.

UK GOES DOWN UNDER: Australian-style ‘megafunds’ will become commonplace

The government is also planning to create pensions ‘megafunds’ in a similar style to Australian superfunds, with a minimum size of £25billion. Major providers will have to have at least one default pension fund operating at this kind of level by 2030 – and they will be able to combine old, underperforming schemes into ‘megafunds’ without savers’ consent.

✔️The good news: The review has a strong focus on driving better outcomes for savers. Megafunds should benefit savers, as larger pools of money allow investing at scale, which in theory drives better returns – Australian superfunds have returned an average of 8% annually over the past 32 years. It’s good that underperforming funds will be consolidated without having to get consent, as this can slow down a process that is in the best interests of savers.

❌The bad news: It seems that the government is going to be a lot more involved in where schemes are investing, but it’s not 100% clear whether that’s really for the benefit of savers, or the economy.

💡The takeaway: Now is as good a time as any to take an interest in your pension. Track down all of your pots (you likely have a different pension for every job you’ve worked) and check your investments – make sure you’re not in an underperforming default fund.

BAG THE BENEFITS: Time to extend your child benefit

Child benefit automatically stops in the August after your child turns 16. But, if your child is staying in full-time education or approved training, you can extend your claim and keep getting the payments, worth £1,354 a year for the first child. Watch our video on this here.

✔️The good news: If your child is sticking with education, such as to complete A-levels, you can keep getting child benefit as normal. This also applies if your child is going into certain training schemes, such as Foundation Apprenticeships in Wales. Check the full list here.

❌The bad news: Certain types of education and certain shemes don’t qualify, such as university degrees, BTEC Higher National Certificates (also known as advanced courses) and paid apprenticeships.

💡The takeaway: It’s 100% worth checking whether you could keep getting payments for your child, as you get thousands of pounds extra. You can apply to extend your claim here via your Government Gateway account – but you need to do so by 31st August after your child’s 16th birthday.

One Minute Market Fix

Stock markets around the world have rallied after a US court ruled that Donald Trump’s trade tariffs are illegal, throwing his trade policies into chaos.

The US president now has 10 days and counting to cancel his tariffs, which have caused worldwide chaos over the past few months.

Germany’s DAX index has hit another record high this week and surged again following the news, rising by 0.8%, while the Stoxx Europe 600 (which covers most of Europe) rose 0.5%. In the US, the S&P 500 futures are up 1.5%.

The FTSE 100 has risen slightly this week, but didn’t rally as much, partly as the UK already secured a trade deal with Trump earlier this month.

Regulator / Government Latest 

CRYPTO CASH OUT: Crypto funds must refund customers in cash

New FCA plans focus on ensuring crypto investments are easily accessible and held securely.

🤓In a nutshell: Crypto firms will have to allow investors to redeem their tokens for cash whenever they want, and must hold assets in a third-party trust. So, if you invest in certain cryptoassets and stablecoins, you will be able to get your investment back at any time.

Chart That Made Us Look Twice

Investors are FLEEING bonds in the aftermath of the US’s so-called “Liberation Day”.

Source: Citywire and Morningstar

Outflows from bond funds in April were the second-highest on record. A chart from Citywire this week shows the extend of outflows from various fixed income asset classes after the US introduced sweeping tariffs on countries around the world.

Wait, what’s ‘fixed income’? Bonds are part of an asset class known as “fixed income”, which tends to do well in an environment where interest rates are falling.

Why is everyone ditching it, then? The tariffs have made the future for inflation and interest rates a bit foggy, which is putting investors off bonds.

Platform Watch 👀

SPOILER: Free up-front cash can come at a cost.

Everyone wants free cash… but would you still want it if it would cost you more long term?

Before jumping on a ‘cash incentive’ offer, check the charges and interest rates to make sure you’re still getting a good deal.

Freetrade, for example, offers 1% cash back for transferring your pension (up to £2,000), while Charles Stanley offers up to £1,500 cash back for transferring your investments to Charles Stanley Direct.

Insider Edge: What Smart Money Is Watching

With so much going on with pensions, right now could be a great time to make sure you’re not missing out.

So many people make a massive mistake when they start their first job that could cost them tens of thousands of pounds in savings later in life, and that’s opting out of their workplace pensions.

It might seem tempting to save yourself a bit of extra cash each month – but opting out means someone on the average starting salary will miss out on £62 of free money every month. That’s because if you pay into your pension, your employer also has to pay in for you – literally free cash.

That money is then invested and grows over time. You can use our workplace pension checker to track how much your pension fund has performed over time, and how much you could earn by investing.

Rate Of The Week 💵

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

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.