The Times - UK (2020-09-05)

62 1GM Saturday September 5 2020 | the times

Money

Not everyone’s risk

tolerance fits into

fixed categories

and as life goes on

your circumstances

tend to get more

complicated

Extra pension wait for fortysomethings

M

illions of savers will have to

wait two more years for their

personal pensions after the

government said that it would raise the

age barrier.

Workers will have to wait until they

are 57 to access their savings from de-

fined contribution pensions, up from

55, the Treasury said on Thursday. The

change will come into effect in 2028.

The announcement will most frus-

trate the pension planning of 860,000

savers now aged between 46 and 48,

who may have planned to access their

pots in 2028, but will now have to wait.

In a ministerial statement John Glen,

economic secretary to the Treasury,

said the change was mooted six years

ago. “That announcement set out the

timetable well in advance to enable

people to make financial plans and will

be legislated for in due course,” he said.

Steven Cameron, pensions director

at Aegon, said: “It’s now imperative that

both government and industry make

sure this change is clear to all those

saving in pensions. We can’t afford a

repeat of the government communica-

tion gaps which left many women to

find out too late that their state pension

age was increasing from 60 to 65.”

David Byers

Savers of Geri Halliwell’s age

will be the first to be affected

Why you should let robots

T

ime is precious for families

juggling jobs, childcare, run-

ning a home and countless

other things on the never-

ending to-do list.

That’s why more people are signing

up to services that automate our finan-

ces — and why more are appearing. It is

possible for companies to switch your

energy tariff, buy and sell investments

and top up your savings account on

your behalf, all while you get on with

your day job.

Can you trust the robots to do a good

job? We take a look at what’s on offer.

0 Energy

More than six out of ten energy cus-

tomers fail to check that they are on

their supplier’s best deal, according to

Energy Helpline, a price comparison

website. Auto-switching services such

as Look After My Bills, Flipper, Weflip,

Migrate and Labrador promise to do

the hard work for you.

The sites make monthly checks and

switch you to the gas and electricity

tariff they judge to be the best value.

Most look for a minimum saving of

£50 a year to trigger a switch. Last year

about 300,000 people used these ser-

vices. According to Look After My Bills,

about 9.5 million households pay a

standard variable tariff from a big

energy provider. These are typically the

most expensive kind of deal; fixed tar-

iffs revert to them once they expire. The

company says that six out of ten of its

new members were on these tariffs

when they signed up, and in the first

half of the year saved an average of

£280 by adopting a fixed rate.

However, autoswitching sites are not

without flaws, it would seem. A Citizens

Advice report in March said that such

sites, which are not regulated, were fail-

ing to do proper comparisons.

Without naming names, it said that

some autoswitchers were comparing

tariffs from fewer than 15 out of about

70 possible energy suppliers. As a result

some customers were paying £70 a year

more than if they had searched and

switched themselves.

James Daley from Fairer Finance, a

consumer group, said: “Autoswitching

sites are a great innovation. People

are sick of having to constantly shop

around and switch to get the best deals.

But these sites need to be trustworthy,

and some are unlikely to get you the

very best deal. Regulation of these

switching sites needs looking at. Even

with the fee-charging platforms, it’s

not hard to see how they could take

advantage of their customers.”

0 Savings

Automated savings plans are offered by

money apps that use algorithms to ana-

lyse your spending habits. Savings apps

such as Chip, Tandem, Moneybox and

Plum work out how much money you

can afford to squirrel away — and make

the transfer on your behalf.

Plum analyses your daily spend and

transfers small amounts into a savings

account about five times a month. You

can choose between six settings to

guide the app on how much to save. It is

a good way to get into a savings habit,

although some app accounts do not pay

the best interest rates. Plum’s easy

access account, for example, pays just

0.6 per cent. Some pay nothing at all.

You can authorise the robots behind

some of the apps to round up the

spare change from your debit card

transactions and stash away the differ-

ence. For instance, if your coffee costs

£2.20, 80p is automatically transferred

to a nominated savings account.

Some of the high street banks are

on board too. Lloyds Banking Group

(Lloyds, Halifax and Bank of Scotland)

offers a similar Save the Change ser-

vice. Nationwide customers can do the

same using its Impulse Saver.

If it is better rates you are looking

for, the cash savings platforms Octopus

Cash, Raisin, Flagstone and Har-

greaves Lansdown Active Savings give

you automatic access to a range of

accounts with banks. Once registered

with Octopus Cash, for example, you

can switch between seven partner

banks, which means you do not need to

spend time filling in forms to open an

account with a new company; you

can do it with a few clicks online.

These platforms are typically for

large cash savings.

0 Investments

Would you trust an algorithm to

look after your investments? Hun-

dreds of thousands of investors do,

using robo-advisers. These are invest-

ment platforms that provide algorithm-

based services to automate parts of the

investment process. Technology is used

to reduce the complexity and lower the

costs often associated with investing.

Robo-advisers claim to provide a

low-cost, flexible and efficient alter-

native to the traditional wealth man-

agement industry. Among the

names to know are Nutmeg and

Wealthify.

You will usually be asked 10 or

15 simple questions, after which

you are shown a suitable basket of

investments. Once you agree, the

platform manages these invest-

ments for you. Charges tend to be no

more than 1 per cent and can be as low

as 0.6 per cent.

Nutmeg is the biggest of the robo-

advisers, with more than £2 billion of

investors’ savings in its coffers. Inves-

tors choose from ten fully managed

(by a team of human managers) port-

folios or five unmanaged ones (updat-

ed by algorithms) and charges are

up to 1 per cent or 0.68 per cent for

unmanaged.

Nutmeg requires a minimum

£500 deposit for an Isa, pension or

investment account. If you have

one of these accounts already, you

can open a general investment

account with just £1.

Wealthify offers five risk categories

and will let you start investing from just

£1. It charges 0.6 per cent.

The downside of robo-advice is that

it is a very broad approach. Not every-

one’s risk tolerance fits into fixed cate-

gories and, as life goes on, financial

circumstances tend to get far more

complicated. During difficult times, a

robo-adviser would be unlikely to rival

the decisions made by a seasoned

investor or adviser.

Some of the savings apps, including

Plum, will automatically invest your

savings, but your choice of funds is usu-

ally very limited.

0 Pensions

If you are approaching retirement,

there’s a good chance that a robot has

already taken control of how your pen-

sion is being invested.

Lifestyling is an investment strategy

that provides automatic switching of

Dozens of apps and

websites are promising

to save you time and

cash. Holly Thomas

looks at which ones

could be worth trying

£2bn

of savings

managed by the

robo-adviser

Nutmeg

9.5m

households on the

priciest energy tariff

£674m

lost each year

by drivers

auto-renewing their

car insurance