Reckless Caution

Generally, saving in cash is less lucrative in the long-term than some other forms of investment.

That is the BBC’s assessment, not ours — but do not just take their word for it either. As independent financial planners in Preston, we would tell you the same thing.

Steve Webb, the former Pensions Minister, has described the problem as “reckless caution”: people holding far too much of their long-term money in cash and missing out considerably as a result.

It is an unusually good phrase, because caution is exactly what it feels like at the time. Nobody moves money into a deposit account thinking they are taking a risk. But over ten, twenty or thirty years, inflation quietly does its work and the money that felt safest turns out to have bought the least.

What we would actually discuss with you

We will talk through investing pension or ISA money across a diversified portfolio of funds, chosen to match the level of risk you are both willing and able to take. In practice, the conversations tend to be about one of two things:

• Moving money from a Cash ISA to a Stocks and Shares ISA, where the timescale justifies it.
• Choosing a more appropriate fund within an existing or new pension — something a great many people have never reviewed since the day the plan was set up.

Neither is right for everybody. Money you may need in the next few years generally belongs in cash and if you would not be able to sleep through a market fall then a lower-risk approach is the correct one for you regardless of what the arithmetic says.

The point about time

The argument for investing rests almost entirely on how long you have. Over a year or two, cash is very often the sensible answer. Over twenty, the picture reverses — which is precisely why pension money, the longest-dated money most people own, is the money most worth reviewing.