Why is the FTSE 100 soaring – and can its run continue?

0:02Lee Boyce: Welcome to This Is Money podcast sponsored by Trading212. I'm Georgie Frost and joining me and Simon Lambert today is Lee Boyce. And coming up, the flying footsie is on course for the best start to the year since 1998. But what are we buying? Zooming in on Rolls-Royce, shares have soared over a thousand percent in five years. Is it too late to join the party? Also today, what do kids do with their junior Isis when they turn 18? NS &I cuts the premium bond prize rate again. We look at the government's making tax digital. Is expensive chaos on the way? And would you really save money with an EV?

0:37Lee Boyce: Don't forget you're up to date with all the latest breaking money news. Just go to thisismoney.co.uk or download the app. But first, as Simon mentioned last week with his Stat of the Week, the FTSE 100 has been on something of a tear-up this year. In fact, the London stock market is enjoying its best start to the year for nearly three decades as it closes in on the 11 ,000 mark. The gains so far this year are 8.8%. It's been helped by the Tasty20, the stocks that have all gone up over 50%. But before we get there, Simon, just a reminder, why the rise? And also, I'm curious, what happened in 1998?

1:14Simon Lambert: In 1998, something called the dot-com boom was just getting a bit of a run-up and starting to move into full swing. That was mainly a US phenomenon, but markets were riding high and doing well. The country was riding a wave of optimism in the UK, fueled by a new Labour government and Cool Britannia. This was peak Cool Britannia years. Labour were elected in 97. The economy started picking up. Largely, actually, you know, one of the things this is connected to is that the sort of early to mid-90s years had been really quite miserable economically. We'd seen the really bad recession at the start of the 90s.

2:04Simon Lambert: We had seen the housing market as well really suffered. It's actually hard for us to think about now because every time the housing market has suffered since the financial crisis, we've propped it up. But back then, we didn't prop it up in the same way. That was starting to rebound. And so you had this uptick that was going on. And sometimes you just get good years of the stock market. And sometimes it doesn't even rhyme with what's going on in the general mood in the country. If you look at last year, last year was a fantastic year for the FTSE 100. It delivered a total return of 25%. I wouldn't necessarily say last year was a fantastic mood for the economy or sentiment amongst British business or consumers.

2:46Lee Boyce: Yeah, quite. The first question?

2:49Simon Lambert: Oh, yeah, the first question. Was that?

2:52Lee Boyce: The subject of our conversation.

2:54Simon Lambert: Why is it going up?

2:56Lee Boyce: Why the rise, Simon?

2:57Simon Lambert: And long time podcast listeners are going to be hugely disappointed that I went back in time without doing the do-do-do-do-do-do-do-do-do-do-do-do-do.

3:07Lee Boyce: It's true, it's true.

3:08Simon Lambert: Build up or making a DeLorean. It's not too late, Simon. Or cracking the usual DeLorean joke. Anyway, I've got both those mentions in. So if you're playing This Is Money podcast, bingo, you can tick those two off. Right. Why is the stock market going up?

3:21Lee Boyce: Yes.

3:21Simon Lambert: This is something that we have also been talking about for some time. the reason why the uk stock market is going up is well there's a number of reasons one actually compared to the us stock market and some other markets it's pretty cheap the uk stock market has been unloved for some time the footsie 100 which is what we're talking about that's the part of the market that's been doing really really well and if you look at the uk stock market you can divide it into different chunks you've got the footsie 100 that's the 100 biggest uk listed companies by market value. Then you've got the FTSE 250, which is the next 250 down.

3:59Simon Lambert: And then you go below that and you get the rest of the FTSE all share. And then you've got the small cap indices and AIM, which is the junior market. So the broad measure of the UK stock market that's usually used is actually something called the FTSE all share. We focus a lot of attention on the FTSE 100, which is a top 100 companies. And actually, the top 100 companies make up such a big chunk of the all share that it's a reasonable read across between the two. But the FTSE 250 below it, which is what's considered the mid cap stops, the more medium sized companies, those are considered to be more domestically focused, whereas the FTSE 100 is considered to be more internationally focused, regardless of which it has been seen as old hat.

4:43Simon Lambert: Everyone's been buying into big US tech, AI, exciting stories, and they have not been buying into the old fashioned industries that the UK is seen as having in its top stock market index. So financials, banks and insurers, miners, energy companies, like, yeah, who wants that? I want Nvidia, Apple, Tesla, exciting stuff. Anyway, turns out you can have too much of a good thing. And with the Magnificent Seven and the US stock market absolutely rampaging ahead, concerns over valuation, and also taking up so much of the global stock market that the US stock market now accounts for about 70 % of some of the global stock market indices, attention has started to shift elsewhere.

5:35Simon Lambert: And attention has started to shift to better value stock markets and also interestingly to some old-fashioned companies. There is interestingly what's going on with this whole sort of next chapter of the AI story is people are now looking at real stuff and investing in real stuff, whether that's miners who are digging real stuff out of the ground, whether that is engineers like Rolls-Royce BAE who are making real stuff and be a benefiting from the defense spending boom um banks i'm not sure you can say banks make real stuff but they do lend money into the real economy um so anyway and you know it's cheap and the other element is that there's so much money that has gone into the u.s stock market and into those giant companies in the u.s stock market that it doesn't take much for when some of that starts to shift away to drive up other stock markets elsewhere.

6:39Simon Lambert: NVIDIA is worth more than the whole UK stock market. So it doesn't have to be that everybody stops buying NVIDIA, everybody stops buying Microsoft, everybody stops buying Amazon and Apple. All it needs to be is just a little bit of that money starts to get diverted elsewhere, and it can have a serious effect. and then investors start to see these things going up and they go oh that looks good that's going up and you get more attention and more interest and demand goes up and you start to see momentum building and for the first time in a really long time the footsie is looking like it it's got a bit of momentum what's happened previously is it'll have a good year and then it just completely lose momentum.

7:26Simon Lambert: It's like trying to jumpstart a faulty car. Oh, no, no, it's not working. And so on. And, you know, one of the best years the FTSE had prior to last year was when it beat the other markets, but it beat them by not falling as much. It basically was flat when the others fell. Whereas now, last year and this year, things are looking pretty good.

7:49Lee Boyce: They are indeed. And like you say, it's something we've been saying for a long time. Is this the year is this the year so could this lee be the year or is it just another little flotation

8:00Georgie Frost: i'm not too sure about that i mean the 50 100 is a massively international index uh you know when you when you look at it and the makeup of it one thing's for sure though i think that as i remember saying now it's back in fashion because of the defensive nature i think of the 50 100 versus you know you could argue inflated valuations of technology stocks especially in the u.s i mean some of the some of the figures are just absolutely mind-bending how much these companies are actually worth um when you look at the the tasty 20 that we've labeled them here the 20 companies that have gone up more than 50 percent in the last year simon was outlining quite a lot in there the list is led by uh fresnillo which is a minor it's up 448 percent uh which is absolutely the astronomical but there's a really familiar names in here for everyday uh british people we're going to talk about rolls royce in a minute but that's up 116 percent you've got companies like vodafone is up 70 percent barclays 54 percent lloyd's 52 percent you know they're companies that people they know but there are also some companies in there that you know even i was like i've not even heard of that company so airtel africa is third in the list which means you've not heard of air tell african i've not heard of air tell africa and when we were looking through this list um 149 that's up but obviously it doesn't have much of a uk presence it's uh you know africa that but that's the nature of the footage very international which is what i was trying to say we look at the where it's got come from where it's gone though uh the level so you know at the time of recording of this we're hovering around 10 900 at 50 100 it's gone on absolute tear up so far this year you only have to go back to april it sunk as low as 7 544 which was the donald trump liberation day tariff blitz um that's kind of sort of hit markets i mean we're hovering at almost 11 000 um it felt like just yesterday it was going past the 10 000 milestone um and the other thing to point out here as well was that it's benefiting from uh sterling weakness so 80 percent of blue chip revenues you know they come from overseas um so they're boosting big boost profits when they're converted back into pounds so there's a lot going on it's a very international flavored market at 3100 but i do think that as simon said there's just quite a bit of overspill of money uh pouring into what has been you know quite an unloved uh market um and people going maybe we are just too heavily weighted on the magnificent seven yeah mag 7 have had so much coverage uh and so much money pour into them um you know do they offer value still are they going to keep on the trajectory and i think that's what's been on the

10:42Lee Boyce: forefront of a lot of investors minds is it simon though too late to get involved in this particular party and if you'd like to what's the best way to increase your exposure to the uk if if you are feeling a bit uncomfortable with US and AI dominance?

10:57Simon Lambert: I mean, it's not necessarily too late. What I would say about those companies that we've got in our Tasty 20 is that they have gone up by a lot over the last year. But many of them are still considered to potentially be relatively undervalued. Some of them are not. Rolls Royce, which we're going to talk about in a minute, is trading on a very high valuation. It's actually valued more highly than NVIDIA at the moment, interestingly. BAE is trading on a reasonably high valuation, certainly compared to where it has been in the past. But obviously it's benefiting from all that defence spending that's going on and the need to do more defence spending.

11:42Simon Lambert: But everybody knows about that. So is that already in the price? Some of the others, for example, maybe Lloyds Bank, GSK, they're considered to still be relatively inexpensive. I think with anything like this, if you watch something go up by a lot and then you try to jump on that wagon, then you need to be careful, okay? Because momentum can continue for quite some time, but momentum can also suddenly stop. And what you need to be doing is spreading your risk and diversifying. So the worst thing you could possibly do is just basically buy the one company at the top of this list, which is Fresnillo, which has gone up by 448 % in the last year.

12:26Simon Lambert: So Fresnillo has gone up by so much because it's a miner and obviously gold and silver prices have gone through the roof. Endeavor Mining is in second position. Anto Fogasta, another miner in fourth position. But what you could do, you know, you could very easily, actually, using some of the investment apps that you can get nowadays that offer you commission-free trading. So Trading 212, sponsor of this podcast, right? If you have a Trading 212 app, you can invest in the stock market with no account fees and no dealing fees. So you could very easily take some money and you could split it between all 20 of these companies.

13:04Simon Lambert: And then you would be diversified. You would have a diversified portfolio. It would be across quite a few different industries, ones that have been doing very well recently, but it would be across quite a few different industries. You'd have mining, telecoms, engineering, energy, banks and financials, industrials, healthcare. That's a reasonable spread, right? And it's pretty much what the FTSE does. But you could just buy these 20 and you could build your own portfolio. Or you could do the easy thing and you could buy a FTSE 100 tracker or buy a FTSE all-show tracker. And then you don't have to do any of that work.

13:44Simon Lambert: You let the computer do it for you and the market do the deciding for you. You won't beat the market, but you won't fall behind the market because there's every chance that if you buy these 20 in here, they could continue to do better and you beat the market. But it is also the chance that if you buy these 20 in here, they fall behind the market and actually you do worse. The other thing I would think about is potentially the FTSE 250, the mid-caps. Now, there's a number of fund managers I've spoken to who are saying that the value now lies further down the scale in the mid caps and in some of the small cap companies, which are still very much underappreciated by investors.

14:28Simon Lambert: And some of them are, you know, making lots of profits, sitting on big cash piles and still trading on really lowly price to earnings ratios, which is a measure of how expensive a company is, basically. share price compared to how much earnings that share price is entitled to. And that potentially they've got more of a run up for future gains than some of these big FTSE 100 stocks that have already made the bumper returns.

14:57Lee Boyce: All right, then, Simon, you said we're going to talk about Rolls-Royce. Let's go there now, because share prices rocketed 1 ,178 % in five years. and the British Engineering Powerhouse's bumper results last week sent them up again. So, Lee, can the shares continue their incredible run? Or if you're lucky enough, ready to own them is now the time to sort of cut and run, basically. And if so, where else should you invest? But before we get there, this is not the car, right? No, this is not the car.

15:30Georgie Frost: which uh i wish some of our uh people that publish sometimes realize that when they start throwing pictures of of the cars um no it is not the cars uh it's largely you know industry in terms of uh engine making think um airplanes and that type of thing um the run that rolls royce has had since the pandemic is absolutely incredible i mean that figure that you just banded there it's absolutely astronomical it's now the best performing blue chick chip it's got 116 billion pound valuation um it's absolutely astronomical the turnaround and if you'd invested in that 2020 slump you'd be sitting incredibly pretty uh today i mean it was near bankrupted i think i'm right in saying in the pandemic you know it was incredible um you know it's impressive what it's done because you know there was a pan let's not forget the post-pandemic shortage of spare parts components all of that kind of stuff it was a massive problem um and it's had the the turnaround has been largely thanks well not largely but a big part of it to turkish born boss uh two fan and i'm not going to try and pronounce his surname we can just call him turbo two fan because that's what he's referred to i don't want to do a disservice trying to pronounce his uh his surname on this show but he has uh managed to really kind of steer this even further um and you know we've got things like worries over defense and that kind of thing that roles voice are uh in in kind of part with and they they they've got the contract for um next generation of small modular nuclear reactors um they're gonna be built potentially around the uk there's lots of things going on with rolls voice that make it still potentially a good buy but you know who knows what's around the corner but it's got 150 000 small shareholders uh stuck through the company through fricking thin it was privatized under thatcher in 1987 uh and younger investors also uh getting it got into the party you know trading team who actually is saying that you know it's been very popular with with the younger generation as well and i think part of that it's because it is such a familiar name i think i was gonna say because they think it's the

17:43Lee Boyce: car because they think it's the car yeah quite possibly um it's growth prospects are said to be

17:49Georgie Frost: far better than a lot of blue chip peers uh and upgraded forecasts from the sweep appear to sort of back that up um i'm not going to make any kind of crazy suggestions here of where the rolls-royce share price goes next because you look at it on a chart and you think i mean how much again how much yeah and that line continue to go up um but there are other options i think simon is probably best place to tell you what the other options potentially are of rolls royce but a real potted kind of last five six years history of just how far and the share price has gone

18:23Lee Boyce: i mean it's an interesting story isn't it simon and it's a an interesting i suppose conundrum if you are one of those people who uh got in early and benefited from such a stonking rise but it It also makes me think generally a lesson on if you have a stock in your portfolio that has been on a bit of a tear up, what should you be thinking about for your next move? But before we get that, Rolls Royce, the party, is it going to continue? Are the fundamentals rock solid and therefore it's just going to keep on going, Simon? Or is it time to sort of cut a little bit and invest somewhere else? And if you do, where?

19:01Simon Lambert: Well, look, this is a very difficult one to call. OK, because Rolls-Royce shares, as Lee Flack, have gone up by an astonishing amount. For example, if you had invested a thousand pounds into Rolls-Royce five years ago, you would now have 13 ,000 pounds. If you had invested 1 ,000 pounds into Nvidia five years ago, you would have more. But you'd have 14 ,000 pounds. that illustrates quite how much that Rolls Royce share price has gone up by it's gone up by nearly as much as Nvidia okay which is pretty astonishing when you consider how much Nvidia has gone up in value what is also interesting as I alluded to earlier is that it is now more highly valued

19:49Lee Boyce: than Nvidia and it came out with some astonishing figures yesterday so for example Rolls Royce

19:57Simon Lambert: predicted that its profits are going to go up substantially, that it is going to get involved in a up to£9 billion buyback, which helps push up the share price further because by buying back shares, you reduce the number of shares in the market. And therefore, then that lack of supply, if it meets demand, should drive up the share price. It's also very good for corporate executives because it helps boost the share price and they like that. And often their bonuses are tied to it. So it is going to do two and a half billion pounds worth of buybacks this year. It is not just involved in aerospace engineering.

20:41Simon Lambert: It is involved in defense. But it is also involved in power and energy. And that is one of the really big issues that we have at the moment. So there's two things. it's making a lot of money from the uh providing the power for ai data centers and it thinks that there's going to be a lot more money in this because the problem with these data centers is they use unbelievable amounts of energy and this is probably where the data center thing and the ai thing is eventually going to run up and hit a brick wall is that the amount of energy you need to power these data centers that are allegedly all going to be built has to come from somewhere and if it's coming from the same place that the energy we're using to power our homes and businesses comes from then it's going to send the cost of powering our homes and businesses through the absolute roof um so somebody's gonna have to work out what to do and the other thing is the next generation of small modular nuclear reactors yeah now these are basically a new and untested technology aimed at producing nuclear power stations in factories at lower cost and higher installation speeds.

21:54Simon Lambert: Our government is pumping two and a half billion into the project, which reduces the risk for Rolls-Royce shareholders and provides some backing for it. But also, you've got to remember that if this is happening here, this is happening around the world, and Rolls-Royce is considered to be at the forefront of this stuff. So if Rolls-Royce is successful with those, then actually, you know, it could have potentially a much bigger runway for its profits. Also then, if you look at the size of Rolls-Royce, I think it's roughly about 116, 120 billion, 116 billion valuation earlier this week. It's gone up a bit since the results.

22:34Simon Lambert: It's fifth biggest company on the UK stock market. I mean, it could get bigger. You could see a scenario where Rolls-Royce gets bigger. Certainly, when you compare it to the valuations put on some of the US tech companies, and the size of those US tech companies. You could see how something like Rolls-Royce could get bigger. But as you said, a lot of those gains have been made. And it is very, very highly rated, P-E ratio of 40, higher than NVIDIA. You know, can that continue? But I could tell you a story about holding on to shares in Rolls-Royce.

23:07Lee Boyce: Do you want to know a story about that? I do. And then I'm going to ask you a few investing 101 terminologies. so you can have that to look forward to, Simon. Right.

23:17Simon Lambert: I bought some Rolls-Royce shares in the pandemic. I looked it up earlier.

23:24Lee Boyce: I remember you did.

23:25Simon Lambert: Yeah, on the 29th of September 2021, I bought£5 ,000 worth of Rolls-Royce shares. I'll tell you how much I bought. At£1.42. Now, in theory, I'd be sitting on a lot of money right now. unfortunately we know where this story is yeah yeah i sold those rolls-royce shares before right so what happened was okay and this illustrates um something that the investors need to understand is this was not all plain sailing okay i bought rolls-royce shares the reason why i bought rolls-royce shares is because i was sitting on some money at the time because we were sitting on money to then do work on our house and i did what you shouldn't do i invested money that i was going to need in the short term so first of all you shouldn't do that but i did do it and i took a calculated risk on it there was a number of companies i bought individual shares in because i thought that at the time they were effectively being priced for going bust and they might go bust but the furthest they if you go bust the furthest you can go is zero right but the upside of companies that are quite often priced for for pretty much for going bust can be really quite big especially with some of these big companies and we've seen this before with big companies where everybody's completely written them off and then they do bounce back they don't always bounce back some of them do actually just fade away anyway a year later my investment in rolls-royce was worth 50 of the money i'd put in those shares went down from september 2021 by september 2022 2022, they hit a low point of about 70p.

25:06Simon Lambert: There were a number of occasions over that time where I thought I had made a serious mistake and I very nearly sold out of those shares at a loss and cut my losses and went down 50%. You know, I'm never going to make that money back. I should just take the money out of my investment. I should just sell and I should buy something else. You made a bad decision you got it wrong i didn't i held on um often sometimes just through a mix of kind of inertia and being busy and procrastinating life yeah exactly uh by the time i sold them uh at the start of january 2024 they'd gone up to about 300p so i'd made a really healthy gain on those and it was at this point when we were having to pay the final bills for the work that we'd done on the house and i needed that money and i was like great okay you know i've got the money there and i but i was getting really twitchy about the market taking a tumble or me losing it so i had trailing stop losses running on some of those investments including rolls royce and they were quite tight because i was like i don't i don't even want to lose you know 500 quid a thousand pounds of this because I've you know I've got these bills and I need to pay them um there was a stock market wobble at the start of uh 2024 and I got stopped out of Rolls-Royce at just over 300p um so that was great I took the money I was like brilliant but I do remember thinking at the time maybe I should reinvest some money in from somewhere else I should take some money out of one of my other investments and buy some Rolls-Royce shares again because actually I do think there is more to come from Rolls-Royce.

26:45Simon Lambert: But what I was doing was I was thinking the price will come down. I'll wait for the price to come down a bit. I'll wait for the price to come down a bit. And at one point it did, and I didn't do it. And then it just went up. Within a year, it had doubled. They were now worth 600p. And a year later, pretty much, you know, it's just after a year later now, February 2026, they've more than doubled again. So there you go. It just goes to show that sometimes you should run your winners. But when you've made that money, you anchor on the money that you've made and you're like, ooh, do I really want to?

27:22Simon Lambert: So, yeah, it's a difficult decision to make.

27:25Lee Boyce: It is a difficult decision to make. And there will be a lot of people sort of looking at their portfolios thinking that there might be individual stocks that have moved to become quite dominant. I've got one myself, SLB Limited, Schlumberger as was, which is now taking up about 7 % of my portfolio. What should I be doing? I know you're not a financial advisor but there were lots of people in this position. If they do think, you know, I'm going to take a little bit from Rolls-Royce, where would you go next? What would you do?

27:55Simon Lambert: Well, sometimes the advice on this can be confusing because on one hand you're told to run your winners and cut your losers and on the other hand you're told to, you know, take some profits and top slice some of your winners. I mean, what you can do, And one thing that some people recommend, Richard Hunter, you know, long time markets commentator, often says this to me. The thing to do is to basically take the money that you paid for the shares or paid for the investment out and, you know, and then everything you've got in there is for free. And Lee does this as well. I know that, you know, if you've made a load of money, you just take out the initial cost of the investment and then whatever happens, it's all there for free.

28:37Simon Lambert: um what you can do for example in your position is if you go right well i think seven percent of my portfolio from one individual company is too much is you could sell some of it reinvest some some of the rest of it into other investments that you have if you think they're still worth buying um and then you you reduce the size of it in your portfolio which is the thing that quite often gets recommended in terms of spring cleaning portfolios but then as i said you're not running your winners in the same way that you get told to run your winners so i think what you need to do is you need to look at something and go is this now such a large part of my portfolio that if something bad happened to it it would cause me a problem or it might cause me to react in a bad way

29:16Lee Boyce: and if so then you need to do something about it now i'm a bit like you simon i'm sort of yeah maybe i'll do something about it maybe i'll do something about it dear reader she won't do anything about it um simon just a couple of things you said which i just wanted to get a bit of a 101 on you talked about share buybacks and you talk about p e ratio a price to earnings ratio

29:37Simon Lambert: is the basically the investment industry's benchmark valuation method it's how you decide how expensive a company or a market is and you take the share price and you divide it by earnings per share and it gives you a number and it basically tells you how much profits that individual share is entitled to a low number indicates cheaper a high number indicates more expensive but you need to compare them to similar companies uh in similar industries and sectors rather than for example comparing one type of company to another type of company so tesco which is a supermarket supermarkets tend to trade on quite low price to earnings valuations um so you can't compare tesco's pe to um nvidia's pe for example uh and then what was the other

30:28Lee Boyce: question share buyback you mentioned that relation to rolls royce companies have two main ways of

30:33Simon Lambert: returning money to shareholders one of which is paying dividends which is when they basically pay you a certain amount for each share that you hold and it's a way of rewarding shareholders another way is share buybacks where instead they buy shares back from investors sometimes they'll buy them back and then hold the shares themselves in their own treasury but quite often they buy the shares back and then they cancel the shares, that reduces the total number of shares in existence and tends to drive up the share price.

31:05Lee Boyce: Brilliant. Simon, thank you very much. Our own Investopedia Simon Lambert. Lee, thank you for being so patient there. We're going to talk about, well, something that's quite relevant to you being a parent. A lot of the time when we talk about junior ISAs, the big warning is, yeah, you do realise your kids get the money at 18 and they're just going to spank it. And it turns out that obviously some will do, but probably not as many as we might fear. According to some research by AJ Bell, they took a look at their customers. I assume it's all aggregate data. They didn't literally look at the customers, but, and found out only one in 20 absolutely clean out their junior ISAs when they gain full control.

31:44Lee Boyce: And of course, we don't know that could be for something very sensible, like buying a car or going to uni or whatever um but before we get into some of the detail of that they just give us um a quick reminder junior isis the rules the pitfalls yeah in a nutshell junior isa gives a 9 000 pound limit

32:02Georgie Frost: for under 18s that you can save into uh over the course of those 18 years they can take control or they take control of that junior isa at the age of 16 they can't make a withdrawal until they're 18 and they're the crucial parts they know you can have a cash junior isa or you can have a stocks and shares junior isa the argument is because it's potentially over that 18 year period probably going to be over at least a 10 year period the investment route is probably the better route because you've got time uh for you know compound growth and gains and all that kind of stuff and the smoothing out of any stock market wobbles um but you're right the big pitfall and what people wrestle with is when uh you know the children grow up they've gone through their toddler phase they've gone through the primary school phase then they turn into this grumpy teenager phase and then they turn into that kind of like reckless well there's a bit of a broad maybe i'm just talking about myself a bit of a sweeping brush a reckless 16 to 18 year old who you know might get a bit of money and think oh i'm gonna spend this on some absolute nonsense um i actually think though that um we are becoming a nation better at talking about money and i think that perhaps a lot more children are more clued up than what you kind of we kind of

33:17Lee Boyce: give them credit for after i just sweepingly brushed 16 to 18 year olds but you're making a comparison between what we were like and you're absolutely right it's a different generation

33:27Georgie Frost: potentially i mean i don't remember ever having a conversation about money uh before turning 18 with anyone in my family.

33:34Simon Lambert: You mean apart from can I have some money, please?

33:37Georgie Frost: Yeah, and can you come and pick me up from here and then being told how much the petrol costs and all that kind of stuff. I'm not a taxi driver. But this data from AJ Bell, I think, is encouraging. So I think the takeaway from it is that a third of young people with junior ICES contribute into the ICES once it matures into an adult ICES. So the limit goes up from£9 ,000 to£20 ,000. I would suspect that most young adults aren't going to be filling it out but looking at three years worth customer data to suggest that a third to show that a third of young adults are taking on these junior ISAs into the adult ISA and continuing to put money into it I think is encouraging and it's that kind of like cornerstone and knowing that that ISA is there and yeah sure the first probably three five ten years of having that isa you're probably not going to be contributing a whole lot um you know because you know you're not going to be earning much probably um and also you know cost of living cost of accommodation if you've actually managed to move out of your parents you know all those kind of things mean there's not that much spare money funny enough to go and put into your tax-free isa but yeah the stats are pretty strong uh one in 10 though take get more than half of the money within the first year and one in five make a withdrawal of some amount during this period but only around about one in 20 young savers empty their junior isis when they gain full control of the fund at 18 now as you say that could be for a whole host of reasons and people do say for a whole host of reasons we also don't have the monetary data on this so you know we could say that one in 20 empty their junior isis but the item might only have you know a few hundred pounds in it or or whatnot so it's kind of hard to really quantify but a lot of people do save into those tax-free uh junior ices grandparents relatives encourage it because it could be for driving lessons you know when you're 18 expensive learning to drive it's a very expensive endeavor if there's some money tucked away to be able to use it to do that brilliant some people have probably gone more extreme than that and managed to save a few thousand pounds a year uh for their children uh perhaps by themselves or perhaps with grandparents help or other relatives help and they use that to pay a big chunk of going to university and obviously university has been in the news lots in the last couple of months because of uh you know the high cost of student debt and young adults you know being saddled with effectively a lot of money or interest that builds up hugely in order to get a degree um but i think it's really interesting but there's still that debate of if you are saving for your child where do you save for your child you know do you put it in the junior isa do you put it in your own uh isa wrapper if you're worried about what they're going to do with the money and you want more control over it um the one thing i would definitely say though is however you choose to do it just make sure you do do it and you don't sit on your twiddle your thumbs and to get on with it earlier the better and simon and i were talking about this in the office the other day because you shouldn't be put off even if like a younger member of your family so your child is 10 and you haven't opened a junior isa for them or done anything it's not too late that's still another eight years of contributions that you can put in there and we get a lot of questions from grandparents um you know you have your three thousand pounds annual gifting allowance not a bad place to stick it uh if you want to help your grandchildren out and you've got the means to do so and the gifting out of regular income you know also plenty of uh space in that nine thousand pound junior isa wrapper to be making some regular of gifts in there you add all of that up and you know a big advocate for trying to give uh young adults a boost up when they hit that age by saving small and regular over the course of potentially

37:25Lee Boyce: 18 years because it really does add up i think this whole student loan debate is to me with someone with no kids but just highlighted just how vitally important is if you can to really think about your kids and saving for them from a young age you see this georgia this is the can of worms

37:43Georgie Frost: that's opened it yeah you're kind of singing into it now we're closing the can of worms yeah

37:48Lee Boyce: absolutely we're not going i'm not going on that debate but i was just thinking about it i know exactly what you mean just the fact that there's so many costs for kids nowadays and it's not just student loans i don't want to go to uni but you know driving lessons you just mentioned there there's so much one thing i do want to talk about because he's a bit of a grandparent's favorite when it comes to kids is premium bonds lead bad news for savers this week as ns and i made it even harder to win just explain to us what's changed and look we every time we talk about premium bonds i ask the same thing but look really is it worth having them um yeah i mean the writing's

38:23Georgie Frost: been on the wall for a while they've been quite high in terms of comparing it to what the only thing you can kind of vaguely compare premium bonds to which is easy access accounts and they've been quite competitive rates people have been pouring money into them but the underlying prize rate is changing from april so there's a draw uh on on monday on the first and so on the second of march and that has a 3.6 underlying rate and each one pound bond has a 22 000 to one odd of a chance of winning that is going to fall back to 3.3 from the april draw and each one pound uh prize will go to 23 000 to one it also means that some of the big prizes have been cut back somewhat so for example there was 78 uh 100 000 pound prizes in the most recent draw that's going to fall to 71 there was 143 prizes worth 50 grand um sorry there was 154 and it's going to fall to 143 lots of people like their idea of being able to win one of those big sums and the one million pounds of course that's not changing that's still uh two two prizes each month are they worth still holding definitely uh i think so but as part of a balanced uh suite of finances you know you should not just have all of your money part in premium bonds um and i think you have to kind of evaluate what percentage you want because because the allowance for premium bonds is is uh 50 000 it's very generous uh really but and a lot of the big prizes of course get scooped by people that are maxing out their premium bonds and there's quite a lot of britains who uh like premium bonds and have maxed them out and would probably be benefit would benefit from spreading it about a bit and putting it elsewhere because you're not guaranteed to to win you know this is an average odds 3.3 percent you might not necessarily win anything but people just like that notion of being in it to win it you're not going to lose your stake um and i'm not going to be pulling my money out of premium bonds but only a small percentage of my uh savings investments are in it and actually just that while we're on the same thread and talking about easy access there was a easy access account launched today from coventry building society which is a best buy rate of 4.25 just to come just in comparison uh to this premium bonds you know if you were looking for a new home to stick some of your cash in you just do still want it in easy access um that 4.25 percent rate can be is a rare beast in which it can be opened online and in branch post phone all of the methods which is quite rare these days but it's one thing i'll point out it's not it's not strictly easy access you're only allowed to withdraw from it three times a year but it's unlikely that anyone has money in premium bonds that they withdraw three times a year people like to just part of they're cashing it and hope for the best fingers crossed get to that start of the month and hoping that they're going to win something big but yeah it's it's definitely one of those moves where you want to re-evaluate where you've got your money and whether it's beneficial or how much and how

41:26Lee Boyce: much exactly yeah i sold out of mine because i actually used it for a deposit for a house but i do miss the monthly like the thrill exactly 25 quid i'm rich stick a 50 quid in there

41:38Georgie Frost: you can still feel like you're part of it and actually just to go back to what you said it is a favorite for for grandparents and relatives and they've made it easier you know to be able to stick money into accounts for for children and whatnot i still think a junior is the better option because if you are putting in piecemeal small amounts into premium bonds it's very unlikely you're going to win anything yeah exactly all right then something about government

42:03Lee Boyce: departments and going digital that makes me a little bit nervous um but there's an interesting article from your senior reporter, Ed Magnus. Hundreds of thousands of taxpayers are just seven weeks away from a major tax shakeup that could plunge their finances into chaos. Goodness me, that sounds dramatic. Making tax digital is HMRC's big change to the way that property owners, the self-employed, sole traders all report their income and expenses. Now, over the next two years, almost 3 million people will be affected. But tax experts are warning that the overhaul is little understood and that many are just blissfully unaware of the upcoming changes, which I can't believe when I read this.

42:42Lee Boyce: I mean, I've heard about Making Tax Digital for some time. I didn't realise I first heard about it from George Osborne in 2015. Wow. So, Simon, what is Making Tax Digital? What does it want to achieve? Why has it been going on for so long?

42:58Simon Lambert: well making tax digital is not doing your tax return on the gov.uk website which many people would think they have already made their tax digital from doing that they put in the details it tells them how much tax they owe never quite explains how the number was arrived at in a way that you can actually challenge it always seems to be that you owe more than you thought you would have done and then you have to front up the cash and it's all done online which as i said many would consider to be digital making tax digital however is basically introducing a sweeping overhaul which means that rather than doing the tax returns once a year people are who are affected by this will be doing them five times a year and if they're registered for vat it might be nine

43:48Lee Boyce: times a year oh my god simon simon look how many what a million people i think were late on their

43:53Simon Lambert: self-assessment this year alone yeah yes and and the problem with this well there were a number of problems with this um it is that a most people many people affected are blissfully unaware of it until it hits them right in the face and then they're going to be really annoyed secondly many of the people affected by it um are probably quite busy doing things like running small businesses and being entrepreneurs and sole traders, like fixing people's boilers. Plumbers are going to be affected by this. Coming around to deal with your lights. Electricians are going to be affected by this. Building houses.

44:30Simon Lambert: Builders are affected by this. You know, the list goes on. And also that they are going to have to use specialist software to do it. So basically what's going on is you're going to have to do these returns multiple times a year. You're not going to have to pay your tax bill. that many times the idea is it keeps the kind of running tally rather than there being this one and done thing once a year and i can see the logic behind that i could probably see more logic behind it if you were also making running payments which would probably be quite unpopular but actually from a financial point of view better would make sense for people because like you're self-employed okay i'm right in saying that one of the places where people often get caught out when they're self-employed is at the end of the year when they're like oh my god i've got to pay this all my tax in one go actually you pay twice don't you because you pay on account as well yeah but uh anyway i don't think the system works very well for a lot of people um in terms of kind of planning ahead and cash management things like that but the other issue is this is this kind of software thing it's like you're not just going to be able to go do this on the gov.uk site which i think if that was the case then this would be okay but it's not you're going to have to either use an accountant or you're going to have to use professional software now almost all of this software you pay a fee for some of it offers fee-free trial periods people may have noticed that the thing about fee-free trial periods is at the end of the trial period they stop being fee-free and also once you're locked into some of these services the fees seem to go up by quite a bit i know my wife is self-employed she uses zero when she started using zero zero was really cheap for her she now pays quite a lot of money for zero for example um there are some free options and the government is saying there's going to be more free options um i don't know how good those free options are we've actually going to have a column from uh heather rogers our tax expert who's going to talk us through a few of them coming up soon.

46:40Simon Lambert: I mean, the problem with free options versus the, you know, the ones that you pay for is sometimes you get what you pay for. Some would consider that we are already paying for the tax system through our taxes, taxes, that there's actually, you know, if you look at the gov.uk tax system, it's, you know, beyond the bit where it spits out a number that you're like, how, what, the calculation bit actually works pretty well you know so why didn't they build this into there um yeah and so it's going to affect from april people with gross income above 50 000 pounds so that's about 900 000 people from the next april that's going to step down to above 30 000 pounds that's about another 1.1 million and then from the next april after that it's going to be 20 000 pounds so that's about another million and there is a plan to keep this going further and further down the scale so you will get to the point where things like community groups and stuff like that are going to get hit and this is this is one of the concerns you know people with like small neighborhood associations and stuff like that might end up getting caught out by this and having to pay accountants fees and having all of the money that they raise each year just going out on the counseling fees because they're so worried about getting things wrong and the other thing issue here is that those numbers are gross income.

48:00Simon Lambert: They're not your profits. So for example, it's quite easy to hit those numbers. You don't have to be making 50 grand a year yourself as a sole trader in your profits. You just need to be having gross income of that. So for example, you could very much see how a plumber, an electrician, someone like that might hit that number, but they're actually making much less money. Well, probably not plumbers and electricians. They're probably making more money, but you know what I mean.

48:31Lee Boyce: As someone who does VAT, I'm crying inside here, Simon, because you mentioned there about small sort of community businesses and whatnot. You just want to be getting on with your job, don't you? And I just checked how much I was paying, so I have zero as well. It's£48 a quarter, and then I have an accountant, and I was reading the story thinking, I mean, look, I'm a big fan of my accountant. She's lovely. but I feel like they will benefit greatly from things like this. And I thought the point of this was to try and make it easier for us and easier to do our jobs.

49:06Georgie Frost: And I just kind of feel a bit about it as someone who's the dreaded email

49:11Lee Boyce: I get every quarter is time to do your VAT, Georgie. Any more of that? I can't handle it. Right, Lee, can you really save money switching to an electric vehicle? Let's shut this debate down once and for all.

49:25Georgie Frost: That was the worst segue ever.

49:29Lee Boyce: No, no, no, no, no, no.

49:30Simon Lambert: Look, hang on a minute. I'm going to step in here. I'm just going to step in and point out that our esteemed host, who is absolute gold dust at this stuff usually, missed an absolutely unbelievable obvious segue, which is with Making Tax Digital, when you get things wrong, there's going to be penalty points. and it's going to be like the ones you get when you're driving. A certain number of points, you then get a fine and you get in trouble. Moving on to electric cars.

50:04Lee Boyce: You see, the thing is, Simon, I've had neither penalties from HMLC nor for driving, so it wouldn't come into my mind, you see.

50:11Simon Lambert: Goody-doo shoes over there.

50:12Lee Boyce: And besides, sometimes, Lee, you just need to park something. Oh, nice. This is more like it. This is electrifying, Georgie.

50:22Simon Lambert: Guys, guys, guys, people are listening. to this they've got other things to do can somebody put their foot down on the accelerator

50:27Lee Boyce: and move things on a bit right all right then fine i will do that right lee i've asked you the question is this just a moral decision and actually you'll end up paying more and you're going to just be racked with range anxiety and trying to find somewhere to charge with all the finances laid out on the table which is genuinely the cheapest option right now just when we talk about the expenses of a car as it were i'm crying because i've just paid 1500 pounds for my absolute piece of rubbish out there to pass its mot um so yeah crying inside here um what elements are we talking about when we talk about how expensive a car is i mean obviously up front costs i think

51:07Georgie Frost: that um before i go on take and we range anxiety i think now is not the crucial part of what people are worried about about electric car ownership i think that electric car ownership yeah and i'm talking about people that can have a charging point installed at home not people that can't do the the charging on their driveway i think it's not really the the hugest issue now because lots of cars are coming out with quite big ranges all of the infrastructure while not perfect is improving somewhat i think what the actual uh kind of crux of this is and what you're talking about here is the different it's balancing the different costs and the things that are coming up so for example uh the paper mile uh sort of system that is meant to be coming in in a couple of years time you know it's put a lot of people off it's put a massive spanner in the works because part of the benefit previously of ev ownership was you kind of sidestep that kind of tax but of course the treasury are seeing that there's going to be a huge uh gap that needs to be filled for fuel duty and it's opting for this measure you know in order to kind of fill the coffers that way but the things you're going to want to consider if you're if you're going for an electric car alongside the paper mile thing and if you're happy with that and all the maths add up is first of all as you say the purchase price so the actual price that you're going to be paying at a dealership to drive it away and what uh this study has done this study is bolter express what what it's kind of showing here is that there is quite a vast gap between uh petrol and ev equivalents on the whole so for example i always use the voxel corsa because it's such an entry-level car for most and the fact that there's no ford fiesta anymore so um the petrol corsa starts from 21 ,955 pounds the electric corsa starts from 27 ,505 pounds then you need to factor in um how much depreciation that that car might have so that classic thing of this is how much money it's going to lose me you drive it off the forecourt which i can't bear you know what other purchases do we make you know you're just going to drive off of a forecourt and all of a sudden it's worth half the price it's such a bizarre notion um i really gets to me anyway value loss on the petrol course according to auto express 11 605 pounds on the electric course 18 379 pounds that's quite big it works out servicing so that's the next thing you're going to want to be thinking about servicing on the petrol car um over that three-year period let's say nine sorry i should say that that's

53:37Lee Boyce: value loss over the three-year period not when you just drive off the forecourt and servicing

53:41Georgie Frost: over three years 986 pounds for petrol versus just 283 pounds for the ev insurance is broadly the same but we did do a story this week warning that there are some electric cars especially chinese electric cars that insurers just aren't insuring at the moment because there's a lack of knowledge about them and a lack of knowledge of where spare parts and components are coming from uh veds now the same 390 each and then looking at how much you're actually going to pay in the fuel so for petrol um they're talking here uh over 30 talking about 36 000 miles driven over these three years quite quite a high amount lots of people do under that but anyway 4283 pounds on petrol 1 ,000 and they're 314 pounds for electric um you again that's for charging you know probably at the lower end rather than at an expensive end uh you know kind of out and about but i think a lot of people know that already like a lot of people know that it's going to be more expensive um and also those ev model prices i gave you are with um any applicable grants as well i should point that out anyway for the Corsa it works out that the cost to own uh the the petrol version 18 ,913 pounds for the EV is actually 22 ,000 pounds and it's done four other popular cars so the Puma the EV versus petrol actually comes out broadly similar uh Golf um the EV slightly more expensive over that three-year period versus a petrol there's a Skoda Kroc which is actually what I drive versus the ev version which is the skoda l rock it's actually far cheaper to have the ev version of that which i kind of uh my felt a little bit sad reading that and then again i saw the price of a new croc here 35 740 pounds i could tell you when i bought our croc brand new seven years ago it was vastly cheaper than that shows you the inflation on some of these uh car prices now and then a little bit more of a higher end bmw uh you've got a petrol version of the 420i grand coupe m sport 46 915 pounds is the price for that one an ev version and they've picked the bmw i4 e-dry 35 m sport catchy 52 870 pounds you add all of that up it is saying that the petrol version of the car is 5 000 pounds cheaper to own over three years right versus dv so any electric car that you are tempted to buy you're going to want to compare to how much ownership it's going to cost the petrol um and how long you are planning to have this car and simon's going to be better at explaining this it still is quite hugely beneficial i believe to get an ev free work if you're um a company allow it and he'll be much better at explaining that but you want to be thinking about all of these different um bits of ownership um i personally i haven't made the switch to an ev mainly because when i bought my skoda seven years ago i decided that i was going to have it for at least 10 years um and that's kind of firmly what's been the plan i am quite tempted by the reno 5 ev it's only one i've been tempted by but it seems like half of britain have also been tempted by that one because there's quite a big weight in this to get one also sporty kind of hatchback probably not the ideal car for a family with two children buggy and a wife that treats the car like an extended bedroom of the house clothes and bits and bobs really don't think the reno 5 is going to cut it but you want to just sit down and not kind of i think it's just a sensible it's a sensible thought discussion and sketching out numbers on the back of a pad and figuring out the cost of things and let's not forget at the moment petrol is quite cheap compared to where it has been in previous years and the price of a liter of unleaded i'm talking about here you know fluctuations could go up again at some point i think it's the cheapest level for about two or three years something like that definitely paying around about 130 a liter around here so that could change but then so can the price of electricity so that can change and sometimes they go in tandem don't we know it think about you know um it is a lot to think about firstly speaking i think if i was in the market for a car at the moment i'd probably buy a petrol kind of three-year-old ish car uh is probably the plum point evs are improving though and there are people that are very happy with their evs um and we do get emails and people very sensibly uh give us the data the numbers and that they're saving money with an ev typically if they're charging at home typically if it's not like high use so more sort of like users are run about that's a very very very very broad rule of thumb i'm the same as you lee i if i was to buy

58:29Lee Boyce: a new car at the moment i would probably go for petrol as well and as much as you say that range anxiety in reality may not be an issue i do think there's a legacy narrative around it that will still be putting people off i think because i'm still thinking about it also there's nowhere to really charge up uh where i am at the moment um but also i was thinking of running my voxel mocker into the ground for 10 years, I don't think it's going to last, Lee. We've got to eight years and I think that's quite an achievement for it. Bless it. Simon, your views?

59:01Simon Lambert: You can run an electric car incredibly cheaply if, as Lee said, you're charging at home all the time, particularly if you've got solar panels and what they call an agile energy tariff. So you're charging at the cheapest possible times um and you you're not doing those kind of big motorway milesy and then filling up on the motorway because like with petrol filling up on the motorway is expensive if you need to charge your car on the move uh the salary sacrifice work thing that lee alluded lee mentioned sorry uh involves buying electric car you're not technically buying it you're leasing it effectively through a work salary sacrifice scheme and then you can um not pay tax on those monthly payments.

59:46Simon Lambert: You can save the tax, you can save the national insurance. There is a small charge to claw back a little bit of the saving, but because electric cars are considered to be a good thing, it's a very, very small charge and it's very, very tax efficient and so tax efficient and so popular that it's having an impact on secondhand EV prices. Those three-year-old secondhand EVs are so cheap because basically if you can salary sacrifice one, the cost is comparable.

1:00:13Lee Boyce: Simon, thank you very much. It's now time for your start of the week.

1:00:19Simon Lambert: 37 and 42. These are the lottery numbers that have been drawn the most since the lotto changed to 1 to 59 from 1 to 49 on the 10th of October 2015. Each of those has appeared 127 times, followed by 52, 126 times, 39 and 58, picked 125 times each. Finally, 11 is the sixth most drawn number.

1:00:46Lee Boyce: What's the lowest?

1:00:47Simon Lambert: The unluckiest numbers are 21, 26, 30, 44, 48 and 55.

1:00:52Lee Boyce: All right. Thank you very much, Simon. Thank you, Lee. And thank you for listening. You can keep up to date with all the latest breaking money news. Just go to thisismoney.co.uk or download the app. And if you have any comments or questions for the team or any car-related puns you want to share with us, Simon?

1:01:06Simon Lambert: You can email us at podcast at thisismoney.co.uk. Tell us about your experience of owning an electric car if you own one and how cheap you have managed to make it. If you are someone who has managed to make running an electric car unbelievably cheap, we would love to hear from you. Also, any stories of companies that were on the brink of, you know, going bust that you bought into the shares and made stonking great gains on. Tell us about those. We'd love to hear them.

1:01:35Lee Boyce: and if you like our podcast why not race us wherever you found us it helps other people find us too