SWC Community:
There will be plenty of welcome attention and interest in
#SWC now (deservedly so), with the announced intent to launch the MORE Preference share.
With that likely comes a raft of questions & opinions from all angles - sceptical & supportive - on whether a market exists in the UK for such a weekly dividend-paying Pref share.
How well might something like this fit in the UK market?
Well, here’s some context, perhaps…
Last year, a House of Commons Treasury Committee looked specifically at the UK’s love affair with Cash ISAs.
Some of the stats are, to me at least, pretty staggering.
They reported that in 2023/24, around 66% of all new ISA subscriptions went into Cash ISAs.
14.4 million people held a Cash ISA but NO other type of ISA - completely shunning the possibilities (and risks) of Stocks & Shares ISAs.
And UK savers had around £360Billion sitting in Cash ISAs.
Even more interestingly, between 2021/22 & 2023/24, subscriptions into Cash ISAs increased by 125%.
Stocks & Shares ISA subscriptions actually FELL by 9%.
So us UK plebs REALLY do like our cash savings….
That’s partly what the Treasury Committee was looking at: how to persuade more Brits to invest, rather than simply leaving money sitting in cash.
And specifically, what might happen if the annual Cash ISA allowance was reduced by the government?
The committee findings weren’t exactly encouraging.
One survey suggested only 19% of Cash ISA savers would invest more in the stock market.
Another found just 9% would move their money into a Stocks & Shares ISA.
And around half basically said “Meh. I’ll just put my money into another cash savings account instead.” (Presumably taking the tax implications on the nose)
The inference perhaps tells its own story.
For millions of UK savers, the attraction of Cash ISAs isn’t necessarily the ISA.
It’s CASH.
The perceived stability, the predictable return.
The accessibility, simplicity & risk avoidance.
The comfort of knowing roughly what your money will be worth next week & next year (even while turning a blind eye to inflation & monetary debasement).
The Treasury Committee ended up recommending AGAINST cutting the £20k Cash ISA allowance, arguing it probably wouldn’t result in a significant move into stocks & shares anyway.
But the Government has decided to do it regardless.
So from April 27, under-65s will only be able to put £12k per year into a Cash ISA, rather than £20k.
(The overall ISA allowance remains £20k)
Government policy is deliberately trying to nudge some of this enormous wedge of UK cash towards investments instead.
Which brings us back to SWC & the incoming MORE Pref.
What happens if an investment arrives in the UK giving even SOME of those reluctant cash investors SOME of the characteristics they clearly value?
Something designed around:
A price that remains close to par.
A regular & predictable weekly dividend.
An annualised yield comfortably, comfortably above typical sub-5% UK cash savings rates.
All sat inside the tax-free wrapper of a Stocks & Shares ISA.
And potentially enough liquidity that investors might sell at, or around par, if they need their money back.
To be absolutely clear, a Pref is NOT cash, and I’m sure the MORE prospectus will be abundantly clear on what it is, what it isn’t, & the risks it carries.
Its value isn’t guaranteed.
It does carry issuer and market liquidity risk that a protected cash ISA deposit simply doesn’t.
But that’s not really my point.
My point is there appears to be a potentially enormous gap between two things:
What the UK Gov wants savers to do
…vs what millions of UK savers have repeatedly demonstrated they actually WANT from their money.
Stability. Income. Liquidity. Tax efficiency.
So if a new UK-listed pref equity appears on the scene, deliberately engineered to offer some of the very characteristics that cash savers clearly value…
Well, I think a few people might just like the appeal of having a bit MORE.👀