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Is it too late to save £20,000 into a cash Isa?
Is it too late to save £20,000 into a cash Isa?

Times

time15-07-2025

  • Business
  • Times

Is it too late to save £20,000 into a cash Isa?

Q. Is it too late to open a cash Isa and get the £20,000 annual allowance? If Rachel Reeves changes the rules to reduce that amount, will it take effect for this tax year?Name supplied In short, no, it's not too late to open a cash Isa and take full advantage of the £20,000 annual tax-free allowance. There has been much speculation about when the chancellor might announce reforms to the cash Isa and what these might look like. Rachel Reeves is expected to announce plans to consult the finance industry on cash Isas, so we will have to wait until this is concluded before knowing the details of any changes for definite. • Why the cash Isa shake-up was put on pause That said, it is extremely unlikely that any reduction in the cash Isa allowance (if indeed that is what the chancellor eventually decides to do) would take effect for the 2025-2026 tax year. It is also expected that any reforms would not be retrospectively enforced, meaning if you saved the full £20,000 into a cash Isa this year or have accumulated more than £20,000 from previous years, it will most likely not be affected by any future changes. But you shouldn't wait for the details of any changes to be confirmed to start thinking about using your annual Isa allowance. If you have the funds, it has always been a good idea to use your Isa allowance as early in the year as possible because of the benefit of compound interest. The longer you have your money in a tax wrapper (such as an Isa) the longer it has to grow tax-free. This is true of cash Isas and also the stocks and shares Isas. For the past 6-12 months the government has been talking about 'getting the balance right' between cash savings and stocks and shares investing. I do not agree that the government should lower the cash Isa limit, but its goal to get more people investing is worthwhile. We are a nation of fantastic savers but we could and should be investing more. From a practical perspective, it may be worth really considering if the right thing for you is to use 100 per cent of your £20,000 allowance within a cash Isa, or whether this is the year to consider putting some of it in a stocks and shares account. Another option you could consider is the Lifetime Isa, which can be used to save for your first home (up to a value of £450,000) or retirement. You have to be under 40 to open one, and you can save £4,000 each tax year until you are 50 and the government will top it up by 25 per cent. If you withdraw it before you are 60 for any reason other than buy qualifying first home then you will lose 25 per cent — eating up the bonus and even some of your own savings. The £4,000 does form part of your overall £20,000 allowance, but the government bonus does not, so it can actually help you save £21,000 into Isas in one tax year. It's important to remember your Isas can be used for different financial goals. A Lifetime Isa can be of use for the big life goals of retirement or buying your first home; a cash Isa is more suitable for short-term savings or emergency funds; and a stocks and shares Isa is designed for long-term investments (over at least five years, and preferably longer), aiming for higher returns.

Berkshire Stock Falls 8% in 3 Months: Should You Buy the Dip?
Berkshire Stock Falls 8% in 3 Months: Should You Buy the Dip?

Globe and Mail

time27-06-2025

  • Business
  • Globe and Mail

Berkshire Stock Falls 8% in 3 Months: Should You Buy the Dip?

Shares of Berkshire Hathaway Inc. ( BRK.B ) have lost 7.8% in the past three months, underperforming the industry 's decline of 6.7%, the Finance sector's increase of 4.8% and the Zacks S&P 500 composite's increase of 9.1% in the said time frame. BRK.B is now trending below its 50-day simple moving average (SMA), indicating the possibility of a downside ahead. Berkshire Vs Industry, Sector, S&P 500 Shares of Chubb Limited CB and The Progressive Corporation PGR have lost 4.9% and 4.7% in the past three months, respectively. Chubb, a prominent global provider of property and casualty insurance and reinsurance, is strategically leveraging growth opportunities within the middle-market segment in both domestic and international arenas. The insurer is driving long-term expansion by strengthening its core package offerings and expanding its portfolio of specialty insurance products. In addition, Chubb continues to invest in key strategic initiatives that support its broader growth objectives and competitive positioning. Progressive, one of the largest auto insurance groups in the United States, is well-equipped to maintain profitability, supported by its strong market position, broad product suite, and superior underwriting and operational execution. Progressive has refined its strategy to emphasize bundled auto products, limit exposure to high-risk properties, and enhance segmentation through the introduction of innovative, targeted insurance solutions. BRK.B Shares Are Expensive The stock is overvalued compared with its industry. It is currently trading at a price-to-book multiple of 1.59, higher than the industry average of 1.55. Berkshire is relatively cheap compared to Progressive and Chubb. Average Target Price for BRK.B Suggests Upside Based on short-term price targets offered by four analysts, the Zacks average price target is $537.75 per share. The average suggests a potential 10.6% upside from the last closing price. What's Working in Favor of Berkshire Hathaway? Berkshire Hathaway's insurance operations form the core of its business model, accounting for roughly one-quarter of total revenues and serving as a key engine of long-term growth. With extensive market exposure, disciplined pricing and robust underwriting performance, the insurance segment is well-equipped to perform even under adverse market conditions. Complementing its insurance strength, Berkshire's diversified structure adds resilience to its overall operations. A major stabilizing force is Berkshire Hathaway Energy (BHE), the company's energy subsidiary, which focuses heavily on renewable energy. As a regulated utility, BHE generates stable and predictable cash flows that are largely insulated from economic cycles. Its strong financial foundation and long-term commitment to clean energy make it a growing pillar of Berkshire's future growth in a world rapidly shifting toward electrification and sustainability. The Utilities and Energy segment is further supported by Burlington Northern Santa Fe (BNSF) though it faces challenges such as a less favorable business mix and declining fuel surcharge income. Still, rising demand for utility services is expected to bolster future performance in this segment. Berkshire's Manufacturing, Service, and Retail divisions also stand to gain from an improving economic climate, with heightened consumer activity fueling revenue expansion and margin growth. Meanwhile, continued growth in the insurance segment has driven the expansion of Berkshire's insurance float—the pool of premiums held before claims are paid—from approximately $114 billion at the end of 2017 to $173 billion as of first-quarter 2025. This float serves as a low-cost source of capital, which Berkshire has skillfully deployed into high-quality businesses and investments with durable earnings and strong returns, including major stakes in Apple, Coca-Cola, BNSF Railway and various utilities. The company's strong financial position also supports consistent share repurchases—an effective capital allocation strategy that enhances shareholder value over the long term. Berkshire Hathaway's Return on Capital Return on equity ('ROE') in the trailing 12 months was 7.2%, underperforming the industry average of 7.8%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders' funds. It is noteworthy that though BRK.B's ROE is lagging the industry average, the company has been continuously generating improved ROE. Image Source: Zacks Investment Research The same holds true for return on invested capital (ROIC), which has increased every year since 2020. This reflects BRK.B's efficiency in utilizing funds to generate income. However, ROIC in the trailing 12 months was 5.7%, lower than the industry average of 6%. Muted Analyst Sentiment The Zacks Consensus Estimate for 2025 earnings implies a 6.7% year-over-year decrease, while the same for 2026 suggests a 5% increase. The expected long-term earnings growth is pegged at 7%, better than the industry average of 6.8%. The consensus estimate for 2025 and 2026 earnings witnessed no movement in the past 30 days. Parting Thoughts on BRK.B Shares Berkshire Hathaway is a conglomerate with more than 90 subsidiaries engaged in diverse business activities. Thus, holding shares of Berkshire Hathaway renders dynamism to shareholders' portfolios. BRK.B has delivered significant value to shareholders for almost six decades under the leadership of Buffett. The focus will now shift to how the behemoth performs when Greg Abel succeeds Warren Buffett as CEO of Berkshire, effective Jan. 1, 2026. Warren Buffett will continue to be the company's executive chairman. Given Berkshire Hathaway's premium valuation, unfavorable return on capital and muted analyst sentiments surrounding the company, it is better to adopt a wait-and-see approach for this Zacks Rank #3 (Hold) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Zacks' Research Chief Picks Stock Most Likely to "At Least Double" Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren't winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%. See Our Top Stock to Double (Plus 4 Runners Up) >> Chubb Limited (CB): Free Stock Analysis Report Berkshire Hathaway Inc. (BRK.B): Free Stock Analysis Report The Progressive Corporation (PGR): Free Stock Analysis Report

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