A former City banker with a quarter-century of experience at giants like JP Morgan and Goldman Sachs has unveiled a straightforward three-step personal finance strategy, claiming it has saved her tens of thousands of pounds.
The Three-Pot Theory Explained
Charlotte Ransom, who now runs the wealth management firm Netwealth, spent 25 years in high finance but admits she previously overlooked the "balance" needed in managing her own money. Her solution, which she calls the "three pot theory," is designed to help individuals make full use of tax-free allowances and secure inflation-beating returns.
"There's a simple but transformational framework that can help you do this efficiently regardless of how much money you have," Ransom told The Times, as reported by the Express.
Pot One: Your Liquid Base
The first pot is your 'liquid base'. This is typically your current account, where your salary lands and from which you cover all essential monthly outgoings such as your mortgage or rent, utility bills, and groceries.
Pot Two: Your Sleep Well Core
The second pot is crucial for long-term security and is dubbed your 'sleep well core'. This is where you place investments like ISAs and pensions to build wealth steadily over the medium to long term, focusing on reliable growth.
Pot Three: Your Passion Play
The final allocation is for higher-risk, higher-reward investments. Ransom labels this your 'passion play'. "It's exciting and rewarding but you can't bank on it for day-to-day living," she advises. This pot allows for speculative investments without jeopardising core financial stability.
Why This Method Is a "Game Changer"
Ransom emphasises that keeping excessive cash in your liquid base means missing significant opportunities for wealth growth. By segregating funds according to this framework, she says she gained greater financial freedom and reduced future money worries. She describes embracing this approach as a "total game changer".
Her advice comes alongside a warning from money expert Martin Lewis about impending changes to savings tax. Chancellor Rachel Reeves announced in the Budget that the tax on savings interest will rise by 2% across all brackets, effective 6 April 2027.
The Looming Tax Change for Savers
This change makes utilising tax-free wrappers like ISAs more critical than ever. From April 2027, the new rates on taxable savings interest will be:
- 22% for basic rate taxpayers (up from 20%)
- 42% for higher rate taxpayers (up from 40%)
- 47% for additional rate taxpayers (up from 45%)
The personal savings allowance, which lets basic rate taxpayers earn £1,000 in interest tax-free and higher rate taxpayers £500, remains, but any interest exceeding these limits will be taxed at the new, higher rates if not sheltered in an ISA.
Ransom's strategy of actively using the 'sleep well core' pot for ISA investments directly addresses this looming financial shift, potentially saving savvy individuals thousands in unnecessary tax.
