Tuesday 28th March 2017 saw the Royal Mint release 300 million new £1 coins. The updated design is dodecagonal (that’s the fancy word for twelve-sided), bimetallic like the £2 coin and, perhaps most importantly, impossible to fake according to the Mint, thanks to a closely guarded security feature.
The old £1 coin will remain in circulation until Sunday 15th October, when it will be consigned to history along with the many other obsolete forms of UK currency that have gone before it. The round pound has been with us since 1983 when it was introduced to replace the £1 note. But what could one of the first pound coins have made you in the thirty four years since they were first introduced?
Imagine that £1 coin had been left in a drawer, a piggy bank or (perhaps most likely of all) slipped down the back of a sofa in 1983 and done nothing since then. Inflation up to 2017 would mean that the £1 would have had its buying power weakened by approximately 32p.
Had the £1 been invested in gold or in a cash savings account, the return would be healthier, but nothing to write home about, delivering a real value of £1.05 and £1.33 respectively by the end of 2016. Putting the £1 into UK residential property would have seen its real value at the end of 2016 rise to £2.42 – although this calculation doesn’t assume monthly reinvestment, which makes it difficult to compare to other forms of investment calculated.
Investment in shares would have done a lot better. Had the £1 been invested and tracked the rise in the FTSE all-share index, by the end of 2016 and after allowing for inflation, its value would have risen to £11.66, assuming that any income would have been reinvested every month to make the most of compounding over time.
The above calculations offer a neat reminder of both the corrosion to value caused by inflation and of the potential rewards of investment. Whilst investing will always include an element of risk, if you’re in a position to do so then an investment is the best way to help your money grow. It’s not all about return, but doing nothing with your savings means they’re almost certainly going to be losing value over time.
So when you get your hands on one of the new £1 coins, think about what it could be worth thirty four years from now and what you need to do to make sure it works hardest for you.