Is inflation about to rise?

Millions of Britons could potentially see their savings shrink should inflation start to rise.

The latest inflation forecast figures due out (15th August 2017) showed prices rising at 2.7% but with pay remaining flat even with the news that unemployment continued to fall. In the end the Office for National Statistics showed that the consumer price index (CPI) remained at 2.6% the same as the previous month.

There are a number of different factors creating inflationary pressure in the economy including rising commodities and oil prices. A strong economic growth pushes up inflation also with an increase in the demand for goods and services potentially leading to an increase in prices. The falling pound also contributes to higher inflation as that makes importing goods more expensive.

The rising inflation and the stagnating growth in British households pay packets eats away at the nations savings placing a rising pressure on households. Philip Shaw, chief economist at Investec forecasts inflation to gently rise over the coming months to 3%.

The reality is that most people don’t know how to protect their savings and it could see their wealth simply drain away.

In the long-term this is a threat to people becoming financially worse off in retirement especially if you take in to account low interest rates and the stagnant wage growth.

So what can we do to minimise the risk? In a survey by YouGov 27% felt property was a good way to outpace inflation, 13% thought Cash ISAs could help maintain spending power and surprisingly only 7% said investing in stocks and shares ISAs would help particularly as these offer more protection against inflation than Cash ISAs even though there may be a greater investment risk. As the ISA pot increases yearly, now at £20,000 a year, the biggest danger is that some may leave more of their long term cash savings in cash.

Alistair Wilson, head of Zurich’s Retail Platform Strategy said “If you are putting money aside for the long-term, a workplace pension is one of the best ways to grow your savings, and prevent them from being eaten away by inflation. Not only do you receive a top-up from the Government in the form of tax relief, your employer is also likely to put money into your pot, which can help turbo-charge your savings.”

So here are three simple steps to help beat inflation

1. Shop smart – research before making a purchase
2. Consider stocks & shares ISA rather than Cash ISA
3. Top up your workplace pension – benefit from matched employer contributions, you receive tax relief and are better protected from short term market fluctuations

Professional advice is essential

When it comes to looking after our retirement planning and investments, vigilance and professional advice are essential. If you are wondering what to do, contact Robert Bruce Associates for individual assistance.

NOTHING IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL FINANCIAL ADVICE.

Source:
Goldmine Media
The Guardian
Zurich

Pension or ISA in retirement?

It seems with all the changes in legislation over the past couple of years, the full freedoms to pension savers and the launch of the Lifetime ISA (LISA) has opened up the need to consider how funding ISAs fits in with investors longer term objectives.

ISAs are traditionally used for savings in a tax efficient way, free of income tax and capital gains with no tax to pay when cashed in unlike pensions which receive upfront tax relief and up to 25% taken as tax-free cash.

The “LISA” which launched in April is a long term saving product, locking up cash until the saver buys their first home or takes the pot as a pension and contributions being boosted by the government. Eligible for over 18 and under 40 and contributions receive a government bonus on any sum up to £4000 a year.

If you are under 40 maybe its worth opening a LISA, you only need £1 to secure the option in investing and once you’ve passed your 40th birthday you’ll loose the chance to open an account.

According to a MetLife study 34% of savers are looking to the ISAs for the majority of their guaranteed income in retirement. Even over 55’s (more than a quarter 28%) are considering using ISAs. Around 21% of pension savers are making more use of ISAs following pension freedoms.

MetLife UK wealth management director, Simon Massey, said: “The increase in annual ISA subscription limits from £15,240 to £20,000 in April this year highlights how much can be saved tax-free, and makes them a real option for retirement planning.”

The MetLife research shows that financial advisors are welcoming the flexibility that pension freedoms, and the incoming ISA subscription limits are bringing. However, saver should be careful before dismissing pensions as tax benefits are still the clear winner over ISAs especially for the higher-rate taxpayer and a pension can only be drawn on after the age of 55 unlike an ISA where funds can be taken before retirement.

Ultimately a hybrid strategy of pension and ISA funding is probably the best idea giving the investor more flexibility moving forward for retirement.

Professional advice is essential

When it comes to looking after our retirement planning and investments, vigilance and professional advice are essential. If you are wondering what to do, contact Robert Bruce Associates for individual assistance.

NOTHING IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL FINANCIAL ADVICE.

Source:
The Telegraph
The  Actuary

Faint signs of life in the savings market

Piggy Bank2Slight boost in savings rates

There has been a modest rise in savings rates being offered in the marketplace.

A recent survey has shown that the majority of both non-ISA and ISA deposit taking companies have raised their rates marginally over the last two months. In the non-ISA sector, no notice rates have risen by 0.1% to 0.67%, which is just below a two-year high, whilst notice accounts have risen by 0.03% to 0.79%, again the highest rate seen since December 2013. The number of products available in this sector increased by 43.

In the ISA sector the number of products available in the market rose by 26, to stand at 333, the highest number seen since October 2012.

Given that cash ISAs make up the majority of the increase in depositing, increasing competition in this sector has seen rates rise. Average rates for no notice cash ISAs have risen by 0.02% to 1.14% and one-year fixed rates have risen by the same amount to 1.48%. This one-year rate is now at its highest level seen since November 2014 and shows a fairly positive trend.

One caveat here is the fact that longer-term ISA rates have not followed suit, but have actually seen a drop in interest rates offered of 0.02% to 1.88%.

As is usual, due to the financial tax-year end, April saw a rise in search activity as searches for fixed ISAs accounted for 26.45% (an increase of 1.07%), whilst searches for variable ISAs accounted for 23.61% (an increase of 0.5%).

Given that the base bank rate has remained at the historical low of 0.5% for over six years now, and that inflation has turned negative at -0.1%, this is good news for savers.

If you would like guidance on any of these issues, please give us a call. We would be happy to offer you our advice.

Professional advice is essential
When it comes to looking after our retirement planning and investments, vigilance and professional advice are essential. If you are wondering what to do, contact Robert Bruce Associates for individual assistance.

NOTHING IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL FINANCIAL ADVICE.

Junior Isa – Investing in your children’s future

Next month (November 2012) marks the first anniversary of the Junior Isa (Individual savings account), which was introduced as a tax-efficient savings vehicle for children.

Designed as a mini-extension of the existing and very popular adult Isa, the junior version allows parents, grandparents and even family friends to invest cash on behalf of children, or those under 18.  This investment can be in stocks and shares or in cash.

Whilst launched, with good intentions, to replace the Child Trust Fund (CTF) the take-up of Junior Isa’s has been disappointing.  The HM Revenue & Customs (HMRC) reports that only 72,000 such accounts were opened between November 1st 2011 and April 5th 2012, with investment funds therein totaling £116m.  This is a tiny proportion of the eligible number of such children – approximately six million – or less than 2%.

Given that there were 5,500,000 CTF’s opened by April 2011 this looks disappointing, however, at the introduction of CTF’s the then government donated a voucher worth £250 to each child, but since then only 18% of such funds has seen any further investment.

These additional investments totalled £325m, which is only an average of £321 per account. Compare this to the average held in the newer Junior Isa which is £1,614.

So whilst they appear to be less popular, those parents, grandparents and other benefactors are utilising the vehicle to better effect.

Research conducted by Family Investments reported that 92% of parents and children aged under 18 said whilst they thought that it was important to save on behalf of their children 56% of those canvassed had not even heard of a Junior ISA.

Given the tumultuous economic climate we are living through, the need for long-term saving for our off-spring has never been greater.

We have heard much of the “bank of mum and dad’” having to be utilised in later life to fund a child’s education, work placement ,or eventual house purchase, what better way to cushion the shock of this requirement by starting such a Junior Isa now.

Please contact us to see how we can advise you on the best way forward when investing tax-efficiently in your children, grandchildren or family.

Professional advice is essential
When it comes to looking after our retirement planning and investments, vigilance and professional advice are essential. If you are wondering what to do, contact Robert Bruce Associates for individual assistance.

NOTHING IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL FINANCIAL ADVICE.

Drip feed can ease investment risk

In the 1950s and ‘60s, National Savings Stamps were a simple way to save. You could buy stamps for sixpence (2.5p) or two-and six (12.5p) at the post office. They were an incentive to save a little, even in hard times, and boost Government cash after the war years. Stamps paid no interest; the idea was to fill a page and pay them into a Post Office Savings Bank account.

What was simply a way of gradually accumulating a useful little bit of capital has now been adopted for equity investment, but with a difference. Whereas putting 7/6d into savings stamps each month – or, nowadays, perhaps £100 monthly straight into an interest-bearing account – represents a level monthly investment, the same does not apply to equities.

As we all know, equities can produce capital gains and also rising dividend income, although neither part of this happy combination is guaranteed. Indeed, the exact opposite may happen, particularly in the short term; and the effect of short-term fluctuations in share values has been heightened in the past few years by more volatile markets.

Thus an investor who buys shares worth £36,000 one April might, if prices collapse over the following six months, do less well in the long run than another investor whose £36,000-worth of shares bought six months later would have been priced lower, giving more for the same money. If the first investor had a crystal ball to foresee the collapse, their purchase could have been postponed. Conversely, share prices could have taken off between April and October; then the second investor would have done less well.

If, like many of us, both of these hypothetical investors really wanted to moderate the risk of putting a chunk of money into equities just before a stock market downturn, they could have used an investment method called ‘pound cost averaging’. Instead of investing the £36,000 all in one go, they could perhaps drip-feed £3,000 into shares or units in a collective investment scheme every month for a year.

With this technique, if share prices drop steadily in the first six months, investors will buy more shares or units for each successive monthly £3,000. If share prices go up steadily, their £3,000 would buy fewer shares or units each month. With this drip-feeding method, both investors potentially soften the impact of an early slump in share prices, which would be a relief. On the other hand, if prices move ahead strongly during the early months, they will not gain as much as if they had put in a lump sum at the start.

Talk to us about whether the pound cost averaging method could suit your risk profile and objectives.

Professional advice is essential
When it comes to looking after our retirement planning and investments, vigilance and professional advice are essential. If you are wondering what to do, contact Robert Bruce Associates for individual assistance.

NOTHING IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL FINANCIAL ADVICE.

Savings & investment – join the regular army

A whole army of savers opt to put money away regularly, month by month. It takes commitment, as situations may arise when the cash would be handy to meet some immediate need. Two or three decades ago, regular saving was the norm; if you wanted to get a mortgage, you had to demonstrate the ability to find a fixed sum each month and keep it up for some time to show you would be able to find monthly mortgage payments.

After the credit boom and later crunch, regular saving has been coming back into fashion. It is not surprising that financial institutions rather like regular savers as they deliver a steady inflow of money. Thus you may discover that a bank or building society offers a more generous interest rate on its regular savings accounts, interest that can aid progress towards a savings goal.

It can pay to find out what is on offer from your own bank or building society and checking what may be available from its competitors. The most eye-catching offers may be dependent on other accounts being held and subject to a monthly saving cap and a reduced interest rate after a fixed period of saving. Alternative offers may have less appealing headline rates but give more flexibility with fewer strings attached.

Many different regular savings accounts exist in the marketplace. It is sensible to seek out one with terms that fit your needs, from the monthly amount you can invest to the length of time for which the premium rate of interest will be earned. With a variable monthly amount and a low minimum – or even the ability to skip a month now and then, penalty-free – you may dispel any concern about occasional unforeseen expenditure.

Monthly investment may also work well when building a stake in an equity-based collective investment scheme, provided this form of longer-term investment matches your needs and attitude to risk. When you ‘drip-feed’ your investment monthly, you avert the risk of putting a lump sum in just before a stock market fall. Should share prices drop after your first payment, your second will purchase more units in the scheme, and so on as prices fluctuate. The technique is often referred to as ‘pound cost averaging’.

Whether you invest in a cash account or an equity fund, the benefits of regular investment may be even greater if the monthly subscriptions go into an Individual Savings Account, especially if interest or dividends are reinvested. No tax is levied on interest; just the 10% deducted from UK company dividends is charged. The annual ISA limits (£11,280, £5,640 for cash, Junior ISA £3,600) divide by twelve for convenient maximum monthly subscriptions.

It is always advisable to take professional guidance on your savings and investment decisions, particularly regarding their tax efficiency.
Professional advice is essential
When it comes to looking after our retirement planning and investments, vigilance and professional advice are essential. If you are wondering what to do, contact Robert Bruce Associates for individual assistance.
NOTHING IN THIS ARTICLE SHOULD BE SEEN AS GIVING INDIVIDUAL FINANCIAL ADVICE.