The Office for National Statistics (ONS) recently confirmed that inflation calculated by the Consumer Prices Index (CPI) rose from 1.8% in January to 2.3% in February, a figure above both the Bank of England’s own target of 2% and the figure of 2.2% predicted by many financial commentators. This rise will obviously have an impact on how far the money in your wallet is likely to go – but what about the money in your nest egg?
Unfortunately, the recent rise means that it will be harder than ever for your interest-bearing savings to generate real returns on your investments.
* The value of any money you have in a typical high street savings account will now be eroding more quickly than before.
The rise in inflation also means that it’s now even harder to find a savings option that will actually beat the 2.3% figure. Many of the accounts that exceed this rate are help to buy ISAs, but this makes them unavailable to anyone not saving towards their first home.
Other options open to all savers struggle to beat the new inflation figure – even the new NS&I savings bond, which will pay 2.2% and was heralded by the Chancellor, Philip Hammond, as offering welcome respite for savers, will no longer be able to keep pace.
* Away from savings accounts many investment funds, including those held within an ISA, offer the potential of higher rates of return and traditionally can keep pace with inflation, but equally, they come with an increased level of risk.
And before considering using cash savings to fund an investment it will also be important to ensure that you have access to sufficient cash resources at all times to meet your short, medium, and longer term needs. In this volatile world, frequent changes in market conditions, in inflation, and in interest rates, will affect the balance of any portfolio as well as its risk profile.
* The key advice is to check you are maintaining the appropriate portfolio balance for your risk profile, and to regularly review your capital and income needs both now and in the future.
Barry Fleming & Partners has grown from a tax advisory background into a broader business that encompasses investment management. Both things matter for wealth management, retention and creation. That expertise makes the company strikingly different from others.
This capability allows Barry Fleming and Partners to use its strength in tax advice to take a 360-degree-view of a financial situation to give much broader, more comprehensive advice.
We bring together up to the minute tax, estate, investment and retirement planning advice to create individual, ‘joined up’ financial strategies. This allows our clients to understand and have confidence in how they can best control, retain, and build their assets and income to achieve their objectives with least risk.
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Barry Fleming & Partners are an independent financial advisor specialising in ISA’s, Pensions, Tax, Trusts, Estate Planning, Inheritance Tax Planning (IHT) and other Financial Planning areas. Please don’t hesitate to call on 01488 608 686 and ask to talk to one of our financial advisors. Alternatively use the contact form on our home page.