These are confusing times for UK investors. One minute we are being told that interest rates are on the way up and it is only a question of time before the Bank of England tells us when and by how much. The next we hear that they are not going up after all, at least for a while, and could even be on the way down again if the Brexit talks go badly.
Similarly, not so long ago we were being warned that inflation had raised its ugly head again and, as the doom-mongers had predicted, the Consumer Price Index (CPI) duly broke through 3.0% barrier last autumn. The Bank of England responded by doubling base rate to 0.5% in November. However, since the turn of the year the pressure has eased off and inflation is now back around 2.5%, or roughly where it was a year ago and further expected interest rate rises have not materialised. The pound, meanwhile, which took such a hammering after the Brexit vote almost two years ago, has since recovered against both the Euro and the Dollar.
Whether you are a borrower or a lender, professional or amateur investor, it is hard to know which way to turn, when even the Governor of the Bank of England and Government can’t seem to predict what’s coming next. If you are a saver or investor who wants to preserve the value of your capital the riddle is not easy to solve.
Predictably, last November’s rise in interest rates went straight through to borrower costs, but only trickled through to the rates paid to long-suffering savers. National Savings and Investments will pay you 1.45% on a One Year Income Bond and 1.9% if you agree to lock up your cash for 3 years. Even Atom Bank, one of the new breed of digital banks, will only pay 2.25% for a 3-year commitment. These returns are still below the current rate of inflation.
Perhaps not surprisingly, the only really bright spot has been the Stock Market which has continued on its bull run to reach new levels. But the price you pay comes in the form of risk – how much risk are you prepared to take, or can you afford to take, with your hard-earned capital? What is your appetite or capacity for gambling? The answer will depend on the outlook of the individual and your personal circumstances.
That said, most people would settle for a slightly lower return, if some of the risk was eliminated. One possible solution is provided by the Innovative Finance ISA (IFISA), launched in April 2016, which enables investors to enjoy the returns available through alternative assets – for example, corporate debentures and P2P loans – but in a tax-efficient way. The Government has further enhanced the opportunity by upping the annual ISA allowance to £20,000 for the 2018-19 tax year.
For those who like certainty, Triple Point Advancr IFISA allows investors to secure fixed rate, tax free returns of up to 6.43% over periods of 1, 2 or 3 years through an IFISA. This gives investors a predictable rate of return that comfortably exceeds inflation, combined with security over a portfolio of underlying assets managed by Triple Point’s own panel of experts.
Risk Warning
Risk Warning: remember that Advancr Bonds are investments, not savings, and your capital and interest are at risk. Tax treatment depends on individual circumstances and is subject to change.
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