Interest rates: six years at 0.5%
It has been more than five years since UK interest rates fell to 0.5% - the lowest rate ever. That has been good news for borrowers such as businesses and home buyers, but bad for savers. There is no imminent increase on the horizon and a Treasury report of independent forecasts suggests base rates could rise from 0.5% to 1% by the end of 2015.
In the meantime, even the best rates for taxed savers fail to beat inflation. There are, however, other options besides bank accounts for you to consider. If you are happy to lock your savings away, you could earn 3% over five years or 2.7% over three years or possibly more.
However, bank and building society accounts have generally not performed well over the long term. But investing in other ways almost always involves taking on higher risk.
If you are willing to try a riskier investment than cash in a bank account, there are various bond funds. These invest in loans to the Government and to companies by way of gilts and corporate bonds; returns are a mix of interest and gains (or falls) in the bond's underlying value. If interest rates rise, bond prices are likely to fall.
Further up the risk and reward scale come funds with a mix of bonds and equities, and then equity income funds. These invest in shares that managers believe offer prospects of increasing dividends with capital gains. Such products are sensitive to stock markets – values can go up or down - but they may offer better returns over the longer term.
There is no easy solution to low interest rates. If you seek more reward, you must be prepared to take on more risk and we are here to advise you before you make any investment decisions.
The value of your investment and the income from it can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investing in shares should be regarded as a long-term investment and should fit in with your overall attitude to risk and financial circumstances. The information in this article does not constitute advice and should be used for informational purposes only. This content has been provided to Helm Godfrey by Taxbriefs.