The best savings and investments

Posted on: 20 September 2011 by Matt Higham

Matt Higham ponders the best options for keeping your investments safe from inflation.

National Savings & InvestmentsIn a blow to savers wanting to beat inflation, National Savings and Investments (NS&I) have withdrawn their Index-linked Savings Certificates and Fixed Interest Savings Certificates from sale. NS&I have stated that any existing Savings Certificate holders can reinvest into another type of Savings Certificate on offer at the time - regardless of the Savings Certificate they currently hold

But, as Savings Certificates have now been withdrawn from general sale (as of 6th September 2011), anyone who has invested in other NS&I products will not be able to reinvest their money into Savings Certificates. (1) 

So how to beat inflation at its current levels and make any return above this with a savings account? Although possible, it's not easy and you don't have many options: you will need to find an account paying at least 5.2% net interest as this is the current rate of inflation. At present, there are very few high interest savings accounts that do this. If you held £10,000 in an average Building Society at current levels of interest, and took no income from it, you'd lose the cost of a small family car over a 10 year period. 

Those banks and building societies that do offer an interest rate to beat inflation are fixed rate ISAs, available from the Yorkshire and Principality building societies and the Clydesdale Bank, to name a few (2). Be aware, too, of all the details in the small print. 

For most people the attraction of the index-linked savings certificates from NS&I was that they offered an easy solution to the problem of how to beat inflation, as they gave a return in line with inflation as measured by the Retail Prices Index as well as a percentage of interest, provided the certificate was held for at least a year. The other great appeal of National Savings and Investments is that they offer an unmatched level of security for your capital because they are backed by HM Treasury.

When you save or invest it's often because you want to create a sum of money available to you at a certain time, preferably tax free, with some flexibility and without taking too much risk. How to beat inflation as well can be the tricky part. 

The following are some of the ways you can do that which are not savings accounts. First of all, you could try collective investments; meaning that you can get a spread of a wide range of shares across a spread of different companies. Some examples are as follows:

  • Unit trusts
  • Open Ended Investment Companies (OEIC)
  • Life Assurance Bonds
  • “Guaranteed” income or Growth bonds

They all have good and bad points and within these collective investments there is a wide variety of choice. Before you invest in any of these, have a chat with an independent financial adviser who can find out about all your requirements and match you up to the best type of savings or investment to meet those requirements. A good independent financial adviser will ask you to start with what risks you're prepared to take, what access you might need to your money and what your rate of tax is, as well as other details. 

All this information is vital for tailoring exactly the right investment for you, to meet your requirements, achieve your objectives and try to beat inflation. Your adviser will then research to find the best solutions for you and return to you with them. They may also suggest using an Investment Wrap Account to help you keep the costs of your investments down, make charges more transparent and make them easier to keep track of. 

Overall though, the most important thing to consider when you want to know how to beat inflation is the kind of tax 'environment' your investments will be held in. Your adviser will help you choose your investments carefully to make sure as far as possible you invest in a tax free environment, and within Capital Gains Tax levels, for example. 

For a free assessment of your savings and investment choices, call Worldwide on 0845 230 9876, e-mail or take a look at our website

The value of shares and investments can go down as well as up.


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