Savings Advice

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Investments, Savings Advice No Responses »

Sep 142011

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With inflation now running at a high level and the stock market in turmoil, there is only one place that offers savers real risk-free returns without paying a penny in tax.

National Savings & Investments’ index-linked savings certificates continue to be hugely popular – and it’s not hard to see why.

Not only have they delivered better returns than any high street bank or building society account; they have also outperformed many riskier investment accounts.

For savers the real selling point is that their money keeps its purchasing power. The same can’t be said of most high street savings accounts, which that are losing money in real terms once tax and inflation have been taken into account.

Savers can invest up to £15,000 in these certificates, and will get a return equivalent to RPI (currently 5pc) plus 0.5pc over the five-year term. Not surprisingly, money has poured into these “linkers” – a total of £6.5bn was invested in just two months after NS & I reissued the savings plans earlier this year.

If you had invested the full £15,000 in NS & I linkers 10 years ago are now sitting on a nest egg worth £23,746 – an annualised return of 4.7pc. This is despite the fact that inflation has been low for much of this period. Over the same period, the average corporate bond fund has produced annual returns of just 3.7pc, while the average equity income fund has returned 3.6pc – both of which could be taxed if held outside an Isa or pension.

Savers should also ensure that they had some money in an instant-access account for emergencies, but savings certificates should then be their next port of call. Investing in equities can be a good long-term bet against inflation, but, as we’ve seen recently, shares can be volatile and you need to be prepared to shoulder this risk.

Although there have been very few new issues of savings certificates in the past two years, NS & I has in the past launched two or three issues a year. Those who have stuck with these savings products can now have sizeable sums protected against inflation.

Protect your savings from inflation

Savings Advice No Responses »

Sep 142011

Inflation running far ahead of the Bank of England target, most savers are finding that their money is worth less by the day. There are steps that savers can take to avoid inflation eroding their savings. Below we look at the most popular options.

GDP projection based on market interest rate expectations and £200 billion asset purchases, August 2011

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Inflation-linked bonds and accounts

Some banks and building societies have launched inflation-linked products for those concerned about their cash losing value. But, it can be difficult to work out which ones are best for you, and some tie your money up for a long time.

Bonds from National Savings & Investments have the advantage of not requiring you to pay tax on your interest, and offer 0.5pc above the RPI when held for five years. However, you can take your money out earlier and still get a return as long as you hold them for at least a year. You can put in £15,000 per issue.

ISAs

For those who pay tax on their interest it is almost impossible to outrun inflation.

This makes it more important than ever to use your tax-free cash ISA allowance of £5,340 a year. The best rates are available to those who are willing to put their money away for five years, and include Northern Rock’s fixed-rate Isa paying 4.26pc over five years, just below June’s CPI figure. With inflation predicted to fall back from here in the coming months, this product should help your cash to maintain its value.

Mortgage overpayments

Another option to avoid inflation on your savings is to make overpayments on your mortgage. By offsetting your savings against your debt, you effectively end up with an interest-free savings rate at whatever rate you are paying on your mortgage.

For many people this will be better than a top-paying savings account. However, you need to make sure that you do not fall foul of your lender’s rules on overpayments. Some mortgages are fully flexible, allowing you to make overpayments and get them back freely, while others do not allow you to take overpayments back, or will charge you if you make too many.

Top paying savings account

If you want total security for your savings and have exhausted all other options and used your tax-free allowance, the best you can do is to find the best paying home for your money. You will get more interest if you tie up your money for longer, but the tax, if you have to pay it, is likely to take the total return way below inflation.

Lower-risk investments

If you want to take on more risk, a portfolio of dividend-paying shares can help you to outrun inflation. This is only an option for those with a diversified portfolio and who can withstand (both emotionally and financially) the ups and downs of stock markets. The good news is that after a dreadful couple of years, the number of companies increasing or reinstating dividends this year outnumbers those that cut or cancelled payouts in 2009.

But investors might prefer to buy funds than invest in a spread of dividend–paying companies, which tend to be equity-income funds. These funds have had a tougher time than many over the past three years, but are starting to come into their own as dividends make a comeback.

Low interest rates until 2013

Savings Advice No Responses »

Sep 132011

Interest rates are likely to be frozen at their lowest ever level ‘until 2013’, economists have warned.

The historic 0.5 per cent low has now remained for 30 months, the longest period of unchanged rates since the Second World War.

The Bank of England cut the base rate in March 2009 to try to promote ‘liquidity’ during the credit crunch which followed the financial crash of 2008.

Economists have warned savers, with many earning as little as 01 per cent, that it is likely to last for at least another year.

It is good news for homeowners with a variable mortage, who can look forward to a further extended period of low rates. But for savers, the income from their savings, which many pensioners rely on, has all but disappeared.

The global economic slowdown is bad news for Britain because many UK firms rely on strong growth around the world to boost trade and jobs.

Growth is turning out to be much slower than we thought three months ago. But he said that a downturn on the scale of the recession of 2008 and 2009 ‘is not foreseen’

Financial benefits of renting office space

Savings Advice, Small Business No Responses »

Jul 212011

If you’re a small business or start up it can be hard to see the benefits of renting office space, especially from a cost effectiveness perspective. But if you’re shrewd, you can end up with your business in impressive new premises while still pushing forward towards your financial goals.

The latest trend is shared offices – taking part of an office that is managed by another firm on monthly running contract, rather than the old leasing model that sees all the responsibility and admin heaped on your company. Of course, desk rental isn’t for everyone. But have a read through this short office space rental guide to see if either renting, or renting out, desk space might be viable for your business.

1) The office gives you the edge

If you’re not already in an office – perhaps working from home – there is a lot to be said fro renting office space. First, there is professionalism – depending on the business and the type of clients you may have, simply having an office address, being in the town centre or regular access a meeting room can raise your businesses stakes. If you’re a start-up looking to spread your base, nothing says you mean business like moving into a quality commercial unit.

2) Contacts and inspiration

When you rent desk space in a shared office, you get the benefit of being in an environment with other small businesses. You tend to find many small businesses and freelancers who take advantage of serviced or shared office space are from creative professions such as writers, designers and web developers. This can create a great office buzz, where like minded people can share ideas and ask advice, as well as offering up opportunities not only for business deals but also friendships.

3) Spend a little more, get a little more

If you’ve looked at moving into office space, but found you can’t get what you need for the money, try looking at somewhere a little bigger. Sounds crazy, but if you can agree with whoever you’re leasing from to sub-let some of the space you can recoup the extra space, or more, by getting others in to share your offices with you. You may find you can get into a slightly nicer area, or a better looking building, by taking on a little more space.

4) Downsized? Claw that money back

The recession has hit us all, some worse than others. If you’ve found you had to lay off staff and are now rattling round in a half empty office, why not let that space out to other small businesses that are looking for a break and will appreciate cheap serviced offices or shared offices? The new influx of people can give your office a new lease of life, while you’re already heating and lighting that room – you may as well let someone make use of it and pay you for the privilege.

There are of course some possible downsides. If you are looking to rent office space you may not be happy that you’re relinquishing so many decisions – from decoration to choosing a broadband supplier or security firm. But remember, it will be on a short term lease – you can move on easily if things don’t work out.

Security can be an issue, of course. For some businesses it simply won’t be appropriate to have people not connected directly to your company having open access to your building. Some may even find the extra staff a distraction, rather than a positive addition to the work environment. But for many, renting office space provides the perfect answer to their problems.

About the author: Chris Marling writes on behalf of Office Genie, the UK’s first proper online marketplace for desk space and shared office space.

Personal Loans

Savings Advice No Responses »

Mar 092011

loans Personal Loans offer you the opportunity to borrow money from a financial institution, such as a bank and gradually repay the amount borrowed in installments over an extended period of time. A personal loan can be taken out for a wide variety of reasons such as financing an extention, going on holiday, or even paying for private medical treatment. In exchange for the personal loan, you will be required to pay interest on the amount you have borrowed, which means that the total amount you repay will exceed the initial value of the personal loan.

Before you decide to take out a personal loan, consider all your options carefully and make sure that you will be able to afford the repayments. Failing to make repayments will have a detrimental effect on your credit rating. But if you handle it correctly a personal loan can enable you to manage your finances more easily and provide you with extra finance when you need it most.

When you understand the advantages and disadvantages of personal loans in general, comparing the loans on offer will prove easier.

Advantages of a Loan
Loans are a fast way to obtain funds for a special purchase or project, and even large amounts can be borrowed for almost any purpose. They are suitable for expensive purchases that require immediate payment, allowing you to spread the cost of the purchase and manage your short term finance easily.

There is a lot of competition amongst lenders, which usually makes it possible for you to negotiate a cheaper interest rate than the one which you are initially quoted. It may also be worth investigating whether there is a specialist lender who can provide loans tailored to your specific purpose, for example buying a car, since they may offer you a cheaper or more suitable loan.

Disadvantages of a Loan
Loans constitute a long-term financial agreement and used in the right way can be a useful financial tool. Anyone considering applying for a loan should look at their income and expenditure carefully, and calculate exactly how much they can afford to borrow based on how much money they can spend on repayments each month, once their other financial committments have been honoured.

If you cannot afford to make repayments when they are due, you may face a penalty. If you have chosen to take out a secured loan, you may even lose your home. For this reason it is important to read all the ‘small print’ of any loan contract to see what penalties could be levied, and consider whether or not you should be applying for a loan at all. If you default on the loan, your credit rating and ability to access credit in the future will be detrimentally affected.

You could also be penalised for making a large lump sum repayment to pay off your loan sooner than agreed. Although most loan companies will allow you to do this, they may charge you an early repayment fee.

For anyone wishing to borrow only a small amount that they aim to pay back within a short period of time, a credit card may be a better solution because the balance can usually be paid off in full at any time without incurring early repayment fees.

Savings safety net

Savings Advice No Responses »

Mar 032011

You can save safely with Banks and Building Societies because of the UK governments savings safety net.

All British savers have the first £85,000 of cash protected in the event of their bank or building society going bust from the 1 January 2011.

This £85,000 limit is applied ‘per individual, per bank’, so if you have more money than this to make sure your savings are government backed put any cash that you have more than the £85,000 limit in to another bank or building society. Remember that joint account customers can get up to £170,000 refunded if their bank fails.

The savings compensation was brought in after the banking financial crisis a few years ago and basically means that If you’re bank or building society hits the walls you are protected. This means that savers can claim back up to £85,000 back from the Financial Services Compensation Scheme (FSCS) – £170,000 for a joint account.

The £85k and £170k (joint account) limits do not apply to money held with National Savings & Investments, where all of your money is 100% guaranteed by the Government.

As Building societies are mutuals, where each member is effectively a shareholder, all building societies are independently governed by their own boards and cannot be owned by another institution. So each of the nation’s building societies will be separately covered by the FSCS up to £85,000 for each member.

Building societies will tend to support each other if the worst happens and their self-protecting outlook means another society is likely to step in and merge with another that may be in trouble.

Further House price Falls are inevitable

Savings Advice No Responses »

Jan 082011

house price falls Further falls in house prices are ‘inevitable’ and will continue into the new year, according to the latest report from property specialist Hometrack.

The forecast came as the index, which surveys estate agents across England and Wales, showed property prices dipped by 0.9% in October – the biggest monthly fall since January 2009.

But Hometrack says it expects a modest drift in the market and not a repeat of the dramatic slump of 2008 to 2009.

‘A stand-off is beginning to emerge between buyers waiting for prices to fall further and sellers being unrealistic on the price they’re willing to accept,’ said Richard Donnell, Hometrack’s director of research.

‘Further price falls are inevitable in the run up to Christmas and are likely to continue into the first half of 2011.’

‘We expect a modest adjustment in prices rather than a return to the double digit falls seen in 2008.’

After registering robust gains as house prices bounced back from their recent lows in spring 2009, the property market has come off the boil in the past six months.

The number of transactions remains low and Hometrack said that house prices were likely to continue to slip into the first half of next year.

You can read more here:http://www.fmwf.com/taxonomy/personal-finance/2010/11/falling-house-prices-are-inevitable/

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