With the constant flow of negative coverage for both the economy and global markets, it can be difficult to keep up to date with which products are competitive. Here we offer you some help by taking a look at the range of current solutions available for both savers and investors.
The constant barrage of news items which outline a negative view of the current economic and investment landscape create a difficult environment for decision making, whether you are looking at savings products or investments. Headlines such as ‘FTSE sinks again’, ‘record low interest rates set to continue’ and ‘inflation on the up’ are unfortunately all too familiar.
Although the driving forces behind these market conditions might be beyond our control, it is vital that before you do take action you make sure that you understand all of the options available. We therefore take a look at some of the most popular areas where we can help you find the best deals.
Fixed rate bonds
Current best deals include 3.35% fixed for 1 year provided by FirstSave and 3.55% fixed for 2 years provided by Vanquis Bank. Higher rates are available for committing to a longer term, with Scottish Widows offering 4.25% fixed for five years.
Often regarded as a mainstay for UK savers, this is now under challenge. Certainly the golden age of 7%+ per annum seems well and truly behind us but there are more compounding problems. Inflation is certainly on the up, with the Consumer Price Index currently at 4.5% and the Retail Price Index at 5.2% - so you have to match this rate just to keep the spending power of your money. And don’t forget tax – unless you’re a non-taxpayer you will have to take off at least 20% from the quoted rate.
Fixed rate bond alternatives
The continuing impact of historically low interest rates has resulted in a sharp increase in the search for alternatives. Consequently there has been an increased focus on structured deposits which combine capital protection with the potential for higher returns than those available from fixed rate bonds.
The market for these products has grown substantially, with major banks (such as Royal Bank of Scotland and Santander) providing the financial strength on the deposits, thus giving peace of mind to the investor.
Two plans have generated particular interest recently: Meteor’s Income Deposit Plan offers the investor the opportunity of 7% each year provided the FTSE stays between 4,250 and 7,250, whilst Gilliat’s Deposit Kick Out provides a potential 10% per annum with the opportunity to mature early each year, dependent on the performance of five FTSE 100 shares. All of these plans are also available as Cash ISAs and for Cash ISA transfer.
Furthering the concept of defined return and defined risk is the structured investment. Although your capital is at risk, these plans replace the day to day volatility associated with direct investment by cleary stating up front what must happen to provide the returns on offer. These products are also appealing since they can be structured to benefit not only from rising markets, but also flat or falling markets.
An example of a plan which benefits from a flat or rising market is the kick out plan. These offer exposure to an index, for example the FTSE 100, and if the level of the index is higher at the end of each year than its starting value, it will provide a fixed annual return for each year it has been in place. For example, the potential annual return from Investec's Enahanced Kick Out Plan is currently 10.5%. In contrast, if you consider the market will decrease over time then Morgan Stanley’s Defensive Digital Plan offers the opportunity of a fixed return of 60% even if the FTSE falls by up to 20%.
Structured investments therefore offer a wide range of compelling alternatives to investment funds and are available as Stocks & Shares ISAs.
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No news, feature article or comment should be seen as a personal recommendation to invest. If you are in any doubt as to the suitability of a particular investment please contact us for advice.
The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors.
Some structured investment plans are not capital protected and there may be the risk of losing some or all of your initial investment. There is also a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated, in which case you may not be entitled to compensation from the Financial Services Compensation Scheme (FSCS). In addition, you may not get back the full amount invested if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.
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