Newspaper article The Journal (Newcastle, England)

Are Your Precious Savings Standing Still?

Newspaper article The Journal (Newcastle, England)

Are Your Precious Savings Standing Still?

Article excerpt

IT'S been seven years since the Bank of England slashed its base rate to 0.5% and since then hopes of rate rises have been consistently dashed.

Recently, the situation worsened with National Savings & Investments as well as major banks announcing forthcoming cuts, rather than increases, to the interest paid on many accounts, some by as much by 50%.

Such cuts have dealt another damaging blow to savers needing a safe, but rewarding home for their cash.

So what do you do with your savings? If you need it to grow in real terms, it's likely that you will need to take on some alternative risk beyond deposit accounts.

For those who don't want to risk their capital, sticking to traditional options of savings accounts, leaves them having to accept low interest rates which, in the case of many accounts, is hardly worth having at all. So what if you were prepared to sacrifice the meagre interest paid on most accounts in return for hopefully achieving much more, but still without risking the original capital? One option might be Premium Bonds.

If you have no luck, you will still have your original capital when you cash in your holding, although remember that its spending power will have been eroded by the effect of inflation.

If you have average luck, you will earn 1.25% but if you have exceptional luck, you could earn as much as PS1,000,000 on as little as a PS100 holding, although this is very, very unlikely.

An alternative that we at Lowes Financial Management utilise alongside instant access accounts and sometimes Premium Bonds are structured deposits.

Like Premium Bonds, the net result could just be a return of capital, with no interest, but structured deposits can produce much higher returns than fixed term deposit accounts, without the investor needing luck, whilse providing the same protection against the bank failing. …

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