Page 26 - Phonebox Magazine October 2008

Finance Matters
brought to you by Advison Independent Financial Advisers
Are your savings losing you money?
This month has seen Mervyn King, the Governor of the Bank of England, have to write to the Chancellor of the Exchequer for the third time. Since interest rates have been set by the Bank of England rather than the government of the day, there has been a requirement for the Governor to write should the level of inflation (as measured by the Consumer Prices Index – CPI) vary by more than 1% from the target. Currently the target is 2% and as such a letter has to be written each time CPI is outside the range of 1% - 3%.
The CPI figure for September was 4.7%, whilst RPI stood at 4.8%. Rising inflation is bad news on a number of fronts, although a high figure in September is welcomed in some quarters because many State Benefits have their annual increases based on the inflation figure for this month.
However, for savers in the UK this level of inflation can mean their money is actually losing value in real terms. For a 20% tax payer, a gross interest rate of 6.0% will be required just to
match the RPI figure, let alone make any real gain. Bearing in mind the vast majority of money in the UK is on a lot lower level than this, most of us are losing money on our savings.
The expectation is that inflation will fall over the coming year and this is the reason the Bank of England Monetary Policy Committee has not put up interest rates to try and dampen it down. For savers, the bad news is that if the forecast reduction in inflation occurs, it is almost certain that a reduction in interest rates will follow.
If you are one of those with money in accounts with a low level of interest, you should look around to see if there is a better rate you can achieve. Additionally, for those who are prepared to take a level of risk and tie up some of their savings for a longer period of time, assets other than cash may be appropriate. These could include Gilts or Investment Grade bonds which may be able to achieve higher returns, in particular during a period of falling interest rates. K
Expert independent advice is essential to ensure you make the most of the opportunities available for you and to establish an effective strategy. Unlike many IFAs, Advison not only provides the initial advice you require but also produces regular personalised reviews of your Investments, Pensions and Protection Policies, enabling us to ensure the assets you hold are still relevant to your circumstances. We would be pleased to discuss your specific situation and plan the most appropriate course of action for you. For full details about Advison please see our advertisement below.
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Independent Financial Advisers
Advison is a small, friendly and reliable firm specialising in Investments, Retirement Planning and IHT Mitigation.
We offer a return to the traditional values only a smaller company can offer, a service we find
is appreciated by the more discerning client. We are happy to see you in the comfort of your own home or at our peaceful and relaxed country offices, which have plenty of free parking.
All staff at Advison is either AFPC or FPC qualified.
----------------This is your opportunity to speak with the experts----------------
• Planned Savings Magazine – National Estate Planner of the Year
• Regularly quoted in the national press for over 10 years
• Used as financial planning experts on BBC, Sky, CNBC, Bloomberg, Simply Money and the Money Channel • Choice Magazine’s Pensions and Trusts expert
Call Kevin or Andrew for a preliminary chat or to arrange an appointment.
No 7, Water End Barns, Eversholt (Nr Woburn), Beds. MK17 9EA T: 01525 288488 E Mail: ifa@advison.co.uk
Advison Ltd is an appointed representative of IN Partnership the trading name of The On-Line Partnership Limited which is authorised and regulated by the Financial Services Authority. Registered (England) No. 5009271
26 Phonebox Magazine