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Tuesday November 21st, 2017 

News Archive - August 2010

Inflation and savings

14/08/2010

Inflation is creeping up. The Consumer Prices Index (CPI) is standing at 3.2% p.a. Anyone who has been looking for a savings account recently will have found that this level of return is only available if you tie up your cash in a fixed rate bond for at least 3 years. Interest is of course liable to income tax for basic and higher rate taxpayers - the upshot of this is that most cash savers are seeing their nest-eggs shrink in real terms.

It has long been suspected that the Government would not mind a 'dose' of inflation which would effectively devalue the huge debts that the country faces.

Cash savers need to face up to the fact that if their savings are not growing faster than inflation then they are effectively losing money, despite the fact that their bank balances are not falling in monetary terms.

Banks are trying to tempt savers with complicated 'structured products' which offer a return linked to the FTSE100, with a guarantee of their capital returned if the growth targets are not achieved. If you 'do the maths' on these products they tend to be skewed in favour of the bank, with the potential returns not much greater than the risk free return from a normal savings account.

So where should you invest your long term savings?

Investing in a balanced portfolio with exposure to UK and overseas shares, fixed interest and commercial property will give you more opportunity for real growth than a cash investment. The balance between lower and higher risk investments can be adjusted dependng on your attitude to risk to give the desired level of volatility.

At the moment, even cash investments can damage your wealth - come and speak to Mulberry Financial about the alternatives.

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The material here is for general information only and is not intended to be relied upon for individual investment decisions. Appropriate independent advice should be obtained before making any such decisions. Mulberry Financial Ltd does not accept any liability for any loss suffered by any user as a result of any such decision.
The information is based on our understanding of current HMRC rules and practices (as at the news article date) which are always subject to change. Taxation and trust advice and Cash ISAs are not regulated by the Financial Conduct Authority. This site is aimed at UK residents only.
Please remember that the prices of shares and other investments can fall sharply. You may not get back the money you originally invested. Past performance is not necessarily a guide to the future.


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