1 PLIGHT OF SAVERS
The search for income has intensified in recent years as it has hit home that low growth and low interest rates are here to stay in the developed world. In the UK, the Bank of England base rate has been at an historic low of just 0.5% since March 2009 – and there’s no indication that this will change any time soon.
Darius McDermott, managing director of Chelsea Financial Services, the investment fund broker, says: “Anyone still in cash should really consider taking on a little more risk to get better returns: £10,000 left in cash when interest rates first went to 0.5% is only worth £10,234* today. If the money had been moved to the average UK equity income fund it would be worth £25,669.”
2 GREATER RISK = GREATER REWARD?
Justin Modray, founder of Candid Financial Advice, a recently-launched independent financial adviser (IFA), warns that, aside from shopping around for a better savings account, there’s no magical way of earning more interest: a higher income means taking on greater risk.
“If you can’t afford to lose money then taking risk is probably a bad idea, but if you can afford to risk some money, or already have a portfolio of investments, then other sources of income stack up well versus cash.”
* 9 March 2009 to 9 November 2015. IA Money Market and IA UK Equity Income sectors
