Monthly archive for October, 2013
With the fund management industry rocked by the recent news that star fund manager Neil Woodford will be leaving Invesco Perpetual, we take a look at five alternatives to consider for those investors who may be taking this news as a good time to review their options.
Decision to leave
Neil Woodford is undoubtedly one of the best known stars of the fund management industry and given the fact that across the giant Invesco Perpetual Income and High Income funds alone he runs close to £25 billion, it is indeed a news item worthy of further consideration. In total, he manages over £30 billion which is just under half of Invesco’s total assets.
Although the news will hopefully not bring about any significant changes in the very short term and investors should not be too hasty to make any sudden changes, his decision to leave will inevitably create difficulties and will no doubt give many income investors a cause for concern.
According to a number of market analysts, the index of UK’s leading blue chip companies could surge ahead in the short term. With the FTSE 100 Index opening this morning over the 6,700 point mark, what could this mean for our investment decisions? We take a look at what the experts are saying as well as consider some investment options to match your view of what the future could hold.
Citigroup tips FTSE to reach 8,000
The FTSE 100 could be on course to break its previous record high and hit 8,000 points by the end of 2014, according to a bold prediction from market strategists at Citigroup. A recent note by the bank’s analysts, reported in the Telegraph, argues that improving bank balance sheets and stronger corporate earnings, alongside easing fears of a eurozone breakup, will lift investor sentiment towards equities, helping to fuel a strong run in the FTSE 100.
Experts at the bank believe a revival of so-called ‘animal spirits’ within UK company boardrooms will spur a pick-up in merger and acquisition activity and act as further support for share prices helping to push them higher.
Whether you’re opening a savings account for the first time or looking for a new deal, you might want to bear in mind our top 5 things to watch out for before you sign up:
1. Decide how much access you want
Typically with savings accounts, the longer you can afford to put your money aside, the better the interest rate you’ll get. Fixed rate savings accounts have tended to provide higher rates on interest than instant access or easy access savings accounts. This effect has been somewhat reduced in recent years due to a record low base rate – but there can be other benefits to a fixed rate savings account. If you know you’ll be tempted to dip into your savings for no good reason, a fixed rate account could act as a deterrent.
2. Beware of introductory rates
Many savings accounts offer an attractively high interest rate at first glance – however, this is often an introductory rate, which is fixed for a set period of time after the account is opened. It can then drop steeply, so make sure that you make a note of the date that the introductory rate ends.
Banks use introductory bonus rates to attract new customers, relying on the fact that the majority of customers won’t switch after the bonus rate ends. If you switch to a savings account with a better rate of interest as soon as the bonus rate ends, you can take advantage of the high initial rate before moving to a new provider – perhaps with a similar introductory bonus deal.
Virgin Money is launching a new range of fixed rate bonds and fixed rate cash ISAs offering up to 2.75% gross/AER fixed.
The new fixed rate bond range includes a rate of 1.75% for a 1 year fixed rate bond, 2.20% fixed for 3 years and 2.75% fixed for 5 years. These savings bonds can be opened with just £1 and have an upper limit of £2m. Account holders will be able to make additional deposits will be accepted for as long as the bonds remain available to new customers. No withdrawals are allowed during the fixed rate period.
Compare fixed rate bonds >>
By combining a high fixed income with conditional capital protection, the Enhanced Income Plan from Investec Bank has been our most popular income investment. With the need for income being at the forefront of every saver and investor alike, we take a detailed look at why this investment plan has proved to be a consistent best seller.
Income needs high on the agenda
Apart from a few blips, although investing in the FTSE over the last 12 months will have been a rewarding experience, meeting income needs still remains a challenge. With low interest rates set to continue, volatile bond yields and increasing uncertainty as to what the next few years could hold in terms of the UK stock market, these are challenging times.
The need for income is also one of the most consistent demands put on our capital, whether you are working and need to supplement your earnings, or retired and looking to add to your pension income, but unfortunately the current economic environment is proving to be one of the most challenging ever seen. With record low interest rates looking here to stay and the ever-increasing impact of above target inflation, these demands on our capital have never been greater.
Fixed or variable income?
Whilst many traditional income investments offer a variable income and put your capital fully at risk, the Enhanced Income Plan combines a fixed income with conditional capital protection. The plan thereby offers a defined return for a defined level of risk, which is perhaps one of the features that helps explain this investment’s popularity.
The troubles facing fixed rate savers have been commented on frequently in recent months as the harsh reality of maturing bondholders facing significant drops in income levels continues to have a dramatic impact on so many of us. But more and more savers still need to face the real truth about the impact this is having and understand the viable options available. Here, we take a look at this genuine savings dilemma as well as one particular option that could be a middle ground for those looking to improve the poor fixed rate returns available from their capital.
The need for interest
The need for a competitive return from our capital is never more prominent than when we consider the level of interest available from fixed rate savings. Whether you need the interest to help boost income, or simply use the interest to help grow your capital, either way you are facing a period of record low returns on offer.
The need for income is also one of the most consistent demands put on our capital, whether you are working and need to supplement your earnings, or retired and looking to add to your pension income, but unfortunately the current economic environment is proving to be one of the most challenging ever seen. With record low interest rates looking here to stay and the ever-increasing impact of above target inflation, these demands on our capital have never been greater. Read more
If you have a regular savings habit, you’re already one step ahead of many people in the UK. But don’t rest on your laurels just yet – it’s always a good idea to review your accounts regularly to make sure you’re earning as much interest as possible, and that you don’t lose out on the latest savings account deals as they come onto the market. Here we look at four situations when you should take a look at your current savings plan to make sure you’re still getting the best deal:
1) When bonus rates come to an end
Many savings accounts offer attractive bonus rates for new customers, which are usually fixed for a limited period such as one year from the opening of the account. When this bonus rate ends, however, the interest rate on offer may be lower than you could get with other savings accounts. So, if you choose a fixed rate account that pays a high rate of interest, make a note of when the fixed rate finishes. It is quite common for your savings provider to automatically move your money into a lower-paying account once the bonus rate ends, unless you take action.
To make sure you get a good deal, check how long the introductory interest rate will last for and if there are any restrictions on you moving your money after the introductory rate ends. Some banks and building societies may levy a charge if you move your money – which means you may lose some of the interest you’ve earned – so make sure you take this into account.
So far, 2013 has seen rates on cash ISAs continue to fall. Many savers have seen their interest rates drop to below the level of inflation (currently 2.9%). With savers earning lower interest on their savings than the rate of inflation, many people are at risk of a reduction in the value of their money in real terms.
To get a snapshot of what’s happening to cash ISA rates right now, we compared data* on several different ISA providers on the British high street – NatWest, Barclays, HSBC, Lloyds TSB, and Santander – to see how their rates have changed over the last 12 months. All rates below are based on a deposit of the maximum cash ISA allowance for that year – £5,640 in 2011/12 and £5,760 in 2012/2013.