PLANNING
Low interest rates
It is a fact that most people in the UK are not great investors, preferring cashbased saving using ISAs and building society-style, interest-based accounts.
Since 2008, UK interest rates have been at an
historic low of just 0.5 per cent and are forecast to
remain depressed for the forseeable future.
Key points
Low interest rates make deposit-based savings
uncompetitive
This means this type of provision is unlikely to
increase the value of your savings enough to provide
a meaningful income over the long term.
Stock market investing can keep your savings
ahead of inflation
UK equities (capital only)
UK RPI
£1,533,381
£532,990
£267,430
Base rate (reinvesting interest)
£538,459
Base rate (interest only)
£275,500
£100,000
£100,000
£100,000
£100,000
£100,000
£100,000
% change
402%
1433%
433%
167%
438%
176%
....................................................................
UK equities (total return)
£502,455
Sum invested
....................................................................
Halifax Residential
House Price series
Return in 2014
Interest rates are likely to stay low until the end
of 2016 at the earliest
....................................................................
1985 - 2014
....................................................................
Once inflation cuts into your cash-based savings, it is
unlikely they will grow in real terms at all. For most of
us, saving for retirement is a long-term exercise and
this time period can help to iron out the ups and
downs of the stock market. In periods of low interest
rates, it can make sense to use your potentially
higher disposable income in order to invest it into
the stock market.
Annualised
5.7%
9.9%
5.9%
3.5%
6.0%
3.6%
Growth trends: UK equites outstripped other asset classes, as long as you steadily
reinvested dividends (Source: True Potential).
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