Money in a savings account is returning next to nothing. As has been anticipated for many months, the Bank of England has finally announced its decision to cut interest rates from 0.5% to 0.25%, a record low and the first cut since 2009. The UK economy is said to be contracting at its fastest rate since the financial crisis and the interest rate cuts form part of a raft of measures to try and boost it.
That’s as may be, but it certainly doesn’t give savers much incentive to tie up their money in a savings account. You may understandably be pretty put out that you’ve had to suffer historically low interest rates for over three years, whilst rates on ISAs and fixed term bonds have also been slashed. With fixed-term bond rates having fallen to an all time low, you’ll have to lock your money away for five years or more, if you want to earn anything at all over inflation.
With this in mind, you might think you’re just as well keeping your cash under the mattress! However, in our view there are three viable alternatives to settling for poor returns on cash investments.
Of course, we would offer this as an option you might say, but just look at the numbers. Gold is performing exceptionally well, with the year to date gold price having grown at 40.85% at time of writing.
It consistently demonstrates itself as a sound and safe alternative to cash, which has outperformed shares over the last few years. It will also help to ensure that your savings are not eroded through a combination of inflation and poor interest rates.
Although you won’t receive income from holding gold, the aim is to outstrip inflation through capital appreciation. One way of doing this can be through one-off purchases of either physical gold bars or gold coins. In contrast to the possible risks of electronic gold like mining shares funds – this is just solid gold as a means to proactively protect your wealth and beat bank account returns. What’s more, gold coins are tax free.
A savings account made of gold
At a time when many financial institutions have been withdrawing their ‘best buy’ savings accounts without anything to replace them, a gold savings account can offer a very attractive alternative.
You might think you’d need thousands of pounds of liquid assets to get started in investing in gold but that‘s far from the case. Buying gold is relevant to all of us, regardless of wealth, and can just replace the amount you regularly save in the bank. There are regular gold savings options, which start at £250 per month, with no maximum. This enables you to drip feed funds on a regular basis to build up your nest egg steadily. If the scheme purchases UK gold coins, then any appreciation is tax free, making it comparable to an ISA.
And thirdly, how about a SIPP?
A well managed SIPP has the potential to outperform cash investments, but it doesn’t need to leave the safety of cash behind entirely. Cash can still be part of your portfolio and the proportions adjusted in line with your risk profile as your circumstances change, such as approaching retirement, for example. Of course, you can also hold gold bullion as part of a SIPP, which can be a worthwhile option to consider, for those wishing to add balance to their pension.
Or consider all three…
As an overall recommendation, we would always emphasise that expert advice can help you to better structure your investments and provide a balanced portfolio rather than relying on standard cash ISAs or default bank portfolios. Professional advice can be expensive but if it comes up with some recommendations that bring you greater returns on your cash, you may find it more than pays for itself. Depending on your particular situation, the best solution may well be to consider two or three of the options discussed, providing further diversification.
So don’t despair with record low interest rates and assume the only option is to squirrel your cash away in a savings account. There are other opportunities out there and some of those are golden…