{"id":3478,"date":"2016-10-05T00:00:16","date_gmt":"2016-10-04T23:00:16","guid":{"rendered":"https:\/\/blog.propertypartner.co\/?p=3478"},"modified":"2020-10-22T14:32:00","modified_gmt":"2020-10-22T13:32:00","slug":"is-this-the-end-of-savings","status":"publish","type":"post","link":"https:\/\/www.londonhouseexchange.com\/blog\/is-this-the-end-of-savings\/","title":{"rendered":"Is this the end of ‘savings’?"},"content":{"rendered":"

Is this the end of ‘savings’?<\/strong><\/p>\n

\u2018Tell me if this doesn\u2019t seem like Mars\u2019<\/em>, said the Coutts Chief Investment Officer at a Property Partner event in May – \u2018I have an advert from 1991 that says – Nationwide, 1-year cash ISA: 16.25%…\u2019<\/em> It certainly seemed like Mars at the time, in May 2016 – and now? More like Pluto.<\/p>\n

Times have changed, and the Bank of England base rate is at an all time low of 0.25%. The Treasury has now issued public debt at a record negative interest rate of -1.77% a year, and RBS was the first UK bank to announce a negative interest rate of -0.4% for corporate clients. Are savings accounts next?<\/p>\n


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Rethinking your savings<\/strong><\/p>\n

While unlikely at present, it\u2019s by no means unimaginable that we could potentially have to pay for the privilege of keeping our money secure. What we can be sure of, is that there will be no meaningful returns from savings products for a long time. In fact, savings are already being eroded by inflation at today\u2019s rock bottom rates.<\/p>\n

Savers looking for any kind of return, must now be willing to take some kind of risk and start investing – but this isn\u2019t to say that they need to take much risk. So what are your options? The graph below shows a spread of different asset classes, ranked by risk and reward over the past 5 years:<\/p>\n


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\"risk-reward-by-asset-class\"<\/a>
\nSources: Land registry, ONS, FTSE all share index, World Gold Council, Cash savings: Average household deposits with banks and building societies, (compiled by bank of England).<\/em><\/p>\n


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Stock and shares come as no surprise in the higher-risk group of investments. Gold, which can serve as a safe haven in times of crisis, has proven highly volatile and tends to under-perform mainstream asset classes in the longer term. It is also worth noting that the average return for savings accounts is far higher than you\u2019d expect, because of previous rates that we can no longer hope to achieve.<\/p>\n

On the other hand, Residential property has proven a lower risk investment, and with far higher rewards over the long-term. It offers a reliable income stream, and has seen no loss in any 5-year period since records began in 1973. There\u2019s no arguing with the facts.<\/p>\n

In the current environment (and with savings products seemingly at an end) the search for yield has been redoubled. In the words of Alan Higgins, Chief Investment Officer at Coutts:<\/p>\n

\u2018Naturally if you\u2019re offered an income stream of 3-4%, which is likely growing and relatively low risk – of course you have to take it.\u2019<\/em><\/p>\n

Our properties are currently offering an average income of over 3%, with potential gains if prices rise. We\u2019ll say no more:<\/p>\n

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View our properties<\/a><\/div>\n<\/div>\n

 
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