Britain’s savers are caught in a vicious crossfire of low-interest rates and rising inflation. Over the past 11 months – since just before the Brexit vote – the Consumer Price Index (CPI) has risen from 0.3% in May 2016 to 2.7% in April this year, the latest month reported by the Office for National Statistics (ONS). The Bank of England is predicting that inflation will peak at around 2.8%, but independent economists are expecting the 3% mark to be breached sooner rather than later.
Either way, with interest rates still anchored at record low levels, and expected to remain that way for the foreseeable future, there is little relief in sight for those clients who have to settle for 1% or less for putting their cash on deposit with a bank, building society or in National Savings and Investments. Even where those savings are invested in a Cash ISA, inflation is effectively causing losses, in real terms – it is a huge price to pay for housing capital.
Cause and effect
We can attribute the main cause of our rising inflation to the fall in the value of sterling against the major currencies following the Brexit vote almost a year ago. The price of imported goods, including oil, has shot up, putting enormous pressure on the value of disposable income and savings.
But knowing the reason is little consolation to people who are powerless to do anything about it – particularly with the pound continuing to jump around in the run-up to the General Election. The circumstances have emphasised the need to look around for new ways to help clients fight back against this erosion of capital value.
A higher return – and a tax break – might warrant a little higher risk
One answer to the conundrum, though perhaps not suitable for everyone, is to consider accepting a degree of risk in return for higher reward. Introduced in April 2016, the Innovative Finance ISA (IFISA) is designed to allow private investors – as distinct from savers – to earn higher rates of interest through putting their cash into different asset classes, such as peer-to-peer (P2P) loans. More recently the range of eligible assets for IFISAs has been extended to include corporate debentures and crowd bonds.
The result is that, through an experienced IFISA provider like Triple Point Advancr, it is now possible to secure fixed rate, tax free returns for advised clients of up to 6.7% over periods of 1, 2 or 3 years (provided they are held within an IFISA or SIPP). This is a level that keeps them ahead of inflation, allowing their capital to grow, whilst also providing a reasonable level of capital security.
Triple Point Advancr investors need to have a minimum of £1,000 (maximum £1m) and income can be paid out monthly or automatically reinvested for a compounded gain. Underlying investments are selected by Triple Point’s committee of experts who have a successful track-record stretching back over 12 years.
Investments are made in fixed term debt securities, which are secured against the assets of the issuer – typically these are companies that operate in the leasing, lending and asset finance sector, which ultimately finance creditworthy smaller businesses after they have undergone a robust due diligence process.
Triple Point has so far provided over 50,000 loans and leases to UK SMEs, thereby not only providing investors with an inflation-fighting return, but also supporting growth and investment in the UK economy.
Triple Point Advancr offers fixed-term secured bonds targeting high annual returns and are built around a simple idea; to give individual investors direct access to our professionally managed leasing and lending investments via fixed interest secured bonds.
Impact investment as an important part of your client’s investment portfolio
Ian McLennan, Partner and Investment Lead at Triple Point, speaks to Intelligent Partnership about t...
Impact Investment a ‘Win-Win’ for both investors and advisers
A more principled approach to investing is a key theme sweeping markets. However, most of the ethica...
What is driving the nice-ification of investment?
Written by Rebecca O'Connor for "Good with Money"Trends usually start with a small group o...