Are there any real alternatives to deposit accounts?
The revelation that £2.3 billion was withdrawn from UK savings accounts in the month of January has caught many people by surprise. There are many questions to be answered such as where are these significant funds being reinvested? Will this trend continue in the short term? Which sectors are benefiting?
There are many alternatives, some of which appear to be on the agenda and others which do not:-
Tax efficient savings vehicles
ISAs and other tax efficient savings vehicles are always popular in troubled times as they allow investors to place their funds on deposit, attracting interest, until investment opportunities arise. Cash investments, stock investments and property investments are three of the more popular tax efficient vehicle investment elements.
The UK stock market
At some stage there will be a shift from savings accounts to the UK stock market where there is both potential for long-term capital growth and improvement in income streams in the short to medium term. However, there is little evidence that we are seeing a significant switch into the stock market at this moment in time.
Property
Like the UK stock market, there is potential for long-term capital growth and substantial income streams in the UK domestic and commercial property markets. However, these two markets are currently in a serious decline and there is little evidence that funds are being switched into these areas just yet.
It looks as though savings are either being withdrawn to cover daily living costs or they are being transferred to longer term deposit arrangements which offer a higher guaranteed income.
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