Over the last few weeks there has been a significant increase in the number of people in the UK who are paying off their debts as opposed to building up further problems for the future. Many people seem to be happy to use their savings to reduce their debts but is this really a sensible course of action?
As UK base rates continue to languish at 0.5%, with many experts believing they are unlikely to move higher in the short to medium term, the return on savings accounts at the moment is negligible for many people. So how best can you put your savings to work?
A number of recent surveys have suggested that more and more people in the UK are now being forced to dip into their savings to cover their traditional monthly living expenses. This is a worrying sign for the UK economy because ultimately any reduction in disposable income, i.e. income left after living expenses have been deducted, means there is less to invest in the UK economy which will impact business figures, profitability as well as eventually employment.
As UK base rates look set to continue to remain relatively low in the short to medium term a number of banks have stepped forward with stepped savings interest rate bonds. In effect these bonds will offer a guaranteed interest rate in year one which will step up in year two, year three, year four and year five. However, experts have warned investors to check out the quality of the providers as well as the terms and conditions associated with these bonds.
Despite the fact that officially the UK recession is over, there is no doubt that millions of people in the UK are dipping into their savings to make ends meet. This is a situation which cannot go on indefinitely and has already blown a hole in UK savings over the last two years. If you are struggling to make ends meet on your current income, and indeed are reverting to spending your savings, then you need to revisit your budget.
The FSA has today stepped into the mix in relation to financial institutions offering savings returns based upon the level of the RPI (retail price index). A number of companies have been using the current RPI, around 4.8%, to project forward what look like very lucrative returns. One company, the National Savings & Investments Company, was forced to revise down one projection on a particular product from 5.82% a year to 3.96% per annum.
A report today suggests that Brits are leaving around £40 million a year down the back of their sofas with the average household affected to the tune of just under £2. However, the back of your sofa is not the only place where you may find hidden treasure with pockets topping the list at 39%, loose change at the bottom of a bag at 36%, money left in the car at 27% and coins down the back of your sofa at 23%.
Coutts, the high-class banking division of Royal Bank of Scotland, is under investigation by the FSA in relation to a specific AIG linked savings product which was sold to a number of the bank's customers. The product was marketed under the Alico brand name which has since been sold off to US insurer MetLife for just over $15 billion.
The NS&I (National Savings and Investments) has recently withdrawn two very popular state backed investment products from the investment arena. This comes at a time when the UK government is looking to reduce the burden on UK taxpayers and with the close relationship between the NS&I and the UK government (with the NS&I effectively financed by the UK taxpayer) the withdrawal of these products is disappointing but not necessarily unexpected.
While investing money for your children may be something beyond the reach of many people in the current economic climate, it is something which many people will consider in more prosperous economic times. So what's the best way to invest money for your child's future?
