×


Home About Contribute Media Kit Contact Sign In
×







.


Finance Industry News

Case for with-profits investments strengthened by NS&I decision to slash rates


Healthy Investment chief exec says cautiously managed with-profits funds could offer an alternative in an age of negative real interest rates.

Case for with-profits investments strengthened by NS&I decision to slash rates


"The Bank of England base rate currently stands at 0.1 per cent and it seems very unlikely that central bankers will be considering raising interest rates any time soon."
Peter Green



Earlier this week National Savings & Investments (NS&I) announced it would dramatically cut the interest rates available on its products from 24 November 2020. Commenting on this development, Peter Green, chief executive of Healthy Investment, said these changes added further weight to the case for cautious investors to consider with-profits funds.

Greater Manchester-headquartered Healthy Investment is one of the UK’s oldest friendly societies. It provides ISAs, Investment Bonds, Junior ISAs, Child Trust Funds and savings plans to more than 110,000 members.

The majority of Healthy Investment’s products are invested in ethical, cautiously managed with-profits funds that “smooth” returns for investors, ironing out many of the peaks and troughs generated by volatile markets.

Mr Green said, “NS&I has traditionally provided a home for many of the UK’s more cautious savers. Yesterday’s announcement, however, means most of them now face the prospect of their money falling in value as interest rates do not come close to matching inflation.

“Even if the cost of living were to rise by just one per cent per year, a return of 0.01 per cent on an NS&I Income Bond would see the value of savings eroded.

“Cautiously managed with-profits funds, by contrast, invest in a combination of money market funds, government and corporate bonds, property and equities. This provides the possibility of long-term growth while minimising risk as far as possible by diversifying the range of assets they hold.”

With-profits funds use a practice called “smoothing” to retain some of the returns made in strong years which can then help mitigate the effects of falling markets in weaker years. This means with-profits tend to provide a more predictable investment experience than, for instance, investing via unit trusts.

In many cases with-profits policies are also able to provide capital guarantees. While not equivalent to cash, these guarantees mean investors can be confident that, as long as they stick to the provider’s terms and conditions, their capital will be secure in the long-term.

Mr Green continued, “NS&I’s move is unlikely to be a one-off in the savings market. The Bank of England base rate currently stands at 0.1 per cent and, given the economic headwinds we face, it seems very unlikely that central bankers will be considering raising interest rates any time soon. There is also likely to be political pressure to inject inflation into the economy to help erode the value of the national debt.

“Of course, with-profits funds aren’t suitable for everybody, and might not be the answer if you want to make unplanned withdrawals at short notice. I believe, though, that they merit serious consideration by anyone who wants a medium to long-term investment with predictable returns and a realistic prospect of beating inflation.”

Important note: Past performance is not a guide to the future. The value of investments can fall as well as rise and, although a number of Healthy Investment products come with capital guarantees, these are dependent on members meeting certain conditions so in some circumstances investors may not get back the full value of their original investment.

.


Finance Business News - An apprentice at West Lancashire firm Acumen Financial Partnership says lockdown helped him focus on becoming a fully qualified adviser. Daniel Frampton, who s 21, finished The Chartered Insurance Institute CII apprenticeship four months early despite some of his exams being cancelled.


Lockdown success for West Lancashire apprentice

Finance Business News - Three professional services firms based in Manchester have come together to share their expertise by providing a series of webinars. Alexander amp Co Chartered Accountants and Tax Advisors, BLM Law and Xentum Financial Planning and Wealth Management will provide these complementary to both clients and non-clients.


Three Manchester businesses are sharing their expertise in a series of webinars

Finance Business News - The national awards, which are held in association with ContractorUK and FreeAgent, are highly sought after across the entire accounting industry as they recognise the top contractor suppliers across the UK.


Gorilla Accounting Nominated For Prestigious National Award

Finance Business News - COVID-19 pandemic is taking its toll on both the lives and livelihoods of the UK nation. For businesses, the challenge of regaining the monetary losses suffered in recent months commences. This is particularly true for SMEs.


How SMEs Can Support Their Finance Department After a Pandemic

Finance Business News - As a society, we are becoming more eco-conscious, both as consumers and as businesses.


Want to Empower Your Employees To Be More Sustainable?

Finance Business News - Salford Credit Union is recruiting for a treasurer to donate their time and skills in order to support the organisation s next phase of development - as it improves its offer to compete with high street lenders.


Salford Credit Union appeals for financial services expert to join their board