Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Fox in the Henhouse: Why Interest Rates Are Rising - 23rd Apr 18
Stocks and Bonds, This is Not a Market - 23rd Apr 18
Happy Anniversary Silver Investors! - 23rd Apr 18
The Hottest Commodity Play In 2018 - 23rd Apr 18
Stock Market Correction Turns Consolidation - 23rd Apr 18
Silver Squeeze, Gold Fails & GDX Breadth - 23rd Apr 18
US Economy Is Cooked, the Growth Cycle has Peaked - 23rd Apr 18
Inflation, With a Shelf Life - 23rd Apr 18 - Gary_Tanashian
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

How to Beat UK Savings Crisis with Child Junior Cash ISA, Pension's and Life-time ISA

Personal_Finance / Savings Accounts Nov 27, 2016 - 05:43 AM GMT

By: Nadeem_Walayat

Personal_Finance

Britain's spanking new Chancellor, Philip Hammond recently threw some scraps at Britain's hard pressed savers with his 2.2% savings bond due to go live early 2017 by which time the CPI Inflation will be nudging 3% and RPI 4%, which illustrates its just a smoke and mirrors exercise, and even then will be limited to a measly £3k investment fixed for 3 years.

UK inflation is set to soar as I covered in my earlier analysis. And so the chancellors announcement does nothing to prevent the inevitable stealth theft of purchasing power of peoples hard earned savings and wages.


04 Jul 2016 - BrExit Implications for UK Economy, Interest Rates, Bonds, Markets, Debt & Deficit, Inflation...

Therefore both of these factors look set to drive UK CPI inflation significantly higher to above CPI 2% and very probably to spike above 3% early 2017, and RPI probably spiking above 4%. However, beyond that unless the surge in inflation triggers significant wage inflation then CPI inflation should then soon start retreat to back below 2% and the trend towards that of the inflation rate of the US at that time a year from now.

So the bottom line is that despite brexit inducing economic weakness, expect UK CPI Inflation to spike towards 3% and RPI to above 4% by early 2017, probably peaking for January 2017 data before trending lower into mid 2017

For more on the prospects for post Brexit Britain see my in depth pieces of analysis that are likely to increasingly become manifest.

UK Savings Interest Rates Collapse

My tracking of the Halifax Cash ISA's best illustrates the relentless collapse in UK savings interest rates. Firstly, the Halifax recently withdrew virtually all of their fixed rate accounts. However, to continue with this long standing series for when longer duration fixed rates return, I have applied the percentage change on the 1 year fixed rate to fixes for preceding longer duration terms (in red) to illustrate what has happened to the UK savings market.

Halifax ISA's May 2012 Sept 2012 Nov 2012 Mar 2013 May 2013 July 2013 Mar 2014 June 2014 Mar 2015 April 2016 Aug 2016 Nov 2016 % Cut
Instant Access
3%
2.75%
2.35%
1.75%
1.35% 1.35% 1.5% 1.30% 1.05% 0.60% 0.40% 0.35% -88%
1 Year Fix
2.25%
2.05%
2.05%
1.75% 1.75% 1.65% 1.5% 1.40%   0.90% 0.65% -71%
2 Year Fix
4.00%
3.25%
2.25%
2.5%
2.10% 2.10% 2.05% 1.8% 1.65% 1.25% 1.06% 0.75% -81%
3 Year Fix
4.25%
3.75%
2.35%
3.00%
2.25% 2.25% 2.25% 2% 1.75%   1.125 0.80% -81%
4 Year Fix
4.35%
3.80%
2.40%
3.05%
2.30% 2.30% 2.40% 2.10% 1.85%   1.19% 0.86% -80%
5 Year Fix
4.50%
4.15%
2.60%
3.10%
2.35% 2.35% 2.5% 2.20% 2.00% 2.00% 1.28% 0.92% -80%

That's right a 80%+ collapse in savings rates!

So what can savers do ?

Of course followers of my articles and videos will know that in our post financial crisis world the best place to be park ones capital for the long-run is in stock and property markets. Apparently both of which were expected to CRASH post BrExit by most of the clueless financial media. Instead have resumed their respective bull markets.

For stock and housing capital investments see -

So what to do if savers are determined to retain a sizeable rainy day cash savings fund?

Well that depends on ones age and family circumstance, for instance -

1. Do you have children?

2. Are you under 40 ?

3. How close are you to 55 years of age or already beyond?

Child / Junior Cash ISA's

Whilst one will be very lucky to find a cash ISA account that pays more than 2% today, i.e. the best I can see out there is 1.45% for a 5 year fix! That's right! FIVE YEARS! In my opinion any savings account that pays less than RPI amounts to stealth THEFT, and with RPI currently at 2% that means every savings account being sold today guarantees the theft of the value of ones savings!

However there is a glimmer of hope for people with children, in fact children under the age of 18 can be utilised to park long-term savings with tax free! AND the rates typically can be near double the adult rate! For instance the current best rate is with the Coventry ISA that pays 3.25% per year!

Key points are that there is a deposit limit of £4,080 per tax year and the funds cannot be accessed until the child turns 18. Oh and the money belongs to child, so you have to factor in whether ones sweet 13 year old will become a rebellious 18 year old and decide to blow the money on a fast car or worse drugs!

Life Time ISA's (LISA)

LISA's are George Osborne's (remember him?) March 2016 bribe to savers / cash give away that goes live in April 2017. Unfortunately only available to the UNDER 40's! For every £4k (max) deposited each year the government will top the LISA up with a £1k bonus or 25%. That's potential free money from the government of £32k! from Age 18 to 50. WITH interest on top! Albeit today's interest rates of 1% are rubbish.

However there is a catch. The money can either only be used to buy ones first home, OR be locked in until Age 60! So it really is a long-term inflexible savings vehicle. But in my opinion very much worth it as part of a savings portfolio!

There is also the Help to Buy ISA, but that only results in a maximum bonus of £3k. However you could have BOTH a HTB and LISA but you can only utilise ONE to buy your first home, which means the HTB and thus would be locked into the LISA until age 60. However you can transfer EXISTING HTB's into a LISA from April 2017.

Pension Contributions

And finally if your nearing the minimum age for drawing down on private pension pension at age 55 such as the SIPPs. Then you could look to top up your pension fund and the tax man will ADD to it at your highest tax rate!

For everyone, no matter whether one pays any tax or even works the minimum top up is 20% i.e. for a £1k contribution one would deposit £800 and the tax man will top it up with £200, that's a 25% instant return on ones deposit!

Whilst a 40% tax payer for a £1k contribution would only need to deposit £600, with the tax man topping up with £400, thus an instant 66% return on ones deposit.

Of course the money is taxable when drawn, and would need to be invested of which the safest asset class would be short-dated bonds.

So there you have 3 methods towards alleviating Britain's savings crisis. All of which need careful thought before entering into and are best part of an overall portfolio of long-term savings strategy so as to retain flexibility whilst maximising return on ones capital.

Personally I utilise child ISA's and pensions contributions to help beat the UK savings crisis. Unfortunately I am not eligible for the LISA when it goes live, else that too would form part of my savings portfolio.

Ensure you are subscribed to my always free newsletter for in-depth analysis and detailed trend forecasts.

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2016 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules