Savers have been hit hard by low interest rates, which have largely wiped out bank and building society returns since the base rate hit 0.5 per cent in March 2009. They have proved particularly punitive for those who rely on the income from their savings to live, such as the retired, widows or orphans.
Given that as recently as April 2008, base rates stood at 5 per cent, canny savers who shopped around for a decent margin above this, have seen their income more than halve.
Add into the equation inflation at 3.7 per cent according to the consumer prices index, which excludes housing costs or the 5.3 per cent of the retail prices index, which has a broader remit and it is clear savers are struggling to even maintain the value of their nest eggs. ......
...... We decided to ask the experts for their strategies and are publishing a range of views below. ......
Steve Wilson of Alan Steel Asset Management
“As usual there is no magical solution in the current environment to creating income and guaranteeing the capital. Investors should be very wary of any guaranteed products out there and third party risks involved.
If, however the client can take a bit of risk and a five-year view then equity income funds and even some cautious funds look great value. These provide investors with a good dividend yield with the aim of preserving capital, and ones to consider are Newton Higher Income yielding around 7 per cent, PSigma Income yielding around 4.5 per cent, which is managed by the highly successful Bill Mott who managed Credit Suisse Income for many years.
Much of the growth will come from overseas in future, and James Harries at Newton Global Higher Income is another excellent fund manager yielding around 4.8 per cent, achieving capital growth on top.
For those more cautious investors, Invesco Perpetual Distribution has a mix of equities and fixed-interest investment combining the expertise of Neil Woodford on the equity side and Paul Causer on the fixed-interest part. Together they provide a more cautious approach and yield around 6.7 per cent.
In the current low interest rate environment, investors have to seek alternatives to cash as we suspect this will remain the case for some time.” ......
Quote courtesy of Scotland on Sunday
Sunday 30 May 2010
