Banks

RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

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Currencies

Renminbi strengthens further despite gains by dollar

The renminbi on track for a fourth day of firming against the dollar on Wednesday after China’s central bank once again pushed the currency’s trading band (marginally) stronger. The onshore exchange rate (CNY) for the reniminbi was 0.28 per cent stronger at Rmb6.8855 in afternoon trade, bringing it 0.53 per cent firmer since it last […]

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Financial

Sales in Rocket Internet’s portfolio companies rise 30%

Revenues at Rocket Internet rose strongly at its portfolio companies in the first nine months of the year as the German tech group said it was making strides on the “path towards profitability”. Sales at its main companies increased 30.6 per cent to €1.58bn while losses narrowed. Rocket said the adjusted margin for earnings before […]

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Property

Spanish construction rebuilds after market collapse

Property developer Olivier Crambade founded Therus Invest in Madrid in 2004 to build offices and retail space. For five years business went quite well, and Therus developed and sold more than €300m of properties. Then Spain’s economy imploded, taking property with it, and Mr Crambade spent six years tending to Dhamma Energy, a solar energy […]

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Currencies

Nomura rounds up markets’ biggest misses in 2016

Forecasting markets a year in advance is never easy, but with “year-ahead investment themes” season well underway, Nomura has provided a handy reminder of quite how difficult it is, with an overview of markets’ biggest hits and misses (OK, mostly misses) from the start of 2016. The biggest miss among analysts, according to Nomura’s Sam […]

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Categorized | Banks

How can I earn more interest on my savings?


Posted on September 20, 2016

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I have my savings in an instant access cash Isa with Barclays. There is £43,000 in the account. As you know, this pays very little in interest. What else can I do with the money? I am 66 years of age and retired, with a pension and a mortgage that is paid off, but I would like some extra income if possible.

Interest rates on savings are at all-time lows, writes Danny Cox of Hargreaves Lansdown, although there are steps you can take to improve the returns on your cash.

    These include shopping around for a better rate on your cash Isa, perhaps putting some in a fixed term account or using some of your money to invest in income-producing funds or shares.

    The current rate of consumer price inflation is 0.6 per cent, while retail prices are rising by 1.9 per cent. Earning bank interest below these levels means that the spending power of your cash is weakening. The situation is worse if bank interest is your main source of income.

    You do need cash for short-term spending and to provide an emergency fund. Aim to keep either a minimum of six months’ expenditure, or £10,000. Retired people often keep substantially more than this.

    For this portion of your money, look for an easy access cash Isa that accepts transfers: not all do. There are also non-Isa current accounts that can pay higher rates of interest, even allowing for potential tax. You will have to be very savvy about using direct debits to fund various accounts to get the most out of these, however, as most will not pay much interest on higher balances.

    Danny Cox

    Danny Cox

    You will also need to keep a close eye on any rate changes and be prepared to change accounts to chase the best rates. In his FT Money column, Paul Lewis has christened this strategy “Active Cash”, and says it can beat the stock market.

    Nationwide pays 5 per cent on up to £2,500 in one current account, for example, but you must pay at least £1,000 a month into it.

    TSB also pays 5 per cent on up to £2,000, as long as the account has £500 per month transferred into it and you can register for internet banking and paperless statements.

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    Under new rules, basic rate taxpayers pay no tax on the first £1,000 of savings income.

    In terms of what to do with money to which you do not need instant access, I would look to the stock market for income. Shares in companies have been beneficiaries of low interest rates and cheap borrowing, as this pushes up the valuations of the assets, such as property, on businesses’ books.

    Income from shares — dividends — is currently far in excess of rates of return on cash. So you could transfer part of your cash Isa to a stocks and shares Isa, and invest in a fund whose manager picks stocks that he thinks have a good prospect of paying decent dividends. We like the CF Woodford Equity Income fund, which has an advertised ongoing charge of 0.75 per cent and no other fees.

    You could also investigate simple tracker funds that mimic the performance of the FTSE All-Share index. The Legal and General UK Index costs from just 0.1 per cent a year.

    If this is your first investment I would start slowly, perhaps drip feeding £500 a month into your chosen funds over the next 12 months. This will help you get used to the feel of investing in the markets.

    For savers, interest rates are appallingly low and show no signs of reversing in the next one to three years, adds Darius McDermott of Chelsea Financial Services.

    In fact, the Bank of England has hinted they may go down again after the latest cut in August. So most cash Isas are also reducing their rates. The Barclays Instant Cash Isa rate on a balance of your size will fall from 1 per cent to 0.6 per cent AER as of 1 December.

    Darius McDermott

    If you want the potential for more, you need to change tack. Open a stocks and shares Isa, which is a kind of tax-efficient wrapper through which you can hold investment funds and individual shares.

    This type of Isa has an annual contribution limit of £15,420, but you can transfer in previous years’ savings from a cash Isa without affecting that limit.

    The search for greater return brings greater risk. Investing for the first time later in life can be uncomfortable, but there are some funds that fit the bill for reasonably cautious investors.

    I like the Premier Multi-Asset Monthly Income fund. At the moment, this is mostly invested in other fund managers who buy income-producing investments. It also holds some assets that are considered higher risk — for example, emerging market equities and bonds, as well convertible bonds.

    The historic yield on the Premier fund, which is calculated by dividing its unit price by the dividend per unit, is 4.7 per cent. There are charges of 1.4 per cent a year, however, so you do not get this income for free.

    Remember, it is always a good idea to keep some of your savings in cash in case of emergencies and not to put all of your money into a single investment.

    The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent permitted by law

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    I have decided to purchase some gold but I’m undecided between gold bullion from the Royal Mint or an exchange-traded fund that owns physical gold. What are the pros and cons of each type of investment? The gold will be placed in a self-invested pension plan.