Time to Ditch Poorly Paying Cash Accounts

The consumer reviewer and champion Which? has launched a ‘scrap the savings trap’ campaign as a wake-up call to savers who are holding money in poorly paying bank accounts. They estimate that £4.3bn a year is kept in accounts which were once paying a good rate of interest, but now pay almost nothing*.

The consumer group warns that eight out of ten easy access savings accounts and cash ISAs pay very low rates of interest, with 41 per cent paying a "pitiful" 0.1 per cent or less.

Holding significant sums in cash when interest rates were around the 6% and 8% mark some years ago was no bad thing. For some people there was no need to invest when they could receive such healthy returns from their cash accounts. But the Bank of England base rate has been held at 0.5 per cent since 2009* and cash accounts paying just 0.1per cent means savings may not even be rising in line with inflation. For people in this situation, this should be reviewed.

Taking the step of moving longer-term cash savings into investments which are linked to the stock market doesn’t mean that you suddenly need to be taking excessive gambles. There are solutions which are cautious in their approach and these can be better suited to those who are considering investing for the first time. There are a range of options which can meet the need for your money to either grow or produce an income. Unlike opening a cash savings account, when it comes to investing, time and research has to go into the process. There is more to it than finding an account which pays a good rate of return and writing a cheque.

Our approach

At Sanlam we believe that wealth management means more than accumulating wealth. It also means protecting that wealth. It means investing in a way that doesn’t expose you to more risk than necessary to achieve your goals.

Of course, life isn’t as simple as that. Sometimes ambition for growth or returns exceeds the capacity to achieve them. And there are times when caution should take priority, particularly if getting it wrong could have serious long-term consequences.

Understanding your attitude to risk is key to planning the right investment strategy for you if you are considering moving cash savings. To make it as simple as possible, at Sanlam we’ve developed an easy to understand method to decide how cautious or adventurous you can afford to be with your money.

Before making any recommendations, we base your risk profile on some straightforward questions:

• How much money will you need in future and what for? • How much can you invest and for how long? • How likely are you to need access to your investment before you originally intended?• How much could you afford to lose if you had to access your investment in a hurry?

We’re proud of the way we help clients understand their risk profile, because it reassures clients they’re not taking any unnecessary risks. We can’t eliminate risks completely because investment values will rise and fall, but we will only make recommendations that are consistent with what you feel comfortable with. And then it’s up to you.

Making the right financial decision can be daunting. To give you the reassurance you’re making the correct choice, we train our Wealth Planners to deliver an outstandingly high quality of advice.

To find out about the options for your cash savings, or to speak to a Sanlam Wealth Planner email letstalk@sanlam.co.uk

*http://www.theguardian.com/money/2014/may/10/accounts-losing-savers-which*http://www.bankofengland.co.uk/boeapps/iadb/Repo.asp

The above article is for information purposes and should not be treated as advice. Individual circumstances should always be considered prior to purchasing any financial products. For further information contact Sanlam Private Wealth by e-mailing letstalk@sanlam.co.uk. Sanlam Private Wealth is a trading name of Sanlam Private Wealth UK Limited. Authorised and regulated by the Financial Conduct Authority.