JEFF PRESTRIDGE: NS&I continues to do what most banks and building societies currently refuse to entertain – which is give savers a fairer deal
Savings behemoth NS&I continues to do what most banks and building societies currently refuse to entertain – which is give savers a fairer deal.
Having increased interest rates on Direct Saver and Income Bonds to a half-decent 0.5 per cent, it has now given its three-year green savings bond a much needed reboot.
Previously as unappealing as a night out on Dartmoor with Storm Eunice in rant and rage mode, the latest issue of the bonds will pay guaranteed interest equivalent to 1.3 per cent a year. This is double the rate offered to those who bought the bonds last October when they were launched – a rate I described as at best parsimonious, at worst insulting.
A good sign: All banks and building societies should follow NS&I’s lead and heed our campaign to Give Savers a Rate Rise
The green bond is not without its flaws. The rate isn’t the best available on a three-year bond; it comes nowhere near matching inflation (like Storm Eunice, raging away); and you don’t receive the interest until the bond matures – and when you do get it, all the income will be taxed in the year of receipt.
Through prudent use of the tax-free personal savings allowance (currently, £1,000 a year for basic rate taxpayers, £500 for those paying 40 per cent tax), any tax can be mitigated.
All that now remains is for NS&I to increase the rate on its Direct Isa from 0.35 per cent (an insult) to 0.5 per cent (the same as its taxable equivalent) – and for all banks and building societies to follow this organisation’s lead and heed our campaign to Give Savers a Rate Rise.
Look at history of companies you invest in
Irrespective of whether our savings or investments are green or a whiter shade of pale, we all save and invest to make a return on our money.
Although looking under the bonnet of an investment fund before buying it is an imperative, it is also good to look at the history behind some of the companies you’re invested in.
Personally, I’m more comfortable investing in a fund that has been around the block a few times than one that has just launched and offers no more than a promise.
It’s why I’m drawn to some of the stock market-listed investment trusts that have been quietly going about their business for more than 100 years – in the process, generating a mix of income and capital return. For example, the likes of Foreign & Colonial (1868), Mercantile (1884), Scottish American (1873) and Bankers (1888).
Some of these centenarians have fascinating histories, none more so than Edinburgh Worldwide, now managed by Baillie Gifford.
This £970million trust celebrated its 125th anniversary last year and to mark the occasion Baillie Gifford has published a book on its history – written by investment trust guru John Newlands.
It’s a fascinating read, demonstrating that the trust – like many others – has always been at the forefront of technological change.
Back in the late 19th Century, it was a big investor in the railroads. Today, it’s investing in the electric car revolution (its biggest holding is Tesla) and companies that are developing new therapeutic treatments (the likes of US-listed Alnylam Pharmaceuticals).
This relentless focus on the future does not always reap short-term returns. Over the past year, its technology-heavy portfolio has fallen in price by nearly 43 per cent. But longer term, it delivers results: five-year gains of 118 per cent.
Readers can get free copies of Newlands’ book. Either download one at www.bailliegifford. com/EWIT125 or email me and I’ll send you a hard copy.
Readers add their own tips to beat the squeeze
A massive thanks to readers who contacted me saying how much they enjoyed our 50 tips to beat the cost of living squeeze, published in last week’s Wealth section.
Of course, you were not backward in coming forward with your own ideas. None more so than one of Personal Finance’s longest and most vocal readers, Eddie Browne.
His tips? Ensure any life insurance policies are written in trust, thereby exempting them from potential inheritance tax – with any payout sidestepping the laborious probate process. And use a self-invested personal pension to save for the future, because you can nominate whoever you like – a spouse, children or a charity – to receive the fund upon your death.
Although not strictly cost of living related, they are sound personal finance tips. Thanks Eddie.