With the end of the financial year approaching, we are looking at cash ISAs and how to make the most of the potentially increasing interest rates. April the 5th marks the beginning of the financial year, which means the new ISA allowance comes into effect.
Over the past few years, the Bank of England has been constantly aiming to boost the economy, through discouraging savers with low interest’s rates, encouraging spending. February 2015 appears to be no different with rates being held at 0.5%, despite almost daily pressure for the rate to rise over the past 18 months.
With the government constantly referring to the recovery of the economy, (we’re sure it’s nothing to do with the upcoming elections), the Bank of England remains stoic, warning businesses and individuals alike not to get too optimistic. Is there a reason to consider ISAs as an investment option in 2015?
A third of the public are unconvinced, according to a recent report from Which. This suggests economic confidence has yet to trickle down from political assurances.
Howard Archer, a chief economist from IHS Global, argues that the recent dramatically decreasing oil prices could play a big part in the rise of interest rates.
People not having to spend as much of their income at the pumps, and reduced cost of flights, means that other sectors are getting a much needed boost as a side effect of the oil crash. Unfortunately, this is resulting in dwindling savings, leaving people vulnerable to financial shock, which would certainly contradict the government’s recent pledge of a stabilising economy.
Sooner rather than later, there is likely to be a move towards a national saving strategy instead of an encouragement to spend. The key is identifying when this fundamental crossover will take place.
As ever, the approaching 5th of April will mean banks and building societies offering discounted ISA introductory deals. Identifying who is offering the best return on your investment is never an easy process, with the FCA (Financial Conduct Authority) recently publishing a report on how difficult it remains to switch your cash savings account.
But what is unlikely to change is Junior ISAs offering the best rates. Investing in your children’s / grandchildren’s future and making use of their £4,000 yearly ISA allowance has several benefits. Not enough people take advantage of the higher interest rates and assured stability.
As for the rest of us without offspring to sink money into, our tax free ISA allowance of £15,000 is unlikely to change for the foreseeable future, after the leap of nearly £4,000 in the limit last year.
Being able to tie up your money for the long term will get you the best rate, shown in recently released figures. Although this might provide security in a times of instability, the fixed rate leaving you victim in the case of an interest rate increase. It is a bit of a gamble, which is not the situation you want to find yourself in for your savings.
That being said, based on the fact that the current rate is an all-time low, it may be safe to assume the only way is up.
This may be the time to resist any advances from your savings provider, holding off on any long term investment decisions in light of recent fuel prices taking a plunge, is this a sign change is on the horizon.
As for businesses, the lay of the land is a little more clear. With interest rates on the verge of rising, it’s important to invest in new assets to expand your business.