How to protect your savings and pensions from inflation in the UK | Consumer issues

MeInterest rates will rise again this week and many savers will see interest rates rise as a result, but inflation will rise – Currently 9.4% And it’s set to get higher – eating up the cash value of people’s nest eggs.

Fears of a full-blown recession are growing as central banks around the world raise interest rates to combat inflation. So what can you do now to protect yourself from potential financial damage?

Here we look at some options for protecting your home money and pensions from inflation.

gold everything

They say gold is a traditional haven against inflation, but that wasn’t the case this time. We are back to where we were two years ago. Pound-based performance improved as the dollar appreciated significantly against the pound.

If you want to speculate with gold, you don’t need to buy Kruger Lands (South African gold coins). Small amounts can be invested through ‘Forex Trading Funds’ such as Invesco Physical. Moneykeeps the shiny stuff in a vault at JP Morgan Bank in London.

Gold fell from over $2,000 an ounce in March to about $1,750 an ounce. Photo: ImageBROKER/Alamy

tuck it under the mattress

This is the dumbest thing you can do with money. First, home insurance usually only covers £500 or £1,000 if your house burns down or your money is stolen.

Second, inflation means that the value of cash is plummeting all the time.

put everything in a high interest savings account

It only makes sense if such a thing exists. On Thursday, Oaknorth Bank’s top interest rate on his one-year fixed rate bond was 2.85%. Even the 5-year bond yielded the highest yield of 3.4%. Meanwhile, many high-street banks pay pittances in Isa’s cash account.

That said, aim to keep an emergency savings amount equivalent to three to four months’ worth of expenses. But given what consumer champions face so many UK families, it’s no easy task. Martin Lewis It was the “National Financial Cataclysm”.

buy shares sold by others

probably. However, only speculate this way if you can afford to lose. US tech companies have been the most ‘beaten’ stocks in recent months. PayPal has plummeted from $285 per share a year ago to about $98 this week. Meta (Facebook) dropped from $370 to around $170 and Netflix dropped from $600 to around $225 this year alone.

Scrabble board with cash, stocks and the word Isa
Many high street banks will pay you a small amount in a cash Isa account, but never invest money in stocks if you can’t afford to lose it.
Photo: Andrew Patterson/Alamy

But remember the old stock market adage. “Don’t catch a falling knife”. Just because the stock has fallen 50% over the past year doesn’t mean it won’t drop another 50% over the next year.

Find a boring mutual fund

Some mutual funds have a history of more than 100 years, a track record of regular dividends even during recessions, and diversified holdings of relatively low-risk companies. Boredom probably makes sense in these markets.

Dzmitry Lipski, head of fund research at the website Interactive Investor, said: As confidence expects high inflation to continue, companies that can continue to raise their dividends can provide additional comfort. A track record of 154 years means it has seen many ups and downs. ”

Interactive Investors also like Capital Gearing Trust and Personal Assets Trust.

Read our online investment guide.

reduce one’s pension

Even the humblest employee with a small workplace pension has the right to switch money within the pension. But be careful.

“The boilerplate reaction of selling and cashing is not a good idea,” says Helen Morrissey, a pension expert at investment firm Hargreaves Lansdowne. She adds that an annuity is a long-term investment, and carrying too much cash will likely erode your annuity.

The performance of the big pension funds hasn’t been all that bad over the past year, despite the big declines in stock prices on Wall Street and across Europe.Value of Nest (National Employment Insurance) default fund (retirement date 2040) savings The Trust, which holds pension savings for millions of new UK workers, has only increased by a few per cent, but has actually risen over the past year.

go with smart money

Who warned of inflation, financial market over-enthusiasm, and severe cryptocurrency risks last May? Legendary 91-year-old US investor Warren Buffett. Since then, inflation has skyrocketed, with the Nasdaq index of mostly tech stocks dropping about a fifth and cryptocurrencies crashing.

Buffett said, “Be fearful when others are greedy, and be greedy when others are fearful.”

So what is he buying now? oil company.he has $27 billion plunge Occidental Petroleum and Chevron stock only. It paid off. Occidental’s stock has surged nearly 100% this year, but it’s unlikely anyone concerned about the climate emergency will follow suit.

Warren Buffett
Veteran investor Warren Buffett is buying up stocks in oil companies. Photo: Nati Harnik/AP

Buffett is also a big investor in Apple, whose stock has fallen nearly 10% this year. He continued to buy Apple as its stock price fell.

The UK’s response to Buffett, Terry Smith, said in his book: July Letter to Investors He said he was “not optimistic” about the threat of continued rate hikes.

He said investors should continue to focus on companies with consistently high profit margins. He added that fixed income “certainly isn’t where it should be in this situation” and real estate and real estate are “notoriously local markets with illiquidity and high frictional transaction costs”. .

If you like what Buffett says, you can buy stock in his conglomerate Berkshire Hathaway. Smith’s fund business is called Fundsmith.

do nothing and stay still

If you’re under 50, it’s not a bad strategy. When the market goes down, take comfort in the idea that your monthly pension contributions are buying more stocks (over the long term) than they used to.

How to protect your savings and pensions from inflation in the UK | Consumer issues

Source link How to protect your savings and pensions from inflation in the UK | Consumer issues

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