No relief for savers when interest rates rise

Enable’s IFAs in Bishop’s Stortford know it has been a hard few years for savers and even when interest rates go up they are not likely to benefit from a rates rise.  It is thought that banks will hold rates down to improve their profits, according to some recent forecasts from analysts at credit ratings agency Moody’s.

It is widely expected that The Bank of England will slowly increase interest rates over the coming years, but borrowers are the only ones who are likely to notice the difference. “These increases should contribute positively to the banks' profitability since we do not expect them to pass the benefit immediately to savers,” said Moody's Carlos Suarez Duarte. “We think it’s unlikely that UK banks will pass all the benefits of higher interest rates to their customers and therefore, margins should initially improve.”

After the financial crisis, banks had to build up their capital most now have built up large buffers, designed to keep them safe in any future economic downturn so they can now increase lending levels. "As a large proportion of UK banks and building societies have now achieved their capital and leverage targets, competition between lenders has intensified," said Mr Suarez Duarte. "We believe that the increasing loan pricing competition, especially in the mortgage market, will partially offset these improvements [in margins] as banks and building societies try to increase or defend their market share." But it’s not necessarily good news for savers so if you want to make your money work for you Enable’s IFAs can help you explore the options.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE  

Should Drawdown customers flood to active funds?

Enable’s IFA’s in Bishops Stortford note that recent figures from Hargreaves Lansdown show “The first wave of drawdown customers post pension freedoms are backing active managers.” Their investors who opened drawdown contracts after 6 April shows just £1 in every £20 went into passive funds. It also suggests that UK equity income was the most popular fund sector, accounting for 27.55 per cent of all drawdown assets, while Lloyds Banking Group was the most popular individual stock.

Hargreaves senior analyst Laith Khalaf says: “What is particularly striking is there is clearly an appetite for growth, as well as income, which suggests investors are saving some of their jam for tomorrow, as well as using their pension pot to produce an income today. “Passive funds are not yet well represented amongst drawdown investors.”

But Enable would like to draw attention to the fact that contrary to the impression you might get from the advertising produced by the funds industry, very few active fund managers are able to consistently outperform the markets. For example, analysis of the UK All Companies sector at the end of 2010 showed that only 24% of actively managed funds managed to beat the benchmark stock market (the FTSE All Share) over the previous decade. In that case there would be a strong chance you could end up with a fund that fails to deliver you the return you could get by simply tracking the index with a passive fund.  If you want to look what sort of funds are right for you Enable’s experienced IFA’s can talk you through your options.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE  

Gold holdings

As is often the cases in times of trouble that European investors snap up gold.  In the second quarter as the troubles in Greece threatened to push the country out of the Eurozone a recent World Gold Council (WGC) report said "Fears of a potential Greek exit from the Eurozone saw retail investment in gold reach 47 tonnes, a rise of 19pc compared to last year," Alistair Hewitt, head of market intelligence at the WGC, said. The European bullion market had gone from being "non-existent" to becoming the "world's leading bar and coin market." The increase in Europe was led by Germany, where sales of bars and coins rose 24pc to 24.1 tonnes in the second quarter.

Gold is often considered to be a safe haven in times of market turbulence but Mr Hewitt said a greater number of retail investors were buying smaller quantities of bullion. "Many of the coins being bought are in smaller denominations, which we can contrast to the financial crisis, when there were larger denominations being bought. What this says is that many of the people who were looking to gain exposure to bar and coin are the smaller retail investors.”

"People are looking to protect their wealth," said Mr Hewitt. "Wealth is eroded in many ways, it could be through high inflation, currency weakness, it could be that people want to hedge their risk. Gold plays a really strong role in this.” If you are looking for the best ways to protect your wealth and manage it through all weathers Enable’s experienced IFA’s in Bishop’s Stortford are here to help.


Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE  

No relief for savers when interest rates rise

Enable’s IFAs in Bishop’s Stortford know it has been a hard few years for savers and even when interest rates go up they are not likely to benefit from a rate rise.  It is thought that banks will hold rates down to improve their profits, according to some recent forecasts from analysts at credit ratings agency Moody’s.

It is widely expected that The Bank of England will slowly increase interest rates over the coming years, but borrowers are the only ones who are likely to notice the difference. “These increases should contribute positively to the banks' profitability since we do not expect them to pass the benefit immediately to savers,” said Moody's Carlos Suarez Duarte. “We think it’s unlikely that UK banks will pass all the benefits of higher interest rates to their customers and therefore, margins should initially improve.”

After the financial crisis, banks had to build up their capital most now have built up large buffers, designed to keep them safe in any future economic downturn so they can now increase lending levels. "As a large proportion of UK banks and building societies have now achieved their capital and leverage targets, competition between lenders has intensified," said Mr Suarez Duarte. "We believe that the increasing loan pricing competition, especially in the mortgage market, will partially offset these improvements [in margins] as banks and building societies try to increase or defend their market share." But it’s not necessarily good news for savers so if you want to make your money work for you Enable’s IFAs can help you explore the options.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE  

Should Drawdown customers flood to active funds?

Enable’s IFA’s in Bishop’s Stortford note that recent figures from Hargreaves Lansdown show “The first wave of drawdown customers post pension freedoms are backing active managers."Their analysis of the investment of the preferences of just their investors who opened drawdown contracts after 6 April shows just £1 in every £20 went into passive funds. It also suggests that UK equity income was the most popular fund sector, accounting for 27.55 per cent of all drawdown assets, while Lloyds Banking Group was the most popular individual stock.

Hargreaves senior analyst Laith Khalaf says: “What is particularly striking is there is clearly an appetite for growth, as well as income, which suggests investors are saving some of their jam for tomorrow, as well as using their pension pot to produce an income today. Passive funds are not yet well represented amongst drawdown investors.”

But Enable would like to draw attention to the fact that contrary to the impression you might get from the advertising produced by the funds industry, very few active fund managers are able to consistently outperform the markets. For example, analysis of the UK All Companies sector at the end of 2010 showed that only 24% of actively managed funds managed to beat the benchmark stock market (the FTSE All Share) over the previous decade. In that case there would be a strong chance you could end up with a fund that fails to deliver you the return you could get by simply tracking the index with a passive fund.  If you want to look what sort of funds are right for you Enable’s experience IFA’s can talk you through your options.


Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE 

Gold holdings

As is often the case in times of trouble that European investors snap up gold.  In the second quarter as the troubles in Greece threatened to push the country out of the Eurozone a recent World Gold Council (WGC) report said "Fears of a potential Greek exit from the Eurozone saw retail investment in gold reach 47 tonnes, a rise of 19pc compared to last year," Alistair Hewitt, head of market intelligence at the WGC, said the European bullion market had gone from being "non-existent" to becoming the "world's leading bar and coin market." The increase in Europe was led by Germany, where sales of bars and coins rose 24pc to 24.1 tonnes in the second quarter.

Gold is often considered to be a safe haven in times of market turbulence but Mr Hewitt said a greater number of retail investors were buying smaller quantities of bullion. "Many of the coins being bought are in smaller denominations, which we can contrast to the financial crisis, when there were larger denominations being bought. What this says is that many of the people who were looking to gain exposure to bar and coin are the smaller retail investors.”

"People are looking to protect their wealth," Mr Hewitt continued. "Wealth is eroded in many ways, it could be through high inflation, currency weakness, it could be that people want to hedge their risk. Gold plays a really strong role in this.”

If you are looking for the best ways to protect your wealth and manage it through all weathers Enable’s experienced IFA’s in Bishop’s Stortford are here to help.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE 

Record number of pensioners using homes as 'cash machines' to fund retirement

Enable’s IFA’s in Bishop's Stortford know that may older folk are looking at every option when it comes to financing their retirement. According to one recent report older homeowners borrow £4.2m a day using equity release to bolster income.  Equity release is a loan that is repaid as capital plus interest, when the borrower ultimately sells their property, typically upon death or if they move into a care home. More than 5,400 over-55s used "equity release" to borrow a record £384m against their homes between April and June this year which is 18pc up on the preceding three months and 11pc on last year. The typical borrower releases £68,500 from their home, increasing to £143,000 in London.

But these loans can be hugely expensive because the longer you live, the more interest accumulates, and there are no repayments being made to reduce the debt. Interest rates for these kinds of loans tend to be higher than for traditional home loans, at around 5pc to 7pc. But it is easy to see why cash-poor but property-rich pensioners go for this option.  Nigel Waterson, chair of the Equity Release Council, said: "The average pension pot is around £25,000 - just half the amount of money people take out with equity release," he said. "Clearly pensioners have a gap in their income and property is a valuable source of wealth.”

Regulation of these loans was introduced a decade ago but many policies sold in the 80s and 90s were completely unsuitable and meant homeowners paid back sums that could quadruple the amount originally borrowed. Regulations now mean that borrowers must have financial advice before signing a deal, which must also be approved by a solicitor. If you want advice on better ways to fund your retirement Enable’s IFA’s in Bishops Stortford might be able to help.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE 

Should investors fear an interest rate rise?

Enable’s experienced IFAs in Bishops Stortford can see that the days of record low interest rates look set to be drawing to a close with financial markets pricing in a Base Rate rise in the first half of 2016. There has been much speculation that it could happen sooner that now looks pretty unlikely but it doesn’t stop investors being increasingly anxious about the impact on their portfolios.

But according to Hargreaves Lansdown there may not be much of an historical president to worry about. If we look back history indicates the best strategy is to do nothing. For the last six  main periods of Base Rate rises since 1988 Britain’s leading share index, the FTSE 100, has not suffered a severe selloff and for half of the time the index was flat, or posting small losses, and on the other three occasions the market even  responded positively.

Laith Khalaf, a senior analyst at Hargreaves Lansdown, who helped compile this data, said: “a period of rising interest rates does not necessarily mean poor returns from the stock market. If a central bank is raising interest rates it is generally doing so to curb economic activity, because it believes the economy is in danger of overheating. In other words, economic growth is strong, which is a positive backdrop for companies to do business in." "There are of course negative impacts on companies from higher interest rates. They have to pay more to borrow money, and if consumers have to pay more for their mortgages, they may have less to spend on goods and services that British businesses sell."

The speed of the interest rate rises is also important and Financial markets are expecting rates to go up slowly and gently rather than jump up overnight.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE 

£1.8bn of pensions withdrawn in three months

Enable’s IFAs in Bishops Stortford have noted with interest that recent figures indicate that over 55s have taken a total of £1.8bn from their retirement funds since the Government's new pension freedoms were introduced earlier this year. The numbers exceed the Treasury's latest pension freedom estimates by half a billion pounds.

The pension freedoms were designed to prevent savers being forced into buy annuities and figures confirm that for the first time, retirees in Britain are investing more money in flexible pensions than they are spending on annuities. In the three months since the pension freedoms were introduced, savers have funnelled £720m into flexible arrangements compared to £630m which was spent on annuities. The average annuity was purchased with £55,750, while the average fund invested in a flexible pension was £69,900.

Annuity sales peaked in 2012 when savers invested over £14bn, compared to just £1.2bn of savers' money which was invested in flexible arrangements - called "drawdown" pensions. Dr Yvonne Braun, has said: "This is an important reminder that tens of thousands of people are successfully accessing the pension freedoms as intended and on the whole the industry has risen to the challenge of giving customers what they want.” “The data shows people with smaller pots tend to be cashing them out while those with larger pots tend to be buying a regular income product.” If you want help rearranging your pension Enable’s IFAs can talk you through your options.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE 

What if mortgage interest rates go up?

Mortgage borrowers have recently been rattled following indications from the Bank of England that the first increase in the official cost of borrowing is only months away. But Enable's IFAs in Bishop's Stortford know that the rate at which lenders can access money to lend is key to what they charge you. They usually get this money either from savers’ deposits or by borrowing from other banks on the money markets.

For fixed-rate mortgages, which are more popular when the cost of borrowing is about to rise, the key rate to determine what banks pay for their funds is called the “swap” rate. Swap rates react to expectations of future interest rates and inflation. The other major factor is competition and lenders have been competing fiercely to attract customers and meet their lending targets and this has helped to keep mortgage rates at record lows. It’s slightly different for tracker mortgages, which are less popular at the moment where the wholesale rate is “Libor”, currently it is a little above Bank Rate.

Economists have been broadly expecting that the Bank Rate will initially rise from 0.5pc to 0.75pc, and further increases will be slow and gradual. So far, the swap rates that drive the cost of fixed-rate mortgages have not reacted to expectations of a rise in Bank Rate at the end of the year. This suggests that markets are relaxed about a Bank Rate rise and had already factored it in to the cost of borrowing. As a result, mortgage rates are unlikely to jump.

One thing is fairly certain; however record low rates that have been on offer for most of this year are unlikely to fall any further so if you want to lock in a fixed-rate deal you should maybe consider mortgaging sooner rather than later.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE 

Young to old wealth gap worries?

Enable’s IFAs in bishops Stortford know that if you are a parent you might be worrying about he wealth gap between the young and the old. The transfer of wealth across the generations has been up there on the political agenda recently as well with income, housing assets and student debt being issues in widening the gap in recent decades.

One of the most striking phenomena is probably how quickly home ownership has become the preserve of older generations. According to the Institute for Fiscal Studies (IFS), “a record 80pc of those aged 65-74 now own their own home, compared with just 63pc in 1994.” Data from the accountancy firm PWC, shows that 71.8pc of the people within this age bracket also own their home outright, with no mortgage.

At the same time the incomes of over-65s’ households have risen. Official figures show that in 1994 the average 65-year-old household earned £10,660 net of tax and benefits. This has increased by 137pc to £25,272 in 2014. Meanwhile, the average 30-year-old household has also seen a rise in income, but to a much smaller degree. In 1994 the average 30-year-old household had income of £14,248 net of tax and benefits the equivalent 2014 household has income of £30,368, 113pc higher than 20 years ago.

Adding to the burden of people now in their late 20s and 30s is the cost of student loans. The average 30-year-old graduate in 2014 will still have £18,200 left of their loan to pay back. In 1994 student loans did not exist. If you want to see if you can redistribute some of your wealth across the family Enable’s independent financial advisors are here to help.

Issued by: Enable Independent Financial Life Planners 
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 - Fax: 01279 657339
 Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
It is important always to seek independent financial advice before making any decision regarding your finances. If you would like any assistance, please contact us.
NOTHING CONTAINED IN THE ARTICLES SHOULD BE CONSIDERED AS GIVING INDIVIDUAL FINANCIAL ADVICE