The Daily Express: Find out about the high return alternatives to cash savings

Gold

Silver

Gold

Silver

Gold

Silver

Arabian Pure Gold

14/8/2016

With interest rates at record lows, the Express.co.uk run through the various alternatives to cash savings whilst using Arabian Pure Gold as a thought leader to explain the benefits of investing in physical gold. In recent years, many more ordinary people, particularly retirees, have been investing in gold

by Harvey Jones

Gold, peer-to-peer (P2P) lending, dividend stocks and buy-to-let may give you far higher rates of return, although the risks are greater too.

Here are some options to beat the great British savings squeeze.

GOLD

Gold has glistered lately, with its price rising more than 20 per cent over last year to top $1,350 an ounce.

Many older savers have put at least some of their money into the precious metal, attracted by its status as a safe haven, although the downside is that it does not pay any interest.

Josh Saul, chief executive of Arabian Pure Gold, says more ordinary people are now investing in gold: “Retirees are particularly interested as the value of their pensions has been hit.”

You could buy a share in gold bars via BullionVault.com quickly and cheaply without actually taking delivery of the gold itself (which saves on storage costs and security worries). Alternatively, you can buy gold bars, coins and sovereigns either direct from the Royal Mint or via specialist traders such as Chard, Sharps Pixley or Arabian Pure Gold.

A riskier option is to buy the stocks of gold mining companies such as UK-listed Fresnillo and Randgold Resources.

These have shone lately, their shares soaring by 206 per cent and 117 per cent respectively over the past 12 months, but be warned, now may be too late to jump on the bandwagon.Another option is a low-cost exchange traded fund (ETF) that tracks the gold price, such as the Physical Gold ETF. Actively-managed fund BlackRock Gold & General invests in gold miners and other commodity companies. John Blowers, head of Trustnet Direct, says: “Gold has dazzled, but it can be volatile and could quickly lose its lustre.” The average instant access account pays just 0.55 per cent, but you can get 10 times that from a P2P platform.Market leader Zopa.com is offering returns starting at 3.5 per cent a year, rising to as much as 6.7 per cent if you can lock your money away for longer and take more risk.Rival RateSetter.co.uk offers one-year rates at 2.9 per cent rising to 5.5 per cent a year over five years.P2P platforms work by matching savers looking for a higher interest rate with people and businesses who want to borrow money, and aim to give both parties a better rate than they would get from a bank.Neil Faulkner, founder of P2P ratings agency 4thWay, says returns on P2P are included in your personal savings allowance: “This allows basic rate taxpayers to earn £1,000 a year in tax-free interest, or £500 for higher rate payers. Any income above that is taxed at your income tax rate, but bad debts are tax deductible.”Defaults are a danger although your risk is usually spread between dozens of credit-checked borrowers.The Government-backed Financial Services Compensation Scheme, which protects losses on bank accounts, does not cover P2P although Zopa and RateSetter run their own “contingency funds” as protection.Faulkner adds: “You must understand the risks, but you can dip your toe in the water with as little as £10, then build up your holdings if you feel comfortable with the concept. Beware the new breed of crowdfunding sites that raise funds for start-up businesses and can be risky.”INVESTMENT FUNDS

The stock market has been a big Brexit winner with large company index the FTSE 100 soaring and the FTSE 250, which covers smaller firms, hurriedly playing catch-up.

As well as growth you can also get income from investing in stocks and shares, with the FTSE 100 currently yielding 3.5 per cent a year, although this is not guaranteed.

Alternatively, you could invest in a bond fund that targets a mix of Government and company-issued corporate bonds to give income and some growth as well.

Adrian Lowcock, investment director at wealth advisers Architas, says : “There are still income opportunities out there. Many funds yield more than 5 per cent without huge risk. Spread your money between different funds to reduce volatility and secure a better return in today’s low inflation, low growth world.”

Lowcock tips three funds: Fidelity Enhanced Income, which invests in a combination of UK blue-chip firms and derivatives, and typically yields 6.89 per cent a year; Invesco Perpetual High Yield Bond, which mostly invests in European high yield bonds and boasts an historic yield of 5.88 per cent; and Schroder Global Real Estate Securities, a property fund that can be volatile, but avoided recent problems in the sector and typically yields 5.35 per cent a year.

BUY-TO-LET

A raft of new taxes aimed at landlords, notably April’s three per cent stamp duty surcharge, may have calmed the buy-to-let market.

However, chief executive of mortgage broker SPF Private Client Mark Harris says: “Interest rate cuts may revive activity in buy-to-let .”

Again there are risks, as property prices may fall, although there is little sign of that post-Brexit and tenant demand for rental properties remains high, given the housing shortage.

By slashing interest rates yet again the Bank of England is forcing savers to take bigger risks with their money, but do not invest in anything that is likely to give you sleepless nights.

Source: The Daily Express