The information contained within the following news articles have been pre published. The articles were published on the dates indicated and the information contained within these issues include references to taxation, legislation, regulation and other issues or concerns that may no longer apply
Dealing with inflation
Recently at Census Financial, a number of our customers have expressed concerned about the impact of inflation on their Isas. Here we outline some practical ways you can track the performance of your Isa.
There’s no doubt that inflation has become a major concern for investors. The value of assets is eroded as prices rise: the £1 in your pocket today will buy you much less than it would have done a year ago. The Consumer Price Index (CPI) has measured year-on-year inflation at 4%, and the Retail Price Index (RPI) – which includes housing costs - indicates that it may be a point running at a point or two higher than that. Yet because this inflation is labelled as ‘imported’, that is, due to commodity costs such as oil and food, monetary policy has remained loose, with interest rates at all time lows.
With cash rates low, investors are looking to alternative stores of wealth, such as gold. For investors on fixed incomes, who wish to reduce the volatility in their Isa, index-linked bonds could be useful by providing returns on top of the rate of inflation. For Isa investors, this means striking a balance between your objectives and the risk. Allocating assets in favour of shares has always been a hedge against price rises. Over the long term, the reinvestment of dividend income into Isas, where you pay no additional tax on income, could prove a sound bastion against inflation.
Chartered Financial Planner