With UK interest rates at levels that have not been seen in half a century, where are they heading? Further cuts are anticipated and there are some economists speculating that UK interest rates could fall as low as zero. So where does this place you regarding your unearned income?

 

If you rely on your interest for income, you will have to start using capital, which then sets you off on a spiral of reduced interest and further reduced capital. If you have a large bank balance this may not be a problem as you can plan to erode your capital over the long term. Alternatively, other methods of generating income will have to be considered, such as income bonds or equity release if you own property.

 

Whilst may people are opposed to stockmarket investment, investment bonds linked to it can provide 5% return of capital annually tax free, with the possibility of stock market growth in the long term. Whilst this type of investment can fall as well as rise in value, with stockmarkets low at present, it could be a good time to consider this type of investment.

 

Equity release may also prove to be more popular over the next few years. If you are asset rich with the value of your home, but on a low spendable income, this may make a lot of sense.

Do consult an Independent Financial Adviser for any financial advice.

Contact Brian for further information.

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