Safer Investment Options

By Author: Lecia Selbo
Total Articles: 49
Comment this article

Now that inflation has now hit a nine month high at 2.9%, UK citizens are likely to be worried about feeling pretty low about the overall health of the economy and in particular, their savings. To actually make more than a pittance this tax year, a basic-rate tax payer will have to earn 3.63% on their savings and higher-rate taxpayers will have to secure 4.84%.

Interest rates on the other hand have hit rock bottom. The average instant access account is currently paying approximately 0.75%, meaning that after tax inflation the average return is a depressing minus 2.3%, thanks to the low base rate of 0.5% interest set by the Bank of England. Finding a savings account that is actually worthwhile is becoming increasingly difficult.

The best place for your money therefore should be an ISA. Instant Savings Accounts are tax free savings accounts that allow you to invest up to ?7,200 each year. This can be divided between a cash ISA, up to ?3,600 and stocks and shares ISA obviously of the same amount, or all of it can be placed in a stocks and shares ISA.

One of the best types of ISA if you are after maximum returns ...
... for minimum effort is a corporate bond. Offering you the chance to earn regular income throughout the year, corporate bonds offer high potential for regular returns on your investment at various times in a year.

Corporate bonds are issued by businesses trying to raise cash for investment. They are also referred to as fixed interest securities as the payments are decided in advance.

Corporate bonds are now some of the most attractive investment opportunities available on the market right because of their low risk and tax free savings. But remember that ISAs should be looked at as medium to long term investments of five years or so.

Legal and General offer tax free corporate bonds. Investments are pooled together so the pot of gold, i.e. customer money is larger therefore they can buy and sell a wider range of bonds and therefore have greater earnings potential. The tax-free income generated from these bonds amounts to a current gross distribution yield of 6.1%.

If President Obama''s new banking rules get through, the global banking industry is going to be getting a complete overhaul. So it is worth putting your money in a safe place now to safe guard you against any further upheaval in the future and ISAs will most likely avoid the worst of the fluctuations in inflation and interest rates. Lecia Selbo opened his own corporate bonds with Legal