Unfortunately, just when people need security and an attractive return on their savings, it is now impossible for them to obtain the level of interest that they have previously been used to. Alan Dick, a CERTIFIED FINANCIAL PLANNERCM professional at Forty Two Wealth Management in Glasgow and director of consumer affairs at the IFP comments; "We are worried that such low levels of interest are likely to drive many investors into complex and opaque structured products such as those promoted by banks. These products offer a fantastic opportunity for product providers to make a profit and rebuild their balance sheets at the expense of investors who generally get a poor deal. Unfortunately, it was many of the complex financial instruments behind these so called "secure" products that got the banking sector into so much trouble and brought about the current crisis. It is crucial that people are rational and don't invest in things they don't understand. Remember that if it seems too good to be true then it probably is"
He reminds consumers "when it comes to saving, It is really important to remember the link between risk and reward. Banks and products offering higher rates of interest are doing so because they need to - in order to encourage people to give them the capital they need. Make sure you spread your assets between different organisations avoiding deposits of more than £50,000 in any one bank where you can, to maximise the protection available from the Government."
Dick also suggests that investors will need to rely on basic Financial Planning concepts such as, drawing up a careful budget and sticking to it, as well as minimising "leakage" through tax and charges, rather than trying to find clever ways to increase the income from their savings. "Careful examination of your budget is likely to highlight many areas where cost savings can be made and these can really help to counter the effect of a fall in interest" he says.
Consumers may actually need to reassess their protection needs too. While times may be tough for a family with both adults in employment the death, illness or unemployment of either partner would make things even worse.
