Investing Insiders Weekly #15

TOP STORY: INFLATION RISES

ON THE RISE: Inflation rises again to 3.8% – how to protect your money

Inflation – the rate at which prices are rising – was 3.8% in July, the latest figures show.

Economists had widely expected the rate to remain steady (it was already too high at 3.6% in June – the target for the Bank of England is 2%), so this rise is concerning – and bad news for savers, as the majority of savings accounts now pay rates below inflation.

It’s also bad news for anyone looking to fix a new mortgage deal, as interest rates are likely to stay the same or even rise. 

💡 What should you do about it? 

If your savings rate falls below 3.8% – the current rate of inflation – you are effectively losing money, as prices are rising faster than your money is growing, meaning your pound is not worth as much as it used to be.

There are still some ways to get a good deal. If you can afford to lock some money away for a year or longer, you can still bag a better rate.

You can lock in a 4.43% fixed rate for one year with Aldermore Prosper, or 4.63% for six months. Close Brothers is offering 4.33% for one year.

If your savings goals are longer term and you have three to six months of savings for emergencies, you could consider investing. Stocks and shares ISAs have the same tax benefits as cash ISAs, and the stock market has historically outperformed both cash and inflation.

You can check out our top picks for cash ISA providers here.

For anyone considering taking out a mortgage or remortgaging, it’s worth locking in a deal now, as rates are unlikely to go down in the near-term, or could even rise again if the Bank of England puts rates up to combat high inflation.

You can typically lock in a deal up to four months before you complete on your home or need to remortgage, and you can switch to a better deal if rates fall before your new mortgage officially starts.

FROM THE REGULATOR: PENSION SCAM WARNING

New data from The Pensions Regulator shows that more than 2,000 victims of pension fraud – where their pensions were defrauded by scammers – have managed to claw back £81.5 million in combined compensation.

But this has taken years of work, and thousands of people are still out of pocket. Falling for a pension scam can cost you your entire retirement savings, which can be devastating. 

A pension scam is where savers are lured into putting their retirement money into a particular investment or scheme, often with the promise of high returns or up front cash – but then their money disappears.

How to spot a pension scam: One of the key warning signs of a pension scam is if you are approached about the opportunity out of the blue, either by phone, text or email. 

Since January 2019, there has been a ban on cold-calling about pensions, so no legitimate pension company will contact you in this way unless you have asked them to contact you.

If you do receive a call, a genuine pension company should allow you to hang up and call them back. If the person on the phone warns against you doing this, that is a red flag and could suggest you are being scammed.

Another sign of a scam is if you are pressured into making a quick decision. Genuine companies should not try to force you to make a decision over the phone or under time pressure. 

Some legitimate pension companies run time-limited offers, such as cashback deals for switching to their pension, but you can usually find these deals on the companies’ websites and will have to apply yourself. Hang up and call the company back if you receive a call about these.

And remember, if you are offered a deal that sounds too good to be true, it probably is. Very few investment opportunities offer ‘guaranteed’ returns – these are usually in the form of government-backed bonds. 

In summary: If you are contacted about a pension investment opportunity, hang up and call the company back – don’t be pressured into handing any money over. Do your own research before making any decisions about your retirement funds. Speak to a professional if you are unsure.

Government-backed Money Helper has a directory of legitimate retirement advisers you can use to find one local to you.

QUICK REMINDER: EXTEND YOUR CHILD BENEFIT

Parents with children going into sixth form or college have just over one week left to extend their child benefit claim before the 31st August deadline.

Child benefit automatically stops in August after your child turns 16. But, if your child is staying in full-time education or approved training, you can extend your claim and keep getting the payments, worth £1,300 a year for the first child. 

Full-time education could include completing A levels at school or going to college. Check the full list of approved training schemes here.

Certain types of education and certain schemes don’t qualify, such as university degrees, BTEC Higher National Certificates (also known as advanced courses) and paid apprenticeships.

You can apply to extend your claim here via your Government Gateway account. 

You can also watch our video explaining this in more detail here.

TIP OF THE WEEK: SCHOOL UNIFORM SWAP SHOPS

School uniform costs are getting out of control. According to the latest government estimates, the average cost of a school uniform was £249.58 per child in 2023.

But there are plenty of ways you can get cheaper or free school uniform, even if you need a niche or branded item.

If you haven’t already heard of them, many areas operate school uniform ‘swap shops’ or ‘exchanges’ where parents can take old school uniform and donate it, allowing other parents to collect it. These are usually free of charge.

There is actually a National Directory of School Uniform Swap Shops where you can find your nearest – but this is not conclusive, so search for one in your local area online if you can’t find one here. Facebook is a good place to find local uniform-swapping events.

Read our full guide to saving money on school uniforms here.