With news last week that the Government is considering extending its Funding for Lending Scheme (FLS), which has already been accused of pushing savings rates through the floor, what alternatives are there for people with spare cash who want to make a profit?
The FLS, which was launched last August to make cheap money available to individuals and businesses as long as lenders passed on the saving in competitive rates, drove savers’ returns right down.
In fact, according to figures from Save Our Savers, a campaign group, British depositors have lost more than £43bn in the “real” value of their savings over the past four years.
For the average saver, this translates into a loss of £2,500 in real terms, as inflation has run ahead of the interest rates paid by the vast majority of deposit accounts.
One potential avenue to make money is to buy shares. Recent good performances from the major stock markets have tempted many first-time investors. The FTSE 100 index has risen 9 per cent since the start of the year, while the US Dow Jones index is up 10 per cent.
When markets have done well, many people worry that those buying in could be doing so at the top of the market, but the claim is that equity valuations are currently cheap.
Another option is to invest in a business and get tax relief back. In a Budget document, the Government said that there are plans to raise the limit on how much individuals can invest in cooperatives.
While the Chancellor also announced that previously discussed changes to community investment tax relief will go ahead. This will mean that investors who put money into community development finance institutions will get tax relief of up to 25 per cent over five years.
Marc Stemmer offers financial planning advice to businesses and individuals; helping them to achieve their financial goals.