Insignis 012: Get Cash Clever - What Trump could mean for interest rates and inflation in the UK

Welcome to this week's edition of Get Cash Clever by Insignis Cash.

Get insights on the news impacting your cash in just 3 minutes and 30 seconds.

In this edition, we cover key topics including the latest savings rates, how UK-focused pensions could affect long-term savings growth, and what a Trump presidency means for UK savers. Plus, learn how recent tax changes under Labour’s budget could impact pensioners and why SSAS pensions are still a valuable tool for business owners.

Current Bank Rate: 4.75% (Bank of England ) - The next update is due on December 12th, 2024

CPI Inflation Rate: 1.7% (Bank of England )

TOP INSIGNIS SAVINGS RATES*

Easy Access –? Sainsbury's Bank: 4.66%?

6 Months Fixed – Sainsbury's Bank : 4.77%

1 Year Fixed – AI Rayan Bank : 4.70%?

TOP EURO ACCOUNTS:

Easy Access: Santander Financial Services Plc: 1.95%?

95 Day Notice: Santander Financial Services Plc: 2.70%?

To enquire about our USD or Euro products please reach out to your Account Manager

SSAS: A Valuable Tool for Business Owners, But at Risk of Decline Without Proper Understanding (Money Marketing) ?

The article highlights that SSAS (Small Self-Administered Schemes) continues to offer valuable benefits for business owners, particularly through features like loan backs and investment flexibility.

Pensioners Facing 'Retirement Tax' Within Three Years Under Labour's Budget (The Telegraph) ?

Under Labour's budget, the freezing of tax thresholds means that within three years, many pensioners will pay income tax on their state pension, as the pension amount will exceed the personal allowance. This change could impact those with additional income, as their tax liability increases.?

UK-Focused Pensions May Impact Long–Term Savings Growth for Savers (The Times) ?

The government's proposal to increase investment in UK stocks through pension reforms may result in lower returns for savers. Funds with higher allocations to UK stocks have generally underperformed compared to those with a broader, global focus, potentially leaving savers with smaller pension pots by retirement.?

What a Trump Presidency Means for UK Savers: Interest Rates and Inflation?

What happened?

Donald Trump has been elected as the 47th President of the United States, a result that could significantly influence UK savers. Trump’s expected approach of tax cuts, tariffs, and deregulation is likely to drive inflation in the US, prompting the Federal Reserve to keep interest rates high. This could, in turn, affect the Bank of England’s (BoE) policy, potentially leading to prolonged higher interest rates in the UK. In addition, UK Chancellor of the Exchequer Rachel Reeves recently announced a budget with a substantial increase in public borrowing, adding ￡142 billion over five years to support investment and public services. Economists warn that this fiscal expansion will put further upward pressure on inflation, complicating the BoE’s ability to lower rates.??

Why does it matter?

The combined effects of Trump’s presidency and the UK’s expansive budgetary policies potentially bring new economic challenges for UK savers. Trump’s policies are expected to keep US interest rates high, and Reeves’ budget has intensified inflationary pressures within the UK, likely causing the BoE to delay interest rate cuts. Economists estimate that the BoE will maintain rates 25 to 50 basis points higher than initially anticipated, which could mean higher returns on savings but also prolonged high borrowing costs. This scenario offers little immediate relief for consumers and businesses facing elevated borrowing expenses.?

Inflation remains a key concern. Increased public spending in the UK, coupled with a planned 6.7% increase in the National Living Wage in 2025, is projected to push inflation up, with the Office for Budget Responsibility forecasting a 0.4 percentage point increase in 2025 and 2026. With inflation likely to remain above the BoE’s 2% target, the real value of savings could be gradually reduced over time. As wage costs rise, many businesses may pass these on to consumers through price increases, adding further pressure and making it harder for the BoE to bring inflation back under control.?

What could this mean for you?

For UK savers, the current outlook of elevated interest rates and rising inflation brings both opportunities and challenges. Higher interest rates can improve returns on savings, providing some protection against inflation. However, persistent inflation may counteract these benefits, underscoring the importance of monitoring how inflation could affect the real value of savings over time.?

Seeking professional financial advice is especially valuable in such an environment. Staying informed and proactive will allow UK savers to respond effectively to both the Trump presidency and the UK’s fiscal policies, ensuring their savings strategies remain robust in a dynamic landscape.?

The latest from Insignis?

We’re excited to announce our sponsorship of The Economist podcast. ??

We invite you to visit our website if you have any questions.

Wishing you a wonderful rest of the week. Until next time!

The Insignis Cash team

*Rates are correct on the Insignis Cash Platform as of 12th November 2024. All interest rates displayed are quoted gross p.a. and easy access may be variable. Rates are subject to a minimum and maximum deposit size, please shop around. Availability of products will vary depending on the client type. Check your FSCS coverage. Fixed-term deposits cannot be broken early. Insignis Cash does not provide financial advice.

Market information does not constitute financial advice. Forecasts may change and actual performance may vary. Please seek your own professional financial advice before making a decision.

Insignis Cash is a trading name of Insignis Asset Management Limited (Company number 09477376). Insignis Asset Management Limited is authorised by the Financial Conduct Authority under the Payment Service Regulations 2017 (813442) for the provision of payment services.