Nooooooo!!!!!!
Cash rates may look attractive at the moment due to many years of rubbish interest rates and the financial markets having gone blurgh (technical term!), but cash is not the place for growth, it is a place of safety and underperformance.
Let’s look at the current 5% ish interest rate you can get on a bank account at the moment. This interest is taxed, so if you are a basic rate taxpayer you are only getting 4%. Higher rate taxpayers are only getting 3% (additional rates only get 2.75%).
Makes it even more important to make sure that if you are a couple you have your savings in the lower rate taxpayers name. Don’t be possessive about who “owns” what. The taxman doesn’t care.
On savings of £100,000, this means that £5,000 of interest has gone to £4,000 . . . £3,000 . . . £2,750.
So that great interest rate that you saw is actually reduced by a lot after tax – not so attractive . . . yet by cleverly investing we can reduce the tax to potentially zero.
Look at the below 20 year chart of the Bank of England Base Rate (blue) compared to Global Equities (green). Which end point would you prefer? Green or blue?
Past performance is no guide to future returns.
On top of that, if you are invested and those investments have recently decreased in value as per the above chart, by taking money out you are crystallising the losses and then putting it in cash which will underperform equities, so you won’t make this money back up when the markets spring back up.
