Nationals round-up: Risks of bonds, Swiss savings targeted by the taxman and a think tank suggests ISAs should be scrapped.
Portfolios put at risk by bonds
Investors with “defensive” portfolios have been warned their investments may be taking too much inflation risk. Model portfolios aimed at low-risk investors by Prudential, Standard Life Investments and Skandia have more than 50% in gilts or corporate bonds, which the Financial Times reported are becoming less attractive when inflation is rising while the income they pay is fixed.
Furthermore, when interest rates are hiked to combat inflation, prices of corporate bonds tend to drop, meaning there is also a risk to capital. Advisers say many investors do not understand the risks of fixed-income bonds, and that insurance companies are basing portfolios on historical performance rather than expectations about the future.
Osborne targets Swiss savings
Wealthy clients with savings and investments in Switzerland may be getting a little jittery after reports George Osborne is close to sealing a deal with authorities in the country to tax assets British subjects have stashed in secret accounts. The Daily Mail said it is likely to involve a ‘withholding tax' of 25-35% on savings and investments held in Swiss accounts and the agreement is set to raise between £3bn and £6bn for the Exchequer. The tax would be taken by banks and then handed over by the Swiss authorities, meaning customers can remain anonymous.
ISA ISA maybe?
Clients particularly keen on their ISAs may need some reassuring words after a prominent think tank suggested they should be scrapped. The Independent reported on research by the Institute for Public Policy Research, which said ISAs are failing in their purpose to encourage savers. It added the main beneficiaries of the tax relief offered by ISAs have been those who would have been likely to save anyway. The think tank called for them to be replaced by a new type of savings account which would see a "bonus" paid on a sliding scale, with the amount capped once the balance reaches an average of £3,000.
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