The savings market is reportedly set to benefit as clients weigh impact of higher CGT. Nearly seven in ten (69%) UK IFAs believe most clients will hold investments longer now to defer paying higher CGT, according to the latest Flagstone Base Rate Poll.
17% of respondents say that clients will allocate more “to cash or sell off investments and switch to cash.”
This follows a late-October poll of Flagstone customers which found “that more than a third (34%) of Flagstone savers expect to invest less now or in the future as a result of the CGT change.”
Simon Merchant, CEO of Flagstone, commented that a CGT increase had been signposted for many months.
Simon added that it will have taken many investors – and their advisers – by surprise “that the Treasury decided against delaying the hike until the new tax year. Investors must now choose which investments to keep and which to divest, to minimise the impact of higher CGT liability further down the line.”
Simon also noted that most advisers expect clients to “hang tight. But, if the signals are correct, while holding stocks longer defers CGT liability, this will only delay the returns.”
They also shared that investors exiting investments would be wise to “consider the competitive risk-adjusted returns they can enjoy from savings while rates remain high.”
Clients for whom investing has lost its appeal may “be heartened to see the dozens of Fixed Term rates still available that exceed inflation by as much as 2.5 – 3%.”
Flagstone’s poll / survey also finds that almost “9 in 10 (88%) UK IFAs are predicting a base rate cut when the MPC meets on Thursday 7 November.”
Ahead of the last base rate vote in September, the majority of “respondents correctly predicted a hold.”
Merchant concluded that rates for more than 200 savings accounts “dipped by 0.2 to 1% in the first week after the July base rate cut.”
Rates will almost certainly fall in November, and then again “if a third cut comes in December.”
In a falling rate environment, diversifying your savings by term length is a good choice – and using a savings platform is a “particularly efficient way to ensure maximum diversification.”
It provides reliable liquidity without impinging on your capacity to capitalize on the relentless competition “among banks to stay at the top of the best-buy tables.”
Flagstone Base Rate Poll methodology: industry research canvassing opinions of “93 UK financial advisers and wealth managers, 21-27 October 2024.”
Flagstone Customer Poll, October 2024.
