Investment Insights
Last Updated: 2 Sep 24 6 min read
As one of the most attractive guaranteed bond issues ever offered by NS&I comes to maturity, lots of savers may be looking for a new home for their cash. M&G Wealth offers some ideas.
Over the next few months, the one-year NS&I Guaranteed Growth and Guaranteed Income Bonds are set to mature.
Paying 6.2% – the highest-ever rate paid on the product since launch in 2008 – it’s no wonder that around a quarter of a million UK savers signed up to the issue in the space of just over five weeks in summer 2023.
But the big question bond-holders may be asking now is: “What’s the next smart move for my money?”
Any time a client receives a capital sum – whether from an inheritance, a salary bonus or a maturing bond – is an opportunity to demonstrate the value you provide as an adviser.
Having earned a very attractive interest rate – with full return of capital – NS&I bondholders could be looking for something equally compelling as the next home for their cash.
Here’s how we can help you support conversations with your clients about the long- term and their next smart move.
If you are taking the opportunity to revisit a client’s goals and needs, checking they are on track to meet their financial-planning targets or if their goals, risk tolerance or time horizon have changed at all, you can use our guide to help support these conversations
One essential issue is a client’s level of borrowing. Given the sharp climb in interest rates since the start of 2022, debt has become more costly to service. So, paying off any expensive debt (for example, if a client is coming to the end of a low fixed-rate mortgage) might be an effective use of at least some of their capital.
Another key consideration is investment risk. Recent higher interest rates have made it easier for savers to achieve a good return on cash products As a result, billions of pounds have flowed out of riskier stock-market based investments. But could this be a mistake?
As market analysis has repeatedly shown, ‘risk assets’ like shares have delivered above-inflation growth (partly because they’re investing in the companies whose goods and services are rising in price). By contrast, interest-earning deposits tend to track below the rate of inflation.
Please remember the value of investments can go down as well as up and clients may not get back what they invested and past performance should not be considered a reliable indicator of future performance.
So although savings deposits can pay attractive rates in the short term, it’s critical to consider what the ‘real’ long-term return will be once inflation is taken into account. By keeping some exposure to riskier assets, clients are more likely to see their money grow in real terms to help meet their financial goals.
Appetite for risk is a very personal thing.
If your clients favour stability and security but with the potential to achieve an attractive return, what other options could help them achieve that?
Let’s looks at some options that you may consider to support your client’s next smart investment move.
At M&G Wealth, you can access a range of investment solutions with clients’ priorities in mind – allowing them to target their need for stability and security while also optimising opportunities to build their capital.
The M&G Wealth range of investment solutions are designed to support your clients commit to long-term investing however without offering guarantees like recent short-term interest rates.
The Model Portfolio Service from M&G Wealth Investments, lets you provide clients with a comprehensive portfolio management service and it’s available on a range of leading investment platforms.
You can choose from three portfolio ranges – Passive, Hybrid (combining active and passive) and Global ESG. Each range offers five portfolios to target different levels of risk and reward. Every portfolio is independently risk-rated by leading risk analytics services such as Defaqto, Dynamic Planner, Oxford Risk and EV. So you can match each client’s preference for stability vs performance potential precisely.
The portfolios are characterised by their extensive investment diversification across global equity, bond, property and infrastructure markets. Strategic asset allocation is set by M&G’s highly-respected Treasury & Investment Office (T&IO) – the team behind the UK’s largest with-profits fund.
The M&G Wealth Investments team have the freedom to select funds from across the asset management industry to achieve the agreed asset allocation. So, clients get ‘best-in-class’ investment expertise at every level of their portfolio.
If you believe a single-fund solution is more appropriate for client, our multi-asset Risk Managed Funds could be a smart move.
Again, these include both active and passive fund options. Each Risk Managed Fund has a stated volatility limit – ranging from 9% to 17%. So you can clearly align to the level of risk that’s right for each client.
Each Risk Managed Fund is invested across shares, bonds, property, infrastructure and cash (with asset allocation set by T&IO) using a fund-of-funds approach for deep diversification. As well as using funds managed by M&G investment teams, the investment team can also draw on third-party funds, ETFs and index-trackers to bring in specialist expertise or capture market exposure in the most efficient way.
The Risk Managed Fund range is available on a wide range of investment platforms.
Finally, for clients either looking to build wealth or draw down capital – there’s the PruFund range, one the UK’s best-known solutions for managing investment risk, used by over 450,000 savers and investors across the UK.
PruFund may be of particular interest to holders of recently maturing bonds because it’s expressly aims to grow your client’s money while smoothing the short-term ups and downs of investment markets.
First, global portfolio diversification and active asset allocation help to navigate and spread market risk. Second, PruFund has an established smoothing mechanism which uses Expected Growth Rates, and where required, Unit Price Adjustments, to deliver a smoothed investment journey. The smoothing mechanism also includes Suspension of Smoothing and Unit Price Resets; we expect these to be used in highly unusual circumstances.
The EGR, which is set and published quarterly, is based on a strict, forward-looking formula, taking into account what is expected to happen in markets up to 15 years ahead. Should rises or falls in the underlying portfolio value be substantially higher or lower than the EGR, a unit price adjustment will kick in.
One of the most appealing aspects of PruFund is the wide choice of funds. These include PruFund Growth, PruFund Cautious and a range of Risk Managed Funds. There are also PruFund Planet Funds, aiming to deliver both competitive returns and positive social and environmental outcomes.
So whatever a client’s goals, values and preferences, there should be a PruFund to match.
The PruFund range is available through the M&G Wealth Platform and a range of M&G packaged investment products, including a Retirement Income Account for income drawdown clients.
With UK interest rates recently reduced and now widely expected to see a period of decline, it’s a lot harder for savers and investors to replicate the level of risk-free return that NS&I guaranteed bonds have recently offered.
But as we hope we’ve shown here, M&G Wealth has lots of compelling long- term investment-based solutions to enable your clients to capture long-term performance potential while also meeting their desire to safeguard capital as much as possible.
To discuss how M&G Wealth solutions can help your clients, speak to your M&G Wealth Business Development Manager or If you are looking to speak us about how M&G Wealth can support you and your clients, request a call back here.