Today in Europe and most advanced countries, the era of high interest rates seems like a myth. In the UK, during the Margaret Thatcher period, interest rates were 17%, in the early 90s they were around 10%, in the late 90s they ranged from 3% to 5.75% and finally due to the global economic crisis of 2008, interest rates fell to their lowest in 300 years – 0.5%.
People used to put their money in their savings accounts and they would receive a good rate. It was easy. Saving for retirement was easy.
So why today does the market does not offer interest rates on savings that would allow people to earn a good return. The answer is simple – to stimulate the economy through spending and development. With low interest rates, people are less inclined to save money and companies are lured into borrowing money to invest into expansion and development.
This poses a serious problem to risk averse investors, such as people saving money for retirement and retirees. What options do they have? Even money sitting on your savings accounts is actually losing value. The whole pension planning and retirement savings methodology is changing.
Typically, to earn a decent return you have a choice between a mix of shares, funds and bonds. Then, there are more complex structured investment products, which sometimes are so complex to understand that it is best not to go for them. If you cannot understand how an investment product works, it is best not invest into it.
However, not all countries offer such favourable interest rates. In the Baltic states and Russia for example, interest rates for credit start from 17%. This makes it very difficult for businesses to borrow for business expansion but a favourable environment to save.
Therefore, businesses look elsewhere to raise money. For example, the 12-month Firewood Plan over the years has built up its fixed income programme, which offers investors a favourable rate of 9% per year. Interest rate is paid every quarter directly to the investor’s bank account. Click here to find out more about this plan.
This works very well for a business, which needs capital for expansion but does not want to borrow at such a high rate of 17%. And a private investor can earn a much better return as opposed to investing into bank savings accounts or other products.
The era of interest rates has not disappeared just the method of investing has.