To help deal with the financial pressures brought on by the pandemic in 2020, many companies across sectors have cut their dividends – choosing instead to hold more profits as cash reserves to weather harsher global economic conditions. This, of course, has had a big impact on income investors – i.e. those who draw a significant monthly income from dividends and/or other income generating assets (e.g. bonds). In this article, we explore what impact this has already created on income investors and what the outlook might be as we enter 2021.
Many people in the UK have a tendency to deal with isolated areas of their financial plan, in a reactive way. For instance, suppose a couple in their mid-30s suddenly has their first child. At this point, they may quickly realise that they need a life insurance policy (e.g. to pay off the mortgage). Yet this reactive approach may not come at the best timing. In 2020, for instance, the COVID-19 pandemic has led many insurers to restrict their products and even raise prices.
NS&I Premium Bonds are an interesting alternative to saving into a regular savings account. Yet they have come into the public spotlight in December 2020 due to a recently-announced cut in the rate they offer, from 1.4% to 1%. As a result, many people are now questioning whether they are still worthwhile or if your cash savings are better off in a Cash ISA or similar account at your local high street bank. Below, our financial planning team here at WMM offers some thoughts on this important subject for you to factor into your own case.