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Retirees seek out higher-risk higher-return investments to safeguard against rock bottom interest rates

March 6, 2014Article by Ray Withers

The Bank of England (BoE) is further driving people away from traditional pensions and savings accounts – and is now spurring retirees to seek out higher risk investments as well.

In the BoE’s February 2014 statement, it confirms interest rates are likely to remain low until the end of the decade. Mark Carney, Governor of the Bank of England, said rates will not rise from their historic low for at least another year and, when they do, the increases will be “gradual” and “limited.” He also indicated rates are expected to remain between 2 and 3 per cent until 2020.

Another “hammer blow” for those on a fixed income

In retirement terms, these seven years could mean the difference between poverty and profit. Nigel Green, founder and CEO of world-leading financial advisory group, deVere Group, believes this will simply drive a growing number of retirees to consider higher-risk, higher-return investments to secure their finances.

Mr Green said the “rock bottom interest rates are eroding people’s life savings” and were “another hammer blow” for retirees and those on a fixed income.

He explained: “Tired of their cash holdings making them, in effect, poorer over time, I fully expect more and more retirees will turn traditional thinking on its head. An increasing number will, I believe, consider higher-risk higher-return investment opportunities as well as a well-diversified portfolio in order to be able to fund the retirement they want to enjoy.”

A time to embrace risk

He continued: “Traditionally, the mindset has been that as we get older we should reduce our exposure to risk and, for example, increase holdings of cash and bonds. However, in today’s world this prudent intention could have serious consequences.”

Green believes the recent steady growth in retired clients seeking higher-risk higher-return investments has been as a direct result of Governor Carney’s forward guidance policy last summer and is a trend which looks set to continue.

This news follows hot on the heels of deVere’s “Rich List New Year Resolutions” report, covered in our Revealed: New Year’s resolution secrets of high net worth investors article. The international survey, conducted in Q4 2013 with 547 high net worth individuals, found the top three 2014 financial resolutions were: to save more for retirement; to add higher-risk higher-reward investments to their portfolios; and to provide for their families.

Property is where the profit is

Ray Withers, CEO of Property Frontiers, comments: “Certainly, we have seen a much higher uptake in our highest return investments. However, not all of them are higher risk as we’re also seeing a growth in eco-friendly investments. Our ‘Feeding Senegal’ opportunity is top of investors’ lists, as the country grows in popularity following high profile investment programmes. This agricultural investment delivers expected returns of 239 per cent over five years, making it an exceptional short term gains investment.”

He continues: “Commercial property is also on the up, as demonstrated by our luxury shopping and leisure centre investments in Mongolia, which achieve capital growth of 300 per cent over four-to-five years, with annual yields up to a massive 24 per cent Even UK buy-to-let is offering soaring returns right now, with city centre developments and luxury apartments delivering 8 and 9 per cent yields. Whether you want to go for green, commercial, or traditional buy-to-let, property is where the profit is right now.”

Get in touch on +44 1865 202 700 to find out which high return investments will work best for your own personal portfolio.

Author

Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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