Cash is king, as the saying goes, but it does have its weaknesses. It is fallible to inflation, which has jumped to a 30-year high and has started to eat away at the value of nest eggs.
Joe Ryan, 79, has had £205,000 in a savings account since the early 2000s and has seen little growth on it. Mr Ryan, who lost his wife Annie last June, said he had sold his investments when he moved to Spain 20 years ago and had since left the money in an easy access account, even after returning to the UK in 2017.
“I have been worried about leaving my savings in the account for another 10 years in case it loses value but I’m not sure where to invest it,” he said.
His £44,000 retirement income from state and workplace pensions has been more than enough to cover his expenses. This means he has built up £37,000 in his current account.
Mr Ryan’s sole investment is £115,000 in BAE Systems, the British aerospace company, where he worked for 31 years. His £450,000 home is mortgage-free, and he plans to downsize to a £350,000 property this spring.
The pensioner plans to leave all his money to his son Joseph, 51, and his stepdaughter Leslie, 60. However, he would like to do it in the most tax-efficient way possible. So where should he invest his money now, and how should he plan to pass on his wealth to the next generation?
Alex Hatfield, financial planner at The Private Office, an advice firm
Everyone needs to hold cash. It’s what you need in an emergency, helps you sleep well, and stops you being a forced seller of shares or property in a bad market. But inflation is forecast to be 7.25pc in April, and some economists argue that it may become a more permanent problem.
Even with interest rate rises, the best easy-access account pays a paltry 0.75pc a year. Mr Ryan has been holding cash since the early 2000s. To give some context, inflation has wiped 56pc off the value of money over the past 20 years, whereas money held in a savings account paying the Bank Rate over that time would have gained 44pc. His cash has barely kept its value, if at all.
By contrast, the FTSE 100, a stock market index made up of Britain’s largest companies, has risen by 200pc over the same 20-year period. This shows how inflation has really been a silent assassin for him.
At 79, Mr Ryan should have time on his side. According to life expectancy averages from the Office for National Statistics, he will live a further 10 years.
