Generating better returns on your corporate deposits
By Nick Beal, director of David Williams IFA
THE LATEST pronouncements on interest rates should prompt company directors to ask if their corporate reserves are working as hard for the business as they could be.
The Bank of England’s November inflation report and the latest musings of the Monetary Policy Committee, suggest it could be at least another year before any increase in interest rates.
Rather than having all their surplus cash and company reserves sitting on deposit – and earning next to nothing – far-sighted directors are investing some of this money to generate enhanced returns for the business.
Directors rightly need to have a portion of their company cash reserves available on deposit. But this prolonged era of record low interest rates has driven down returns on company reserve accounts. Some accounts now pay just 0.1% per year.
There may be cases where a company is able to commit some of its reserves for investment, knowing that these funds will be held as long term capital and only called on in an emergency.
David Williams IFA is Northamptonshire’s biggest Chartered Financial Planning firm. We have been successfully working with directors and corporate clients on a number of investment strategies to make profitable use of company funds.
Options for company reserves include term deposits, diversified funds paying an annual bonus, bespoke investment portfolios and defined returns plans. Defined return plans allow a business to share in stock market gains, but protect the reserves from some of the downside risk.