Financial Planners Chartered

Corporate reserves need to earn their keep

MANY DIRECTORS are missing golden opportunities to make their corporate reserves work harder for their business, writes David Sparrow, managing director at David Williams IFA.

Rather than having all their surplus cash and company reserves sitting on deposit earning next to nothing, far-sighted directors are alive to options for this money to be invested to generate enhanced returns for business.

The current era of record low interest rates has driven returns on company reserve accounts to an all-time-low. Some accounts now pay just 0.1%.

And while there are signs that the Bank of England may start to lift Base Rate later this year, any increases in interest rates are likely to be gradual and modest.

Directors rightly want and need to have a portion of their company free cash available on deposit. But there may be cases where they are able to commit some of their reserves to a longer term investment, knowing that these funds will be the last slice of capital and only called on in an emergency.

Northampton adviser David Williams IFA has 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, special bonus earning funds, bespoke investment portfolios and defined returns plans. The later of these in particular can allow a business to share in stock market gains, but protect the reserves from some of the downside risk.

Where a business meets the official HMRC definition of a ‘small company’, the widest range of investments are available, including life assurance bonds. Broadly this definition applies to any firm that meets two of the following conditions:

  • Turnover of up to £6.5 million
  • A balance sheet of up to £3.26 million
  • An average number of employees of up to 50

To discuss how to enhance the returns you can earn on corporate reserves, contact David Williams IFA on 01604 621302 or through

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