Money News

Article written by Kellands Hale, our preferred independent advice firm.

This article is not intended to be financial advice to any individual. The views expressed are those of the author and Moneyfacts.co.uk does not endorse the content.

In today’s world, there are plenty of threats to the security and viability of your wealth.

You might be concerned about how the cost of living crisis will affect your savings and investments, for example, and already be having conversations with your financial planner about how to mitigate these effects.

One potential challenge you could face in the coming months and years that you may not have considered is falling victim to an online scam.

Indeed, a National Cyber Security Centre (NCSC) report reveals that it removed a record-breaking 2.7 million online scams in 2021. This number is four times higher than that of 2020, showing a startling increase in the number of active scams that could put your wealth at risk.

In addition, the UK’s specialist police unit for fraud claims that the current cost of living crisis will create an opportunity for scammers to “exploit” the financial concern many are facing. For example, scammers could offer “energy rebates” by pretending to be a Government body, acquiring your financial details surreptitiously, and potentially causing a highly stressful situation for you and your loved ones.

In light of the increasing number of financial scams that could put your financial viability at risk, there are several red flags even savvy individuals might miss.

The Bank of England still believes the peak is yet to come.

UK inflation reached 9.1% in the 12 months until May, the Office for National Statistics (ONS) announced today. Previously, inflation reached 9% in the 12 months to April.

May’s inflation rate means it is the highest figure to be recorded in the National Statistics series, which began in 1997, and the highest inflation has been in 40 years.

“While the rate of growth in the inflation rate may have slowed, we have plenty warnings that this is not the peak, with the Bank of England expecting it to climb to 11% later this year following the increase in fuel caps,” said Paul Craig, Portfolio Manager at Quilter Investors.

The high-street provider now offers 5% Annual Equivalent Rate (AER) on its FlexDirect account for the first 12 months.

Nationwide BS has increased the introductory rate on its FlexDirect current account to 5% today, making it the top rate on the market for high interest current accounts.

“This market leading rate will help new and existing members make the most of their money, which is particularly important right now,” said Debbie Crosbie, Chief Executive at Nationwide Building Society.

The latest increase means Virgin Money’s Club M and M Plus accounts offer the next highest rate on the market at 2.02%.

It is worth noting that TSB do offer an interest rate of 2.50%, but it is only available to applicants between the ages of 16 and 19.

While Nationwide BS’s new rate may be market-leading, it is fixed for 12 months from account opening. Once this period has expired it will revert to a variable rate which stands at 0.25% at the time of writing.

Regular pay rises may still be of concern for policymakers.

When accounting for inflation, UK regular pay between February and April fell 2.2% compared to the previous year, the Office for National Statistics (ONS) announced today.

“If you exclude bonuses, pay in real terms is falling at its fastest rate in over a decade,” said Sam Beckett, Head of Economic Statistics at the ONS.

When taking bonuses into account, this figure changes to a rise in pay of 0.4%.

“The high level of bonuses continues to cushion the effects of rising prices on total earnings for some workers,” she said.

While regular pay fell compared to the previous year, employees received an average regular pay increase, which excludes bonuses, of 4.2% between February and April this year.

This will be of particular concern for policymakers, like the Bank of England [BoE], due to rising inflation, according to Paul Craig, Portfolio Manager at Quilter Investors.  

“Earlier this year, Andrew Bailey [Governor of the Bank of England] went as far as to urge workers not to ask for big pay rises in the face of spiralling inflation. Ultimately, this all translates to people’s earnings not keeping up with inflation and hampering people’s purchasing power,” he explained.

For Sarah Coles, Senior Personal Finance Expert at Hargreaves Lansdown, this wage increase is not sustainable in the long-term due to inflation.

“Rising inflation will pile the pressure on even more, and over time effective pay cuts are likely to spread. Already, not every company is boosting pay to keep pace with inflation,” she said.