72 Saturday December 18 2021 | the timesMoney
I
nflation has hit a ten-year high
leaving investors scrambling to
find ways to shelter their wealth.
Higher prices can have a devas-
tating impact on your savings.
Those sitting on cash will be the worst
affected as record-low interest rates
mean there are no instant access
accounts able to keep up with inflation.
The annual cost of living index rose
to 5.1 per cent in November, its highest
since September 2011. The Bank of
England had expected inflation to hit
this level in the spring but now expects
it to peak at 6 per cent in April.
Ed Monk from the wealth manager
Fidelity International said: “The stock
market is the place to give your money
the best chance of keeping pace with
inflation. That means the risk of loss, of
course, but now more than ever we can
see the hidden danger that inflation
holds for seemingly safe assets like cash.
There are very few genuinely risk-free
options right now.”0 Tech disruptors
Technology stocks have been one of the
best ways to beat inflation over the past
20 years. While inflation has risen
about 54 per cent in two decades, tech-
nology stocks are up more than 577 per
cent, according to the MSCI informa-
tion technology index. The FTSE 100
index of leading UK companies is up
43 per cent over the same period.
Monk said: “The tech sector, for all
the gains it has made already, remains
in the sweet spot. They are capital-lite
businesses, relative to their huge size, so
should have some insulation against
rising raw material prices while being
able to benefit from higher prices in the
shops.
“The US remains the home of techsome sectors such as tech in particular.”
Interest rates, which are starting to
creep up, may hamper future growth.0 Banks
Higher inflation adds pressure on the
Bank of England to raise interest rates
which it did for the first time in more
than three years this week, from 0.1 per
cent to 0.25 per cent, potentially boost-
ing bank revenues.
A key measure of the profitability of
banks is their net interest margin —
essentially the difference between what
they receive in interest from loans, and
what they pay out as interest to savers.
This margin has been squeezed since
interest rates were slashed, so a rise
could make them more profitable.
Banks rarely pass on the same rate rises
to savers, or do so very slowly.
Banks were also given a positive sig-
nal last week after the Bank of England
said it was minded to scrap strict mort-
gage affordability tests that restrict
how much homebuyers can borrow.
This could encourage more risky bor-
rowing, which in turn would bolster
bank balance sheets.
Hollands said: “Higher inflation has a
tendency to flush out cash savings into
higher returning risk assets like
corporate bonds and equities. As
people move from cash to investments,
in search of real returns that are
positive after being adjusted for infla-
tion, this can also be a good thing for
the wider financial sector including
asset managers whose earnings benefit
from rising assets under management.”
You can buy individual bank stocks
— some firms such as Lloyds Banking
Group are considered undervalued as
they still 20 per cent below where they
were at the start of the pandemic — butInvest in tech and
banks to outrun
soaring inflation
Still got your savings in cash? You’re losing money fast, so it’s time to dip
your toe into the stock market. Ali Hussain rounds up the best picks
and you would be brave to bet against
the world’s largest market right now,
notwithstanding its record high.”
The cheapest way to buy into the US
market is a low-cost tracker such as the
Vanguard S&P 500 ETF, which char-
ges 0.07 per cent a year. The techno-
logy-heavy US Nasdaq index can be
tracked using the iShares Nasdaq 100
ETF for 0.33 per cent.
If you want to invest in a managed
fund, Monk suggests Rathbone Global
Opportunities, which is skewed to-wards the tech sector. Top holdings
include the computer graphics card
company Nvidia and Sartorius Stedim
Biotech, a biotechnology firm. The
fund is up 147 per cent over five years
compared with 82 per cent for its sector.
It has an annual charge of 0.77 per cent.
Jason Hollands from the wealth
manager Tilney is more sceptical: “We
all know that tech stocks have enjoyed
a fantastic decade. While that’s un-
doubtedly down to their role in trans-
forming the way we communicate,
work, shop and entertain ourselves, it
has also been fuelled by an environ-
ment of benign inflation and ultra-low
borrowing costs created by a decade of
emergency monetary policy.
“This has helped to turbo-chargeKeeping investment
costs down is vital — a
2% charge over 30 years
will eat half your profits
a less risky option may be to invest us-
ing a FTSE 100 tracker. The UK index is
dominated by financial stocks. A cheap
option is the iShares Core FTSE 100
ETF, which charges 0.07 per cent a year.0 Pricing power
Firms that can pass on rising prices to
their customers could benefit from
rising inflation.
Danni Hewson from the wealth
manager AJ Bell said: “Investors need
to think about those things we can’t live
without. If you’ve got sandwiches to
make it doesn’t matter how much a loaf
of bread costs. However, consumers
may become more selective about
where they buy goods and services.”She tips firms with well-known brand
names, such as Unilever, which owns
Hellmann’s, Dove and Ben and Jerry’s.
She also tips Reckitt Benckiser, which
owns Finish and Clearasil.
“They can pass on rising prices or
utilise tactics like shrinking the size of
items to maintain margins,” she said.0 Infrastructure
Infrastructure projects sometimes
incorporate inflationary adjustments
into their contracts, which can help to
partially mitigate the impact of rising
prices for investors. Hollands suggests
the Lazard Global Listed Infrastruc-
ture Equity fund. Its top holdings in-
clude the Spanish transport infrastruc-Following the money: we reveal
the fraudsters’ favourite banks
B
anks that don’t have extra secur-
ity checks on money transfers are
being targeted by fraud-
sters, data suggests.
More payments were
laundered through
banks that have not in-
troduced the confir-
mation of payee
(COP) system, which
checks the name on
the account you are
sending money to
against the name you
have been given, than
were made through large
banks such as Barclays,
HSBC, Lloyds, NatWest and San-
tander that were forced to introduce
the system last year.
COP, launched in March 2020, is a
key tool in the fight against bank trans-fer fraud, regulators say. It means that
criminals pretending they work for a le-
gitimate organisation, such as HM
Revenue & Customs or Royal
Mail, can be caught out
because the name on
their bank account will
not be the same.
Figures from the
Payment Systems
Regulator (PSR) ob-
tained by Money
through a Freedom of
Information request
show that the number of
fraudulent payments
through more than 20 banks
that did not have COP systems went
from 7,184 between July and September
last year to 11,974 between October and
January and the value of those pay-
ments increased from £13 million to£23 million. The number and value of
fraudulent payments sent to banks us-
ing COP fell.
The PSR refused to name the banks
that received the most fraudulent funds
because it would “prejudice their com-
mercial interests” and could cause
customers to switch.
Mainstream banks that have not in-
troduced COP include Metro Bank and
Virgin Money. TSB introduced it this
year, after the data was collected.
Fraudulent payments to one bank
went up from 624 in the third quarter of
last year to 1,902 in the final quarter.
Another bank’s increased from 596 to
1,644. A third bank received only five
fraudulent payments between July and
September 2020, but 575 in the three
months after that — an increase of
11,400 per cent.
Andrew Hagger, founder of the per-£23m
value of fraudulent
payments made
through banks
without COP in
Q4 last yearHow secure is your bank?
Banks with added
security: Barclays, HSBC
and First Direct, Lloyds,
NatWest, Santander,
TSB, Bank of Scotland,
Monzo, Starling
Banks without:
Virgin Money,
Metro Banksonal finance site Money-
comms, said that COP was an
“effective way of reducing fraud
and should become mandatory
across the banking sector without
delay”.
Virgin said it believed that the num-
ber of fraudulent payments that went
through it did not increase during the
period that the data was gathered.
Metro Bank said: “We are exploring
the options for implementing Confir-
mation of Payee for our customers. We
can reassure them that they will
continue to be protected from fraud.”
TSB said: “Alongside our fraud re-
fund guarantee, TSB has introducedconfirmation of payee, providing fur-
ther protection against fraud for cus-
tomers of TSB and other banks.”
Genevieve Marjoribanks from the
PSR said it was consulting on plans to
“ensure that by April 2022, there will be
one service available to all payments
firms which they can offer to their
customers in the fight against fraud.”
George Nixonk?
- n
aud
atory
without
he num-
hat went confirmation ofpayee providing furTSB was the
latest bank to
add security
features1990 1995 2000Above inflation
Petrol
+27.1%Sporting events
+8.4%Fridge-freezers
+10.3%