The Bank of England (BoE) has announced a cut to its benchmark interest rate, lowering it from 5% to 4.75% – the Monetary Policy Committee vote was – 8:1. This is the second consecutive rate cut in recent months, aimed at boosting economic activity and addressing a softening inflation landscape. The decision, closely watched by markets, businesses, and consumers, reflects the central bank’s focus on supporting economic stability during uncertain times.

Why the Bank of England Cut Rates to 4.75%

The BoE’s decision comes on the heels of new economic data showing a significant cooling of inflation. In September, the UK’s annual inflation rate fell to 1.7%, marking the lowest level in over three years and well below the government’s 2% target. The unexpected drop in inflation, combined with slowing wage growth, provided the Monetary Policy Committee (MPC) with the justification needed to reduce rates once again.

What the Interest Rate Cut Means for Borrowers

Lowering the base interest rate has immediate implications for borrowers. Homeowners with variable-rate or tracker mortgages are expected to see reductions in their monthly payments, providing some relief as the cost of living continues to challenge many families. While fixed-rate mortgage holders may not experience immediate benefits, new deals could gradually become more competitive as lenders adjust to the BoE’s move.

High Street banks and other lenders are likely to lower rates on personal loans, credit cards, and other borrowing products, making access to credit more affordable. For individuals and businesses, this could stimulate spending and investment, boosting economic activity.

Related:UK Housing Market Sees Homes Selling Quicker in October 2024 

Impact on Savers: Reduced Returns Expected

Unfortunately, the news isn’t as positive for savers. Interest rate cuts typically lead to lower returns on savings accounts, ISAs, and other interest-bearing accounts. The current average rate for an easy-access savings account, around 3%, may soon see reductions as banks adjust to the new base rate.

To mitigate the impact of reduced rates, savers may need to explore alternative options such as fixed-term accounts, bonds, or investing in diversified portfolios.

Related:Share Tips 2024: Finance Monthly’s Leading Selections for This Week

Future Outlook for Interest Rates

While today’s rate cut to 4.75% demonstrates the BoE’s commitment to stimulating growth, uncertainty about future interest rate movements remains – particularly as there is likely to be increased economic demand given the recent budget. Key factors such as inflation trends, wage growth, and global economic conditions will play pivotal roles in shaping the BoE’s next steps. The central bank’s goal is clear: to provide a supportive economic environment without allowing inflation to spiral out of control.

Practical Steps for Borrowers and Savers

For borrowers, this rate cut presents an opportunity to reassess their financial options. Those with variable-rate mortgages should see immediate relief, while others may want to consider refinancing or exploring new deals. On the other hand, savers will need to evaluate their portfolios and consider strategies to maximize returns in a low-interest-rate environment.

October saw the UK host a major investment summit aimed at attracting more money into the many investment opportunities our country offers.

But it wasn’t just prime minister Keir Starmer and chancellor Rachel Reeves making the case for inward investment; we also had the hugely successful American businessman and politician Michael Bloomberg “convinced the future’s bright for Britain”.

Now, when our clients invest, they expect a regular income from their asset in the form of interest and/or dividend payments. Those investing for the long term can move away from the safety of bank deposits into bonds and equities from which we can hope for capital gains too.

Many moderate risk investments will deliver these gains over time, even though their month-by-month asset value growth progression may deliver a saw-toothed graph rather than a smooth incline.

However, occasionally, some of your clients’ investment portfolios may enjoy a windfall gain.

With a defined contribution pension, such as a SSAS or Sipp, the gain is all theirs

Perhaps a pharma company has completed clinical trials on a new drug and found it helps with some cancers and is free of unwanted side effects. Great news for society and a windfall investment gain for those that put money into the company to enable it to research and develop new treatments.

If it was some of your clients’ pension assets that enjoyed this windfall gain, then what happens to the money depends very much on what sort of pension they have.

With a defined contribution (DC) pension, such as a SSAS or Sipp, the gain is all theirs. It will show up immediately in their pension pot if you have advised them to invest directly in the shares. Or it will show up the very next day if they invested via a fund with daily pricing.

If they are age 55 or older, they might choose to take that windfall amount out straight away, less tax, and celebrate by buying the thing they’ve always wanted that’s always been just out of reach.

CDCs give each member an immediate increase to their annual pension amount where schemes benefit from a windfall

However, with a defined benefit (DB) or final salary pension, it’s pretty much the opposite.

DB pensions are ‘balance of cost’ schemes, in which the employer contributes whatever it costs to provide the promised pension. A windfall investment gain typically means the employer can reduce pension contributions, while the members’ benefits remain unchanged.

Today, it may simply accelerate the progress towards scheme buy out with an insurance company – whereupon those benefits become fixed in stone.

With a collective DC (CDC) scheme (there is now one single employer scheme live in the UK – Royal Mail – and a lot more coming as the government unfurls the legislation for multi-employer CDC) it’s a lot more complicated.

Two-thirds of retirees today are living as couples and, for many of them, the gender pensions gap is all too real

CDCs give each member an immediate increase to their annual pension amount where schemes benefit from a windfall. This will be of most value to those on the cusp of retirement, who are about to receive it and have many years of retirement income ahead of them.

However, it will be of much less value to the very old with not long left to draw on their CDC pension, or to young members with decades to go before they draw a pension.

Let’s return to DC schemes for a concluding thought, as that’s where most of your clients are saving for retirement today.

When your clients tot up any windfall investment gain and cry out “it’s all mine!”, do remind them of their obligation to support their spouse or partner’s retirement income as well.

After all, two-thirds of retirees today are living as couples and, for many of them, the gender pensions gap is all too real.

Adrian Boulding is director of retirement strategy at Dunstan Thomas

A SUPERMARKET giant has slashed the price of a litre of Baileys to just £8.50.

Fans of the Irish cream liqueur will be delighted that the cost has been cut ahead of the festive season.

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Morrisons shoppers will be able to get their hands on the discounted drink when they spend £45 or more in store.

But they will need to act quickly as the deal is only on from November 8 to November 14.

Customers in England and Wales will be able to get their hands on the beverage for £8.50 while those in Scotland can pick up a bottle for £11.05.

This is a 61% saving on the usual £22 price tag.

Britain’s coupon kid Jordan Cox said every year there is a Baileys price war among supermarkets which usually happens around November.

He said: “The standard price drop is usually down to £10 for a 1L bottle… or £9.50 if we’re lucky. So for Morrisons to drop the price to £8.50 is quite astonishing!”

The Morrisons deal is especially good as supermarket prices have been naturally increasing over the years, he added. 

Just this week Sainsbury’s halved the cost of a 1 litre bottle to only £10.

The deal is only available to those with a Nectar Card as part of its Nectar Prices.

Meanwhile, Tesco Clubcard customers can pick up a bottle of Baileys for £13.

The offer is valid for delivery from now until December 9.

Supermarkets have increasingly only offered these deals to shoppers who have registered for their loyalty programmes to encourage more people to register.

Shoppers have complained that this is annoying as they could previously get the offers without needing to sign up.

The Morrisons deal is also only available to shoppers who have joined the supermarket’s loyalty scheme and have a More Card.

It is easy to sign up for the loyalty programme, which is free to join.

Go to the Morrisons More website and enter a few details such as your address, email and mobile number.

Once you have registered you will be sent a More Card and can download the supermarket’s app.

You will then receive offers which will give you money off your next shop.

To get the prices in store just scan the barcode on your card or in the app.

You will also be able to earn points on your spending which can be converted into coupons.

Once you reach 5,000 points you convert them into £5 vouchers called “Fivers” which you can spend in store or online.

If you do not have the app then your Fiver will be printed in store.

When you scan your card or app you will also be in with a chance of bagging a “Basket Bonus” which could give you money off your next shop or free treats.

How else to save on Baileys

To make your pounds go further you could always opt for a Baileys dupe, which is similar to the real thing.

You can pick up a 700ml bottle of Ballycastle cream liqueur from Aldi for £4.99.

A litre of the beverage would cost £7.13, which would save you £1.37.

The Ballycastle range comes in several flavours including Chocolate Clementine, White Chocolate and Milk Chocolate Peanut Butter.

All these flavours can be picked up for £7.49.

Other supermarkets including Sainsbury’s, M&S and Lidl also have their own Baileys dupes.

Sainsbury’s 700ml Irish Cream Liqueur costs £13 but Nectar card holders can pick it up for £10.

It would cost £14.28 for a litre, making it more expensive than a bottle of the real deal from Morrisons.

Meanwhile, a 700ml bottle of Carthy’s Country Cream liqueur costs £6.70.

For a whole litre it would set you back £9.57, making it more expensive than a bottle of Baileys from Morrisons.

Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.

Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories

SAINSBURY’S has discontinued a popular breakfast item, leaving shoppers devastated and paying more at the till.

Eagle-eyed customers have noticed the supermarket has axed its two-litre carton of orange juice.

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Confused shoppers took to X, formerly known as Twitter, to find out more.

One said: “Very simple question, why have you stopped selling 2L orange juice, forcing us to pay more for 2 x 1L?”

Sainsbury’s shoppers could previously pick up a large carton of the citrus-flavoured juice for £1.99.

But now, if they want a bigger serving, they have to purchase two one-litre cartons, priced at £1.19 each.

This works out at £2.38 for two litres of orange juice, a 38p increase compared to when they could buy it as a single item.

Sainsbury’s confirmed on social media that the product was no more and apologised for the inconvenience.

But one disgruntled shopper warned they would take their business to discounter Aldi.

They said: “Aldi sells [two-litre cartons], and this leaves me no alternative but to go to them.”

The discounter sells orange juice for £1.99, the same price as Sainsbury’s before it was discontinued.

The Sun has approached Sainsbury’s for comment.

It is not the only time the grocer has axed a popular drink from its shelves.

Earlier this year, Sainsbury’s waved goodbye to its full-sugar lemonade, disappointing customers.

The saccharine drink was one of the few left on the market which did not contain sweeteners and was red-rated for its high levels of sugar.

Customer Claire-Louise complained on X: “Not everyone can tolerate sweeteners and some people choose to avoid them. Very disappointing.”

A representative for Sainsbury’s said at the time: “We regularly review our ranges so that we dedicate space in our stores to the products which are most popular with our customers.”

Vanishing products

Grocers regularly pull items from shelves if they do not perform well or make way for new items.

M&S confirmed last month that it axed its Cocoa & Cherry Bircher pot.

The tub was a popular breakfast snack for many customers who like to eat on the go.

Meanwhile, we can reveal eight nostalgic foods that have disappeared from supermarket shelves over the years.

There is everything from Campbell’s soup to Caramac, and while we won’t know for sure if these loved snacks will ever return, it is worth keeping an eye out.

What is new at Sainsbury’s

Thankfully it is not all doom and gloom at Sainsbury’s.

The retailer has unveiled its Christmas range much to the delight of shoppers.

Some items are currently available to buy but a handful of festive meats and desserts will not land in stores until December.

The popular Sticky Toffee liqueur is back this Christmas, too, quickly becoming a family favourite last year.

Its slots for Christmas shopping delivery have also opened for all customers.

You can get a look at the full range by clicking the link here.

Why are products axed or recipes changed?

ANALYSIS by chief consumer reporter James Flanders.

Food and drinks makers have been known to tweak their recipes or axe items altogether.

They often say that this is down to the changing tastes of customers.

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There are several reasons why this could be done.

For example, government regulation, like the “sugar tax,” forces firms to change their recipes.

Some manufacturers might choose to tweak ingredients to cut costs.

They may opt for a cheaper alternative, especially when costs are rising to keep prices stable.

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For example, Tango Cherry disappeared from shelves in 2018.

It has recently returned after six years away but as a sugar-free version.

Fanta removed sweetener from its sugar-free alternative earlier this year.

Suntory tweaked the flavour of its flagship Lucozade Original and Orange energy drinks.

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While the amount of sugar in every bottle remains unchanged, the supplier swapped out the sweetener aspartame for sucralose.