With interest rates anchored close to zero following the global financial crisis, investors became accustomed to the phrase "cash is trash" as often, after inflation, a loss in real terms was guaranteed. Indeed, I was writing about the dangers of holding too much cash as recently as August 2024.

While inflation remains a consideration, following the sharp rise in interest rates over recent years, cash and short-dated government securities have once again become meaningful asset classes. In addition, the annual capital gains tax (CGT) allowance has fallen from £12,000 to £3,000, making capital growth assets relatively less attractive.

The proposed changes to the inheritance tax on unused pension funds means that more people will be looking to extract money from their pensions. Many will be considering parking some of this in cash for emergencies, to avoid dipping into pensions at market low points. Higher cash returns have also improved the value of maintaining emergency reserves and holding funds for known future short-term........

© Herald Scotland