Continue to seek a safe haven until clouds of uncertainty clear

WITHIN the next few weeks, we will have had the Budget and, perhaps, a general election. How these events will impact upon the investment landscape remains to be seen, but it seems highly likely that the current gap between capital gains tax (CGT) and the top rate of income tax will narrow significantly.

Since the last Money Moves, we have seen a recovery in equity markets that took the FTSE 100 index to a peak of 5,600 points on 11 January but then fall back to 5,100, a level last seen at the start of November 2009.

We have also seen troubles emerging in the Eurozone and the "piigs" countries – Portugal, Ireland, Italy, Greece and Spain.

On Tuesday, the Bank of England announced that the UK inflation rate rose to 3.5 per cent in January – the fastest annual pace for 14 months.

So what should the private investor do? There is an opportunity to take some action ahead of any possible budget changes but any action is taken against the backdrop of continued economic uncertainty and the prospect that returns from cash in in savings accounts will remain low.

If you have not already done so, the starting point is to utilise the ISA limits. These are now 7,200, or 10,200 for those over 50. The limits for all investors increase to 10,200 from the next tax year.

This year, investors who have gains on their investments should ensure that they use their annual CGT allowance where appropriate. For investments, the prudent principles still apply: diversify and ensure a broad-based portfolio that reflects your own objectives and attitude to risk.

However, if inflation increases as some predict, then investors should consider "real assets" such as equities, property and index-linked gilts, that should offer inflation protection over time.

• John Jackson is the chief operating officer at Cornelian Asset Managers