1.63 % before tax to beat inflation

FLAPJACK wrote: »

unless of course they get you on the ("Deprecation of Assetts" card)

Deprivation of Assets

Unfortunately a decent (inflation beating) income from savings over a long time period is not really available. Like I said, it never has been other than for short periods of time.

Over the last year you might have needed about 2% gross to get inflation net. In 1980/81 you'd have needed a heck of a lot to get the 12-15% RPI net. In 1975/76 was it easy to get 15-25% net?

So, if your retirement plans involve setting yourself up so that you need to earn a monthly income from something to supplement your pension, that 'something' should probably not be cash savings. Some form of investment perhaps.

Unfortunately, those with lower incomes and lower wealth have relatively lower ability to participate in 'investments' because they are less able to weather the risks of the ups and downs. That is a shame for them. There will always be people less well off than others, even if we embrace communism rather than capitalism. But it is a fact that they can't expect to just sit on cash savings and make real-terms money from nowhere. That should be true for most of the economic cycle. At this point in the cycle it is just a bit more obvious because the numbers are small.

Like it or not, we DO want people spending or investing rather than hoarding cash and so rates are not set up to incentivise hoarding cash. They only move to that way when the government of the day needs to put the brakes on the economy. If you plan to sit on cash savings year in year out to make your income, rather than doing any more productive work or participating in any active investments, you are setting yourself up for failure because sitting back is not a good way to make income.

I do get that for some people, sitting back is all they can do, because of their age or ability. Looking after people who are only capable of sitting back and doing nothing is what we have the welfare system, state pensions etc, for. Inevitably some of those who want/need it will not think it is enough and some of those who pay it will think it is too much. But personally I don't think that the government is really going to help things along by ordering the banks to pay more money to savers who are sitting on cash, as a welfare supplement.

Maybe you worked all your life on the breadline for a pittance of a state pension and never had the spare cash to build your own proper retirement plan. Forcing a bank to pay you and everyone else more interest on your and their risk free cash is not the way to fix things. It just means everyone has more money and spends more money and your prices go up. Some kind of an effort is being made with 'pensioner bonds', with restricted access so that not everyone can use them and it doesn't distort the market. Of course, it is still met with moans because richer people are more able to benefit from it.

Whether the BoE or government sticks rates up or down or comes up with any kind of initiative there will always be some that don't like it. "Helping savers? Pah, you mean hurting borrowers and businesses that want to invest and expand!" ; "Helping banks not go bust? Pah, now they'll never learn!"; "Helping lower income types get on the property ladder? Help to Bubble more like!". At some point you just have to look past politics, accept you won't get things your own way, get on with your lot in life and do what you can. As the changing demographics mean that the 'grey vote' becomes more and more valuable, the oldies are unlikely to be some forgotten area of society and so their concerns about retired people not having enough income is something that may eventually get addressed one way or another.

A great many threads that talk about interest rates or exchange rates or investment returns end up going off on political tangents which can be quite distracting to those who just want to learn about the best way to save, the cheapest way to invest etc. There are other dedicated boards to 'debate the economy' and discuss whether some state of affairs is the fault of this government or that government.

Frankly as someone whose house cost a large multiple of salary and is unlikely to appreciate by 10-20% a year, I don't have a great deal of sympathy for someone trying to make me feel like they are a martyr for buying a house for one or two year's salary and paying 15% interest on it for a few years while it skyrocketed in value. That and the political stuff is just a distraction from the practical questions of where and how people should save or invest to properly prepare for retirement or their future plans in an MSE way.

All IMHO.