This government is laughing at saver!

shindigger

apt wrote: »

A lot of rise in inflation last year came from sharp rises in food, oil, gas, and commodities. I'd like to know anyone who choose to avoid buying these goods directly or indirectly. These prices are now falling, often sharply. So over the next year even those savers who did not take advantage of the repeated opportunities to fix their interest rates at 6% or more will not be worse off. Savers don't lose out in a recession. It's those that lose their businesses and jobs that pay the price. And those that want the government and Bank of England to make the recession worse by keeping interest rates or the pound higher for the sake of their savings income or foreign holidays are either selfish or stupid or both.

What about a hyper inflationary depression?

shindigger

dunstonh wrote: »

Annuities and other various investment products.



Ok, fire away. However, before you start you need to note that inflation is effectively around 1% now and savings rates are about 1% more than that. A year ago, inflation was around 5-6% and savings rates were around 1% more than that. So, the effect net of inflation is that you are no worse off.

Anyone relying on all the interest on their savings for providing income has always lost money in real terms and that is no different except for the fact they are now going to have erode their capital or lower their spending habits if they insist on sticking with savings.

That is not my experience. Across a number of fund managers. Legal and General and Scot Equitable to name but two.

Ive lost money on every stock market venture. Be it pension, endowment, or S+S ISA. THE ONLY decent return on my money i have had i sfrom a cash ISA paying 6.5% or better.
You do know that most pension schemes are little better than Made-off dont you. I suspect you do and that you are VI worried about your own prospects.

I will never invest in stocks again. Never.

dunstonh

Utter rubbish.

You obviously didnt read the comments or chose to ignore it.

Ive lost £3k on my savings interest,

So? You are no worse off in real terms

6k on my pension pot in a year.

Investments zig zag. Short term losses and short term gains tend to even themselves out over the long term. You dont measure them on the basis of one year in either direction.

Youve clearly bought the deflation bug. Its a lie.

Youve clearly chosen to ignore real returns.

shindigger

dunstonh wrote: »

You obviously didnt read the comments or chose to ignore it.


So? You are no worse off in real terms



Investments zig zag. Short term losses and short term gains tend to even themselves out over the long term. You dont measure them on the basis of one year in either direction.



Youve clearly chosen to ignore real returns.

Really? All i can see are real losses and higher monthly outgoings.
I hope youre not a financial adviser.:cool:

dunstonh

Really? All i can see are real losses and higher monthly outgoings.

I suggest you open your eyes wider then. Reading your posts, you are too blinkered and negative to be objective.

Savings have always typically paid a rate that is just under or just over inflation. That is why the real rate of return is not really any different to what it was in the past. Personal inflation will vary depending on your spending habits and its possible that you are nowhere near the average. However, that doesnt change the impact of average inflation on average savings rates.

jennyjerome1

Like Shindigger, any money I have ever put into stocks and shares, unit trusts, etc has always given a poorer return than money in a savings account. Out of interest I did a calculation on my PEPS. Starting in 1993 for six years, with the advice of a financial adviser, I religiously put money into PEPS under a Skandia funds umbrella. I have never removed money from the account. Today's valuation, after almost 15 years, shows that my average gain has been 1.51% per annum.

dunstonh

I have never removed money from the account. Today's valuation, after almost 15 years, shows that my average gain has been 1.51% per annum.

I started in 94 with investing and I am running just over 10% p.a. There will be posters here that are better than that and worse.

Not rebalancing your funds could be the difference between yours and mind. Plus, diversifiction could be the reason as well. Back in the 90s, it was far more common to see single fund recommendations or limited numbers (often in the same areas though).

ChiefGrasscutter

As is often mentioned, in the 1990’s the Bank of Japan dealt with their recession by cutting interest rates all the way to effectively zero.
As the rates progressively dropped, the Japanese, being a nation of savers, saved more and more and spent less and less. The economy instead of getting better got worse and worse: and it still hasn’t really recovered. Just as very high interest rates are bad for an economy – so are very low interest rates.

In the UK I note that according to Nat Stat’s office the savings ratio has recently jumped from 0.7% to 1.8% - and that is a big jump suggesting that people are indeed reacting to the downturn by saving more and more.
Of course those who use their savings income for the special treats in life and the elderly who rely on them to supplement their pension will suffer from a drop in returns – and with them all that those in retail that rely on this section of the population to keep spending – which they won’t anymore.

The drop in the £ is caused by the state of the economy, lower interest rates and the fact as a sort of petro-currency the £ will drop with the oil price.
This drop helps exporters – but hinders importers and of course many exporters import their raw materials. I wonder how long before we hear the CBI demanding a rise in interest rates to support the £, help reduce import prices and hence reduce the prices of imported goods in the shops, and so help kick start the retail economy…… Talking to one small business the other day facing a 40% rise in imported goods prices he is a distributor for, he wondered to me how the foreign based supplier was genuinely expecting to sell anything at all in the UK at this sort of increase. As an interesting thought, as everyone around the world is reducing rates in parallel, it presumably only needs one country to break ranks and put them up instead and all the money will flow into that country to finance the deficit.

Everyone’s personal inflation rate will be different, as is correctly stated the important bit is your real interest rate – the difference between your personal inflation rate and your investment return rate. In normal times older people in general have higher inflation rates than younger persons as they buy more ‘services’ rather than ‘goods’. In depressions however the opposite is the case as wages (ie services) fall while the prices of goods (mostly imported) rises due to the drop in the £ leading to ‘imported inflation’: this leads to Stagflation – stagnation and inflation.

The mantra of how your capital is eroded by inflation in a savings account while invested in the stockmarket it can grow is often repeated. (notice the word ‘can’ there!)
I think we can agree that 10 years is a reasonable long term investment term, and anyone who bought a FTSE 100 tracker fund 10 years ago is probably sitting on a capital loss at present. Whether it would indeed have been better to stick it in a high interest account depends on the comparative rates of income derived from savings vs income from shares over that period. I don’t personally know but I’d suspect that the savings account might just win out.
Of course this is why immediately post the 1987 mini-crash all the investment companies immediately started used the post crash bottom reference level to show how their capital subsequently grew rather than the pre-crash peak to show how it …..errrrr didn’t grow.

Apologies for the long post….

shindigger

dunstonh wrote: »

I started in 94 with investing and I am running just over 10% p.a. There will be posters here that are better than that and worse.

Not rebalancing your funds could be the difference between yours and mind. Plus, diversifiction could be the reason as well. Back in the 90s, it was far more common to see single fund recommendations or limited numbers (often in the same areas though).

So YOU have outperformed L&G and Scot Equitable. Well done.
That will not be the case for the majority who have endowments (something that has been forgotten about in the housing meltdown).

The footsie is down under 4000 are you buying today?

Consumer investment products in this country are legalised ponzi schemes and will never see a penny of my money again.

Q.Whats holding up the pyramid?
A. The bigger fool.

dunstonh

So YOU have outperformed L&G and Scot Equitable. Well done.

They are insurance companies. They have funds that have performed better than that and worse. Funds and insurance companies are not the same thing.

That will not be the case for the majority who have endowments (something that has been forgotten about in the housing meltdown).

To be honest, I dont care much about endowments. I managed to mostly avoid that issue by specialising as an investments adviser rather than mortgage adviser. Endowments worked in the old days of boom/bust and failed in the low inflation days because they were priced for the boom/bust market with higher inflation. Had that old economy continued, then they would have continued to pay surpluses. However, the changes in the economy that resulted in the shortfalls also resulted in house prices sky rocketing so most people are actually better off because of it.

The footsie is down under 4000 are you buying today?

Nope. I did buy some when it was 3800 and I would be buying some more but my surplus is going on my tax bill this month.