Pensioners' loss of interest on savings

beaujolais-nouveau

Interest on savings has dropped by over 80 per cent in the last six months. It means that if a pensioner had been supplementing his/her State pension by £100/month, s/he is now getting £20/month and probably having to spend some of the capital now (so even less interest coming in).

I am sure that this is obvious to MSE-ers but I was slightly shocked, last week, to find myself having to explain it to a vicar. At first, he didn't seem to want to believe me.

Here's another viewpoint, from the US:

Since the stock market began to fall, friends have been coming to Barbara Goldsmith to talk about their depression, loss of appetite, insomnia and cravings for hot fudge sundaes. 'People are grieving," said Goldsmith, a semiretired psychotherapist who counsels fellow residents of the Gleneagles Country Club, a gated community here. "There was a death. Their money died.' ...

Like retired people everywhere, residents here knowingly juggled what they saw as competing risks.They all heard the standard advice to move their assets out of stocks and into supersafe investments as they neared retirement. ...

Keeping money in stocks left them exposed, of course, to the risk of a once-in-a-lifetime market meltdown. Now, that day is at hand. ...

According to government statistics, a third of retirees have almost no stock exposure. But those are mostly poor or lower-middle-class people who rely on Social Security for income.

http://www.iht.com/articles/2008/11/13/business/13retired.php

To those who find it difficult to feel sorry for these relatively well-off pensioners, remember that in the US there is no "safety net" like we have in the UK (at the moment), and people can live to be over 90.

Broadback

Inevitable I am afraid, there is no doubt that the thrifty are now subsidising the spendthrifts. Sadly I think that in the not too distant future the Government will be forced to cut back its spending dramatically, the retired will then be hit with a double whammy.

Old_Slaphead

New_Gold_Dream wrote: »

Never really understood why pensioners have large sums deposited away, get it spent. Get down to benidorm, it is 22c there today, hit the san miguel and get on the dancefloor. Pointless working for years just to sit at home in telford freezing your toes off with massive amounts of money in the bank.

That's precisely why people save so that they can go to Benidorm when their old bones are cold & creaking.

Also they'd also like to go to Benidorm (metaphorically speaking) for the next 20 years. Unfortunately that can't be done on a simple OAP - not with what's happened to council tax, fuel costs, food prices etc etc.

Also, anyone who's had any funds in a private pension plan has seen their future income aspirations rapidly diminish (thanks to Clown and the *ankers) - so they may need some saviings to make up the shortfall.

Also, if the boiler breaks down or there's some other crisis they have the means to get it sorted.

Also, they came from a generation which saw independance and responsibility as a virtue !!

Having a few quid in the bank also obviates the need to go cap-in-hand to the taxpayer for everything!

Generali

Bit tough isn't it. The Luftwaffe rains bombs down on your house as a kid, you spend your teenage years in austerity and your kids bombard you with the bloody Beatles as an adult. You endure power cuts because of the unions in the 1970s and have to listen to a load of lectures from a Grocer's daughter through the 1980s.

You finally get to retire and just as you're starting to enjoy life, someone nicks your life savings in effect and gives them to a bank.

StevieJ

What is even worse, they call them Baby Boomers and blame them for everything that has gone wrong, well maybe afew years out
BTW Gen is it not bed time or have you come back?

McKneff

Generali wrote: »

Bit tough isn't it. The Luftwaffe rains bombs down on your house as a kid, you spend your teenage years in austerity and your kids bombard you with the bloody Beatles as an adult. You endure power cuts because of the unions in the 1970s and have to listen to a load of lectures from a Grocer's daughter through the 1980s.

You finally get to retire and just as you're starting to enjoy life, someone nicks your life savings in effect and gives them to a bank.

:rotfl: :rotfl:
You gotta laugh, havent you.

Generali

StevieJ wrote: »

What is even worse, they call them Baby Boomers and blame them for everything that has gone wrong, well maybe afew years out
BTW Gen is it not bed time or have you come back?

It's way past my bed time but unemployment has led me to keep unhealthy times.

Old_Slaphead

Generali wrote: »

your kids bombard you with the bloody Beatles as an adult

You're lucky they weren't into Grand Funk Railroad

StevieJ

New_Gold_Dream wrote: »

Never really understood why pensioners have large sums deposited away, get it spent. Get down to benidorm, it is 22c there today, hit the san miguel and get on the dancefloor. Pointless working for years just to sit at home in telford freezing your toes off with massive amounts of money in the bank.

I went to Benidorm 4 or 5 years ago, it was about 40 degrees (May), I was amazed it was absoloutly brilliant, I thought it was going to be rubbish full of Scallys but it was just a mix of different ages enjoying themselves, cheap bits,expensive bits, classy bits and some not so classy bits (that Vickie women, what a good magician ).

lostinrates

Generali wrote: »

Bit tough isn't it. The Luftwaffe rains bombs down on your house as a kid, you spend your teenage years in austerity and your kids bombard you with the bloody Beatles as an adult. You endure power cuts because of the unions in the 1970s and have to listen to a load of lectures from a Grocer's daughter through the 1980s.

You finally get to retire and just as you're starting to enjoy life, someone nicks your life savings in effect and gives them to a bank.

My mother has taken to walking around saying 'I was born in a depression and it looks like I will die in a depression'.

TBH, its making us all a bit depressed.

IveSeenTheLight

beaujolais-nouveau wrote: »

Interest on savings has dropped by over 80 per cent in the last six months. It means that if a pensioner had been supplementing his/her State pension by £100/month, s/he is now getting £20/month and probably having to spend some of the capital now (so even less interest coming in).

In your scenario, it would mean that the pensioner has £24k in savings, previously at 5% and now only getting 1%

This means they only earn £240 per year interest as opposed £1,200

the difference is £960 per year.

So in short, if they continued to maintain they're pension by £100 per month, Their savings would go down to £23,040 after one year

So they see their funds dwindling each year, but it would take 22 years to reduce the savings to just over £500. Unfortunate yes, but 22 years is a hell of a long time, especially as a pensioner.

But I doubt anyone expects interest rates to stay so low.
Lets assume interest rates go up to 6% in two years time.
Even though the savings is down to £22,070, the interest received would cover the £100 per month and start to increase the savings held.

Pensioners who have built up savings to cover them through their pension time have been prudent and understand there will be good and bad times during their pension life.

No one can honestly believe that the economy will run so smoothly during their entire time as a pensioner