Savers you've never had it so good?

MSE_Martin

Thank you all for the feedback. It was in the main very helpful and I took much of it on board and have tweaked accordingly. A piece like this is never easy. My main aim is to make people couple up the concept of interest and inflation - something which often is missed.

LesU

wearside wrote: »

I wonder what the RPI figure will be in September when Pensions and Benefit increases are calculated for April 2010. Will it be down to below 0% meaning deflation and if so, will the rates be frozen or worse still be reduced? I can see many problems arising as we have not been in this situation before.

Of course those on Pensions and Benefits would be the most likely people to be benefiting from a reduction in mortgage rates!
The BoE rate can be used to directly and immediately influence the headline RPI rate through mortgages. It can't influence the CPI rate, which is why it is staying stubbornly high.
The poor devils on the receiving end of a 0% increase in their pensions will presumably be told it's their fault if they haven't got a mortgage to lower their personal outgoings.

shindigger

wearside wrote: »

I wonder what the RPI figure will be in September when Pensions and Benefit increases are calculated for April 2010. Will it be down to below 0% meaning deflation and if so, will the rates be frozen or worse still be reduced? I can see many problems arising as we have not been in this situation before.

I dont know the answer to that, but i do know there will be a mysterious "spike" in inflation of either hue in July when they claculate the train fares.

Do not believe ANY Government stat ever.
Use your eyes and a calculator.
Do not seek advice from the VI's that populate this board.

gozomark

shindigger wrote: »

I dont know the answer to that, but i do know there will be a mysterious "spike" in inflation of either hue in July when they claculate the train fares.

Do not believe ANY Government stat ever.
Use your eyes and a calculator.
Do not seek advice from the VI's that populate this board.

more nuts than in a family sized bar of Cadbury's whole nut chocolate

Nomad25

VI?...................explain please.

So is Martin doing Gordy's work covertly and encouraging us to spend our savings, I'm so confused by all this stuff.

savetilibleed

tsmlion wrote: »

It's a fair point to make but dangerous to advise people to spend capital.

Practically zero rates transfer the onus of achieving returns from the banks to the private individual. People are being asked to take risks with their own money. This, it is hoped, will stimulate asset buying. Certain assets are still good for above average returns so I think a run down of options available would be better than simply saying spend existing capital. After all, what happens when that runs out?

Some savers will have to spend some of their savings.

I'm in the position of having savings, but presently no earned income and a tiny pension in 11 years time. I was hoping my savings would be effectively be my pension. Fat chance now. Like many others, I've fixed as much savings as I can. But most of that in 10-11 months time will end. With the benefit of hindside I'd have fixed for longer, but who would have believed that the interest rates would hit such lows.

I have no mortgage so for me CPI is real.

MSE_Martin

Nomad25 wrote: »

VI?...................explain please.

So is Martin doing Gordy's work covertly and encouraging us to spend our savings, I'm so confused by all this stuff.

Certainly not. What I'm trying to do is to get people to look at their finances objectively. There are some people who are better off and feel they're worse off and our punishing their lifestyles to do so (and others vice versa).

THe problem is many people look at interest rates as an absolute - and neglect the fact inflation is crucial to it.

Lets me use a silly example.

If I told you I'd pay you 30% interest you'd probably think it sounded great. Yet if inflation was 50% actually its a nightmare.

If you had £10,000 in the bank now, and that was enough to buy a mid-size family car. In three years time you'd have £22,000 in the bank. However the car would now cost £34,000 - so you're now short. Even with high interest your money has shrunk.

Yet if you were earning NO interest but there was deflation of 10% now look. In three years time you'd still have £10,000 in the bank, but the car now only costs £7,300. You could buy the car and have £2,700 change EVEN though you earned no interest.

I have no political point to make in what I'm saying - other than to educate that simply saying "I've lost out as my savings interest has dropped" is missing a wider point.

If YOUR inflation has dropped, then you're not as badly off as you think, if YOUR inflation hasn't then you're even worse off than you think. However in general inflation is dropping (more for some than for others) and deflation is possible. That is unprecedented and we need to rejig some perceptions in such an environment.

My worry, having spoken to some pensioners, is they are planning to cut their heat off or stop eating to avoid ever using their capital. And we have to learn to look at this from a wider view point.

I hope this helps

Martin

Hungerdunger

This is a very useful article Martin and I agree with your intentions, but as several of the replies have already indicated, I think you're banging your head against a brick wall, no matter how well you explain it.

RayWolfe

There are none so blind as those who don't want to see. <proverb>

john_s_2

savetilibleed wrote: »

I have no mortgage so for me CPI is real.

Look on the bright side. You don't have a mortgage. Assuming this means you're an outright owner (and apologies if this means you're a renter) then you have less outgoings than someone exactly the same as you, except for having a mortgage.