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Ron2256

StevieJ wrote: »

Not many members of the workforce matched those pay increases over the past two years.

But their rate of inflation is a lot lower. Most members of the workforce have mortgages/debts.

Biggles

MarkyMarkD wrote: »

one unusual month's inflation figure.

Whilst I agree with the general drift of your post, I don't find the latest figures at all unusual. Which is why I maxed out on NS&I index-linked certs in Mar & Apr. In my opinion, it's got further to go.

Ron2256

Biggles wrote: »

It means an enormous amout - it determines the next year's pension and benefits.

It only means a lot because this is the way the governement calculate the increase in pension. Shame they don't take into account the real inflation for pensioners. (Food, energy, rates)

Aegis

Ron2256 wrote: »

It only means a lot because this is the way the governement calculate the increase in pension. Shame they don't take into account the real inflation for pensioners. (Food, energy, rates)

CPI is controlled less directly, but it's what governs the base rate, and therefore the savings rates, so it's certainly considered .

Traditionally RPI has usually been quite a bit higher than CPI, but surprisingly there were few complaints about pensions being increased by more than necessary in the years running up to the inversion.

In any case, the "real rate" of inflation doesn't exist. Real inflation has to be measured on an individual level, accounting for everything that money is spent on by that individual. Any calculated central figure is therefore going to be an approximation, though CPI would be a better estimate for most pensioners because of the lack of interest payments. Of course, as mentioned above, this would actually limit their pension increases more in the good years, and I don't see that being a popular move.

StevieJ

Ron2256 wrote: »

But their rate of inflation is a lot lower. Most members of the workforce have mortgages/debts.

A bonus for the pensioners then when housing costs start to increase and they have no mortgage and debts but recieve increases as if they had :beer:

RayWolfe

So, last quarter "growth" at 0.1% and people want interest rates to go up now!

Robert_Kent

I am sorry to see that my original post has sparked off or re-ignited a difficult debate. It certainly was not my intention when I sought to draw attention to the campaign.

From my perspective (being retired and having planned for it as best I could) and setting aside for the moment the complexities of inflation, CPI, RPI, interest rate swaps, LIBOR, Bank Rate etc etc. isn't it the case that much of the problem confronting us today has been caused by an overly relaxed interest rate policy, and deteriorating lending standards that's fuelled a credit boom that's looking to be unsustainable ?

The emergeance of the short term mortgage coupled with very low interest rates has encouraged many to "draw" against future and unrealised "value" in their houses (I suspect encouraged by the present government in the face of a matured and stagnating UK economy).
If low interest rates continue and absent a real tightening of lending policies the current borrow, spend and damn the consequences attitude will continue.

It seems that many simply take the view that "you're retired, the State will take care of you, but as a taxpayer I am unwilling to do so..."
It also seems to me that we as a nation are happy to "pass the buck" down the line to successive generations (i.e. the cost of quantative easing) - "let's continue to see a flourishing housing market with prices to continue to rise and thereby protect our excessive borrowing - First Time Buyers will fill the gap at the bottom !"

I apologise in advance if many of you see these comments as overly simplistic but I would like to see higher interest rates to enable people that have saved earn a realistic return and thereby "self finance" to a greater extent in retirement. Higher interest rates would also go some way towards curbing the borrowing excesses that have contributed significantly to the economic problems we now face.

I apologise for the length of this message but you might understand forum posting is new to me.

jon3001

Robert_Kent wrote: »

I would like to see higher interest rates to enable people that have saved earn a realistic return and thereby "self finance" to a greater extent in retirement.

High interest rate compared to what? Posters here have already explained the issues concerning real vs nominal interest rates.

Savings accounts are completely the wrong way for providing a retirement income though. Sure - keep some cash aside for emergencies but the rest need a different strategy.


E.g.:

• Invest in income producing assets (dividend yielding shares, bonds, property) to provide a diversified and more stable income.
• Buy an annuity

bendix

Robert_Kent wrote: »

I am sorry to see that my original post has sparked off or re-ignited a difficult debate. It certainly was not my intention when I sought to draw attention to the campaign.

From my perspective (being retired and having planned for it as best I could) and setting aside for the moment the complexities of inflation, CPI, RPI, interest rate swaps, LIBOR, Bank Rate etc etc. isn't it the case that much of the problem confronting us today has been caused by an overly relaxed interest rate policy, and deteriorating lending standards that's fuelled a credit boom that's looking to be unsustainable ?

The emergeance of the short term mortgage coupled with very low interest rates has encouraged many to "draw" against future and unrealised "value" in their houses (I suspect encouraged by the present government in the face of a matured and stagnating UK economy).
If low interest rates continue and absent a real tightening of lending policies the current borrow, spend and damn the consequences attitude will continue.

It seems that many simply take the view that "you're retired, the State will take care of you, but as a taxpayer I am unwilling to do so..."
It also seems to me that we as a nation are happy to "pass the buck" down the line to successive generations (i.e. the cost of quantative easing) - "let's continue to see a flourishing housing market with prices to continue to rise and thereby protect our excessive borrowing - First Time Buyers will fill the gap at the bottom !"

I apologise in advance if many of you see these comments as overly simplistic but I would like to see higher interest rates to enable people that have saved earn a realistic return and thereby "self finance" to a greater extent in retirement. Higher interest rates would also go some way towards curbing the borrowing excesses that have contributed significantly to the economic problems we now face.

I apologise for the length of this message but you might understand forum posting is new to me.

Well surprise surprise.

So you want to see interest rates raised so that you will be better off, but don't give a damn about the impact of those higher interest rates on companies, businesses and people borrowing on mortgages etc?

In the meantime, you're completely oblivious to the simple economic reality which will mean that higher interest rates equal higher costs which equals higher prices, higher inflation and - of course - lower real interest rates.

Nice attitude, and totally totally misguided.

Reaper

Robert_Kent wrote: »

I am sorry to see that my original post has sparked off or re-ignited a difficult debate. It certainly was not my intention when I sought to draw attention to the campaign.

From my perspective (being retired and having planned for it as best I could) and setting aside for the moment the complexities of inflation, CPI, RPI, interest rate swaps, LIBOR, Bank Rate etc etc. isn't it the case that much of the problem confronting us today has been caused by an overly relaxed interest rate policy, and deteriorating lending standards that's fuelled a credit boom that's looking to be unsustainable ?

The emergeance of the short term mortgage coupled with very low interest rates has encouraged many to "draw" against future and unrealised "value" in their houses (I suspect encouraged by the present government in the face of a matured and stagnating UK economy).
If low interest rates continue and absent a real tightening of lending policies the current borrow, spend and damn the consequences attitude will continue.

It seems that many simply take the view that "you're retired, the State will take care of you, but as a taxpayer I am unwilling to do so..."
It also seems to me that we as a nation are happy to "pass the buck" down the line to successive generations (i.e. the cost of quantative easing) - "let's continue to see a flourishing housing market with prices to continue to rise and thereby protect our excessive borrowing - First Time Buyers will fill the gap at the bottom !"

I apologise in advance if many of you see these comments as overly simplistic but I would like to see higher interest rates to enable people that have saved earn a realistic return and thereby "self finance" to a greater extent in retirement. Higher interest rates would also go some way towards curbing the borrowing excesses that have contributed significantly to the economic problems we now face.

I apologise for the length of this message but you might understand forum posting is new to me.

I'm sorry you have had such a babtism of fire on your first post, particuarly when people are asked to be nice to new members, but as you have gathered you walked into a hotly debated topic.

The economic model the government is following is to encourage spending and investment during the bad times to stimulate the economy. That is why they lowered interest rates so much. The plan is to stop you saving and spend (to help businesses) or invest the money in the stock market (to help businesses) instead. It also encourages people/businesses to borrow because rates are low and further spend/invest.

When the economy is booming then interest rates rise to stop inflation, encourage saving instead of spending, reduce borrowing and hopefully prevent another excessive boom.

You could argue that interest rates were not high enough during the good years allowing too much debt to build up, but putting them up during the bad times is the wrong thing to do.