Low Interest on Savings

JamesU

OneADay wrote: »

Rather not touch Northern Rock or any bank set up by the government (do we have a government? )

I find it ironic when public purse needs money, the limits on tax free savings are increased (i.e. ISA allowances). At some point you can affectively pay no interest through bank savings.

I reckon a bank for "savers" only could be good - you put your money in, the bank loans to regular banks at extortionate rates (and does no other business) ... wishful thinking .... but really its at that point where you ask the question "Why give the banks any of your money to keep for 1,2 or x number of years with peanut returns?"

Personally I have no problem with low interest rates when inflation is low even if it is peanuts. No difference getting 6% interest at 4% inflation or 2% when inflation is 0%. If anything savers have benefited a lot from high saving rates when inflation was effectively zero for the year of 2009. It seems fine to me at the moment as broadly speaking "buying power" of cash savings are still worth 99% of what they were in Oct 2008 (overall RPI inflation of 1% between Oct 2008 and present). But that may be changing very soon if RPI inflation starts to take off month on month.

The problem with penalties for withdrawing from banks etc are a completely different matter. The whole concept of cash is that it is a liquid asset that oils the cogs of the economy. Remember how the banks crashed through lack of liquidity? But somehow it is being taken for granted that customers can and should put up with this lack of liquidity which is ludicrous. People need access to their savings for their own purposes just like banks and businesses.

JamesU

Bullfighter

OneADay wrote: »

I am covering my back - sticking to 50k limit after ensuring the said organisations are fully covered by FSCS.

Just bear in mind that Iceland is tiny compared to some countries. If Spain hits the rocks then you don't want to have 50k in a Santander account.

The FSCS hasn't got unlimited funds.

Bullfighter

JamesU wrote: »

Personally I have no problem with low interest rates when inflation is low even if it is peanuts. No difference getting 6% interest at 4% inflation or 2% when inflation is 0%. If anything savers have benefited a lot from high saving rates when inflation was effectively zero for the year of 2009. It seems fine to me at the moment as broadly speaking "buying power" of cash savings are still worth 99% of what they were in Oct 2008 (overall RPI inflation of 1% between Oct 2008 and present). But that may be changing very soon if RPI inflation starts to take off month on month.

The problem with penalties for withdrawing from banks etc are a completely different matter. The whole concept of cash is that it is a liquid asset that oils the cogs of the economy. Remember how the banks crashed through lack of liquidity? But somehow it is being taken for granted that customers can and should put up with this lack of liquidity which is ludicrous. People need access to their savings for their own purposes just like banks and businesses.

JamesU

Sorry mate but inflation is not RPI/CPI.

Look at fuel, food and energy prices and you will see 10%+ inflation. Just because Plasma TV's and iPods are dropping in price doesn't mean that inflation doesn't exist.

My savings (that aren't in Gold) are losing at least 5% of their purchasing power.

StevieJ

Bullfighter wrote: »

Just bear in mind that Iceland is tiny compared to some countries. If Spain hits the rocks then you don't want to have 50k in a Santander account.

The FSCS hasn't got unlimited funds.

But the Bank of England has a printing press

Bullfighter

StevieJ wrote: »

But the Bank of England has a printing press

I think you're being sarcastic :beer:

But some people actually think this is an answer. If we print our way out of trouble then that £50k will soon buy you a loaf of bread with enough change to buy a packet of Rizlas.

JamesU

Bullfighter wrote: »

Sorry mate but inflation is not RPI/CPI.

Look at fuel, food and energy prices and you will see 10%+ inflation. Just because Plasma TV's and iPods are dropping in price doesn't mean that inflation doesn't exist. My savings (that aren't in Gold) are losing at least 5% of their purchasing power.

For sure, but it is easy to pick out specific big rises rather than looking at an overall average.

JamesU

chris_m

JamesU wrote: »

For sure, but it is easy to pick out specific big rises rather than looking at an overall average.

Indeed - the official inflation figures are worked out using a "standard basket" of goods, which is regularly updated to reflect current spending patterns, eg to remove things that people aren't buying much of nowadays and add new things that they are. I think the last revision removed washable nappies and added blu-ray players, for example.

There will always be things which increase faster and other that increase slower (or decrease) but the overall basket gives a good balanced basket which can be reasonably accurate in reflecting overall changes consistently month on month, year on year.

Looking at the 2009 basket, domestic fuels (electricity, gas, oil, coal) are in. Curiously, for motor fuels only Ultra Low Sulphur Diesel is in, petrol isn't. I guess that isn't overly important now that diesel and unleaded petrol prices have come closer together than they were two years ago and are generally within a penny or two of each other.

Stompa

chris_m wrote: »

There will always be things which increase faster and other that increase slower (or decrease) but the overall basket gives a good balanced basket which can be reasonably accurate in reflecting overall changes consistently month on month, year on year.

You can get a better idea of your own 'personal inflation rate' by using the calculator here:

http://www.statistics.gov.uk/pic/

mine's currently running at around 2.6%.

JamesU

Stompa wrote: »

You can get a better idea of your own 'personal inflation rate' by using the calculator here:

http://www.statistics.gov.uk/pic/

mine's currently running at around 2.6%.

Never seen this before, very interesting. Thanks.

JamesU