Are savers being short changed?

cepheus

According to this article NO! since savings are well above base rates.

However, banks are charging mortgages at around 3.5% above base rate verses 1-2% in the recent past, despite high property prices and record consumer credit.




http://www.houseprices.uk.net/hpuk/house_price_server.php?type=mrates&width=600&height=450&year_min=2001&year_max=2010

Moreover, some returns are sensitive to inflation, which is currently high, so surely banks can surely afford higher savings rates?





Unfortunately, banks have to pay back their speculative losses, via reduced savings interest. This cost is really paid by savers. In other words, the message to the public is borrow more to spend more, don't save! This is precisely what got us into the mess in the first place.

lisyloo

This is precisely what got us into the mess in the first place.

I don't think that's right.
What got us into this mess is spending money we DIDN'T have.
That's different to spending your savings.
Yes I agree the government would rather we spent and put money in to the economy than saved, but there are a small minority of people that have no other investment options apart from saving.
I'm moving money from cash to stocks & shares and getting about 10% return rather than 3%.
Most people could invest (I accept that the very elderly may not be able to take a "long term" view).

So I'm afraid I have little sympathy for savers who aern't in their 80s or 90s.

What's the issue with putting your money somewhere else?

pqrdef

There's so much cheap money swilling around that the banks have no need to try to attract savings. All the best rates are loss leaders, on limited offers because the banks can't afford to borrow any more at those rates.

Mortgage rates are relatively high because they have to reflect likely bad debts. When interest rates go up, there will be a lot of people who can't afford their mortgages, and if property prices go down, there will be a lot of negative equity. So the nominal rates paid by borrowers don't really reflect the true rate of return.

middlepuss

lisyloo wrote: »

I'm moving money from cash to stocks & shares and getting about 10% return rather than 3%.

10% - where please?

lisyloo

10% - where please?

A stocks and shares portfolio invested and actively managed in funds with Aberdeen, AEGON, Invesco, Jupiter, L&G, M&G, Newton, Schroder, Standard Life and Threadneedle. Obviously I have no idea what it will produce in future.
Are you doubting you can make such returns from the stock market?
I was not trying to say it was fantastic performance as I don't believe it is particularly outstanding.

If you want the name of my advisors then please PM me as I don't want to break any board rules.

I wasn't out to advertise, just saying that I don't have a huge amount of sympathy for savers because I believe most of them have options to put their money elsewhere.
You can't demand high returns from a particular asset class.
If it isn't performing then you need to move your money.

Of course there are a few people who have little choice.
So I would not persuade people in their 80s or 90s to invest in the stock market, but I'm waiting to be given some feedback as to why other people shouldn't move their money.
I don't think good returns on cash is a god given right.
If you want to make the most of your money you have to actively manage it.

Sapphire

It's not just those who are in their 80s and 90s that need to be careful with their savings. If someone in their 50s and 60s loses their money while speculating, they will not easily get it back.

lisyloo

If you are 50 then you have at least 15 years to recover your money (as these don't sound like people who have made provision to retire before 65), so I would say that's too cautious if you won't take ANY risk.
But if they want to be completely safe with it, they cannot expect spectacular returns can they??
You cannot be very cautious and the whinge about return.
There is a risk/return relationship. If you want low risk you have to accept low returns.

They could have got NSI index-linked certificates earlier in the year.
These are now paying 5.35% at the moment (RPI at 4.5% plus 0.85%).
They are completely safe, accessible and tax free.
I got these in April/May 2010 although they have now been withdrawn.
You have to be a little bit active - like reading Martins weekly emails and looking at web sites like this.
This was widely talked about at the time and there was ample opportunity to take these out.
Admittedly it was a punt on inflation but there was NO risk of capital loss.

If people sit their with their money in rubbish accounts and never bother shopping around and sit on their backsides then they've only got themselves to blame haven't they??
I am being somewhat deliberately provocative here and playing devils advocate but I still don't have a huge amount of sympathy.

I have some low yielding cash at 2.7% bu I fully accept it's my choice to keep that money safe and accessible. That's my choice.
I don't whinge about it.

You don't have to put ALL your money at risk, you can take a balanced approach e.g. put 50% in S&S and 50% safe in cash.
I think 50 is far too young to be not taking any risk.
The problem with not taking any capital risk is lowering your return possibly below inlfation. THAT IS A RISK TOO.
Inflation is 3.1%, so saving will devalue your money, which means loss in real terms.

But at the end of the day it's a choice.

If these people have any purchases to make and their money is devaluing, then they might want to consider bringing forward their spending, assuming it's something that isn't perishable.

Lokolo

[QUOTE=lisyloo;38879012]If you are 50 then you have at least 15 years to recover your money (as these don't sound like people who have made provision to retire before 65), so I would say that's too cautious if you won't take ANY risk.
But if they want to be completely safe with it, they cannot expect spectacular returns can they??
You cannot be very cautious and the whinge about return.
There is a risk/return relationship. If you want low risk you have to accept low returns.

They could have got NSI index-linked certificates earlier in the year.
These are now paying 5.35% at the moment (RPI at 4.5% plus 0.85%).
They are completely safe, accessible and tax free.
I got these in April/May 2010 although they have now been withdrawn.
You have to be a little bit active - like reading Martins weekly emails and looking at web sites like this.
This was widely talked about at the time and there was ample opportunity to take these out.
Admittedly it was a punt on inflation but there was NO risk of capital loss.

If people sit their with their money in rubbish accounts and never bother shopping around and sit on their backsides then they've only got themselves to blame haven't they??
I am being somewhat deliberately provocative here and playing devils advocate but I still don't have a huge amount of sympathy.

I have some low yielding cash at 2.7% bu I fully accept it's my choice to keep that money safe and accessible. That's my choice.
I don't whinge about it.

You don't have to put ALL your money at risk, you can take a balanced approach e.g. put 50% in S&S and 50% safe in cash.
I think 50 is far too young to be not taking any risk.
The problem with not taking any capital risk is lowering your return possibly below inlfation. THAT IS A RISK TOO.
Inflation is 3.1%, so saving will devalue your money, which means loss in real terms.

But at the end of the day it's a choice.[/QUOTE]

You are assuming these savings in cash are for the longterm?

I have a lot of cash savings, which I am not investing, because I plan to use it in the short term....

ceridwen

Speaking as someone in the 50s/60s age group - then...no...I dont think "Oh well...I can take the long view and take a few risks". I just want what was available a couple of years back - ie somewhere safe and secure that will pay me at least enough net interest to match inflation (a "real" rate of interest would be very nice of course...:)). I dont think its too much to ask to expect exactly that - and, as for taking risks, I've not trusted the "financial system" for years now:cool: - so I need somewhere guaranteed safe and that I can take my money out of pretty quickly.

I dont think it at all unreasonable for us to expect that there be at least one suitable place we can "park our savings" and know that we will be able to safely retrieve an "equivalent" amount back again whenever we decide to - after all ....whichever financial institution has the benefit of the use of OUR money is in receipt of a "favour" from us in effect and its the least they could do to ensure we have enough interest to at least cover inflation rate.:cool:

lisyloo

You are assuming these savings in cash are for the longterm?

I'm not assuming anything.
Across the nation I would expect a mixture.
There have been options for short/medium term.

For example I put money into NSI index linked savings certificates in April/May 2010. As already stated these are extremely safe and tax free. Money can be taken out at any time.
The return will be sacrificed in less that 12 months.
So I took these out expecting the money to be available after 12 months and earlier in an emergency with no capital loss.

I have a lot of cash savings, which I am not investing, because I plan to use it in the short term....

If you are saving money short term then you will have to put up with the rates the banks are prepared to offer at the time.
This has always been the case.
Out of interest. Could you save money in REAL terms by paying for the item now.
What I mean by that is, coudl the price of whatever you are buying have risen more than your savings by the time you purchase it.
If so then as already mentioned you could consider bring forward your purchase as your money might buy more in REAL terms right now.

lisyloo

Speaking as someone in the 50s/60s age group - then...no...I dont think "Oh well...I can take the long view and take a few risks".

I'm not sure what you are doing with your pension, but not taking risks with any capital loss will probably result in low returns, WHICH IS A RISK IN ITSELF i.e. not enough growth to produce a decent pension or even devaluation in real terms.
Of course as you get older you reduce the risk, gradually. You are not in your 90s with a few years to live.
I am not suggesting everyone goes 100% S&S.
I have my money split between cash, S&S, NSI and property.
It's never been a good idea to stick to one asset class and no-one is suggesting this.
But at times it can be necessary to alter your portfolio in accordance with what is happening in the economy.

I just want what was available a couple of years back - ie somewhere safe and secure that will pay me at least enough net interest to match inflation

Sorry, no longer available.
You might want it but you don't have a right to it.

I dont think its too much to ask

Why do you think you have a right to expect it?

I've not trusted the "financial system" for years now

If you are shutting yourself off from the financial system (which has changed) then you are taking a RISK.
I used to be like you until someone said to me "You wouldn't stop eating just becasue you got food poisining would you".
They were right.
You are now shutting yourself off from good possibilities because of bad experiences in this past.
This could drastically affect your retirement in future.

so I need somewhere guaranteed safe and that I can take my money out of pretty quickly

Fine, but you have to recognise those attributes come at a price and you don't get to set the price.

I dont think it at all unreasonable for us to expect that there be at least one suitable place we can "park our savings" and know that we will be able to safely retrieve an "equivalent" amount back again whenever we decide to

I do.
I think it's entirely unreasonable to expect complete safety and access for nowt.
You want vaults, compensations schemes, branches all for nothing.
Unreasonable in my view.

whichever financial institution has the benefit of the use of OUR money is in receipt of a "favour" from us

But they don't get much benefit from it, if you want it back at a moments notice do they???