Are savers being short changed?

Lokolo

lisyloo wrote: »

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.

I doubt anyone is going to give a student a mortgage

lisyloo

I doubt anyone is going to give a student a mortgage

I would have thought there would be very few student savers considering that they now have to pay for their tuition fees and maintenance.
Although if they are well off they might be able to "stooze" their student loan if they are at favourable rates.

I do know some students who have got mortgages in the past (and then rented to their mates) but that was pre credit crunch days.

Sapphire

lisyloo wrote: »

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I got these in April/May 2010 although they have now been withdrawn.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.

Yes, I have NS index-linked certificates. However, these are now well and gone so there is no point in saying that people should have taken them out after the event. Nothing has replaced them.

You mentioned that people in their 80s and 90s should not take risks, implying that people in their 60s and 70s should. I strongly disagree.

It's not a question of people in these age groups 'sitting on their backsides'. Some people simply do not want speculate – particularly at such an economically fragile time, when there are many uncertainties facing the British economy, as well as those of continental European countries.

Your view is similar to those who advocated borrowing on the never-never in the 'boom years' without a thought for the possible consequences.

cloud_dog

Sapphire wrote: »

It's not a question of people in these age groups 'sitting on their backsides'. Some people simply do not want speculate – particularly at such an economically fragile time, when there are many uncertainties facing the British economy, as well as those of continental European countries.

I don't want to step in to lisyloo's shoes so to speak but, it is right that they should speculate (to use your term) a percentage so as to offset the low returns from a more guaranteed source, i.e. savings accounts.

Sapphire wrote: »

Your view is similar to those who advocated borrowing on the never-never in the 'boom years' without a thought for the possible consequences.

Your comment goes to the extreme. No one has condoned that. The only way to really keep up with the 'standard of living' is to take some risk, usually via stocks. The amount or percentage invested is up to you. If you are not comfortable with an element of risk then don't take it, but accept the poor returns you recieve.

jimjames

Savings rates are not great but in reality they are excellent compared to the base rate. Lending money at 0.5% and borrowing it at 3% isn't exactly a recipe for profits by banks!

I do agree with Lisyloo's posts, I'm surprised by the suggestions that anyone who is 50 doesn't have sufficient time for investments to recover. If you are investing in mainstream funds like UK if the companies perform so badly that you are looking at losing all your money over 15 years the the economy would be in such poor shape that there would be far more to worry about.

For most people even age 65 with potentially 20-25 years retirement ahead of them a degree of stock based investment to keep pace with inflation would probably be advisable. Risk of investment dropping is only real if you need the money now. In most instances the income remains the same or grows (eg the investment trusts raising dividends for last 40 years) regardless of capital and it is the income that matters.

pqrdef

If the government weren't manipulating the market, one could reasonably expect to get RPI + 2.5% on cash deposits. That's a perfectly reasonable rate for credit-worthy borrowers to pay for the use of other people's money. We've forgotten because governments have been manipulating the market in favour of borrowers for a long time now.

It shouldn't be necessary to choose between inflation-protecting one's capital and deriving an income from it. The point of capital is that you get an income from it and you've still got it.

What one might or might not achieve by speculation is irrelevant. I might do well by playing roulette or betting on horses - or I might not. Taking risks doesn't guarantee returns. The whole point about risk is that many people lose. Most of the profit made on shares is at the expense of other people's losses.

thor

jimjames wrote: »

Savings rates are not great but in reality they are excellent compared to the base rate. Lending money at 0.5% and borrowing it at 3% isn't exactly a recipe for profits by banks!

There are not many products lending at 0.5% from banks these days even if that is the boe rate.

jimjames wrote: »

I do agree with Lisyloo's posts, I'm surprised by the suggestions that anyone who is 50 doesn't have sufficient time for investments to recover. If you are investing in mainstream funds like UK if the companies perform so badly that you are looking at losing all your money over 15 years the the economy would be in such poor shape that there would be far more to worry about.

What if you only get your money back with a zero return? That could easily happen in the next 15 years and yet not signal the death of the british economy(the ftse is still below where it was at the end of the 90s remember).
Sure you can say if you are not prepared to take a risk then you have to expect a meagre return but then conversely you can also state if you want a good return, don't moan about taking high risks.

ceridwen

rayj wrote: »

For most people who have given up working (retired/early retirement) the problem is that the money they have saved to keep them going up to death is about worthless in the building society. The returns are pitiful, remember that most of these people will have paid high interest rates on their mortgages and found they did not have spare cash to spend up the high street.
Now when they want a good return without tieing their investment up for several years they find that they have been forgotten. It must make them feel as if they are being used to subsidise cheap mortgages.

re "it must make them feel as if they are being used to subsidise cheap mortgages" - theres no "feel" about it.

We KNOW we are being used to subsidise other peoples cheap mortgages. I've been on the "receiving end" personally of only ever having the average level of mortgage interest payable - and the only difference to that was a couple of years or so where I had to pay sky-high levels (which was :eek: at the time - as I'd not had the mortgage long enough for the payment to have gone down at all with inflation...). Tough times...but I did it...

lisyloo

However, these are now well and gone so there is no point in saying that people should have taken them out after the event.

I think it's an entirely valid point that there are other vehicles available from time to time (in this case with no capital risk) that pay better returns.

You mentioned that people in their 80s and 90s should not take risks, implying that people in their 60s and 70s should. I strongly disagree.

Well they ARE taking risks if they are saving.
It's a risk of capital deprecitation in real terms (exactly what this thread is complaining about).

Some people simply do not want speculate

Then you have to take other risks i.e. lows returns and possibly capital depreciation.
This is NO safe option here.

Your view is similar to those who advocated borrowing on the never-never in the 'boom years' without a thought for the possible consequences.

Absolutely not. Where have I advocated borrowing??? (apart from completely guaranteed stoozing which is smart IMO).
I am acutally against borrowing and have virtually no debt, so I'm not sure where this idea came from.

I have given a great deal of thought to the possible consequences.
That's why I have a balanced portfolio which balances the risks of capital loss with the risks of capital depreciation.

I think you are wrong if you think people who are saving are not taking a risk. They ARE.

lisyloo

Sure you can say if you are not prepared to take a risk then you have to expect a meagre return but then conversely you can also state if you want a good return, don't moan about taking high risks.

Completely agree with you Thor.
The best wa to get round the risk/return conumdrum (or balancing capital loss with capital depreciation) is surely to have a balance.

I have a certain amount in cash ISAs earning 2.7% which is below CPI but I won't lose the money and it's not a great return.
I have about the same amount in S&S ISA curerntly returning about 10%, but I have the risk of capital loss.
OVERALL I hope to get an above CPI return without risking all my capital.

I don't think I should moan about the savings rates because it's providing me with access and capital protection.
Conversely I totally agree with you 100% that I have no right to moan if my portfolio doesn't perform well OR I risk capital return.

This is the traditional risk/return connundrum.
Yes sure circumstances, age and individual attitudes may make some people more risk averse than other but at the end of the day as adults making conscious choices we have to accept the consequences of our actions.

BTW - I do realise I being harsh and unsympathetic. That's deliberate. I could say "there there, life is so unfair let me kiss it better", but it wouldn't actually change anything I'm afraid.