Are savers being short changed?

Old_Slaphead

lisyloo wrote: »

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?

Out of curiosity, how long have you been investing in stocks and shares?

lisyloo

Out of curiosity, how long have you been investing in stocks and shares?

Through pension, 20 years.
Outside pension 10 years.

Why do you ask?
I'm not a sophisticated investor and don't claim to be, I leave the portfolio management to the professionals.

BTW - the 10% is a snapshot and hides variations between +20% and also dips where capital loss has occured so I wouldn't read too much into that figure.
I don't think we should have a lot of cash whilst it's all depreciating do you? (in our 40s)

Old_Slaphead

lisyloo wrote: »

Through pension, 20 years.
Outside pension 10 years.

Why do you ask?
I'm not a sophisticated investor and don't claim to be, I leave the portfolio management to the professionals.

BTW - the 10% is a snapshot and hides variations between +20% and also dips where capital loss has occured so I wouldn't read too much into that figure.
I don't think we should have a lot of cash whilst it's all depreciating do you?

Because over a relatively short term ie last 2 years people can see stock market as a one way bet.

Anyone, like yourself, investing over a longer period knows that the market can fall very quickly and someone with less than a 10 year investment horizon can easily experience significant capital losses. I've seen half a dozen market crashes (from 1970s onwards) and up to 50% of one's investment can easily be wiped out. Even the FTSE level of 31/12/1999 hasn't yet been recovered. Over the 8 years 2000-8 my best pension investment was the cash fund....thought this hasn't been the case for last 2 years. I'm not advocating cash as a long term investment but sometimes the return and/or security can be of value especially, as now, in nervous market conditions.

For someone aged around 40 I can empathise with your views - I'm not sure how appropriate it is for say 55+. Clearly 'lifestyling' has merits from that age although, in my case, I prefer to do it myself rather than have a rigid system where capital losses can be easily locked in.

bendix

ESKIMO wrote: »

It's rediculous as it only factors in the advertised 'hook' of say 5%AER - which if you read the small-print disclaims that the 5% is only applicable to say the first £1000 or £2500, whilst making standing order deposits of say a minimum of £50 to a max of £250 per month. You could put in as much as you want for as long as you want. You are only getting a return on the 'said' amount.

Savers are totally short-changed. The difference between 'actual' interest payments and what the banks charge on interest loan repayments is unpalpable.

They continue to get away with it scott-free all the time. Enough is enough.

As lisyloo has repeated adnauseum, if you don't like what you get at the banks, do something more constructive with your money.

Your anger at the banks is akin to the rage of Caliban seeing his reflection in the mirror. You're not forced to keep it in the bank; if you want higher returns, take some risks.

As lisyloo says, most of us who have been in stocks and shares over the last 18 months (I went in in April / May 2009), have made returns of 30%, more than enough to offset short-term concerns about low interest rates offered by the mums and dads approach of sticking it in the high street bank.

jeez, you might as well take it out and put it under the mattress.

caveat emptor - you're responsible for your low returns, not the bank.

lisyloo

Because over a relatively short term ie last 2 years people can see stock market as a one way bet.

It's a good point and I always regard it as 5 years plus, which I agree rules out some people.

I am not ONLY advocating S&S as the only alternative.
It's the obvious one, but NSI, ZOPA have also been mentioned.
Paying down debt, gold, bonds, gilts, property funds are other possibilities.
I would consider those mainstream. I'm not talking about wine, art or classic cars although I did mention bringing forward purchases.

I'm not sure how appropriate it is for say 55+

I would make my pension more risk averse as I get older.
That doesn't mean putting it all into cash at age 55, but a gradual switching process to safer investments (not just cash but bonds, gilts, and lower risk shares/funds).
Surely this is something people should expect and build into their planning/estimates??
No-ones advancing age should be coming to them as a shock.

I do agree that older people have to become more risk averse but I believe they should be fully aware that they will both be getting older and also that they will be becoming more risk averse and therefore this should be entirely expected in their financial planning.

This discussion has focussed far too much on Stocks and shares when I was talking about doing other things with your money and that can include spending it too (if that's in your plan at some point).

cloud_dog

Just as a point for reference....... My dear ole Ma is 75 and has a third of her 'savings' in investments. It used to be higher but over time it has reduced and will probably continue to reduce, or at least re-assess this exposure going forward.

nilrem_2

I would be interested to know the breakdown of which age-groups hold the opinion that savers are having a hard time and the opposite (IMHO) rather harsh view that savers should consider themselves lucky?

I would speculate that most in the 'harsh' camp are either in the younger age group or are pensionable age but wealthy, because many pensioners can not afford to speculate for the chance of a high return because if they do and it goes wrong they do not have the chance to replenish their savings pot to live on.

Don't forget that a lot of the people who are now pensioners have worked damned hard when they were younger and perhaps scrimped and saved a bit to live on when they retired and had no idea that the BOE rate would be at 0.50% in the future, it is also their savings that have enabled a lot of younger people to have mortgages and buy their own houses.

I do agree that savings rates of around 4.00% can be had for a 3 year fix and compared to the BOE Rate it's good but compared to inflation it's not so wonderful.

Another thing that people forget is that many of us have found our saving rates have dropped from around the 6.00% figure in 2007 to about half that which means half the income and a lot less cash to spend on goods and services which of course affects the economy!:)

(FWIW I am not of pensionable age yet!)

lisyloo

and the opposite (IMHO) rather harsh view that savers should consider themselves lucky?

I don't think that even I taking a deliberately adversarial posistion would say savers should consider themselves lucky.
I have said that certain age groups have been lucky in other respects for example I was lucky to have no student debt and some have been lucky to have cheap house prices and good stock market growth, but thats seperate from the saving issue.

because many pensioners can not afford to speculate

I agree with you and I have also said that those people should have been fully aware they would be in that situation.
Did they expect to not get old??
The discussions is about savers in general and not just pensioners.

because if they do and it goes wrong they do not have the chance to replenish their savings pot to live on.

Capital loss is also very much a concern for younger people.
No-one wants to lose their money.
But I agree circumstances are different and not just based on age.
It depends whether you can afford to lose it and your attitude to risk.

had no idea that the BOE rate would be at 0.50% in the future

No, but they did know they would get older and become more risk averse and should therefore have had conservative expectations in later life.
I don't believe they should have been building in high expectations or planning for high rates.
I have built in a conservative 3% expectation for my pension over my working life, this take into account the fact that I will be more risk averse when older.
Did people really expect either not to get older or not to become more risk averse? I don't get that, surely it's inevitable and entirely expected.

jimjames

lisyloo wrote: »

I would make my pension more risk averse as I get older.
That doesn't mean putting it all into cash at age 55, but a gradual switching process to safer investments (not just cash but bonds, gilts, and lower risk shares/funds).
Surely this is something people should expect and build into their planning/estimates??
No-ones advancing age should be coming to them as a shock.

I do agree that older people have to become more risk averse but I believe they should be fully aware that they will both be getting older and also that they will be becoming more risk averse and therefore this should be entirely expected in their financial planning.
.

There is also a danger becoming too risk averse and switching all to cash as you retire as this thread has shown. My wife's grandparents switched to cash when they retired age 65, they both lived almost another 30 years in retirement and could have been a lot more comfortable in their later years if they had retained some stock market exposure over that time.

Andy

Rollinghome

Just a mention of two widely accepted “facts” that perhaps shouldn’t go unquestioned.

The first is the tempting idea that timing doesn’t matter; that paper losses aren’t important and that somehow it miraculously all comes out in the wash after 5 or 10 years. Timing does matter.

Someone who invested all in equities in 2000 or 2007 is today likely to have only half the assets of someone who invested two years later. Good timing may be difficult or even impossible but we shouldn’t be persuaded that it doesn’t matter. Buying into markets that are too high, whether due to bad luck or bad judgement, is likely to effect your wealth not for just a few years but for the rest of your life. Going forward from a lower base, you'll always be a proportionate number of steps behind.

The second is that age automatically determines the appropriate level of risk. At any age what determines the appropriate level of risk is your ability to tolerate it and the need to take it. Now that I’m older I’ve enough assets to easily lose half without any effect on my lifestyle so can take much more risk than when I was younger. Nor do I have the same responsibilities and obligations I had.

For the same reasons I don’t need to take as much risk so, balancing the two, my investment style is pretty much unchanged. Within that I have to take into account that if I lost the lot I wouldn’t have 40 years of employment ahead to claw my way back. Any assumption that there should be a simple correlation between age and risk is wide of the mark.

nilrem wrote: »

I would be interested to know the breakdown of which age-groups hold the opinion that savers are having a hard time and the opposite (IMHO) rather harsh view that savers should consider themselves lucky?

It is very unfair that those who don’t want to risk their hard-earned savings are losing them due to poor rates and high inflation. It may also turn out that those who now feel obliged to risk their savings by turning to market investment lose as much or more. But when was life ever fair?