Are savers being short changed?

The_Economist

lisyloo you say that it was our fault for spending money that we didn't have. Well isn't it the banks fault yet again for lending money whilst not doing the right checks on people.
They wanted to make a quick buck without looking at the conceqences if it went all wrong. But yet again they dont lose because they know that they can tap into a unlimited supply of cash called the tax payer to sort out there mess.
Whilst i agree with some of the things you say in your posts i have to take issue with you saying about people should do more on finding a better rate than the currant savings rate. You go on about speculating on the stock markets etc. Isn't the speculating side of things by the banks that has dropped us in this mess in the first place. As they say once bitten twice shy. I dont think i would trust the banks to speculate on my behalf with my money.
I think it is reasonable for people to expect a safe way of saving and a decent rate of interest not linked to stocks and shares.

lisyloo

lisyloo you say that it was our fault for spending money that we didn't have. Well isn't it the banks fault yet again for lending money whilst not doing the right checks on people.

It's both.
The banks have behaved badly but that doesn't total remove personal responsibility. Adults are responsible for their actions.
Just because something is available doesn't mean you have to go and take it.
I was offered an extra £110K on my mortgage application in 2003.
I didn't take it.
No-one has had a gun put against their head to take a loan.
There is a joint responsibility here, but I am in no way defending the banks.

Isn't the speculating side of things by the banks that has dropped us in this mess in the first place.

Speculation should be appropriate.
For example I would not speculate with money I need to live on.
I agree that the banks have been speculating inappropriately.
That's does not mean all speculation is bad.
Without any speculation there would be no investment and that would be a bad thing for the economy.
Like a lot of things it's bad if used inappropriately. The same applies to cars, kitchen knives, dynamite and all sorts of things.
I was putting forward appropraite speculation in the context of a balanced portfolio appropriate to ones circumstacnes, age, tolerance and attitude to risk.

I dont think i would trust the banks to speculate on my behalf with my money.

You don't have to.
Thre are all sorts of things you can do with your money that don't involve banks.
For example lots of people have invested in property, gold, or lent to others e.g. through a company like ZOPA (I'm not advertising for them, it's just the only name I know).
Lots of people like property as they are in control. I'm not saying it's a good investment for everyone and timing right now sucks, but the point is you don't have to be reliant on banks for your speculation, you can do your own thing.

I think it is reasonable for people to expect a safe way of saving and a decent rate of interest not linked to stocks and shares.

I don't think it's a right.
What's your logic behind there being a right to "decent" rates of return and what is "decent"?
Whether you agree with me or not I believe I'm right in saying there is no legal right to above inflation returns, so why is it reasonable to expect it to be provided and who should pay for that provision at a time when the banks are trying to recover from an unprecedented situation albeit of their own making.
Although I'm a save I'm not terribly keen to fund higher rates for savers. That makes no sense to me.
So who pays for this initiative?

VT82

I've just read this from the start, and must congratulate lisyloo on doing a bang up job, remaining stoic and logical in the face of whingeing, and advocating personal responsibility and common sense.

It must take a real glutton for punishment to invest all that energy writing these posts for little thanks and no personal gain, but it is definitely recognised and admired by some!

I partuclarly enjoyed post #11

cepheus

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.

Indeed, buying when prices are expensive is very risky, and probably worse than gambling.

Perhaps the Japanese stockmarket is a sobering thought. Index in black PE in blue



http://etfdailynews.com/blog/2010/10/26/invest-in-the-worlds-cheapest-market-with-this-etf-ewj/

lisyloo

We would all agree that if you speculate you risk losing money. There is no argument there.

For people who rely on their savings for their income then a safe index-linked product would be a good idea.
For those who don't want to speculate on variable rates, then a fixed rate would be a good idea although this obviously has an inflation risk.

Those who speculate on a banks variable rates have to accept the risks of their speculation.

pqrdef

lisyloo wrote: »

For people who rely on their savings for their income then a safe index-linked product would be a good idea.

It would indeed be a good idea, but there aren't any out there. There's nothing that protects capital from inflation and provides any income worth mentioning, nor has there been for quite a while.

There would be, if the government wasn't fixing the market in favour of borrowers.

"Speculating on a banks variable rates" is rubbish. Frankly I don't think you really understand the problem.

lisyloo

nor has there been for quite a while

I would disagree.
Across the entire nation I think we are talking about a pot of money which some people started saving decades ago.
The vast majority of this money could have been put into index linked certificates.

"Speculating on a banks variable rates" is rubbish

Why?
If you rely entirely on variable returns that you have no contract or guarantees over then why don't you consider that speculating on your return?
In fact you have no entitlement/right to a savings account with a commercial company whatsoever.

Frankly I don't think you really understand the problem.

I think I do.

There are a selection of people who for a variety of reasons have turned their back on ALL other forms of savings/investment apart from high st banks.
They have furthermore decided to put themselves at the mercy of the variable rates those banks chose to offer.
Those people are now unhappy with the rates they are getting, but they have no entitlement to ANY level of rates or indeed an account at all.

I guess they can be miserable for the rest of their lives if they wish.
I'd prefer to do something about it to the best of my ability.

BTW - A few years ago (I think Nov 2008) I was getting 7.32% with Nat West.
The rates were high as banks were keen to attract funds.
I don't remember people complaining that rates were too high back then.
Sometimes rates are high (when the banks want funds) other times they aren't as high.
Sometime you win, sometimes you lose.
If you take a variable contract with the rates set by the banks then that's exactly what you get.

pqrdef

lisyloo wrote: »

Across the entire nation I think we are talking about a pot of money which some people started saving decades ago.

Many people get their retirement pots from severance pay, lump sums from pension funds, and trading down in the housing market. They didn't have the money decades ago.

lisyloo wrote: »

The vast majority of this money could have been put into index linked certificates.

The last issue paid only 1% over RPI, thats £300 on the maximum holding of £30,000. That's not an income.

lisyloo wrote: »

There are a selection of people who for a variety of reasons have turned their back on ALL other forms of savings/investment apart from high st banks.

Not at all. There are so-called fixed-interest securities - gilts, foreign sovereign debt, corporate bonds. But the ones that aren't too risky are horribly overpriced.

Lending your money to the government has been a reliable source of income, not at all speculative, since the time of William of Orange. But not now. Gilt yields have never been this low in history.

Negative real interest rates are a new phenomenon, except under hyperinflationary conditions. They aren't a product of the markets. They're caused by the government deciding that lenders will subsidise borrowers (including itself) by lending them money at absurdly cheap rates.

lisyloo wrote: »

Sometimes rates are high (when the banks want funds) other times they aren't as high.

That's not the reason why interest rates vary. Interest rates are dictated by government policy.

But governments aren't immune to public opinion. Even at the BoE not everybody is comfortable. Moaning isn't necessarily a waste of time. There's scope for something like the Daily Express to mount a campaign, if it thought it would attract readers.

Rollinghome

lisyloo wrote: »

I don't think it's a right.
What's your logic behind there being a right to "decent" rates of return and what is "decent"?
Whether you agree with me or not I believe I'm right in saying there is no legal right to above inflation returns, so why is it reasonable to expect it to be provided
So who pays for this initiative?

Hmm, are you getting a little muddled perhaps and as a result suggesting others are saying things they did not? There appears to be no claim in the quote you gave as to there being a "right". Did you misread it?

What the poster actually said was:

The_Economist wrote: »

I think it is reasonable for people to expect a safe way of saving and a decent rate of interest not linked to stocks and shares.

It's obviously far easier to dismiss what people haven't actually said.

You also make the astonishing assumption that it's unreasonable to expect any behaviour that isn't a legal obligation. Whereas in reality most of us expect exactly that every day: from the way we expect to be treated by way of business in shops to the way we expect children to treat their elderly parents. Most of us have a far wider understanding of what is "reasonable" than what is covered by the law. To help you, I would assume that by a "decent rate of return" the poster meant one that maintains the value of his savings.

Quite reasonable people tend to think that it is unfair for others to benefit from the devaluation of their savings. But it's nothing new. I benefitted from the 24% inflation rate of 1975 and high rate in subsequent years that effectively wiped out the value of the very large mortgage I had then. My gain was paid for by the losses of many small savers and I wouldn't for a minute claim that was fair on them. It was a transfer of their wealth to me.

Perhaps what most irks savers now is that, unlike the wage-driven inflation of 1975, they suspect inflation coupled with low rates is currently being used as a political expedient. That, I'd assume, is what they feel is politically unfair.

So while making suggestions on how savers can tackle the problem may be helpful, passing judgement on whether what others perceive as being unfair, or even immoral, is reasonable or otherwise seems a fairly pointless exercise best left to the Pope.

lisyloo

Many people get their retirement pots from severance pay, lump sums from pension funds, and trading down in the housing market. They didn't have the money decades ago.

In the latter two cases they did.
It was tied up in a pension or property (which wasn't a bad move).

The last issue paid only 1% over RPI, thats £300 on the maximum holding of £30,000. That's not an income.

A £30K lump sum is woefully insufficient to provide an income.
1% plus RPI is an excellent tax free, (capital) risk free return.
It's not the rate that's the issue there, it's bad financial planning if you want an income from £30K.

But governments aren't immune to public opinion. Even at the BoE not everybody is comfortable. Moaning isn't necessarily a waste of time. There's scope for something like the Daily Express to mount a campaign, if it thought it would attract readers.

I am all for activism, protesting, expressing opinions to the right people. (Moaning on here won't acheive anything though)
I would entirely support anyone that wanted to attempt to do something about it.