Savers - a call to arms!

lisyloo

Like an NS&I Index Linked Certificate ?

Yes it's a very good example.
They are very safe capital wise and even if you get a low return at least it's in-line with inflation.
They were withdrawn about May . RPI is now 5.1%, so anyone on RPI+1% is getting a very good deal.
They were inundated and had to be withdrawn.
There are other inflation linked products out now (not NS&I).

I think when the word "risk" is used people automatically think of capital risk i.e. losing money in nominal terms.
This is not the only risk we face.
There is inflation risk which is money going down in real terms, which is happening now.
The main way I know to get round this is to have a balanced portfolio in terms of asset classes and liquidity.
So if those savers had property and gold then overall they wouldn't have done so badly.
Perhaps those that own houses are conveniently ignoring that part of their portfolio and the massive paper returns they have had over the last decade.
Of couse paper returns aren't liquid, but there are schemes like equity release than can help and downsizing can work well especially if you have other issues like affording bills, doing DIY, doing housework, needing company etc. as you get older.
My husbands folks downsized 8 years ago and it worked well for them for the reasons above.

LydiaJ

StevieJ wrote: »

His dad won't be happy with you

LOL. I was thinking of my dad (84), not his.

lisyloo wrote: »

Is anyone suggesting that you don't do any financial planning until your 80's????

I am a daughter-in-law and I look after money for my folks in their 80s.
Make sure they pay as little tax as possible, get the right benefits and have the right products/rates.
I know some families are dysfunctionals but I would have expected the majority of families to look after their elderly members.
Does this not happen?

I don't know what goes on in other families. Not all old people have families, anyway.

In my family, my dad has an IFA for investments, one of my brothers (the solicitor one) deals with property and wills and things, and I advise on cash savings accounts. It's not easy, though, when the healthy parent is overwhelmed by caring for the ailing one (both physically and with dementia) and finds it hard to spare the time to deal with banking. He can't understand why it all has to be so much more complicated than it used to be.

Cleaver wrote: »

But surely if you're 80 you won't mind having most of your money in cash, because if you financially planned throughout your life you've built up your money through a wide range of investment vehicles?

But I still think, even if you're 80, you won't need 100% of your cash in the short term. If you do then you won't really mind the low interest rates as you're about to spend it all anyway. Let's say you are 80 and you have £100k. The scenerios are:

1) You plan to blow the whole £100k over the next year on cruises, hookers and little Bob's school fees. If that's the case, who cares whether you earn 1% or 5% on the money over the next year? It'll all be spent soon anyway. Can't believe I just used the words 'blow' and 'hooker' in the same paragraph.
2) You plan to spend £50k on cruises, hookers and little Bob. You've no plans to spend the other £50k so stick it in a mixture of cash, index-linked, fixed-interest, funds, shares, casinos and any other investment or saving vehicles that fit your risk profile.
3) You plan to spend £10k on a boat ride, low grade call girls and buy Bob a fancy calculator. You now need an investment and saving plan (as above) for the other £90k.

So I'm still not convinced that there's anyone out there who needs all their money in cash. And if you do require your entire wealth in cash, surely that's because you're about to need it all, so who cares that much about the interest rate in the short term?

That's assuming your hypothetical older person is healthy and can make plans some way ahead. How about:

Your pension no longer meets your outgoings because you are paying for carers to visit your home to help you to care for your wife, who needs 24hr support. You are on the waiting list to buy a sheltered flat, but have no way of knowing when one will become available (ie when an existing resident dies). So you may need a lot of your money fairly suddenly if a flat becomes available, but if you have to wait a long time for one, then you want your money to earn as much interest as possible in the meantime.

lostinrates

LydiaJ wrote: »

LOL. I was thinking of my dad (84), not his.

.

I'm thinking of me!

But families might not be up to it. Think of the poor suckers reliant on me! Some people don't want to share financial stuations with their family for advice or help...not uncommon.


many people are financially illiterate, many people are just too caught up with daily grind and (wrongly and blame lies with them) to make time for it today...''manana'' or don't have pennies for advisers to help them. IMO, all those offices sorting their staff out with gyms to help them live longer, a better perk would be to give them a couple of hours with a good IFA a year.

Graham_Devon

Suprised no one has mentioned this yet...

Interest rates on savings accounts have fallen quite a bit. For those using savings to top up incomes, and there will be a lot of pensioners doing that, many will now be seeing the actual lump sum declining each month, which has a knock on effect of the interest also declining each month.

This was mentioned on the BBC not that long back...could have been last month when inflation rose.

So it's a double whammy. We all know how important compound interest is. Well this is the same, in reverse.

What's more, it scares some pensioners, as that's all that have, and they cannot simply go out to work to earn more. It's worrying to see both your interest each month reduce, aswell as your capital reduce, especially when you only have a certain amount.

Tripple whammy for pensioners is the biggest costs for them, are rising at the highest levels (heating fuels etc).

So some people may well be unsympathetic. However, I'm not sure they really know anyone in the position I'm talking about. Unfortunately, I do. It really does worry some, and I really do take offence to some people saying "well they should have prepared" or some other claptrap. Show me anyone who prepared for 0.5% base rates. I do mean anyone, mortgagees, economists, savers.

It's also pointless saying "well people can get 2.8% on this account" and pointing out an internet account. Even if pensioners are able to use these accounts, they are often bonus rates, or banks outside of the country. Something a lot of pensioners would be wary of.

nearlynew

ILW wrote: »

There are many causes of inflation, the oil price is but one. much inflation is caused be expectation alone.

No.


there is only one cause of inflation and that is printing too much money.

inflation doesn't "just happen".


it is a consequence of the actions of liars and thieves



inflation is theft

PasturesNew

Cleaver wrote: »

If you have a serious amount of money (let's say £100k+) then you wouldn't dream of having this as cash, you'd have it invested in something that protects it.

Not necessarily, not if it's sitting there waiting for a nice house to come up for sale.

And "invested in something that protects it", to be honest, savings/investing really make my head spin and I get confused and have no idea. So I keep it in cash. Even opening savings accounts and using them is challenging to me.

PasturesNew

Graham_Devon wrote: »

Suprised no one has mentioned this yet...

Interest rates on savings accounts have fallen quite a bit. For those using savings to top up incomes, and there will be a lot of pensioners doing that, many will now be seeing the actual lump sum declining each month, which has a knock on effect of the interest also declining each month.

This was mentioned on the BBC not that long back...could have been last month when inflation rose.

So it's a double whammy. We all know how important compound interest is. Well this is the same, in reverse.

What's more, it scares some pensioners, as that's all that have, and they cannot simply go out to work to earn more. It's worrying to see both your interest each month reduce, aswell as your capital reduce, especially when you only have a certain amount.

Tripple whammy for pensioners is the biggest costs for them, are rising at the highest levels (heating fuels etc).

So some people may well be unsympathetic. However, I'm not sure they really know anyone in the position I'm talking about. Unfortunately, I do. It really does worry some, and I really do take offence to some people saying "well they should have prepared" or some other claptrap. Show me anyone who prepared for 0.5% base rates. I do mean anyone, mortgagees, economists, savers.

It's also pointless saying "well people can get 2.8% on this account" and pointing out an internet account. Even if pensioners are able to use these accounts, they are often bonus rates, or banks outside of the country. Something a lot of pensioners would be wary of.

At least pensioners have a fixed amount coming in, from their pension/s. In my situation I don't have a safety net.

Since 2007, my income's dropped by about 60% with the loss of interest and the loss of temping work being available.

There are also a number of people who were using their savings interest as a safety net while they waited a few years for something. e.g. people who retired early and thought they'd be OK for 1-2-3 years until they got their pension.

Graham_Devon

PasturesNew wrote: »

Not necessarily, not if it's sitting there waiting for a nice house to come up for sale.

And "invested in something that protects it", to be honest, savings/investing really make my head spin and I get confused and have no idea. So I keep it in cash. Even opening savings accounts and using them is challenging to me.

I'm not sure that you can invest in any product that protects your capital better than a savings account does anyway.

All investment products carry risk, which is usually (always?) larger than a savings account. So not really sure what is meant when saying it should be "invested" in something that protects it.

ILW

lisyloo wrote: »

Do you have any examples of the type of businesses or services you are talking about?
Most businesses I can thinkg of are in the opposite situation - rising costs but unable to raise prices.

Office equipment and the associated consummables.

All B2B stuff so VAT doesn't come into it.

Loughton_Monkey

Inflation is the complex result of the inability or unwillingness of one component in any supply chain to accept the full consequences of actions beyond their control.

If half the wheat harvest is damaged by floods, do we expect each farmer to sell at the same price and suffer the full cost of under-production? No. We expect the price to zoom up. Do we expect the bakery to accept the higher price of flour without putting up the price of bread?.....

Similarly, the wheat harvest flourishes another year....... prices go down...... deflation.

So what I am getting at is the 'commodity prices' go up/go down causing volatility but not necessarily inflation.

But tell me a supply chain the doesn't include 'Labour' as a cost. Labour is a 'commodity' in a free market just as much as wheat, milk, or cocao beans. But it does not ever fall. Basically it only stands still or rises. So-called 'developed' economies have sought to overcome this by outsourcing to [e.g.] China where labour is cheaper. Add the extra shipping and supply chain profits it is still cheaper.

This works well for a time, although it creates unemployment in the 'developed' country.

But eventually, the labour cost in China increases (because it goes up, but never down). Hence the 'developed' world suffers the additional burden of inflation.

So the clue to inflation, in my view is that 'Rice' is an inanimate object and as such is a 'true commodity'. It's price will truly rise and fall 'precisely' to reflect its availablity. It is just as likely to cause inflation one year, as deflation the next. On the other hand, a 'Human' is an animate object. It acts in a complex way and does not in any way behave as a 'commodity'. Hence inflation.