Interest rates so low - don't bother saving!

marathon_man_3

inearlygaveup wrote: »

Totally agree marathon man. We like you and many others controlled our spending all our working years, just to see it all being drained away.

Thank you.
I was beginning to think that I was an anomaly within this thread. We also, as was written above, don't owe a single penny to anyone for anything.
I am totally aware of inflationary effects but am prepared to suffer the effects of that rather than put a single penny at risk (in monetary terms). Before we retired, we had chunks of our savings invested in various funds affected by stock market and property price fluctuations and looked at the shrinking valuations on a regular basis. For us, enough was enough. We calculated the value of what we had, decided that we could get by on what we had and cashed it all in. We had calculated that part of our income going forward was going to include interest on our cash but unfortunately we didn't realise that it was going to be so little hence we are eating a little into our cash each month to get by.
We will have enough to last us but the emphasis all seems to be unfairly on the side of the borrower. There will be massive outcries of financial hardship when the interest rate eventually starts in the upward direction but we savers/pensioners have just had to take it with very little sympathy around.

Glen_Clark

gadgetmind wrote: »

Sitting like a mug in cash is pretty grim even in "normal" times but at the moment it means that you're bearing the full brunt of fiscal oppression without even trying to get out from under the jack boot.

With the benefit of hindsight you are right, of course.
Interesting article in the FT yesterday discussing how the Governments QE programme has completely reversed market fundamentals. Shares and asset prices rising in a recession. And the bankrupt banks being the amongst the best performers due to public subsidy. Guessing what the monetary policy committee is going to do has become more important than traditional market research (and is why the BoE's own pension fund has outperformed all the others as they switched their own pension fund into index linked bonds before cranking up the printing presses and destroying ours)
The big question is, of course, where does it go from here. Traditionally when you hear people talking about how much they have made out of shares or gold, how mad you are to stay in cash, we have been at the top of the market when the small investor finally piles in and loses his shirt.

gadgetmind

marathon_man wrote: »

we had chunks of our savings invested in various funds affected by stock market and property price fluctuations and looked at the shrinking valuations on a regular basis. For us, enough was enough. We calculated the value of what we had, decided that we could get by on what we had and cashed it all in.

Out of interest, do you recall the date when you did this?

mumf

Marathon Man is correct-there will be an outcry when interest rates go up and borrowers realise they cannot afford the debt. This is just like the late eighties when we bought our house. People were buying ad an "investment",instead of buying a home. In recent years it seems people have overstretched their borrowing on the back of low interest rates. Boy, is that a ticking timebomb!

grey_gym_sock

Glen_Clark wrote: »

How can you believe any of the Government's statistics on the National Debt when so much of it is off the balance sheet -
PFI,
unfunded Public Sector Pensions Liability,
commitment to support the insolvent Banks,
etc etc.

it's all very well not believing them, but the next step should be to estimate the real level of public debt, not just to throw up one's hands and say "it's massive!" ...

in very rough figures:

the official figure for the debt is £1000bn+.

PFI was initial borrowing £50bn+, with a commitment to pay £200bn+. some of the higher figure is buying services. it could all be bought out now for nearer to £50bn.

PFI alone isn't big enough to change the basic picture that public debt as a % of GDP was moving sideways from the mid-1970s until 2008, when it really took off. and is still lower than in the post-WW2 period (during which it was gradually falling).

public sector pensions? which ones?

there are various funded schemes, many of which have already been altered to make them more sustainable, but we keep on being told that they're unaffordable - there is a political agenda behind this, and if you don't trust the government, you shouldn't believe all they say about this either.

there is state pension, plus means-tested benefits paid to pensioners. there is a real issue here with the proportion of workers to pensioners falling with increasing life expectancy. but given the changes already made and planned (increasing state pension starting age), i'm not sure how much imbalance will be left. pls give any sensible figures you have here (but not the total liability for paying future pensions, because some of it clearly can be paid from future taxation, so it's not all a deficit).

supporting banks: there are very large liabilities here, but also very large assets, surely matching most of the liabilities. the important question is how much the public sector likely to lose before it can exit the banking sector. any ideas?

coastline

Set the link up here at 1984-2011..and you can get a rough guide to building society savings v FTSE100 v RPI index.
I've used 1984 as it was the introduction of the FTSE....
The building society savings are average of course..without tax...but can be bettered with fixed rate bonds ...cash ISA's etc.
FTSE investors can always beat the indicies with dividends and a good fund manager... but reading the forums of late the route to passive investing seems popular...
Just to add a family member inherited £5,000 in 1985...basically deposited it in a building society and took out fixed rate bonds...its now over £25,000...I see it every year.
The FTSE in that time isn't that much better...but we know theres other sectors to invest in which have produced very good returns....research is needed and is available online today.
To be honest I'm not surprised people just stick to building societies...you hear good and bad about investing....just like everything else I suppose.

http://swanlowpark.co.uk/svad0901.jsp

Glen_Clark

grey_gym_sock wrote: »

....there is a real issue here with the proportion of workers to pensioners falling with increasing life expectancy. but given the changes already made and planned (increasing state pension starting age)...

Yet another example of why the Governments statistics are meaningless. They have made an assumption that people will be able to carry on working when we haven't got enough jobs for the young and keen, yet alone the old and tired, plus all the disabled they are turfing off benefits. Their statistics make an assumption that all the suitable extra jobs will magically appear.

There has long been an unfunded public sector pension liability, but it is now out of all proportion to what it was. Doctors and Dentists on £250k plus Town Hall Bureaucrats on £500k plus, more overpaid Bureaucrats than we have ever had before, and living longer.

There aer also many hidden costs in PFI contracts - its costing the taxpayer hundreds of pounds just to change a light bulb. Something that used to be done by a resident maintenance man on the average wage.

Government statistics only show part of the picture, which is meaningless on its own.

gadgetmind

FTSE investors can always beat the indicies with dividends and a good fund manager...

They'll also need a crystal ball to identify that manager in advance.

I just aim to have the same performance as the FTSE 350 HY total return but without the fees.

gadgetmind

Glen_Clark wrote: »

There aer also many hidden costs in PFI contracts - its costing the taxpayer hundreds of pounds just to change a light bulb. Something that used to be done by a resident maintenance man on the average wage.

Which is why my wife and I hold shares in four companies that specialise is running PFI contracts.

atush

Sitting like a mug in cash is pretty grim even in "normal" times but at the moment it means that you're bearing the full brunt of fiscal oppression without even trying to get out from under the jack boot.

C_Mababejive wrote: »

True and thats where the system has the advantage you see because most people dont even consider let alone understand the concepts which we discuss here. They are sheep for shearing.

Gadget and the above have it right.

There are all kinds of RISK, and investment risk is just one of many. To be SO afraid of that, that you disregard all other risks (from inflation to shortfall) is just plain unwise if not perhaps ignorant. Those who do this, by slavishly saving only in cash are cutting off their own noses to spite their own faces.:eek: