Merv outvoted

PaulF81

We are trying to clear ours by the end of the decade. Same reason. Pretty sure low rates till at least then, not so sure afterwards.

DervProf

I'm just glad I have next to no mortgage.

Those with large mortgages must be thanking their lucky stars.

Many pensioners with savings probably benefited from previous economic growth and higher interest rates. However, to some pensioners with modest savings (and I bet there are many), the current low interest rates must be having a noticeable effect on their lives.

Still, as long as those who are well clued up, and in a position to take advantage of the rather "unusual" financial situation we now find ourselves in, it's all good !

coastline

Harry_Boyle wrote: »

More fool them for keeping their savings in cash - an investment strategy 100% guaranteed to be eroded by inflation.

However, I doubt the figure is 'millions', it'll just be a few thousand folk who decided not to invest in traditional pensions (and therefore have a guaranteed annuity) because they didn't want to 'lose control' of their money or because they didn't trust the government/pensions industry.

Not such a great decision after all - though they were right not to trust the government, just wrong in holding their wealth in cash.

link shows 30% of all UK savings is deposit based at £1,218 billion...thats a few bob.

http://www.lloydsbankinggroup.com/media/pdfs/LTSB/2012/0206ValueofUKhouseholdsavings.pdf

grizzly1911

Harry_Boyle wrote: »

However, I doubt the figure is 'millions', it'll just be a few thousand folk who decided not to invest in traditional pensions (and therefore have a guaranteed annuity) because they didn't want to 'lose control' of their money or because they didn't trust the government/pensions industry.

Not such a great decision after all - though they were right not to trust the government, just wrong in holding their wealth in cash.



Well, they could just change their investment strategy to take advantage of the current financial climate - just as I did by buying a dream home in 2010. There are two sorts of people in this world; those who adapt to their environment and those who expect the environment to adapt to them. Nature tells us which type flourishes and which doesn't.

So every body gets a guaranteed annuity?

QE hasn't had any effect?

We aren't talking about pensioner supremo's like you just average Jo(e) in the street with their prudential plan or whatever. Yes we know annuities aren't the only vehicle to release pensions.

Annuity rates, which determine the amount of income investors can buy with their pension fund, are based on gilt yields. QE effectively reduces the number of gilts on the market by buying them from banks, insurance and pension companies, and pushes up the price of those that remain, thereby reducing their yields and the amount of annuity income a pensioner can buy.
Annuity rates have fallen from 7.855% for a level income for a 65-year-old man in 2008 to 5.743% in 2012, and in June alone there were 16 annuity rate cuts. This means a man buying an annuity with a £100,000 pension pot would currently get an income of £5,743 a year, almost a third of the £15,600 he would have got when annuity rates peaked in 1990.


http://www.guardian.co.uk/money/2012/jul/05/quantitative-easing-affect-annuities-pensions-inflation


As you reach pensionable age it is prudent to switch out of riskier funds into more stable funds and cash.

I doubt soon to be pensioners would be looking to lock into low rate mortgages and property as they will already have had the their dreams and living in reality.

sabretoothtigger

annuity rates peaked in 1990.

I was getting 10% interest then. You could get a 5 year fixed 10% savings account also I think "TESSA".
Money is valued less now and greater investment required

more stable funds and cash.

Thats an oxymoron, cash is not stable. Its hard for people to decide what is, Im finding my most consisent returns are from Asia Pacific, more often then not I see it ticks up another half a percent. A million miles away from what people think is stable

Harry_Boyle

Graham_Devon wrote: »

Yer, cus that would work for pensioners. :undecided

Of course it would. They could take those tens of thousands of pounds they are allegedly holding in cash and invest it in bonds, gilts and shares and then live of the return - just as I intend to do when I take my pension and put it into drawdown.

Come on Devon, I know you are the King of indecision but surely even you wouldn't just sit back and watch your savings erode and do nothing?

Harry_Boyle

coastline wrote: »

link shows 30% of all UK savings is deposit based at £1,218 billion...thats a few bob.

http://www.lloydsbankinggroup.com/media/pdfs/LTSB/2012/0206ValueofUKhouseholdsavings.pdf

It's always a good idea to have an element of your savings in cash, especially your emergency savings, as it's easy to get at quickly. I have £20k of emergency savings sat in cash ISAs and I dare say I'm not alone in this.

Generali

vivatifosi wrote: »

There's a link to the minutes in the BBC quote Thrug, but I'll put a direct link in here for good measure:

http://www.bankofengland.co.uk/publications/minutes/Pages/mpc/pdf/2013/mpc1302.aspx

I think it's perfectly legitimate to say that Lady Merv was outvoted, after all it's the Governor who decides what the MPC vote on after 2 days of discussion/chit chat.

If we use a working premise that you don't get to run the BoE if you're an idiot, and I realize that runs contrary to the views of some posters but they're wrong, why would Merv put something to the vote of the MPC that he knew he'd be outvoted on?

Further, let us consider the purpose of the MPC:
1. Price stability
2. Supporting the economic policies of the government of the day

It is perfectly conceivable that the Government's policy is a weak pound to encourage trade. It is also conceivable that the MPC voted as they did to signal that more QE was in the offing, a powerful signal as the Fed are signaling that their QE might have ended.

For those worried about the price of imports, remember you can afford expensive imports if you have a job but you can't afford cheap ones if you don't.

vivatifosi

Generali wrote: »

I think it's perfectly legitimate to say that Lady Merv was outvoted, after all it's the Governor who decides what the MPC vote on after 2 days of discussion/chit chat.

I stuck this thread up as an interesting talking point rather than anything else, but somewhere - either in the beeb article or elsewhere - I did see it mentioned that in spite of their independence it was very rare for the MPC to vote differently to Merv and it had only happened a few times during his tenure.

Generali

vivatifosi wrote: »

I stuck this thread up as an interesting talking point rather than anything else, but somewhere - either in the beeb article or elsewhere - I did see it mentioned that in spite of their independence it was very rare for the MPC to vote differently to Merv and it had only happened a few times during his tenure.

Merv and other Governors have regularly had split votes and that's how it should be, again contrary to the views of some here, as each member of the MPC is independent from the others as well as from the Government.

So the question remains, why would Merv set a vote he know he'd lose? IMV it's because he/they want to send a signal to the market without having to change policy. Don't forget that this is a Central Bank, not Parliament and so they have no requirement to tell anyone except their political masters the truth. Also, there is a long-standing exception within Parliament even that Central Bank intervention needed be spoken about truthfully: many a Chancellor has stood before the house hours before a devaluation and told the Members that a devaluation would be over his dead body.

Perhaps the Currency Wars are entering a new phase, moving on from a phoney war to the shooting bit.