Biggest drop in savings for 40years

grizzly1911

"Savers have been withdrawing money from their accounts at the fastest rate for nearly 40 years, Bank of England figures show.
They took £23 billion out of long-term savings in the past 12 months, equivalent to £900 for every household in the country"


”Ros Altmann, a former Downing Street policy adviser, told The Telegraph: “The figures are desperately worrying. People are stopping saving for the long term because all the policies of the last few years mean you would be a mug to save.
“The problem is no economy can thrive in the long run without people saving. You can’t run it on borrowing and debt, you need to save and invest for the future. If you just withdraw money and spend you are talking about a recipe for long-term economic decline."

http://www.telegraph.co.uk/finance/personalfinance/savings/10489947/Savings-drop-to-lowest-level-in-40-years-Bank-of-England-figures-reveal.html

chewmylegoff

The article suggests that it was either "spent" or moved to current accounts, but of course it may well have been transfered from cash savings into investments given the terrible rates available on cash deposits. Alternatively people may just have shifted money from maturing long term deposits into current accounts waiting for improvement in savings rates as they don't want to lock in for long periods at pathetically low rates (I expect interest rates on savings are also at (at least) a 40 year low).

The figures do not therefore necessarily demonstrate that people are spending all their money and not investing for the future.

LydiaJ

Even if the money has been withdrawn and put into "current accounts" that may not mean that it has ceased to function as "savings". Martin's guide to savings accounts points out that the best interest rates available at the moment are on current accounts, and advisers savers to put money in there up to the max that the accounts will pay interest on.

Generali

One of the reasons for low interest rates (including QE) is to push investors into riskier investments.

So we can see what's happening to cash, a very low risk investment. "What's happening to mutual fund flows Gen?" I hear you ask as one.

http://m.barrons.com/articles/BL-FUNDSB-13648 I reply. Ooh, highest inflows into equity funds since 2000. Amazing. If this keeps up they won't need QE or very low interest rates any longer.

michaels

Is this another success for funding for lending - until FFL savings rates of 3% (and more for term accounts) were widely available, that has reduced by more than 1% with FFL and I like many others have moved money elsewhere - I have put 350 households worth into property for example.

System

There is a difference between "saving", meaning the percentage of national income that is not spent on consumption but is invested in capital items for future growth, and "savings", which is loosely used just to mean people's rainy-day fund.

I would have expected a senior policy advisor to understand the difference.

Loughton_Monkey

michaels wrote: »

Is this another success for funding for lending - until FFL savings rates of 3% (and more for term accounts) were widely available, thay has reduced by more than 1% with FFL and I like many others have moved money elsewhere - I have put 350 households worth into property for example.

Quite right.

The Altmann woman doth whinge again. A not infrequent occurrence.

Those of us with offset mortgages have long since been scraping every penny out of them to shove into longer term bonds, making 'loadsamony' on the turn. Now, of course, the party's over and it has all been shovelled back since a 1.88% gross equivalent rate is not bad by comparison.

Then who doesn't use Santander for £20K and get their 3%, plus (in my case) around £15 a month cashback.

And, yes, like some, I have thrown a fair bit into investment funds as a hedge - sticking to the safer 'absolute' funds. Since mid October, they have made me 6.2% so far.

So multiplying this sort of thing across the population, it's probably just 'good management' more than it is "desperately worrying".

I suspect Ms Altmann's own pension fund might be looking "desperately worrying" causing her to try an boost it by writing whinging articles for a fat fee. She should go on one of her Saga Cruises and give us all a rest.

mayonnaise

So people are moving money out of low interest accounts.
That's not worrying, Ros. That's very MSE.

Generali

Clifford_Pope wrote: »

I would have expected a senior policy advisor to understand the difference.

Apple pie in the sky hopes there I think Clifford_Pope old boy.

Actually, looking on wikipedia, you'd hope Ms Altmann would know better quite frankly. Money put into current accounts can be spent but can also be used to be shares and other assets. It's unusual to be able to buy into a mutual fund from a savings account directly.

Generali

Loughton_Monkey wrote: »

And, yes, like some, I have thrown a fair bit into investment funds as a hedge - sticking to the safer 'absolute' funds. Since mid October, they have made me 6.2% so far.

6.2% is a great return over 7 weeks.

Safe though...? I have my doubts.

As I hope you know, I wish you nothing but joy and gin. Returns like that, as a retiree, would make me twitchy. Feel free to PM me with the name of the fund. I'd be happy to kick the tyres.

michaels

Loughton_Monkey wrote: »

Then who doesn't use Santander for £20K and get their 3%, plus (in my case) around £15 a month cashback.

I'm sure you are aware but you and Mrs Monkey can both have two 1-2-3 accounts each.