Prudent savers being punished - reply from governor boe office

bigadaj

Do you have a specific reference for that Dalbar quote?

There's a lot of antipathy to their general findings and accusations of bias so it would be interesting to see the basis of their claims.

patientperson

I for one agree with you

BLB53

Do you have a specific reference for that Dalbar quote?

Its from the 2015 annual Dalbar report 'Quantitive Analysis of Investor Behaviour'. I do not have a link but it may be available via google

One of the key findings - "The 20 yr annualised return for the S&P was 9.85% whereas the return for the average investor in funds was 5.2%"

enthusiasticsaver

Low savings rates are a problem for those who rely on savings income but I think the BOE has no option but to keep interest rates low for the foreseeable future. We are still a heavily indebted nation (including government who is borrowing more than ever) and interest rate rises would depress an already slow growing economy. This is not restricted to the UK. Rising unemployment would not help our economy so they have no choice really. If they increase savings rates most savers would not spend more so that would not help the overall economic situation.

All any of us can do is maximise our savings by using high interest current accounts and regular savings and invest according to your risk profile. We have a large cash buffer as OH just retired and I am going at the end of this year so a lot of our money is just sat earning 1-1.5% to 3%. The rest is invested. I am resigned to that not changing anytime soon.

steampowered

BLB53 wrote: »

I agree you don't need to be an expert to invest which begs the questions:
Why less than 5% of the population manage a S&S investment portfolio

That is an interesting figure, and unfortunately very low.

One key reason is that a big portion of the population don't have any savings at all. This article suggests 16 million people have savings of less than £100.

I suppose another reason is that people don't spend any time thinking about it.

, and secondly,
Of those that take the plunge, why the majority consistently underperform the index by quite a significant margin (according to Dalbar)

I think the important comparison is the performance of investments vs. the performance of cash. Not the performance of self-selected investments vs. the index.

Even people who are underperforming the index will be doing much better than cash savings. Your report suggests that the 20yr annualised return return for the average fund investor was 5.2% which is way better than cash.

If you want your returns to track the index, you can simply buy a tracker fund.

steampowered

enthusiasticsaver wrote: »

a lot of our money is just sat earning 1-1.5% to 3%. The rest is invested. I am resigned to that not changing anytime soon.

If you don't need to access to all of that money in the short term, keeping it in cash rather than investing it would be unwise.

bigadaj

enthusiasticsaver wrote: »

Low savings rates are a problem for those who rely on savings income but I think the BOE has no option but to keep interest rates low for the foreseeable future. We are still a heavily indebted nation (including government who is borrowing more than ever) and interest rate rises would depress an already slow growing economy. This is not restricted to the UK. Rising unemployment would not help our economy so they have no choice really. If they increase savings rates most savers would not spend more so that would not help the overall economic situation.

All any of us can do is maximise our savings by using high interest current accounts and regular savings and invest according to your risk profile. We have a large cash buffer as OH just retired and I am going at the end of this year so a lot of our money is just sat earning 1-1.5% to 3%. The rest is invested. I am resigned to that not changing anytime soon.

But you seem to end up with a self perpetuating process of perverse incentives. We can't raise interest rates because the economy is too weak (it was because the pound was too strong but that excuse went after Brexit).

So we end up with asset prices being inflated, an ever more inflated housing market, with ultra low mortgage rates being the excuse and supporting factor for the latter. Meanwhile the main thing keeping the economy going is consumer spending, primarily on imported goods with a continuing and often increasing trade deficit. Consumer spending financed by ever increasing personal indebtedness.

No easy or obvious exit but a decade of near zero interest rates isnt a good place to be.

HUMBUG

Thrugelmir wrote: »

Suggest you research a little more before wildly speculating.

Okay , you seem to know it all . Why don't you provide us with how much has been lent to the banks vs how much they have loaned out to businesses?

HUMBUG

jimjames wrote: »

If you're so worried about rates then maybe you should be making the most of the decent ones available. Until this year all my cash was at 5%, it's still at over 3% and my mortgage is just over 2%.

Investments have done fantastically since 2009 so it's definitely not been bad or destroyed savings culture as you claim.

I'm talking about pensioners and others who may have worked all their lives to save a fair amount where interest from their income is all they have to live off (without having to reduce their Capital amount). They are being hamstrung!!!!

How would you feel if you were 70+ seeing all your savings going down the drain because of rigged low interest rates + high inflation?

HUMBUG

PeacefulWaters wrote: »

So you reckon the banks have a business model of paying interest on something and then not lending it out?

What's in it for them then?

Childish rants rarely achieve anything.

So I guess you know how much have been loaned to the banks and how much of it has been lent to businesses? I am guessing they have stashed it away but please feel free to correct me with the accurate figures.