Prudent savers being punished - reply from governor boe office

dunstonh

sadly your response is very typical of someone who has not suffered a massive income drop thanks to the mess the MPC has created

Using cash savings for income is a high risk option. The risks are shortfall risk and inflation risk (and potentially provider risk). Inflation risk is virtually guaranteed if you use savings for income. Shortfall risk will happen when interest rates are low.

So, if someone chooses a higher risk option with known risks, they cannot be surprised when those risk events happen.

Also, the MPC hasnt created this specifically. Some of their decisions have led to this but the alternatives were a lot worse and in a global economy, the UKs interest rates are not just affected by home events but also global interest rates.

My savings and dividend income has been trashed by way over 50%

Who cares about dividend income. It is just one part of the total return. It is more tax efficient to look at total return and draw on that basis. Your total return will not have been trashed. It will be very healthy. Don't make out that you are worse off as that is complete BS.

bowlhead99

despair wrote: »

sadly your response is very typical of someone who has not suffered a massive income drop thanks to the mess the MPC has created.

Yes, I don't have £50k+ of cash in the bank and a pile of stocks and shares like you, nor a fully paid off property, so have not been relying on unearned income, but employment. I'm grateful that the employment has been able to continue thanks to the support provided by BoE. There are millions like me.

The Bof E is not allowed to target specific groups yet it has deliberately via FLS and TFS poured billions of very cheap money into banks and b soc in the full knowledge it would trash interest rates and thus the incomes of millions

You acknowledge that the BoE should not target specific groups and should instead concentrate on what it perceives to be the best interests of the economy as a whole.

Yet your complaint is that they are not targeting you and people in your specific group for a boost in income. Well, that's how it works. They're not going to pander to your specific interests ahead of the wider economy.

My savings and dividend income has been trashed by way over 50% , but because i dare to have savings i am not entitled to pension credit yet its totally impossible to live on the resulting income which because my state pension is only £70 pw falls way way below even personal tax allowance

I think the government's view on that would be that they would have been willing to top up a typical pensioner's income from £70pw to £159pw via pension credit, but they withhold pension credit by £2 a week for every £1k of savings and investments you have over £10k.

So the reason you are not getting government welfare handouts to take your £70 to £159 is your £55k+ of savings and investments which mean you're not the most at need for targeted support. Sorry but that's just the way it is. The people in real need of support have under £1k in savings and investments and losing a few percent of interest on that is neither here nor there.

If your income from dividend-paying investments has been "trashed" it is your poor investment choices as others have been doing well in recent years.

If your savings interest has been "trashed" and your opinion of the fall is that it's solely and utterly because the BoE / MPC had not acted earlier to cool the economy before the problematic credit crunch days, perhaps one thing for you to consider is that the level of interest you were getting on 2007/8 was unsustainably high - and that if the BoE had done a different job of regulating the banks you wouldn't have gotten used to getting risk free returns on cash comfortably above the rate of inflation, because you wouldn't have been getting it.

That should not imply you now deserve more interest on low risk investments.

Glen_Clark

If you cast your mind back to Cameron's pre-election promises to savers - which even the Torygraph calls political hogwash http://www.telegraph.co.uk/finance/personalfinance/pensions/10457090/Camerons-broken-promise-to-savers-costs-68bn.html (and all the scandals surrounding financial salesmen) is it surprising they stayed in cash ?

Malthusian

Glen_Clark wrote: »

If you cast your mind back to Cameron's pre-election promises to savers - which even the Torygraph calls political hogwash http://www.telegraph.co.uk/finance/personalfinance/pensions/10457090/Camerons-broken-promise-to-savers-costs-68bn.html (and all the scandals surrounding financial salesmen) is it surprising they stayed in cash ?

Yes.

Yes I would be extremely surprised if anyone puts all their savings in cash and subjects themselves to very high shortfall risk because of what some polit said.

The statement that "Cameron's broken promise cost savers £68bn" is hogwash, for two reasons. Firstly, Cameron did not promise to take interest rates out of the hands of the Bank of England and under the direct control of the Prime Minister, and then raise them. So investors lost nothing from a promise that was never made. Secondly, even from that hypothetical £68bn you have to deduct the money that savers gained from rising house prices, from investment growth and from not living in a country undergoing permanent deflation, which would have meant even more crippling national debt and a decade-long recession, which would have meant significant tax rises (not !!!!!footing around with pension allowances, actual tax rises), all of which would have been the inevitable result of holding interest rates at an unjustifiably high level.

The scandals surrounding financial salesmen would lead me to take advice from professional independent advisers, not a salesman.

Glen_Clark

Malthusian wrote: »

you have to deduct the money that savers gained from rising house prices, from investment growth

For that you have to assume all savers are shareholders and homeowners (and can take out a few bricks from their house and sell them for income)

despair

its all very easy to criticise others when you do not know the full situation

i never said i expected interest returns of 5 or 6 % that were available pre the crisis
but i do insist that until FLS was foisted onto the scene by B of E in august 2012 rates of 3 or 4 % were easily available and that would be perfectly acceptable but FLS put paid to that and directly gave all mortgage holders a huge benefit which was never ever offered during our lifetime.
I could care less what value my house is its of no relevance since i cannot spend its bricks just the same as i have very good reasons for not wanting to take risks with what cash i had ....yes if i could turn back the clock i wish i had been totally selfish and not accepted caring responsibilities and been able to secure a pension plan, but i cant change the past and i have just as much right to fair treatment


The B of E has directly targeted mortgage holders giving them a cheap deal
The B of E actions has pushed houses out of reach of the young
The B of E has robbed savers especially elderly as a result

those 3 actions are not in anyway good for the entire country and the backlash will come when more and more elderly are forced to claim pension credit and associated benefits ,when they cant pay care home bills
When the young cant buy houses all the effects of such ill thought out policies will come home to roost and the financial effects will dwarf any of the last few years

The plain fact is that savers of all ages have been deliberately robbed in favour of !!!!less debtors and the rich and theres no way on earth that creating a bigger and bigger debt mountain is in anyway good for the country so the B if E are acting outside their remit
This has zilch to do with Global anything ..its to do with a bunch of Central Bankers who all get together once a month for an all expenses paid jolly to plot how they can furthur rob the prudent and kick the can down the road
Their egos and paypackets are so huge they have no understanding whatever of the carnage they have created

unitedwestand

Don't get mad, buy cryptocurrencies :-)

Glen_Clark

despair wrote: »

its all very easy to criticise others when you do not know the full situation

i never said i expected interest returns of 5 or 6 % that were available pre the crisis
but i do insist that until FLS was foisted onto the scene by B of E in august 2012 rates of 3 or 4 % were easily available and that would be perfectly acceptable but FLS put paid to that and directly gave all mortgage holders a huge benefit which was never ever offered during our lifetime.
I could care less what value my house is its of no relevance since i cannot spend its bricks just the same as i have very good reasons for not wanting to take risks with what cash i had ....yes if i could turn back the clock i wish i had been totally selfish and not accepted caring responsibilities and been able to secure a pension plan, but i cant change the past and i have just as much right to fair treatment


The B of E has directly targeted mortgage holders giving them a cheap deal
The B of E actions has pushed houses out of reach of the young
The B of E has robbed savers especially elderly as a result

those 3 actions are not in anyway good for the entire country and the backlash will come when more and more elderly are forced to claim pension credit and associated benefits ,when they cant pay care home bills
When the young cant buy houses all the effects of such ill thought out policies will come home to roost and the financial effects will dwarf any of the last few years

The plain fact is that savers of all ages have been deliberately robbed in favour of !!!!less debtors and the rich and theres no way on earth that creating a bigger and bigger debt mountain is in anyway good for the country so the B if E are acting outside their remit
This has zilch to do with Global anything ..its to do with a bunch of Central Bankers who all get together once a month for an all expenses paid jolly to plot how they can furthur rob the prudent and kick the can down the road
Their egos and paypackets are so huge they have no understanding whatever of the carnage they have created

The old get a better deal because they are more likely to vote. Fair? I dunno - if the young can't be bothered to vote perhaps they get the politicians they deserve?

Keep_pedalling

If this is all the fault of the BoE why are all the major developed word countries in the same boat? I certainly would not chance my arm depositing money in the countries currently paying high interest rates.

http://www.global-rates.com/interest-rates/central-banks/central-banks.aspx

OldMusicGuy

despair wrote: »

FLS put paid to that and directly gave all mortgage holders a huge benefit which was never ever offered during our lifetime.

That's one way of looking at it. But in the past mortgage holders got other benefits - remember MIRAS? I think most young people would bite your arm off for that!

despair wrote: »

I could care less what value my house is its of no relevance since i cannot spend its bricks just the same as i have very good reasons for not wanting to take risks with what cash i had ....yes if i could turn back the clock i wish i had been totally selfish and not accepted caring responsibilities and been able to secure a pension plan, but i cant change the past and i have just as much right to fair treatment

You can spend the bricks in your house - sell it and downsize. People of my generation (and I assume yours) have benefitted hugely from tax free gains on property and as you rightly point out, it is much harder for young people to get on the housing ladder than it was for me 40 years ago. My own view is that it is my generation's responsibility to pass on some of those gains to their kids (instead of whinging about how hard it is for them). And also to use those gains to pay for our care home fees rather than expect the state to pay them. But that's just my view.

despair wrote: »

The plain fact is that savers of all ages have been deliberately robbed in favour of !!!!less debtors and the rich and theres no way on earth that creating a bigger and bigger debt mountain is in anyway good for the country so the B if E are acting outside their remit
This has zilch to do with Global anything ..its to do with a bunch of Central Bankers who all get together once a month for an all expenses paid jolly to plot how they can furthur rob the prudent and kick the can down the road
Their egos and paypackets are so huge they have no understanding whatever of the carnage they have created

I'll have to differ with your view there but I do have some sympathy if you feel it is challenging to have to manage your own investments rather than be offered "good honest" saving products. It is very challenging and can be stressful, a lot of people won't have the inclination or the knowledge. I was told 25 years ago save x and you will get a nice annuity of between y and z. Well, I have saved and invested so I now have 2x but it turns out I can only get an annuity of .5 y if I am lucky, which won't be enough to retire on. So instead here I am trying to learn a lot more about investing and pension planning.