Combating Inflation

RG2015

I am retired and have some savings that I want to protect from inflation and perhaps earn some modest interest over and above inflation. I am not interested in large profits or significant capital growth. I have no specific plans other than a nest egg for any future financial needs and I am risk averse.

I remember a time when banks offered savings accounts to fill these needs but sadly those days are long gone. NS&I had index linked bonds that are still renewable now for existing holders. I never even knew they existed then. Now the banks have us jumping through hoops with multiple current accounts, regular savers, switching bonuses and 0% credit card stoozing.

I have not mentioned investing as that has not actually changed since 2008 and doesn't suit my risk profile. In any case I am seeking simplicity and I am not sure that simple low risk investments would meet my inflation-plus goal.

I am not asking for advice and this is more of a moan about the current personal finance landscape. I am also acutely aware that I am in a privileged position compared to those fighting poverty and debt.

I suppose that I am looking for any thoughts that others might have. Maybe I should be on the discussion venting boards but I fear that they be less sympathetic there.

AnotherJoe

RG2015 wrote: »

I am retired and have some savings that I want to protect from inflation and perhaps earn some modest interest over and above inflation. I am not interested in large profits or significant capital growth. I have no specific plans other than a nest egg for any future financial needs and I am risk averse.

I remember a time when banks offered savings accounts to fill these needs but sadly those days are long gone. NS&I had index linked bonds that are still renewable now for existing holders. I never even knew they existed then. Now the banks have us jumping through hoops with multiple current accounts, regular savers, switching bonuses and 0% credit card stoozing.

I have not mentioned investing as that has not actually changed since 2008 and doesn't suit my risk profile. In any case I am seeking simplicity and I am not sure that simple low risk investments would meet my inflation-plus goal.

I am not asking for advice and this is more of a moan about the current personal finance landscape. I am also acutely aware that I am in a privileged position compared to those fighting poverty and debt.

I suppose that I am looking for any thoughts that others might have. Maybe I should be on the discussion venting boards but I fear that they be less sympathetic there.

Would you like to have your cake and eat it as well ?
(is that sympathetic enough? )

Alexland

If you don't like the conditions on earth - you should see how tough it is on other planets. At least the temperature matches our biological composition. It's not great being a saver, you know your options, so try and be thankful for things that are going well in life.

DairyQueen

We all need a good vent from time-to-time. As you are aware, the holy grail of risk-free, effortless, inflation-linked returns don't exist, and are unlikely to exist anytime soon. I'm afraid you have the same choices as the rest of us: a) make the effort to chase interest on regular savers and current accounts; b) accept that your savings won't keep pace with inflation; c) take some investment risk.

Given that you are very risk averse but have the luxury of time, may I suggest that you devote a little of your week to option a).

No effort, no gain.

Audaxer

If you have a substantial amount in cash savings, it is definitely worth considering investments, even although you are risk averse. Investments will drop in value from time to time, but should beat inflation over the long-term. So although you are risk averse, your strategy of keeping it all in cash savings is guaranteed to drop in value in the long term, whereas the likes of a low risk globally diversified multi asset fund is more than likely to increase in value in the long term.

OldMusicGuy

Or you refuse to believe in inflation by adapting your lifestyle away from consumerism and accept that if you want risk free savings, about 2.3% is the best you are going to get. I retire in four weeks and we will be downsizing our lifestyle so that "inflation" has minimal impact.

I remember a time when interest rates weren't ridiculously low. Until they go up a lot more, you will have to invest if you want your money to grow consistently above inflation. I also remember when inflation was over 20%. Even I couldn't ignore that level of inflation.

DairyQueen

OldMusicGuy wrote: »

Or you refuse to believe in inflation by adapting your lifestyle away from consumerism

There's a lot of that in our retirement plan too. If I end up savaged by the sequence of returns risk _pale_ it'll be beans on toast for tea (but Beanz Meanz Heinz).

OldMusicGuy wrote: »

I remember a time when interest rates weren't ridiculously low.

Yep, the good, old days when cash savings rates beat inflation. Remember them well.

OldMusicGuy wrote: »

I also remember when inflation was over 20%. Even I couldn't ignore that level of inflation.

20% inflation AND thrice-weekly power cuts. Happy days

kidmugsy

RG2015 wrote: »

I am retired and have some savings that I want to protect from inflation and perhaps earn some modest interest over and above inflation.

I'm sure many of us have that ambition.

RG2015 wrote: »

I have not mentioned investing.

The world had an almighty crash in 2008 because of an accumulation of debt, much of it high risk. Many governments had run frighteningly large deficits and our own, in particular, had effectively cooked the books by using extravagant PFI deals to disguise even more debt. (Thanks, Gordon.) In hopes of avoiding a steep depression (which might have been short) governments and central banks opted for a long shallow depression instead. Hence the difficulty for the citizen in finding the sorts of savings and investment opportunities that he was accustomed to. Be in no doubt: this has been the intended result of policy, not the whim of the gods.

But debt still looks a problem to me; look at (for instance) US municipalities and states, and their often near-bankrupt pension funds. Look at the huge and ever-growing debt of Uncle Sam. Look at the straitened circumstances of many of our own DB pension funds. It's not even clear to me that the long shallow depression has yet guaranteed the absence of a deep depression - it may only have delayed it.

The low interest rate policies have also driven up asset values so that, in the US and some other countries, they look poor value and vulnerable to a crash. I don't know what's for the best: we have some SIPP money invested in gold ETCs. Is that mad? Lord alone knows. If I had a safe way to store them I'd have some gold sovereigns too.

msallen

It seems your only option is to spend all your savings now on non-perishable goods that you can use for the rest of your life in the knowledge that a pound today will have bought you a current pounds worth of Heinz beans when you eat them in 25 years time.

fun4everyone

RG2015 wrote: »

I am retired and have some savings that I want to protect from inflation and perhaps earn some modest interest over and above inflation. I am not interested in large profits or significant capital growth. I have no specific plans other than a nest egg for any future financial needs and I am risk averse.

You are risk averse, which is perfectly normal. What you have to understand is that by not putting in work to get the cash returns through current accounts/regular savers and not taking on any investment risk you are opening yourself up to inflation risk. In reality inflation is not a "risk" it's a fact. Do nothing and the purchasing power of your money will just erode. That is a certainty and a much bigger overall "risk" than wealth preservation investment fluctuation.

DairyQueen wrote: »

We all need a good vent from time-to-time. As you are aware, the holy grail of risk-free, effortless, inflation-linked returns don't exist, and are unlikely to exist anytime soon. I'm afraid you have the same choices as the rest of us: a) make the effort to chase interest on regular savers and current accounts; b) accept that your savings won't keep pace with inflation; c) take some investment risk.

Given that you are very risk averse but have the luxury of time, may I suggest that you devote a little of your week to option a).

No effort, no gain.

This is the best reply to this thread for you OP.

Glen_Clark

kidmugsy wrote: »

using extravagant PFI deals to disguise even more debt. (Thanks, Gordon.) .

I'm no fan of Gordon Brown but its a bit Daily Mail to name him as the only one responsible for PFI.
PFI was actually introduced by John Major's Tory Government in 1992. Brown carried it on but PFI and public debt increased greatly after he left.