Should there be a legal minimum interest rate for fixed rate accounts, for NS&I at least?

cricidmuslibale

HappyBirthday said:

NS&I has not offered fixed rate accounts for some time. Only rollovers of existings bonds and certificates get the new lower rates so the topic is moot. New customers may not apply. Existing customers may not add.

Also the Guaranteed Growth Bond issue 55 5-year pays 0.55% AER from 24 Nov 2020.

So, whilst I get the gist of the original post, it does not paint an accurate picture.

Yes most of this is true but let's be fair if you have to fix for 5 years to get 0.55% with no option either to withdraw even at a penalty or close the account early then, realistically, very few people are going to be in a position to be able to save money in this bond let alone to want to do so!  0.55% for 5 years is going to mean that for the vast majority of the bond's lifetime the value of any amount of capital saved in it will be significantly eroded by inflation which by any measure is almost certain to be higher than 0.55% for most of the next 5 years, probably quite a bit higher at times too. So this bond is in effect a losing account not a saving one at all!

naedanger

Another vote for no here. (It is just supply and demand, too many people want to save and not enough want to take risk or spend their money now.)

I am not sure if it has been raised on this thread, but for those who don't think there should be a minimum, does that extend to allowing interest rates to go negative? (My own view is yes, but in practice any negative rate will need to be less than the cost of storing money securely so probably only negative by a fraction of a percentage. In practice I doubt it will go negative for typical small to medium savers.)

steampowered

Saving is a mugs game, over the long term.

People should really be investing. The stock markets have returned something like 7% per year on average pretty consistently over the past 10 years and the past 70 years.

redpete

steampowered said:

Saving is a mugs game, over the long term.

Not for the proportion of your money that you want to be available at a fixed or unpredictable point in the future that you want to be protected against volatility.

cricidmuslibale

redpete said:

steampowered said:

Saving is a mugs game, over the long term.

Not for the proportion of your money that you want to be available at a fixed or unpredictable point in the future that you want to be protected against volatility.

Totally agree with this! Some of us savers simply can't afford for various reasons to risk losing very much or even any of their capital through investing rather than saving!

grumiofoundation

redpete said:

steampowered said:

Saving is a mugs game, over the long term.

Not for the proportion of your money that you want to be available at a fixed or unpredictable point in the future that you want to be protected against volatility.

Agreed but if you want protection against volatility you sacrifice long-term returns.

cricidmuslibale said:

redpete said:

steampowered said:

Saving is a mugs game, over the long term.

Not for the proportion of your money that you want to be available at a fixed or unpredictable point in the future that you want to be protected against volatility.

Totally agree with this! Some of us savers simply can't afford for various reasons to risk losing very much or even any of their capital through investing rather than saving!

If the priority is to avoid losing capital over the short term (e.g. money for a house deposit going to be spent in 6 months) is the interest rate that important?

Incidentally you do realise your proposed legally mandated 0.5% is lower than the savings rates currently available? 

Eco_Miser

cricidmuslibale said:

Thrugelmir said:

EdGasketTheSecond said:

Thrift and saving should be rewarded.

Reward should come from taking a risk. 

So hard work and saving shouldn't count for anything then? What you manage to save up should be lost to inflation unless you gamble with it? Doesn't sound right or desirable to me but its where we are.

I couldn't agree more! Some savers, for moral and/or religious reasons, will never feel at all comfortable with any form of gambling on their savings! For some, any form of gambling is either forbidden entirely or at least heavily discouraged!

A large number of people have religious or moral objections to accepting interest at any rate, even 0.01%, but none on making money by investing in businesses.

Not me, but I still don't think getting good interest is either a God-given or Government-given right.

Would you support a law limiting the maximum interest payable on fixed term accounts?

Thrugelmir

wmb194 said:

Thrugelmir said:

EdGasketTheSecond said:

Thrugelmir said:

EdGasketTheSecond said:

Thrift and saving should be rewarded.

Reward should come from taking a risk. 

So hard work and saving shouldn't count for anything then? What you manage to save up should be lost to inflation unless you gamble with it? Doesn't sound right or desirable to me but its where we are.

Savers are indirectly lending money to another party with zero risk. Someone has to pay the cost of administration and / or default.  

Re lending to banks and building societies, it might be low risk but you are lending your money to a profit seeking business so why shouldn't you take a cut of the action? 

That's called being a shareholder.  For savers there's no risk. As deposits are covered by Government guarantees. The levies for which are built into the rates charged to those who borrow from the banks. 

At the moment banks are forbidden from paying dividends to shareholders. In order that banks preserve capital. Insuring against the worst possible outcome. As a consequence bank share prices fell. Many peoples pension savings hold bank shares. 

Savers are effectively wrapped in cotton wool. Though they might not realise or appreciate the fact. 

cricidmuslibale

steampowered said:

Saving is a mugs game, over the long term.

Not for the proportion of your money that you want to be available at a fixed or unpredictable point in the future that you want to be protected against volatility.

Totally agree with this! Some of us savers simply can't afford for various reasons to risk losing very much or even any of their capital through investing rather than saving!

If the priority is to avoid losing capital over the short term (e.g. money for a house deposit going to be spent in 6 months) is the interest rate that important?

Incidentally you do realise your proposed legally mandated 0.5% is lower than the savings rates currently available? 

Yes the interest rate is important when you usually rely on monthly interest to supplement earnings (now, as a freelancer, much reduced due to COVID) and now you have the double whammy of spending capital due to insufficient interest and much lower earnings.

   Yes I did realise that about the 0.5% but if the Bank of England cuts the base rate from 0.1% to negative then it is very possible that fixed savings rates will fall further. (Most of NS&I's fixed rates from 24th Nov onwards and those of the big banks now are below 0.5%.)

cricidmuslibale

I couldn't agree more! Some savers, for moral and/or religious reasons, will never feel at all comfortable with any form of gambling on their savings! For some, any form of gambling is either forbidden entirely or at least heavily discouraged!

A large number of people have religious or moral objections to accepting interest at any rate, even 0.01%, but none on making money by investing in businesses.

Not me, but I still don't think getting good interest is either a God-given or Government-given right.

Would you support a law limiting the maximum interest payable on fixed term accounts?

There are some people who would regard risking one's capital on the stock market in order to try to get a better return as a form of gambling, I am one of them, and I am not comfortable with doing this in the same way that I'm not comfortable with betting for example. I wasn't referring to those who only save in Sharia-compliant accounts btw.
I'm not seeking good interest merely what would be a reasonable amount as a bare minimum.

No I think the maximum interest payable should be up to the savings provider even in the case of NS&I. No savings provider is ever likely to offer returns that even come close to matching possible investment returns and I'm sure the vast majority of savers both realise and fully accept that in return for knowing that their capital should at least be safe (apart from sometimes losing its real value due to inflation) in savings.