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

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.

John_

cricidmuslibale said:

John_ said:

cricidmuslibale said:

Newbie here! Is it just me that thinks this or does anyone else agree that it really isn't morally right at all for financial institutions, especially a state savings provider like NS&I, to be offering very low interest rates (less than 0.5% AER) on fixed rate accounts? Surely if you're asking people to tie their money up with you for a year or more, often with no withdrawals permitted, there should as a fair return for this be a legal minimum interest rate paid on these savings, say at least 0.5% AER! All opinions welcome, of course.

No, it’s an absolutely ludicrous idea. If you don’t find the interest rate attractive then don’t save with them.

You may disagree with me wholeheartedly, that's absolutely fine, but to call my suggestion ludicrous is a little bit strong surely!

I don’t think so, it’s not a million miles from saying that a doctor should have a legal requirement to make you well.
Where would the money come from to pay you this interest? Who would you be taking it off? 

John_

EdGasketTheSecond said:

John_ 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.

Where should the money come from to pay you your rate of interest? 

By allowing free markets to determine interest rates; NOT the FED / Central Banks who are leading us into the biggest financial mess you've ever seen.

The free market does determine interest rates, that’s exactly the complaint that the OP was making, that they are receiving free-market rates.

EdGasketTheSecond

We don't have free markets at the moment though do we? We haven't had since the 2008 crash and the FED started on it's 'temporary' program of QE, which far from being temporary is now never going to be reversed and is spiralling rapidly out of control, as is UK spending.

VXman

EdGasketTheSecond said:

Thrift and saving should be rewarded. Instead borrowing to buy what you can't afford and haven't yet worked for is being rewarded. This includes the government who want inflation to help resolve their debt problem. Then you have the World Economic Forum that doesn't want anyone to own anything (except them of course) by 2030.

I agree with you except the rate should be a minimum of the inflation rate not simply 0.5%. In the real world it isn't going to happen so buy gold and hope for the best. Good luck.

The problem with thrift and saving is you don't spend. The model.for human existence is one of spend and growth. If everybody was thrifty and saved there would be no jobs. 

I'm not agreeing with this model but it's the way the world works. There would have to be a wholesale.change in society for anything different. And if there isn't the world.will.eventually end in destruction anyway due to.lack.of resources, pollution etc

John_

EdGasketTheSecond said:

We don't have free markets at the moment though do we? We haven't had since the 2008 crash and the FED started on it's 'temporary' program of QE, which far from being temporary is now never going to be reversed and is spiralling rapidly out of control, as is UK spending.

It’s hard to know where to start with this.

Yes, we have free markets in which interest rates banks give to savers or charge to borrowers. I’ve no idea what is giving you the idea otherwise, but the banks that you are depositing with are not borrowing from the BOE in general.

EdGasketTheSecond

Look you don't understand do you? The FED and central banks are forcing low interest rates and doing QE; it is NOT the free market behaving as it should.

Prism

EdGasketTheSecond said:

Look you don't understand do you? The FED and central banks are forcing low interest rates and doing QE; it is NOT the free market behaving as it should.

Who says that is not how a free market should work. The central banks buy bonds in todays world. It seems to be working in general as a way to prevent more severe downturns.

You seem overly concerned about the FED. This is a thread about UK interest rates which the FED have no control over.

steampowered

cricidmuslibale said:

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!

You cannot avoid taking risk to capital I'm afraid. 

If you keep money in savings account, you will face risk to capital through inflation. If inflation exceeds interest rates by 2% per year - which is about right at the moment - over a 10 year period, your capital will lose 22% of its value. 

On the other hand, the chance of making a loss on a balanced portfolio of stock market investments over a 10 year period is very low.

If you expect to be saving over a long time period, investing is actually lower risk than a savings account.