Pension chat

Swipe

My prediction is one more BOE 25bps hike then a pause for a few months and then some cuts. I suspect it will then hover around the 3% region for a long time. Long gone are the low rates of the last decade.

Albermarle

Swipe said:

My prediction is one more BOE 25bps hike then a pause for a few months and then some cuts. I suspect it will then hover around the 3% region for a long time. Long gone are the low rates of the last decade.

Sounds like a very feasible scenario. The long term outlook for lower rates is why you are not seeing better rates for longer term fixes ( as you usually do )

RG2015

Albermarle said:

Swipe said:

My prediction is one more BOE 25bps hike then a pause for a few months and then some cuts. I suspect it will then hover around the 3% region for a long time. Long gone are the low rates of the last decade.

Sounds like a very feasible scenario. The long term outlook for lower rates is why you are not seeing better rates for longer term fixes ( as you usually do )

Longer term rates are determined by the banks, both commercial and retail. At the moment they are hedging their bets or rather sitting on the fence.

After the debacle of Truss and Kwartang, it sounds like the banks have no more idea of the longer term outlook than us here. They will react to the financial climate as and when they see the signs.

We have already had unprecedented times. Who knows what will follow that.

For the avoidance of doubt, the one thing I do not expect is a doomsday meltdown scenario.

LHW99

Albermarle said:

Swipe said:

My prediction is one more BOE 25bps hike then a pause for a few months and then some cuts. I suspect it will then hover around the 3% region for a long time. Long gone are the low rates of the last decade.

Sounds like a very feasible scenario. The long term outlook for lower rates is why you are not seeing better rates for longer term fixes ( as you usually do )

Looking on Secure Trust recently, for an ISA transfer, and 2 and 3 year rates were the same at 4.35%, and 5 year rates were lower at 4%.

Looks from that as if the expectation will be for a pause / very slow reduction over the next few years but settling below 5%, which I believe is around the long term historic average.

housebuyer143

RG2015 said:

sevenhills said:

Nebulous2 said:

Public sector may be asking for inflation rate pay rises, but they have been settling well below that. Private sector payrises have consistently been higher than public sector ones. 

A lot of companies are making record profits, luxury goods are selling at record levels. High inflation should cause demand destruction and there's some evidence that is happening. One of the reasons supermarkets dropped the price of milk recently was that people were stopping buying it, and value-added milk products, such as yoghurt and cheese.

Wholesale prices of food have dropped recently, but retail ones haven't, although supermarkets are now on the defensive, having to defend why food prices inflation is dropping in the EU and not here. 

We're still shaking out disruption from the pandemic. A lot of people had an enforced curb on expenditure, while continuing to earn, and it appears a lot of that saved money is still around. 

One of the metrics I'm watching,  informally, is the price of campsites. Millions of people caravan / motorhome.  The caravan club appears to have made no effort to reduce costs and has just kept raising prices. A caravan site that was £20 a night off-peak,  pre-pandemic, is now £35. Yet people have kept paying it. That is discretionary spending, and brings a lot of associated additional expenses, such as fuel to get there and additional food costs. Until we see people resisting these non-essential price rises, in addition to stopping buying cheese, then inflation will continue. 

Public sector pay is increasing by 5% and private sector pay by 7%
With CPI at 10% and RPI at 14% everyone is getting poorer, but pensioners with their inflation matching increase are still spending, many seem to still be spending because jobs are plentiful and optimism is holding.
Inflation must drop to the level of pay rises, very soon. Interest rates could have one more increase, but there will be at least one decrease in interest rates before the next election.

The basic state pension is £10,600 after last month’s inflation matching increase. If this was their only income I suggest that many pensioners would still be struggling.

The increase would likely be more than swallowed up by increases in energy and food costs. Many would still not be spending on more than the essentials.

One pensioner on their own yes, but £21,200 a year for two pensioners living together, free prescriptions, free bus pass, winter fuel allowance, probably rent and mortgage free, that's a lot of money to have a year. It's known that as you get older you spend less. I'm not against pensioners getting an increase as they have no ability to earn more, but the pension is very generous. 

sevenhills

housebuyer143 said:

RG2015 said:

sevenhills said:

Nebulous2 said:

Public sector may be asking for inflation rate pay rises, but they have been settling well below that. Private sector payrises have consistently been higher than public sector ones. 

A lot of companies are making record profits, luxury goods are selling at record levels. High inflation should cause demand destruction and there's some evidence that is happening. One of the reasons supermarkets dropped the price of milk recently was that people were stopping buying it, and value-added milk products, such as yoghurt and cheese.

Wholesale prices of food have dropped recently, but retail ones haven't, although supermarkets are now on the defensive, having to defend why food prices inflation is dropping in the EU and not here. 

We're still shaking out disruption from the pandemic. A lot of people had an enforced curb on expenditure, while continuing to earn, and it appears a lot of that saved money is still around. 

One of the metrics I'm watching,  informally, is the price of campsites. Millions of people caravan / motorhome.  The caravan club appears to have made no effort to reduce costs and has just kept raising prices. A caravan site that was £20 a night off-peak,  pre-pandemic, is now £35. Yet people have kept paying it. That is discretionary spending, and brings a lot of associated additional expenses, such as fuel to get there and additional food costs. Until we see people resisting these non-essential price rises, in addition to stopping buying cheese, then inflation will continue. 

Public sector pay is increasing by 5% and private sector pay by 7%
With CPI at 10% and RPI at 14% everyone is getting poorer, but pensioners with their inflation matching increase are still spending, many seem to still be spending because jobs are plentiful and optimism is holding.
Inflation must drop to the level of pay rises, very soon. Interest rates could have one more increase, but there will be at least one decrease in interest rates before the next election.

The basic state pension is £10,600 after last month’s inflation matching increase. If this was their only income I suggest that many pensioners would still be struggling.

The increase would likely be more than swallowed up by increases in energy and food costs. Many would still not be spending on more than the essentials.

One pensioner on their own yes, but £21,200 a year for two pensioners living together, free prescriptions, free bus pass, winter fuel allowance, probably rent and mortgage free, that's a lot of money to have a year. It's known that as you get older you spend less. I'm not against pensioners getting an increase as they have no ability to earn more, but the pension is very generous. 

One pensioner on their own will also get over £800 for their winter fuel allowance, not sure how much a couple would get, but those in a low income could qualify for around £1,000

All this extra money is feeding inflation, so wages need to be suppressed even more.

Band7

Apologies for going somewhat off-topic but as payments to pensioners have been mentioned, I felt some corrections are necessary.

RG2015 said:

The basic state pension is £10,600 after last month’s inflation matching increase. If this was their only income I suggest that many pensioners would still be struggling.

The increase would likely be more than swallowed up by increases in energy and food costs. Many would still not be spending on more than the essentials.

£10,600 is the maximum of the new state pension. Only a minority of pensioners are on the new state pension, and of that minority, not everyone gets the maximum. The max old basic pension is now £8,122 a year. This is why some 15% of pensioners are living in poverty.

https://www.gov.uk/government/publications/benefit-and-pension-rates-2023-to-2024/benefit-and-pension-rates-2023-to-2024#state-pension

housebuyer143 said

One pensioner on their own yes, but £21,200 a year for two pensioners living together, free prescriptions, free bus pass, winter fuel allowance, probably rent and mortgage free, that's a lot of money to have a year. It's known that as you get older you spend less. I'm not against pensioners getting an increase as they have no ability to earn more, but the pension is very generous. 

I can only assume you are joking. £21,200 for 2 people is hardly very generous, by any measure. Not that every pensioner actually does get the max amount, see above. Being mortgage free also doesn't mean there are no house maintenance costs, and cost of living does vary depending on where you live. Different people have different opinions of how much is required for a comfortable life but I hope you are aiming for more than £21k (inflation adjusted) retirement income for your household.

sevenhills said:

One pensioner on their own will also get over £800 for their winter fuel allowance, not sure how much a couple would get, but those in a low income could qualify for around £1,000

The winter fuel allowance is not over £800.

sevenhills

There is not just one payment that people are getting.
Pensioner households who receive the winter fuel payment will get an extra £300 in 2023, on top of the £300 they have already received in 2022. The second £300 payment for pensioners will be paid this winter. If you receive pension credit, you can get all of the below: Both cost of living payments of £650 and £900.
Pensioners that don't qualify for the full state pension can claim pension credit, which can equate to more than the full state pension.

housebuyer143

Band7 said:

Apologies for going somewhat off-topic but as payments to pensioners have been mentioned, I felt some corrections are necessary.

RG2015 said:

The basic state pension is £10,600 after last month’s inflation matching increase. If this was their only income I suggest that many pensioners would still be struggling.

The increase would likely be more than swallowed up by increases in energy and food costs. Many would still not be spending on more than the essentials.

£10,600 is the maximum of the new state pension. Only a minority of pensioners are on the new state pension, and of that minority, not everyone gets the maximum. The max old basic pension is now £8,122 a year. This is why some 15% of pensioners are living in poverty.

https://www.gov.uk/government/publications/benefit-and-pension-rates-2023-to-2024/benefit-and-pension-rates-2023-to-2024#state-pension

housebuyer143 said

One pensioner on their own yes, but £21,200 a year for two pensioners living together, free prescriptions, free bus pass, winter fuel allowance, probably rent and mortgage free, that's a lot of money to have a year. It's known that as you get older you spend less. I'm not against pensioners getting an increase as they have no ability to earn more, but the pension is very generous. 

I can only assume you are joking. £21,200 for 2 people is hardly very generous, by any measure. Not that every pensioner actually does get the max amount, see above. Being mortgage free also doesn't mean there are no house maintenance costs, and cost of living does vary depending on where you live. Different people have different opinions of how much is required for a comfortable life but I hope you are aiming for more than £21k (inflation adjusted) retirement income for your household.

sevenhills said:

One pensioner on their own will also get over £800 for their winter fuel allowance, not sure how much a couple would get, but those in a low income could qualify for around £1,000

The winter fuel allowance is not over £800.

Actually if I ended up with £21k adjusted for inflation when I retire I would be happy tbh. That's all me and my husband pay to live now a year and we service a £7k a year mortgage, plus have a child and run two cars and we live very comfortably.

If a couple can't live on almost £2k a month tax (if you have no rent or mortgage) free without living in poverty I do suggest that pensioners need to look at their spending. Lots will have private pension as well to top it up. 

Each to their own opinion but I look at my parents who both received the new state pension in full who live in South West and they tell me they can't believe how generous the pension is. The bills are not exactly cheap down there but they are definitely not in poverty. They might not be accumulating savings on that amount but I don't think they should be at this age.

Band7

I would take the argument that the state pension is tremendous value for money because most people would never be able to accrue enough money for an index-linked £203/week for the rest of their life. However, as I said, most pensioners do not currently get the max new SP, and it’s not as simple as saying people can claim pension credit. I get £157 a week and no, I cannot get Pension Credit because I have other income that disqualifies me.

I also still don’t consider £203/week, or £10,600 pa per person  ‘generous’, even if your parents do. According www.minimumincome.org.uk, a single pensioner needs £17k, and a pensioner couple at least £26k for a decent standard of living. To my mind, there is a huge gap between ‘decent’ and ‘generous’, and neither of these figures can be achieved with UK state pension alone.