long term savings interest rates average?

Reestit_Mutton

Hi,

I need to find a reliable figure for the long term average annual return from savings (after tax) - I'm sure that the investment gurus on this board will have this figure to hand as it's often used for risk/return analyses for different types of investments.

Any references?

cheers
Reestit Mutton

meester

depends on your personal tax rate. Tax was up to 97.5% in the 70s on unearned income.

What you want is the average long-term savings rate.

Long-term real cost/standard-of-living-adjusted rates are pretty close to zero.

This looks like the thing:

Global Investment Returns Year Book
http://business.scotsman.com/personal-finance?articleid=3786651

An investment in UK shares of £100 at the start of 1900 would, with dividends re-invested, have grown to more than £2.2 million by the end of 2007, a return of 9.7 per cent a year. Long bonds and treasury bills gave lower annualised returns of 5.3 per cent and 5 per cent respectively

Here's CPI since 1750:

http://www.statistics.gov.uk/articles/economic_trends/ET604CPI1750.pdf

Inflation only began in 1914-1915

Taking an equal horizon (though the first real rising trend started when the government abandoned the Gold Standard in WW1, noting that the CPI in 1795 was 9.4)
The CPI in 1900 was 9.2
As of 2003 it was 715.2

715.2 /9.2 = 77.74

77.74 ^ 1/103 = 4.3% per year inflation

Given the 5.2% return from bonds, which one assumes to be gross, it's safe to say, therefore, that the best number to take for the long-term real net (post-tax) return from savings is indeed approximately ZERO.

dougz_2

meester wrote: »

long-term real net (post-tax) return from savings is indeed approximately ZERO.

but what about government index-linked savings certs? assuming they are roughly comparable to other savings in the long term, they would suggest you get something like roughly 1-2%? which is not a lot, but more than zero.

meester

dougz wrote: »

but what about government index-linked savings certs? assuming they are roughly comparable to other savings in the long term, they would suggest you get something like roughly 1-2%? which is not a lot, but more than zero.

According to the article in The Scotsman, gilt yield was 5% YoY over the last century while inflation was 4.3%.

That is less than 1% return YoY, and after tax return is clearly zero or below.

Corporate bonds would be slightly better yielding because you are taking on risk, junk bonds better still, because there is more risk.