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  • FIRST POST
    • MSE Guy
    • By MSE Guy 28th Jul 10, 9:23 AM
    • 1,628Posts
    • 1,255Thanks
    MSE Guy
    MSE News: No 'savings' accounts exist, they're all 'losings'
    • #1
    • 28th Jul 10, 9:23 AM
    MSE News: No 'savings' accounts exist, they're all 'losings' 28th Jul 10 at 9:23 AM
    This is the discussion thread for the following MSE News Story:

    "The only UK savings account that beats the present 5% RPI inflation rate was withdrawn last week, so what next for savers? ..."

Page 1
    • Lokolo 2
    • By Lokolo 2 28th Jul 10, 9:35 AM
    • 942 Posts
    • 735 Thanks
    Lokolo 2
    • #2
    • 28th Jul 10, 9:35 AM
    • #2
    • 28th Jul 10, 9:35 AM
    Yes we all know that rates are below inflation, but saving at below inflation is better than not saving at all isn't it?
    • edinburgher
    • By edinburgher 28th Jul 10, 9:42 AM
    • 11,484 Posts
    • 61,390 Thanks
    edinburgher
    • #3
    • 28th Jul 10, 9:42 AM
    • #3
    • 28th Jul 10, 9:42 AM
    Yes we all know that rates are below inflation, but saving at below inflation is better than not saving at all isn't it?
    Originally posted by aaronmanz
    Absolutely - but it's only a matter of time before some cretin comes along and says 'I shouldn't bother my backside saving and will just claim benefits like everyone else'

    Granted, it's rubbish to see wealth shrinking, but I think we need a little perspective on the negative effects of inflation on cash savings.

    Most people who are saving towards a short-medium term goal (holiday, house deposit etc.) will still be able to reach said goals regardless of inflation, because they're saving £££ of pounds a month and even with this decreasing by a percent or two a year, their capital will continue to grow.

    Aside from these goals, I can't understand the appeal of having huge stashes of cash - would far rather have my money invested somewhere where I stand a chance of making some real money instead of just piling up slowly. Then again, I'm fairly risk-tolerant.

    Those who will be hurt by this will be older savers with most of their money in cash. They have my genuine sympathies because there's not much they'll be able to do...
  • flyingscotno1
    • #4
    • 28th Jul 10, 10:13 AM
    • #4
    • 28th Jul 10, 10:13 AM
    Equally, not everyone suffers inflation at the same rate- the official rate is
    a best fit but we all have a personal inflation rates and if you use more or less of a product. The are looking at average, but someone who say doesn't drive hasn't been as affected as Mr Average 10K miles who has seen pence per litre go up by 20p in the last year.

    Indeed there is higher inflation for some and lower for others.
  • bendix
    • #5
    • 28th Jul 10, 10:24 AM
    • #5
    • 28th Jul 10, 10:24 AM
    Is it just me, or does anyone else think that the MSE management is starting to get very cavalier and irresponsible in the way it promotes these type of stories?

    What possible motivation could there be to issue this, except PR? Can they not understand how some of our more gullible posters might look at it and decide to stop saving completely?

    Unbelievable. Another MSE lowpoint, following the disingenuous article a couple of months ago about NS&I rates of return.
    • Sceptic001
    • By Sceptic001 28th Jul 10, 10:28 AM
    • 1,099 Posts
    • 853 Thanks
    Sceptic001
    • #6
    • 28th Jul 10, 10:28 AM
    • #6
    • 28th Jul 10, 10:28 AM
    And in what respect can it be defined as "news"? There is no new information, just a rehashing of stories that appeared last week after the sudden demise of index-linked savings certificates.
  • bendix
    • #7
    • 28th Jul 10, 10:35 AM
    • #7
    • 28th Jul 10, 10:35 AM
    Meanwhile, the most important personal finance story of the day - the Government's plan to abolish Labour's ridiculous plans around abolishing high rate tax relief on pension contributions and replace them with a £40,000 limit on tax free contributions - has been completely ignored.
    • alanq
    • By alanq 28th Jul 10, 10:40 AM
    • 4,153 Posts
    • 2,730 Thanks
    alanq
    • #8
    • 28th Jul 10, 10:40 AM
    • #8
    • 28th Jul 10, 10:40 AM
    It remains to be seen whether any current savings account will beat inflation. It may turn out that some of the fixed term bonds do beat inflation over their life. There is no point in comparing inflation over the past year with interest rates for the coming years.
    • ScarletBea
    • By ScarletBea 28th Jul 10, 11:06 AM
    • 2,788 Posts
    • 4,163 Thanks
    ScarletBea
    • #9
    • 28th Jul 10, 11:06 AM
    • #9
    • 28th Jul 10, 11:06 AM
    I don't notice any visible inflation for me though...
    Being brave is going after your dreams head on
  • bendix
    I don't notice any visible inflation for me though...
    Originally posted by ScarletBea

    Neither do I, to be honest. If anything, most things I buy have got got cheaper or are at roughly the same level as they were last year.
    • Reaper
    • By Reaper 28th Jul 10, 11:11 AM
    • 6,482 Posts
    • 4,837 Thanks
    Reaper
    Meanwhile, the most important personal finance story of the day - the Government's plan to abolish Labour's ridiculous plans around abolishing high rate tax relief on pension contributions and replace them with a £40,000 limit on tax free contributions - has been completely ignored.
    Originally posted by bendix
    That could be because it has not been decided what to replace it with yet: http://www.bbc.co.uk/news/business-10775689
  • Former MSE Dan

    What possible motivation could there be to issue this, except PR? Can they not understand how some of our more gullible posters might look at it and decide to stop saving completely?
    Originally posted by bendix
    Hi bendix,

    I find this middle section a bit strange - the whole second half of the story is listing the top picks and saying people should actively monitor rates and switch?

    Sorry you don't agree with this article, but then that's the great thing about forums, lots of opinions

    Dan
    • MoneySavingNovice
    • By MoneySavingNovice 28th Jul 10, 11:24 AM
    • 352 Posts
    • 367 Thanks
    MoneySavingNovice
    I did a depressing calculation - the best financial product which I currently has (after inflation) is my Mortgage - which due to the low rate is making me money. My offset savings (held in different institutions) are actually losing me money!

    (I’m in the luck position to be able to pay-off my mortgage tomorrow, as I have more savings than Mortgage)

    But what does about the world when you lose money on your savings and make money on you mortgage?
    • chardir
    • By chardir 28th Jul 10, 11:55 AM
    • 222 Posts
    • 160 Thanks
    chardir
    It seems to me that the comparison between savings rates and inflation is irrelevant. Ok, so your savings are slowly depreciating but what's the alternative? If you spend the money (on anything that's not an asset) then it depreciates instantly (i.e. you can no longer spend it). Or you could invest in stocks/property etc. which is risky and is affected by inflation in exactly the same way.
    • Mickygg
    • By Mickygg 28th Jul 10, 11:57 AM
    • 1,462 Posts
    • 1,222 Thanks
    Mickygg
    I don't notice any visible inflation for me though...
    Originally posted by ScarletBea
    I noticed this in Tesco where many food items are rocketing.

    What isn't taken into account in these headlines is that inflation affects you depending on what you spend. If you spend £20k a year but have £100k in savings then your savings will grow above inflation due to the amounts involved. 3% on £100k gives you £3k, whereas 5% on £20k spend gives you £1k, so savings have given you £2k above inflation. It's all relative to what you spend, earn and save.

    I agree with the above that these headlines are pretty useless. What they should say is interest rates on accounts are low when compared to current rate inflation and leave it at that.
    • chardir
    • By chardir 28th Jul 10, 12:39 PM
    • 222 Posts
    • 160 Thanks
    chardir
    What isn't taken into account in these headlines is that inflation affects you depending on what you spend. If you spend £20k a year but have £100k in savings then your savings will grow above inflation due to the amounts involved. 3% on £100k gives you £3k, whereas 5% on £20k spend gives you £1k, so savings have given you £2k above inflation. It's all relative to what you spend, earn and save.
    Originally posted by Mickygg
    It doesn't work like that. If you have 100k in savings and inflation is 5% then in a year's time you'll need 105k to buy exactly the same goods. If your savings have only increased to 103k then you're 2k worse off. How much you spend isn't a factor.
  • bendix
    Hi bendix,

    I find this middle section a bit strange - the whole second half of the story is listing the top picks and saying people should actively monitor rates and switch?

    Sorry you don't agree with this article, but then that's the great thing about forums, lots of opinions

    Dan
    Originally posted by MSE Dan
    Then you obviously don't read the posts on this forum very well Dan.

    Just this morning there was a thread started by someone who said that as interest rates are so low, he's not bothering to save anymore. He /she wishes they had not saved before and instead wished they had p****d all their savings up a wall.

    Such threads are not uncommon.

    Your article plays into this populist nonsense completely. There are many unsophisticated investors and savers here who will see thrust of what you saying and decide that it's not worth being financially prudent - they might as well spend everything they save.

    And that - frankly - is irresponsible on a site like this.
    Last edited by bendix; 28-07-2010 at 1:26 PM.
    • lisyloo
    • By lisyloo 28th Jul 10, 12:48 PM
    • 24,058 Posts
    • 12,467 Thanks
    lisyloo
    There are many unsophisticated investors and savers here who will see thrust of what you saying and decide that it's not worth being financially prudent - they might as well spend everything they save.
    I don't agree with not being prudent.
    But I can see a case for bringing forward purchases you CAN afford if prices in real terms are cheaper right now.

    Personally I don't think there is a god given right to have above inflation risk free savings.
    But people can still invest in other things even if unsophisticated.
    • Simon11
    • By Simon11 28th Jul 10, 12:54 PM
    • 595 Posts
    • 458 Thanks
    Simon11
    I agree, it’s the same when they talk about a price war between the Petrol stations again and again. There’s always competition between petrol stations. Once one petrol company does it, the others follow otherwise they lose business. They’re also looking to get a mention in the press to support their brand which MSE happily advertised.....

    The quality of these recent news articles are similar standard to Daily Express

    With regards to the news article, You are scaring potential savers, by saying its pointless as the inflation rate is higher. However this won't be the case in a few months (Hopefully), yet no mention of this.

    Think Long term, not short term
    "No likey no need to hit thanks button!"
    However its always nice to be thanked if you feel mine and other people's posts here offer great advice So hit the button if you likey
    • Mickygg
    • By Mickygg 28th Jul 10, 2:16 PM
    • 1,462 Posts
    • 1,222 Thanks
    Mickygg
    It doesn't work like that. If you have 100k in savings and inflation is 5% then in a year's time you'll need 105k to buy exactly the same goods. If your savings have only increased to 103k then you're 2k worse off. How much you spend isn't a factor.
    Originally posted by chardir
    The actual goods you buy and the amount of money you spend is actually a factor. The 5% RPI is an average of many items, whereas you are affected differently by what you buy and how much you spend.

    For example house inflation is different to RPI. If I am saving for a new house, and spending all my wage money on food, this will be different to the value of my money when I compare it to spending my savings all on booze and my earnings on a pet tiger.

    The 5% inflation headline rate is all relative to what you spend your money on and what you save for. It affects all people differently and isn't as clear cut as £100k savings with RPI at 5% and interest rate at 3% means you'll be worse off. I admit this will though of course be the case for many people.
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