Savers told to stop moaning and start spending
#1
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Savers told to stop moaning and start spending
Yep Mr Bean thinks that is if you are a saver you can afford to suffer the low interest rates.
I guess it's for the greater good right?
http://www.telegraph.co.uk/finance/p...-spending.html
I guess it's for the greater good right?
http://www.telegraph.co.uk/finance/p...-spending.html
Savers told to stop moaning and start spending
Savers should stop complaining about poor returns and start spending to help the economy, a senior Bank of England official warned today.
By Robert Winnett and Myra Butterworth
Published: 10:03PM BST 27 Sep 2010
612 Comments
Mr Bean said low returns on savings were part of the Bank of England's strategy Photo: PA
Older households could afford to suffer because they had benefited from previous property price rises, Charles Bean, the deputy governor, suggested.
They should "not expect" to live off interest, he added, admitting that low returns were part of a strategy.
His remarks are likely to infuriate savers, who are among the biggest victims of the recession. About five million retired people are thought to rely on the interest earned by their nest-eggs. But almost all savings accounts now pay less than inflation.
The typical savings rate has fallen from more than 2.8 per cent before the financial crisis to 0.23 per cent last month.
Mr Bean said he "fully sympathised". But he continued: "Savers shouldn't necessarily expect to be able to live just off their income in times when interest rates are low. It may make sense for them to eat into their capital a bit."
He added: "Very often older households have actually benefited from the fact that they've seen capital gains on their houses."
In an interview with Channel Four News on Monday night, he said that savers "might be suffering" from the low Bank Rate. But they had done well from higher rates in the past and would do so again.
Mr Bean said that encouraging Britons to spend was one reason why the Bank had cut interest rates. They have been held at 0.5 per cent for 18 months, hitting rates offered on savings accounts.
The strategy had led to Mervyn King, the governor, receiving many letters of complaint.
But it was designed to return the economy to a reasonable level of activity as quickly as possible, he said. "The faster we can achieve that, the sooner interest rates will get back to more normal levels."
Had the Bank not acted, "unemployment would have been higher, wage growth would have been lower," Mr Bean added.
The comments angered groups representing the elderly and those putting money aside. The Daily Telegraph has campaigned for protection for savers.
Ros Altmann, director-general of Saga, said: "Savers are being taken advantage of. They did the right thing and have been let down at the other end of the deal.
"I don't think this is what most people would consider fair."
Dot Gibson, of the National Pensioners Convention, said: "For years we've been told to put money aside for our retirement only to find that interest rates have sunk and now we have to use our savings just to pay the bills."
Jason Riddle, of Save Our Savers, said: "The Bank was aware that there was a lack of saving before the financial crisis, but those who were prudently saving while others spent, are being heavily punished."
Official figures show that savers have lost about £18 billion a year in interest as a result of the Bank's response to the worst recession in a generation.
The amount Britons save has fallen by more than a fifth since the start of the year, a survey showed today.
The average person is saving £102 a month, down from £130 in February, according to Santander.
Savers should stop complaining about poor returns and start spending to help the economy, a senior Bank of England official warned today.
By Robert Winnett and Myra Butterworth
Published: 10:03PM BST 27 Sep 2010
612 Comments
Mr Bean said low returns on savings were part of the Bank of England's strategy Photo: PA
Older households could afford to suffer because they had benefited from previous property price rises, Charles Bean, the deputy governor, suggested.
They should "not expect" to live off interest, he added, admitting that low returns were part of a strategy.
His remarks are likely to infuriate savers, who are among the biggest victims of the recession. About five million retired people are thought to rely on the interest earned by their nest-eggs. But almost all savings accounts now pay less than inflation.
The typical savings rate has fallen from more than 2.8 per cent before the financial crisis to 0.23 per cent last month.
Mr Bean said he "fully sympathised". But he continued: "Savers shouldn't necessarily expect to be able to live just off their income in times when interest rates are low. It may make sense for them to eat into their capital a bit."
He added: "Very often older households have actually benefited from the fact that they've seen capital gains on their houses."
In an interview with Channel Four News on Monday night, he said that savers "might be suffering" from the low Bank Rate. But they had done well from higher rates in the past and would do so again.
Mr Bean said that encouraging Britons to spend was one reason why the Bank had cut interest rates. They have been held at 0.5 per cent for 18 months, hitting rates offered on savings accounts.
The strategy had led to Mervyn King, the governor, receiving many letters of complaint.
But it was designed to return the economy to a reasonable level of activity as quickly as possible, he said. "The faster we can achieve that, the sooner interest rates will get back to more normal levels."
Had the Bank not acted, "unemployment would have been higher, wage growth would have been lower," Mr Bean added.
The comments angered groups representing the elderly and those putting money aside. The Daily Telegraph has campaigned for protection for savers.
Ros Altmann, director-general of Saga, said: "Savers are being taken advantage of. They did the right thing and have been let down at the other end of the deal.
"I don't think this is what most people would consider fair."
Dot Gibson, of the National Pensioners Convention, said: "For years we've been told to put money aside for our retirement only to find that interest rates have sunk and now we have to use our savings just to pay the bills."
Jason Riddle, of Save Our Savers, said: "The Bank was aware that there was a lack of saving before the financial crisis, but those who were prudently saving while others spent, are being heavily punished."
Official figures show that savers have lost about £18 billion a year in interest as a result of the Bank's response to the worst recession in a generation.
The amount Britons save has fallen by more than a fifth since the start of the year, a survey showed today.
The average person is saving £102 a month, down from £130 in February, according to Santander.
#3
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I'm pretty pissed off about it. I mean I have significant cash in the bank which is now getting devalued by inflation.
Silly me for being prudent.
I actually just put a lot of it into a 1 year saving bond paying a paltry ~3% gross. That is atrocious and still means I get eroded by inflation a bit.
Incidentally I did this 'cos I am going to (at least) wait a year before buying a house now. I want to see how things pan out and save a bit more.
Silly me for being prudent.
I actually just put a lot of it into a 1 year saving bond paying a paltry ~3% gross. That is atrocious and still means I get eroded by inflation a bit.
Incidentally I did this 'cos I am going to (at least) wait a year before buying a house now. I want to see how things pan out and save a bit more.
#4
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I think they are only saying that because of the double dip and deflation fears. If your not spending and actually saving, what difference does it make if your money is worth less than it was?
I appreciate that those living on savings in retirement are going to find it hard but those that work and save, it shouldn't make that much difference to you if your saving rather than spending. Granted your spending "a bit" more and saving "a bit" less but thats only as long as inflation rises. If people don't spend and demand reduces you'll get deflation. Your not earning on your savings but then your money will go further as everything gets cheaper.
Hopefully those that are saving aren't talked into spending - its that that caused this in the first place. We need to be weened off buy now pay later and onto save now, MAYBE buy later.
I appreciate that those living on savings in retirement are going to find it hard but those that work and save, it shouldn't make that much difference to you if your saving rather than spending. Granted your spending "a bit" more and saving "a bit" less but thats only as long as inflation rises. If people don't spend and demand reduces you'll get deflation. Your not earning on your savings but then your money will go further as everything gets cheaper.
Hopefully those that are saving aren't talked into spending - its that that caused this in the first place. We need to be weened off buy now pay later and onto save now, MAYBE buy later.
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Cash savings are an asset like many others. Why should cash savers be (de facto) taxed to prop up homeowners?
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Interest rates are low to encourage spending (low mortgage should = greater spending power) so we can spend our way out of the mire we are in, trouble is that most people have no savings & Banks are still not lending at low enough rates to encourage it ... won't get better any time soon
TX.
PS
If you have savings then Good For You albeit that they're worth less & less each year so why not spend & go out with a bang!
TX.
PS
If you have savings then Good For You albeit that they're worth less & less each year so why not spend & go out with a bang!
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#8
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Directly for most is too risky. A balanced selection of ETFs and Unit Trusts would be my first choice for investment - A pension IF your prepared to put the effort in.
Last edited by EddScott; 28 September 2010 at 12:57 PM.
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#10
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You may as well start saying to homeowners what difference does it make if your house is worth less today than say, one year ago....it's still a roof over your head right?
Cash savings are an asset like many others. Why should cash savers be (de facto) taxed to prop up homeowners?
Cash savings are an asset like many others. Why should cash savers be (de facto) taxed to prop up homeowners?
It only makes a difference if you are buying or selling. The bit in between is really only for the Daily Fail readers to worry about on a Sunday morning.
The second part of your post, you've lost me.
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Why save when you can spend all your money now?
Because when I'm a pensioner, I don't want to die of starvation or Hypothermia due to not having enough money to eat or pay my heating bills. And because I work in the private sector, I won't have a final salary pension to fall back on.
What a pr!ck.
Because when I'm a pensioner, I don't want to die of starvation or Hypothermia due to not having enough money to eat or pay my heating bills. And because I work in the private sector, I won't have a final salary pension to fall back on.
What a pr!ck.
#12
I would have thought he would have changed his name by deed poll before sticking his neck out!
How can he condemn those who have saved a nest egg to live off to spend all that away for his convenience? How are those people to continue when their savings are spent up and they are unable to work.
How about his banking mates spending their ill gotten gains to support the country in the mess that they helped to create while they were raking it in.
Les
How can he condemn those who have saved a nest egg to live off to spend all that away for his convenience? How are those people to continue when their savings are spent up and they are unable to work.
How about his banking mates spending their ill gotten gains to support the country in the mess that they helped to create while they were raking it in.
Les
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If inflation continues to rise, interest rates will have to go up.
OR
Inflation collapses and we enter a period of deflation - you won't get the high rates but your money will go further.
Like I said, the fact that the BoE are now telling savers to spend indicates to me that they have a genuine fear of deflation.
I would say, however that the most likely outcome will be prolonged stagnation - a "lost decade" of sorts.
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Why save when you can spend all your money now?
Because when I'm a pensioner, I don't want to die of starvation or Hypothermia due to not having enough money to eat or pay my heating bills. And because I work in the private sector, I won't have a final salary pension to fall back on.
Because when I'm a pensioner, I don't want to die of starvation or Hypothermia due to not having enough money to eat or pay my heating bills. And because I work in the private sector, I won't have a final salary pension to fall back on.
TX.
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I agree with Terminator - I'm taking my chances now and enjoying what I earn! I'm certainly not putting money in to a pension, for it to be worth crutch when I EVENTUALLY retire! And to be honest, with the way I live, I'll be lucky to see past 60 anyways!
#21
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The government has reduced rates to keep the economy going - it isn't working if they feel the need to tell savers to spend thats for sure. The banks could still offer 5 or 6% on savings but they don't - and don't think for a minute they wouldn't still make a shed full of money by offering (what is our money) back to us and a crap rate and loaning our money back to us at another crap rate.
Its the banks that choose the rates to offer savers.
Another media driven missconception. A pension is worth as much effort as you put into it. A rule of thumb (although quite high IMO) is to take your age - half it - and use that as % of your income that you should put aside each year to fund retirement. Sounds high? Well if you commit to the pension and take an interest only mortgage you get a comfortable income in retirement and a decent cash sum to chop out the mortgage.
And if you do end up living into your 60s and 70s with no money saved you'll be at the mercy of what will constitute state benefits at that time - and if you think the elderly get a raw deal now imagine what it will be like in 30 years!
Last edited by EddScott; 28 September 2010 at 02:45 PM.
#23
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Inflation HELPS borrowers, and HURTS savers.
It's a wealth transfer.
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And if you do end up living into your 60s and 70s with no money saved you'll be at the mercy of what will constitute state benefits at that time - and if you think the elderly get a raw deal now imagine what it will be like in 30 years![/QUOTE]
in 30 years time, most people will be working in to there 70's anyway!
in 30 years time, most people will be working in to there 70's anyway!
#25
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Inflation reduces spending power for those who live off savings. However, to stave off inflation, interest rates are increased. Without one you can't have the other.
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Er you do realise that low interest rates promotes borrowing and thus inflation!
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The gov want you to put your money in pension funds a.k.a the stock market ponzi scheme.
#28
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LOL, no it doesn't. BoE base rate is kept low to encourage us to spend. Its kept low so (for most of us) our mortgage is cheaper thus we are likely to spend more. Its got nothing to do with borrowing.
If we spend and spend, demand goes up, prices increase - this is inflation. BoE base rate is then increased to reduce inflation to reduce our spending.
In an ar5se about face way, it would help savers to spend. If we all spend, inflation goes up so interest rates would go up - the knock on effect would be higher rates of savings.
The problem is no one really wants to spend - even those that like spending - hence this act of desperation from the BoE.
Last edited by EddScott; 28 September 2010 at 04:14 PM.
#29
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Seems some of the people in this thread take a lot for granted. It is an invisible tax as Tony says because it allows the government to spend more than they take in taxes (at least the system which creates inflation does). So where does the difference come from...? It's your reduction in purchasing power for their ability to spend.
#30
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Seems some of the people in this thread take a lot for granted. It is an invisible tax as Tony says because it allows the government to spend more than they take in taxes (at least the system which creates inflation does). So where does the difference come from...? It's your reduction in purchasing power for their ability to spend.
EDIT - I would add that its in the governments interest to have high inflation because it means its reducing the cost of its debt. In this respect it is unfair to savers, however it still isn't a tax.
Last edited by EddScott; 29 September 2010 at 10:20 AM.