Mugging savers

 

           Savers are important people in a successful economy. We should want more people to make provision for their own future. We should welcome them providing finance for others to use  intelligently to add to our national income and wealth.

            The present government says it wants people to be more self reliant in the future. It welcomes the idea of people saving more for their retirement, putting aside more for bad fortune or ill health, buying their own homes and investing in their own business. A more self reliant enterprising society based on more personal ownership should be richer and happier, with more tax revenue to help those in need who cannot fend for themselves.

           The problem is the inherited deficit and the planned way to reduce it are getting in the way of really helping actual and potential savers. The wish to raise more in tax revenue than people are prepared to pay, has already led to new raids on people’s pension funds. Whilst they have been mainly at the higher end, many more savers fear there could be further tax changes that will adversely affect them

            Pension funds too have been undermined by the ultra low interest rates on government debts, thanks to Quantitative Easing. This has left funds with large deficits, and forced many companies to close their funds completely. Many people now in the private sector have no access to an employer fund anymore as a result.

            The same ultra low interest rates hit the living standards of all those seeking to rely on or augment their income from interest on savings. People contemplating a cash ISA or a safe investment of a cash lump sum they have acquired face very poor returns.

           Savers have then been hit by a higher rate of inflation than the Bank planned or promised. When inflation gets as high as 5% it eats away the money of the prudent at far too fast a rate.

           The Chancellor would be well advised to make things a bit fairer for savers. Saving and making provision for your future is a good idea. Too many tax changes, too little return, too much inflation put people off saving or make it difficult.

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103 Comments

  1. Leslie Singleton
    Posted March 19, 2013 at 6:36 am | Permalink

    I have written a number of times about the illogical and counterproductive burdens placed on employers, with not a whisper in reply. The burdens are numerous and all over the place (for which employers are, scarcely believably, taxed instead of rewarded according to the number they employ) but, concentrating for now on Pensions, given that your subject today is Savings, can you or anyone else explain why employers should have to have anything whatsoever to do with their employees’ pensions, let alone be forced by the Government to contribute–and be vilified in the process in what I assume are Government adverts (From memory, “…and the best bit is your boss has to contribute” ). Maybe I misunderstand but that advert seems to me to be a disgrace especially as it is from the Government. Are we trying to persuade people to employ others or not?

    • lifelogic
      Posted March 19, 2013 at 12:25 pm | Permalink

      Indeed it is yet another outrage from this silly socialist government. The government shooting itself (and growth) in the foot yet again.

    • Ben Kelly
      Posted March 19, 2013 at 2:51 pm | Permalink

      @ Leslie Singleton

      I regret that I can’t share your concern for companies. These companies operate within the infrastructure provided by tax and should pay a greater share as they derive so much benefit from: subsidised cheap labour; education; subsidised immigration; road and rail infrastructure; law and order; cheap interest rates. a little tax and red tape seems small price to pay.

      If it really is worth bringing in new employees but the 13% additional contribution is stopping them I would suggest that the employee is not really needed and probably wouldn’t be employed in the first place unless they were replacing existing employees because new employees did not attract NI but existing staff did.

      I understand that corporations and small business generate the wealth but it is the employees that actually allow this to happen so the tax burden should be shifted from the employee onto the corporation. If business is truly sitting on piles of cash, unprepared to invest it would make sense to take it from them punitively or else encourage them to spend it productively.

      Business has for too long been the protected unicorn and needs to be hunted.

      • Leslie Singleton
        Posted March 19, 2013 at 8:00 pm | Permalink

        Ben Kelly–I was talking about employers (not companies) and their NI (not tax). It is the puzzling idea that taxing employers for each extra employee is a good idea for the country that I was inveighing against. It is by no means just employers that benefit from living in this country–others including employees do as well and very much so.

      • JimF
        Posted March 19, 2013 at 9:54 pm | Permalink

        Bilge.

        UK small companies are working in an environment with higher labour costs, property costs and taxes than the majority of competitors. Our only advantage is proximity to the UK market, and our exports in comparison with most Far East manufacturers are pitiful. Our education system is also second rate in comparison. We rely on our own language to sell things overseas because we can’t train people to speak host languages in export markets. Our ability to produce engineers out of your beloved infrastructure is pathetic. We charge business rates based on the space businesses occupy, which is closely related to the volume of what they make and are trying to export. When a business has to vacate space because they’re going through hard times, we still take business rates from them on empty space. We cane businesses building up with inconsistent annual allowances against Corporation tax then give preferential 8% tax rates to owners who sell up. We don’t help new business owners with bank loans or ready equity when they sacrifice salary in the early days, but we cane them with income tax and limit their pension contributions when they’re successful. We make students take out enormous loans, but still whack them for more income tax when they use their acquired knowledge to become successful.

        Take a trip to Singapore and see how things should work.

      • JimF
        Posted March 19, 2013 at 10:05 pm | Permalink

        And incidently allowing low paid employees to continue to invest in schemes which are 100% guaranteed to be financially disfavorable to them could theoretically leave company owners liable to charges of lack of trust and possibly mis-selling. However if these employees are cajouled or persuaded into opting out that is, also. I gather, illegal. It is left to the Company to pay to defer this liability on to an IFA. This is grossly unfair.

      • Bob
        Posted March 20, 2013 at 8:36 am | Permalink

        @Ben Kelly

        subsidised cheap labour
        education
        subsidised immigration
        road and rail infrastructure
        law and order
        cheap interest rates
        a little tax and red tape seems small price to pay.

        “Business has for too long been the protected unicorn and needs to be hunted.”

        How many people do you employ Ben?

  2. lifelogic
    Posted March 19, 2013 at 7:01 am | Permalink

    For most, saving and making provision for your future is not a good idea given the system that currently pertains under Cameron and that is the problem. The systems says (unless you are fairly rich and have good accountants) that you might as well spend and be feckless, then others will pay for your property, your health care, your pension, your long term care, your schools, your heat and light, your legal aid, your food ………… and you will have all the time in the world too.

    Osborne and Cameron should, in this budget be trying to make the UK the place for the worlds rich to keep and invest their money and live, but they are doing the opposite just pushing them away.

    Telling us about what they will do on tax breaks for child care of working parents starting after they have left office is a nonsense. That will be decided by Miliband and Balls not them anyway.

    • lifelogic
      Posted March 19, 2013 at 7:09 am | Permalink

      Pension funds now make little sense for many. Often the tax deferments/reliefs (with later loss of benefits) are just not sufficient to cover the costs and investment restriction of the schemes. No one borrowing expensively as, so many now are, should be saving into a pension but the government is soon virtually forcing them to do so.

      It is hard to have a safely net that does not augment the feckless, but that is what is needed. This especially as we now have no control of the UK borders, it will need to be a very basic one.

      • zorro
        Posted March 19, 2013 at 5:37 pm | Permalink

        Indeed, and the fact is that you will never see the capital sum anyway….pensions are a con, it is far better to look at other more easily liquidable assets for investment purposes and the provision of funds in later life.

        zorro

    • bigneil
      Posted March 19, 2013 at 7:51 pm | Permalink

      “look after ourselves?” – i have worked 45 years – and paid taxes all the time – -now injured and finished – awarded £22 a week – now gone up to £50 – -plus my works pension – -but this puts me in position of being taxed MORE than the money from the state – -so therefore i have paid in for absolutely NOTHING – -yet people can jump out of a lorry – only intention is to have free life – and the government machine springs to life to care for these people – -translators because these people dont speak english – -and have no intention of as it improves their employment chances – -NHS for all their health care – never mind any disease they have conveniently brought with them for any of us to catch – schooling for all their kids – the more kids the more money yippeee – -housing – -given that one non working mother here is going to get a small mansion just for her – what is going to happen when foreign families roll up with ten or more – -are we to build them ALL massive specially for them houses??? – – if we dont and/or not quick enough – -will there be shark lawyers waiting to sue the councils for the “human rights “of the freeloaders we are getting – -wether we ( in this democratic ha ha country ) like it or not?? – -WHAT IS THE POINT OF TRYING TO LOOK ATFTER OURSELVES WHEN THE GOVERNMENT AND THE BANKERS ARE THE ONLY PEOPLE WHO ARE ENSURING THAT THEY ARE THE ONLY ONES WHO CAN ??? – -the SS Britanic is “full steam ahead” for the iceberg !!

  3. margaret brandreth-j
    Posted March 19, 2013 at 7:23 am | Permalink

    The pension funds have been ruined. The superannuated jobs which many, included myself, relied on the NHS to provide and was a long term plan for all who worked in the NHS has been massaged so that no stability in ingoing pension funds exists with the outcome as desired by the masseurs ,that people are left without the pension yet have worked in the NHS all their life. This disgusting activity by NHS managers was brought about by those placed in high positions to stream line the NHS. Their actions are immoral.
    All private pensions have been similarly maneouvred .The options then are obvious , live in relative poverty and save for old age, thereby providing a little for older age . It is a further unethical step to squeeze these savings again. The argument is that it stops the people who spend and is not good for growth.I do not believe this is so, as human instinct is for survival of self . Money would not be saved or spent if they were not led to believe that there would be some sort of insurance for the future. Risk elimination is the ground of the poorer independent person, whereas those who rely on the state for benefits help growth and know that the money will arrive through the post at the behest of the tax payer.

    • alan jutson
      Posted March 19, 2013 at 6:00 pm | Permalink

      Margaret

      I am a little confused by your outline of the NHS pension scheme.

      We have a family member, and also friends children who are in the scheme, and it seems excellent to me.

      The NHS /Employer/ taxpayer share of the funding is 14% of salary, with the employee contributing much less.
      If you are clinically qualified (A Nurse) then for every year over 20 years of service you get and additional years bonus each year.

      Example: Thus 30 years service equals 40 years entitlement.

      In addition you have a choice of lump sum at the end, in the case of a family member who is due to retire shortly, that lump sum is almost equivelent to their entire contribution, with an excellent pension on top of that.

      The pension is also underwritten at 50% for the lifetime of the Spouse should the holder pass away first.

      Please compare with Equitable life or any other pension provider, where if you are self employed you have to contribute 100% of all of the payments yourself (out of your own income) and then end up with a very poor annuity rate at the end of it.

      The NHS Pension scheme is simply one of the best in the Country, the holders do not realise how fiortunate they are.
      Not my words, but the words of a person who organises pre retirement courses (HNS Funded) for those employees who are planning to retire in the next 12 months..

      • REPAY
        Posted March 20, 2013 at 1:05 pm | Permalink

        Spot on…unfunded public pensions are not discussed much. Apparently Clegg wants to cap private pensions at 1 million pounds – down from 1.5million. This man and our senior policy creators in the civil service has no sense of equity as their pensions, if you could even get an inflation linked annuity, is probably worth 2.5m in the private sector.
        Lib Dems tough on wealth, tough on the causes of wealth!

  4. alan jutson
    Posted March 19, 2013 at 7:35 am | Permalink

    Your post today John sums up well the way savers and those who have sought to do the so called “right thing” have been screwed for years by successive Governments.
    But I suppose we should be grateful that we do not live in Cyprus.

    I see Mr Terry Leahy of Tesco’s has written an excellent piece in todays Daily Mail about what the Chancellor should do in his budget.
    Cut personal taxes, cut business taxes, cut Government expenditure, and have smaller State involvement in almost everything.
    Far from Labours mantra of too fast too deep, he says action has been too slow, too shallow.
    Like many of us here, he also thinks Mr Cable and Mr Balls are in fantasy land believing that additional borrowing is the solution.

    • wab
      Posted March 19, 2013 at 11:37 am | Permalink

      “Cut Government expenditure.”

      Yes, on the very day the government announces yet another increase in expenditure, on child care vouchers. Funnily enough, no cost is mentioned, nor how it will be paid for (obviously by people without children, ultimately). Perhaps they have a model which says that it will all be paid for out of increased tax revenue from those parents (mainly mothers) who will now go out to work instead of stay at home. Unlikely, though.

      The cost of provision could quite easily go up, now that parents can afford more, so in the end parents might not be that much better off, and the main winners are likely to be the providers of child care.

      • Bob
        Posted March 19, 2013 at 4:11 pm | Permalink

        Have I got this right – if you look after your own children you get nothing, but if you exchange children with friends and neighbours you each get £1200 per child?

        • bigneil
          Posted March 19, 2013 at 7:54 pm | Permalink

          on this basis sir – how many romanian and bulgarian nurseries will open up?

      • zorro
        Posted March 19, 2013 at 5:38 pm | Permalink

        It is election fodder I am afraid…..

        zorro

    • lifelogic
      Posted March 19, 2013 at 12:26 pm | Permalink

      Terry Leahy is quite right as everyone sensible knows full well.

    • uanime5
      Posted March 20, 2013 at 1:47 pm | Permalink

      The Government has already cut corporation tax and the economy seems to have gotten worse so how will further cuts improve it?

    • frances
      Posted March 22, 2013 at 4:51 pm | Permalink

      Actually savers in the UK have been robbed by stealth to a far far greater extent than anything threatened in Cyprus
      Osbourne has now given the green light for the B. of E TO STEAL whats left of our savings by a combination of more and more useless Q E and resulting rampant inflstion
      The only winners are the rich and the mortgage holders

      All those who did the right thing and went without to save for retirement are being systematically robbed in the cruelest way possible to benefit the debtors

  5. Mike Stallard
    Posted March 19, 2013 at 7:42 am | Permalink

    I do not think you have mentioned the EU and Cyprus, have you……….

    Otherwise, I consider this is worth a “Like”,

  6. Steve Cox
    Posted March 19, 2013 at 7:43 am | Permalink

    Well said, John. The Chancellor seems to believe that he has an ally in reducing the real value of the public debt in higher-than-planned inflation. The fact that inflation is also eroding the value of Britain’s savings seems to be of no concern to him at all. As a supposedly Conservative Chancellor he should be deeply ashamed.

  7. Gary
    Posted March 19, 2013 at 7:52 am | Permalink

    This is all about saving the banks globally. We the people will be repeatedly financially ransacked.

    We in the UK and USA can sit back and smugly watch an EU country take a painful haircut via looting, but at least they declare the looting publicly. We , on the other hand, loot by stealth and on an industrial scale by printing press and hypothecation so that most of
    the people don’t even know they’ve been robbed, until they wake up one day and realize they cannot live on what they have.

  8. Nina Andreeva
    Posted March 19, 2013 at 7:53 am | Permalink

    Why bother saving (or even working) when the state will look after you, especially if you have children, and will ensure that you have the best of everything, including a car, a parrot and a pony for the aforementioned children. There is no point in buying a house either, as it will be taken off you to pay for your long term care while the parrot fancier in the bed next to you gets it for free!

    • bigneil
      Posted March 19, 2013 at 7:59 pm | Permalink

      nina !!! – -I thought that at my advanced years I had heard of most – if not every – things – -but being in bed with a parrot ???? new one on me !! – -and people actually admit to fancying them ?? – -ring jeremy kyle quick !!!

  9. Alan
    Posted March 19, 2013 at 7:53 am | Permalink

    I think it very unlikely that the Chancellor will want to make things “fairer” for savers. His concern is to try to get the economy working and the only people with money that might bring this about are savers, so low interest rates, inflation, devaluation, and printing money, all of which move value from those with savings to those with debts, seems likely to continue.

    A lot of wealth has been destroyed by the banks, and the only way to replace that is to take money from people who have saved. I wonder if the government is wondering if it can follow the example of the Cypriot government. More likely it thinks that its current more stealthy methods are more successful. We would be wealthier now if we had put our savings in euros in a Cypriot bank before the financial crisis started than if we have kept it in sterling in a UK bank.

    • Denis Cooper
      Posted March 19, 2013 at 12:01 pm | Permalink

      Why should the UK government court intense unpopularity, and possibly spark civil unrest, by following the example of the Cypriot government?

      Cyprus has a national central bank just as the UK has a national central bank, but the crucial difference is that Cyprus does not have its own national currency and the national authorities cannot legally create more euros without the consent of the European Central Bank while in contrast the UK national authorities do still have the right to arrange for the creation of more pounds.

      If Cyprus still had its own pound then more money could have been created rather than having to expropriate depositors as a condition for getting an EU/IMF loan; if it hadn’t joined the euro then the government would have been less likely to get itseld into such a mess, but if it did then it would have had a better way out of that mess.

      “We would be wealthier now if we had put our savings in euros in a Cypriot bank before the financial crisis started than if we have kept it in sterling in a UK bank.”

      Possibly, if we had taken advantage of the over-valuation of sterling to move into another currency before the crash and then moved back afterwards.

  10. Gary
    Posted March 19, 2013 at 7:55 am | Permalink

    Where are the bondholders? Why don’t the large bondholders in the banks take a loss?

    Some will say that these people are being protected and the small man has to pay for these elites.

    • lifelogic
      Posted March 19, 2013 at 9:01 am | Permalink

      Indeed the depositors are the last ones who should lose out.

      • zorro
        Posted March 19, 2013 at 5:41 pm | Permalink

        In any sane world, as we know, this is what should have happened with the banks. The shareholders should have taken the hit……..maybe that gives you a good idea about who holds the shares.

        zorro

  11. Roger Farmer
    Posted March 19, 2013 at 8:07 am | Permalink

    The ultimate mugging is what the EU led by Merkel are trying to do to Cypriot bank account holders. Some comment on this with especial reference to it’s legality would be very welcome.
    I would personally suggest that any theft of money from the accounts of British account holders should be compensated by the UK government by means of an appropriate reduction in the amount paid into the EU budget. This needs to be done with the same immediacy as the blocking of accounts in Cyprus. At the same time a group action should be organised by the UK government before the ECHR for all those affected. Perhaps Mr Putin would be supportive of such a move.
    So far I have not heard a bleat from any of our political leaders apart from Mr Farage. I await Osborne’s thoughts on the matter during his budget speach but I am not holding my breath.

    • uanime5
      Posted March 19, 2013 at 7:22 pm | Permalink

      Which human right would you claim has been violated? Remember that the Government has the right to tax people, so you can’t claim that a new tax is a human rights violation.

  12. Hope
    Posted March 19, 2013 at 8:14 am | Permalink

    You forget the FLS to banks which helps keeps the interest rate low. After watching events over the last few days -EU stealing money from savers and Cameron’s lack of negotiation skills over the press- who would trust him to negotiate the UK ‘position in the EU. Cameron is finished in the public’s eyes, when are the Tories going to wake up?

    • me2
      Posted March 19, 2013 at 8:25 am | Permalink

      “when are the Tories going to wake up?”

      When UKIP overtake them in the polls, that’s when. Our host and Dan Hannan seem to think it is their wise counsel that will lead the Tories back to sanity, the rest of us know it is only the loss of support to UKIP that can tempt them to return to the right path.

      Reply I seem to remember winning the battle to oppose the Euro, and persuading Mr Cameron to demand a new relationship with the EU without UKIP either existing or being ahead in the polls

      • Ian Wragg
        Posted March 19, 2013 at 3:15 pm | Permalink

        I think you are being a little naive John. I was involved in the anti Euro before it was fashionable and before Cameron joined the government. s for a new relationship with the EU, we already have it. Cameroon has given away more power in 3 years than any other Prime Minister. Problem is the relationship is flowing the wrong way.

    • lifelogic
      Posted March 19, 2013 at 9:09 am | Permalink

      Mr Cameron say he will fight “with all my heart and all my soul” for Britain to stay in the EU, come what may it seems. Clearly not a very good negotiating stance if you wish to negotiate anything sensible. He will not even be around in just two years, so the EU can just wait and perhaps offer him a new job and a further good pension to shut him up.

      How do we rid ourselves of career politicians and get some who might represent the real interest of the voters rather than themselves, the EU and the paying lobbyists? Not really possible alas given the current system.

    • lifelogic
      Posted March 19, 2013 at 10:46 am | Permalink

      Indeed to Osborne the EU bank theft is just a “tax” and I have not heard him even criticise it. Had I been robbed like this I would take all my money (remaining) out of the bank as soon as possible and in all the other risk countries. So it is likely to be a rather counterproductive EU theft I suspect, even from the EU perspective.

      It seems that the UK government was given no advance warning, but some Russian depositors were.

      • spartacus
        Posted March 19, 2013 at 11:25 am | Permalink

        Sound money is the bedrock on which people plan a future.
        Every country I have been to which abandons this has been a poor country (like Italy).
        Inflation benefits the rich at the expense of the poor.
        Many rich people have a range of assets other than savings.
        Many poor people struggle to save and every penny is hard earned.

        The government has a problem that 1 in 5 pounds spent is borrowed.
        That is at least 100bln pounds too much, or 3333 pounds per worker borrowed extra on top of taxes.

        The government could do many things to cut back spending – they could cut the 10bln and rising bill spent on foreign aid where 1/3rd of the money goes on ‘consultancy fees’ and many projects have dubious value.

        They could look for cuts in spending in the NHS where huge sums of money extra spent, have had very little improvement in outcomes for people.

        They could reduce the amount people coming to the UK which will cost people even more in welfare and housing bills ad is of little benefit to the native population.

        They could cap payments to landlords far more aggressively with Housing Benefit payments – many homes would then be available for families to buy rather than rent by removing this subsidy to landlords in areas of high rents, high demand and tight supply.

        But this government instead prefers to take the easy illusion of inflation as a cure.

        Many people who voted Tory will have expected that a sensible program of cutting back government spending would have included cuts like these and that the 50bln we pay the EU would be cut back because we cannot afford it.

        Many Tory voters are disappointed we have a Tory government that has ringfenced areas of spending like Foreign aid, while attacking very poor savers struggling to put away money for the future to make up the shortfall.

        Is voting UKIP the only way of making the government change course?

      • Denis Cooper
        Posted March 19, 2013 at 12:06 pm | Permalink

        Oh, but for Olli Rehn it’s just a “fee”:

        http://www.bloomberg.com/news/2013-03-16/euro-area-takes-aim-at-depositors-in-cyprus-bailout.html

        “This kind of stability fee is clearly a much better choice from the point of view of financial stability and Cypriot citizens than a full-scale bail-in, which would have led to very chaotic consequences in the Cypriot economy,”

  13. Alex
    Posted March 19, 2013 at 8:16 am | Permalink

    Totally agree, but you missed out derisory annuity rates thanks to QE.
    But ministers, civil servants and the governor of the BOE are on tax-payer funded, guaranteed, index-linked salary-based pensions. So why would any of them care about those of us who have saved for 30 years only to see our falling assets buying a pathetic pension?
    Still, it could be worse, we could be in Cyprus having our savings seized by the EU.

    • Nick
      Posted March 19, 2013 at 8:31 am | Permalink

      Just wait Alex. The state is bankrupt, and a huge part is their pensions.

      They will end up being screwed as a result.

  14. Paul H
    Posted March 19, 2013 at 8:25 am | Permalink

    Making provision for the future is indeed a very good idea. Unfortunately the future will be someone else’s problem, and hence the Chancellor – like all politicians seeing only as far as the next election – doesn’t give a damn. As a result we have, for example, the shameful uncertainty introduced by endless tinkering with all aspects of state and private pension provision.

  15. Nick
    Posted March 19, 2013 at 8:30 am | Permalink

    You’re still in denial about the elephant in the room, The herd of elephants.

    http://www.ons.gov.uk/ons/dcp171766_263808.pdf

    Between 2005 and 2010, the pensions debts went up by 736 billion a year. Not total, each and every year.

    Since then taxes have rocketed, along with spending. The increase in the debt is more than the entire government spend now.

    The state is bankrupt.

    However, rather than admit it and do something about it, the game being played in the UK is the same as Cyprus. Lets screw people and keep it going for a bit longer.

    End result, is that the mess just gets larger and larger.

    So what’s your advice for the 30% who have no savings, and who’ve been forced to rely on John Redwood for their retirement, because they have had their NI removed from them, to give to someone else?

    For example, a 26K a year worker who would have invested their NI would have had a fund of well over 560,000 pounds. You’re offering them 130K.

    Reply: A state is only bankrupt when it can no longer tax, borrow and print sufficiently to pay its bills. The Uk can still pay the bills.

    • Denis Cooper
      Posted March 19, 2013 at 12:07 pm | Permalink

      The UK government can still pay its bills, with a bit of help from its friends in Threadneedle Street.

    • JimF
      Posted March 19, 2013 at 10:14 pm | Permalink

      When there is no longer a democratic mandate for a government to “tax borrow and print” and indeed it refuses to do so would you say it is then bankrupt?

  16. Iain Gill
    Posted March 19, 2013 at 8:31 am | Permalink

    let every citizen of the country, if they wish, become a member of the bank of englands employee pension scheme…

    • bigneil
      Posted March 19, 2013 at 8:12 pm | Permalink

      or be given the same rights to increase their own wages when caught out avoiding taxes – -a rise big enough to offset the tax they have to pay? – -it would be nice for all of us to be able to do this – -but MPs are the elite arent they – their skills – -along with kissing the nether regions of that other marvelous group – the bankers – will ensure that they and a few others are the only ones who will have a decent retirement – -the rest of us (will have unpleasant options-ed) -i hope my heart condition kills me soon !! – -and the SS Britanic is full steam ahead for the iceberg .

  17. Robbie
    Posted March 19, 2013 at 8:32 am | Permalink

    I don’t want to be told that the reason that I’m having to stack tins of beans for two quid an hour when I’m in my 70’s is because “you did not save enough during your working days for your retirement”. Hence I have been saving some money in the hope that this will not happen. This government however is destroying what savings I have put aside with its QE/ZIRP policies.

    At the same time we hear of stories like that within a recent Sunday Times article about a couple in their thirties relating how “it was like a miracle” that their mortgage repayments had plummeted from £1,800 to £250 a month saving them nearly £50,000 up to date. Another story headlined “Couple pay 1p a month for mortgage after rates slashed” which you can find via a google search tells how their mortgage payments have dropped from £1,500 a month to just 1p a month. At the same time savers and pensioners are seeing their savings destroyed inflation, QE and ZIRP. Why have the government allowed it to go this far and for so long? How about some balance.

    This has been going on for too long now and it has gone too far in favour of the overborrowed. I simply cannot vote for a government which keeps these kinds of policies.

    • Mark
      Posted March 19, 2013 at 2:09 pm | Permalink

      Indeed, borrowers who overpaid for houses in the Lawson boom of the late 1980s were not mollycoddled in this way. Base rates were kept high – as much as 15% at times, above inflation. If they couldn’t afford it, they had to sell up or be repossessed.

      • zorro
        Posted March 19, 2013 at 5:47 pm | Permalink

        And we recovered then far more quickly than we will ever do now……

        zorro

    • bigneil
      Posted March 19, 2013 at 8:23 pm | Permalink

      may have been better to stockpile tins of beans at home – apparently it would be more beneficial as they have a long shelf life – -we would have to keep this scheme secret as (like the cypriot government raiding money) – our government might raid the larders of everyones home – if they got WIND of the scheme – -!!! – -oh got to have a laugh now and then !!!

  18. Dan
    Posted March 19, 2013 at 8:43 am | Permalink

    Not even muzzling the press is enough for JR to leave the fold….

  19. English Pensioner
    Posted March 19, 2013 at 8:45 am | Permalink

    What is the point of saving? Any money saved has depreciated by around 5% pa, which is not a lot different from what the Cyprus Government is proposing in terms of a tax on savings.
    Meanwhile,I have just been notified that as from May my ISAs will be credited with the huge sum of 0.25% interest pa. No wonder there is inadequate investment; without savings there is no money to lend, and there is now little reason for saving.

  20. Brian Tomkinson
    Posted March 19, 2013 at 9:00 am | Permalink

    You summed it up yesterday with: “Savers have spare money and governments don’t” and the spending junkies leading your party won’t listen. They need their fix and won’t be happy until they have spent everything we have. They are just the same as Labour and the Lib Dems – tax, borrow, spend and waste. Not one of those parties is worthy of support.

  21. Richard1
    Posted March 19, 2013 at 9:13 am | Permalink

    I would like to know what Labour and LibDem politicians – such as the LibDem MEP Sharon Bowles – have against the Cypriot bank acount levy, about which many of them are up in arms. How is it different in principle from the mansion tax which they both favour? It just applies to people who keep their money in banks not houses.

    • alan jutson
      Posted March 19, 2013 at 6:09 pm | Permalink

      Richard 1

      Mansion Tax…..

      Agreed, its just that not many people have yet twigged the way a Mansion tax works.

      ie:
      A tax on assets, and for most people the largest asset they have is their house, which already is taxed on a scale of value, via a Community charge.

      Indeed I think the LIBDUMs wanted/proposed a total wealth tax at one point.

      It seems most politicians (JR excluded) will never be satified until they have all of your money, and you are thus totally dependent upon them for living.

  22. Nationalist
    Posted March 19, 2013 at 9:24 am | Permalink

    Swings and roundabouts! The government is using our taxes to stuff the banks with money via the Funding for Lending scheme so our savings get negligible interest. The banks don’t want or need our money. It looks like “ISA season” isn’t going to happen this year. You might find a 2% ISA but your wealth will be eroded at 3.5%.

    I’ve voted with my feet and moved my cash savings to Swiss Francs. The interest rate I get is zero but the inflation rate is negative! Continual falls in sterling mean an effective positive return.

    On the other hand, the stock market is booming, awash with QE cash looking for a home. I guess it won’t last, but for the nonce it makes my managed funds look very healthy.

    • Denis Cooper
      Posted March 19, 2013 at 12:31 pm | Permalink

      ?

      The inflation rate is not zero if you’re still living in the UK, even if you have your savings in a foreign currency which may or may not drop against the sterling that you’ll need for your expenses in the UK.

  23. Major Frustration
    Posted March 19, 2013 at 10:07 am | Permalink

    JR I appreciate that this article is about savings and allied pressures on savers. On the inflation aspect I think most people working in the private sector get somewhat miffed when the Government is above its inflation target yet the pulic sector pensions are protected. Well, why not limit the indexation of public sector pensions to say 3% – I suspect that might be a more efffective way on controlling inflation than leaving it to the BoE

    • spartacus
      Posted March 20, 2013 at 1:34 pm | Permalink

      Because the public sector has powerful unions which look after their interests.

      The private sector has no powerful unions, and so we get theived from, mass immigration, huge liabilities placed on us from the public sector.

  24. Denis Cooper
    Posted March 19, 2013 at 10:13 am | Permalink

    I think you need to be careful about the effects on QE on pensions.

    It is simplistic and misleading to note that annuity rates are low and argue that N years ago somebody with a pension fund of £X could have got an annual pension of £Y, but now a fund of £X will only buy a lower pension of £Z a year.

    Obviously it has to asked whether that person who now has a fund of £X would have built up a fund as large as £X at that earlier point in time N years ago, but more importantly it has to be asked whether they would have a fund of £X now in the absence of QE.

    There is an inverse relationship between the price of a gilt and its yield, so when the Bank of England uses newly created money to prop up/rig the gilts market the twin effects are to increase prices and decrease yields compared to those which would have obtained in the absence of that intervention by the Bank.

    So if a personal pension fund was entirely invested in gilts, as it could be if the person is approaching retirement, then by pushing up the market prices of gilts QE has increased the value of that fund at the same time as it has reduced annuity rates, and the two effects will very largely if not exactly cancel each other out.

    And if the fund had been partly or wholly invested in equities, once again it has to be asked where the stock market would be now in the absence of QE; I think the answer is almost certainly that the stock market would be lower in the absence of QE, and so the value of the pension fund would be lower, and that would largely cancel out the benefit of higher annuity rates.

    Anybody who converted all the assets in their pension fund into cash before QE had started will now be feeling the full impact of the reduction in annuity rates, but those who remained invested should in general have seen a countervailing increase in the value of their fund.

    In any case if Darling hadn’t started QE in March 2009 then he would have been forced to make drastic cuts to public spending and instead of the current dampening of the economy through so-called “austerity” there would have been something like a meltdown with all kinds of consequences, including of course the political consequence that the Labour party would have been annihilated in the 2010 general election and Cameron would now have a substantial overall majority in the Commons.

    • Denis Cooper
      Posted March 20, 2013 at 12:44 pm | Permalink

      An excellent comment here, unfortunately missed for moderation …

  25. James Sutherland
    Posted March 19, 2013 at 10:30 am | Permalink

    Excessive inflation and effectively negative (below inflation) interest rates seem corrosive to me – I do wish the government and Bank would take this problem seriously at last. Presumably they are so reluctant to do so because the inflation is providing the illusion of minimal economic growth, masking our economic problems in the short term?

  26. Robert Taggart
    Posted March 19, 2013 at 10:35 am | Permalink

    This saver was mugged – by the Great British State (DWP) !
    Their mistake was corrected, but, the savings criteria concerning certain benefits for us scroungers provide folk with a disincentive to declare.
    One has said before – a single figure for savings (higher than £6K) – would make the system more clear. The present tapered system (£6K – £16K) encourages the ‘stuffing of mattresses’ !

    • uanime5
      Posted March 19, 2013 at 7:27 pm | Permalink

      Do you really believe that people would honestly declare how much they had if they were told that having over £6K in savings meant no benefits but having £5,999.99 meant having full benefits?

      • Robert Taggart
        Posted March 21, 2013 at 6:00 pm | Permalink

        If the lower level was raised – there would be no penalty for having more – that little extra could then be earning more – interest.

        So ? – Yes ! At least, this scrounger would !!

  27. MichaelL
    Posted March 19, 2013 at 10:36 am | Permalink

    You have the Bank of England printing money to keep asset prices inflated. This is wrong. Let house prices fall and offer help possibly to people who are seriously under water. Would be cheaper and fairer on everyone. If the most expensive purchase an ordinary person will make is their home – keeping that low would be excellent for the economy. Capital would find its way into productive means – companies via equities.

    It won’t happen:

    i) becuase politicians don’t realise the fundamental problem – the Bank of England itself – should not exist. Or they know they will have far less control over the liberty of people without it.

    ii) vested interests of Banks and people who want to be re-elected at all costs.

    However, to the man in the street, it is fairly easy to open bank account overseas (NZ, Singapore being two places worth investingating) and getting your funds out of Sterling. Thanks to the ANZ Bank and Union Overseas Bank of Singapore, I’m slightly covered. I would encourage people to sort out their SIPP investments – lets hope the govt. don’t try to steal from those accounts.

    I thought the Labour party was statist … unfortunately the Conservatives have done next to nothing to give people back their liberty. And make no mistake sound money is a conerstone of liberty.

    Joe@
    “Still, it could be worse, we could be in Cyprus having our savings seized by the EU.”
    Given say 2008 as your start point – QE has robbed you of far more purchasing power than the Cyprus haircut. They’re getting off lightly.

    Thanks to George Osborne ultimately, something for us to remember at the ballot box.

    • Denis Cooper
      Posted March 19, 2013 at 12:47 pm | Permalink

      If the Bank of England should not exist, is that also true for the national central banks in New Zealand and Singapore?

      • MichaelL
        Posted March 19, 2013 at 4:35 pm | Permalink

        Yes, of course. People should spread their deposits to a number of banks. We’d have different types of banks if there was no lender of last resort of course.

        • Denis Cooper
          Posted March 19, 2013 at 6:44 pm | Permalink

          Then how come New Zealand and Singapore are not also blighted by having a national central bank?

  28. Andyvan
    Posted March 19, 2013 at 10:37 am | Permalink

    Well our bunch of con men and thieves have tried most forms of theft from us, how long before we get outright confiscation like Cyprus? Fit’s right in with the theme of gagging the press, restricting civil rights and trying to get control of the internet. As things get worse we can only expect more on the same theme.

  29. John Eustace
    Posted March 19, 2013 at 10:37 am | Permalink

    Isn’t the problem driven by the fact that the Government will run out of money to service the huge debts being accumulated as soon as interest rates are allowed to return to normal levels?

    Unfortunately I can’t see a way out of this mess without major ongoing inflation.

    Which implies I should take out a large mortgage and move the money out of sterling and into a foreign bank in a stable currency. Not the usual advice for someone coming up to retirement!

    • lifelogic
      Posted March 19, 2013 at 12:31 pm | Permalink

      Sounds a good plan to me borrow in the UK and invest in real assets in sensible countries.

    • Denis Cooper
      Posted March 19, 2013 at 12:56 pm | Permalink

      It’s about six years too late to consider doing that.

      In March 2007 sterling was greatly over-valued with its trade weighted index running above 100, and that would have been a good time to borrow in sterling, move the money into less over-valued currency, and then wait for the index to drop down to the 80’sh it’s been for the past four years.

      http://www.bankofengland.co.uk/boeapps/iadb/fromshowcolumns.asp?Travel=NIxIRxSUx&FromSeries=1&ToSeries=50&DAT=RNG&FD=1&FM=Jan&FY=1963&TD=19&TM=Mar&TY=2013&VFD=Y&CSVF=TT&C=IIN&Filter=N&html.x=32&html.y=19

      • zorro
        Posted March 19, 2013 at 5:50 pm | Permalink

        Or you could have bought shiny stuff…. 🙂

        zorro

      • John Eustace
        Posted March 20, 2013 at 10:03 am | Permalink

        I do very much regret not buying that cheap property in Oz 5 years ago.

        But are you saying the pound has now bottomed out – say against the RMB? I thought our new BofE Governor was going to do his best to drive it further down.

        • Denis Cooper
          Posted March 20, 2013 at 12:42 pm | Permalink

          I’m saying “rather than rely on myths spread by the mass media, look at the actual data for the sterling trade weighted index which is published every working day on the Bank of England website”, link given above.

          • spartacus
            Posted March 21, 2013 at 12:49 pm | Permalink

            One point on the EER.
            Our government is following policies similar to Italy in the early 1990s.
            The lira dropped vs the USD by 90% during those years.

            You cannot forecast anything just by looking at the EER and PPP if underlying policy has signifcantly changed. You have to focus on the policy and the debt.

          • Denis Cooper
            Posted March 21, 2013 at 4:22 pm | Permalink

            Spartacus, as I’ve said before I’m not really attempting to make any forecasts, I’m merely noting the known facts about what has actually been happening over recent years rather then relying on myths spread by the media. I do note that the medium term trends which have been running for four or more years – pound rising against euro, euro and pound falling against dollar, euro index falling, sterling index flat – are still intact despite the recent bouts of hysterics from Telegraph journalists, but rather than predicting how much longer they will remain intact I shall wait and see.

  30. Roger Farmer
    Posted March 19, 2013 at 11:35 am | Permalink

    It would seem to me that not only is the Press about to be censored but comment on this website is already subject to censorship. Comments posted just after 08.00 still not appearing.

    Reply: I have many other things to do. It is not censorship but too much work

    • Roger Farmer
      Posted March 19, 2013 at 4:24 pm | Permalink

      My apologies, I did not for one moment believe that you were doing all the moderation. As you are I am not surprised it takes time. I will be more patient in future

  31. wab
    Posted March 19, 2013 at 11:49 am | Permalink

    “When inflation gets as high as 5% it eats away the money of the prudent at far too fast a rate.”

    Fortunately inflation is not at 5%. And one might call people with (significant) savings “prudent”, but one might instead more properly call them “rich”. There is nothing morally superior about people with savings versus people with borrowings.

    • zorro
      Posted March 19, 2013 at 5:53 pm | Permalink

      The only thing which is positive is that there is quite a lot of discounting on good stuff which you would not see in normal times….. which sort of compensates for the relative loss in purchasing power.

      zorro

      • spartacus
        Posted March 21, 2013 at 12:52 pm | Permalink

        So it’s you I see all the time at Tescos reduced food bins who is always getting there before me?

        • zorro
          Posted March 21, 2013 at 7:35 pm | Permalink

          It looks the same on the plate…. 🙂

          zorro

  32. Major Frustration
    Posted March 19, 2013 at 12:34 pm | Permalink

    Saving my savings is one thing what about saving the Tory party! Or is it too late for both?

  33. Bernard Juby
    Posted March 19, 2013 at 12:46 pm | Permalink

    Hear! Hear!
    If you can see this obvious message then why can’t George and the Bank of England???

  34. David ashton
    Posted March 19, 2013 at 1:17 pm | Permalink

    The massive reduction in returns on savings accounts last year was due to the Bank of Englands lending to banks at very low rates in unlimited quantities. The banks didn’t have to work for their money. They should only be loaned by the BoE a multiple of the deposits which they raise in the competitive marketplace.

  35. Antisthenes
    Posted March 19, 2013 at 1:23 pm | Permalink

    Who would have thought it that too much social democracy would have such a very heavy price? You, me and anyone who was not of the left, a green or a member of the other assorted bunch of lunatic vested interests. Nobody was listening though they were too busy enjoying the fruits of other peoples money. Building up large amounts of debt for the next generation to pay was fine until the generation that had to pay it turns out to be the present one.

  36. John Orchard
    Posted March 19, 2013 at 2:49 pm | Permalink

    Pensioners who paid their national insurance and tax before, during and just after the war had to have 44 years of stamps to qualify for the OAPension. A few years ago it was changed to 30 years of stamps. On such and such a date in 2017? the pension goes up to £140 a week, but, if you are older by a day before it’s implimentation you do not qualify just as we with our 44 years don’t, and get less money a week..

    Where is the fairness in this as we are the ones that kept the Country going before, during and just after the war.

    Once again useless Government who I must agree ( shamefully ) with Ed Milliband’s statement to Cameron last week about him and a Brewery function.

    • zorro
      Posted March 19, 2013 at 5:55 pm | Permalink

      By the look on his face even Cameron was finding it difficult to disagree with that comment…..

      zorro

    • alan jutson
      Posted March 19, 2013 at 6:16 pm | Permalink

      John O

      Agree absolutely with you, I have alSo madde the same comment before.

      The Problem is few as yet understand that all present Pensioners will be EXCLUDED from the new pension arrangements, even though we have paid in 50% more contributions than those who will benefit.

      Screwed again, indeed I feel I am being screwed so often by governments I now take it as normal practice for them.

      I guess the solution is to go on a spending spree, enjoy life to the full, be feckless even, and then rely upon the State as soon as the money has gone.

  37. Electro-Kevin
    Posted March 19, 2013 at 5:49 pm | Permalink

    We’re spending our money now and enjoying it while we can.

    We have minimal pension arrangements and have absolutely no faith that any efforts to do better would not go unpunished in later life.

    Britain doesn’t appear to have a future so why bother planning for it ?

  38. Lindsay McDougall
    Posted March 19, 2013 at 7:05 pm | Permalink

    Never mind 5% inflation. With inflation at 2.8%, the current rate, money halves in value every 25 years. So if you have taken out an annuity without any inflation proofing, make sure that you don’t live too long.

    No coherent, rational arguement against moving to zero inflation has been raised by anyone on this site, whether from the Left or from the Right. Inflation doesn’t enhance real GDP growth, except temporarily in the first year (long since gone). It is true that zero inflation will result in some people having to accept a drop in salary. There is nothing wrong with that; a dose of reality will do people good.

  39. Lindsay McDougall
    Posted March 19, 2013 at 7:16 pm | Permalink

    You are right and the money markets know what is going on. To signal a change of direction, an immediate increase in the base rate from 0.5% to 1.0% and an announcement that QE will be gradually unwound are needed. Liam Halligan for Governor of the BoE!

  40. uanime5
    Posted March 19, 2013 at 7:34 pm | Permalink

    For those interested the Cypriot Parliament has voted on the bailout. Of the 56 MPs 36 voted against it, 19 abstained, and 1 MP was absent. So the Cypriot bank accounts won’t be taxed. So they’ll be more talks and 1 of 4 scenarios will occur.

    1) Cyprus will tax the bank accounts or do something equally serious to raise money.
    2) The EU will loan Cyprus money on more generous terms.
    3) Russia will save Cyprus.
    4) Cyprus will default and crash out of the euro. Most likely bank accounts worth more than €100,000 won’t be protected.

    http://www.telegraph.co.uk/finance/debt-crisis-live/9939296/Cyprus-bailout-live.html

  41. Jon
    Posted March 19, 2013 at 8:30 pm | Permalink

    Long term savings and pensions has been under attack for a very long time, far precedes this Government. It was what lubricated the ready investment of the larger companies allowing the banks to lend to the SME’s. Thats been turned on its head, mainly down to Gordon Brown and we have the banks just wanting to lend to the larger employers which should be the shareholders of what would have been a healthy growing private pension fund industry.

    I agree that too many tax changes in this area also create a sense of distrust when making such long term decisions. The problem there is that too many politicians and editors see it as an easy target to bash.

  42. Bob
    Posted March 20, 2013 at 9:12 am | Permalink

    @Electro-Kevin
    “Britain doesn’t appear to have a future “

    That was always Ted Heath’s plan.

    Weaken the country, dumb down the population, undermine the currency and financial system to the point of bankruptcy, close down the military, change the police from a force to a “service”, encourage indolence and lawlessness, regulate the press etc. etc.

    The LibLabCon Party are complicit in this hegemony, remember that at election time.

  43. David Langley
    Posted March 20, 2013 at 11:50 am | Permalink

    The government would prefer savers to spend their money wouldnt they? I bet the Cypriots now wish they had spent theirs. Waiting for Greek loans to be repaid sounds like Greek mythology again.

  44. David Langley
    Posted March 20, 2013 at 11:54 am | Permalink

    I dont think the government do well when they take our money and then dribble some back to us. I would prefer that the government stop robbing us for spurious good causes and trying to micro manage my life. Leave my money alone please.

  45. Keith
    Posted August 2, 2013 at 8:00 am | Permalink

    So Cameron wants to encourage saving? Sounds good on the one hand, but the truth is he is mugging them with the other hand. No doubt he sees helping himself to the little pots of gold that savers have accumulated as a tasty way of easing his own financial responsibilities. Savers have never had it so bad, and it is down to Government policy and banking practices that have created a better haven for borrowers in the past, and now with absolutely ridiculous interest rates for savers they are paying off the the bad debts that have accrued with money they have put away by being careful. Well, I tell you this Mr. Cameron, I’m having to spend mine, and when it’s gone your lot can start paying my bills for me. Sod saving, it only makes the rich richer.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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