The future
of
Britain’s savers!
more certainty over the rate changes. However, the downside is that people with savings now know that the poor returns are likely to continue for the next couple of years. That said, with this knowledge they can now make informed decisions in planning where to put their savings as there are better funds and bonds available offering higher rates. Holding too much cash for too long is not a wise move when looking to save, given the erosive effects of long-term inflation. Accounting for inflation, the value of these savings would have declined by £77, meaning savers would actually be £54 out of pocket. This figure is based on an average cash ISA rate of less than 1%. The CEBR report also examined alternative options to get Britain’s savings working harder so savers can begin to be smarter with their hard earned money. The report calculates that the ‘real’ average interest rate (allowing for inflation) for lend-to-save – otherwise known as peer-to-peer – lending in 2012 was an estimated 3.4%. Worryingly, the report found that over a fifth of Britons actually have no savings at all and the average savings for all households under 45 years old is just £1,500. This lack of savings points to a potential crisis in future as households, particularly those under the age of 45 who must begin to save more rapidly if they are to avoid a significant fall in living standards in old age. Nicholas Feeney Grosvenor Park Intelligent Investments
The Bank of England has unveiled the most significant changes to the way it conducts monetary policy since it was granted independence in 1997.
On the 7th August, new Bank of England governor Mark Carney unveiled a new policy of ‘forward guidance’, announcing that interest rates will be kept at an alltime-low until unemployment falls below 7%. Mr Carney said it meant that more than 750,000 extra jobs would have to be created before the end of 2016 for rates to start rising again. Mr Carney’s statement has offered a greater degree of certainty over future rate movements, giving confidence to mortgage lenders and fund managers. There will be more optimism over our economic prospects amid a more settled rates environment with things starting to pick up. However, it is bad news for savers! For the next few years at least, interest rates will remain negative, while saving rates will remain non-existent. Anyone reliant on savings is likely to suffer; as will the many whose wages are moving horizontally year on year. This new stance from the Bank of England is very encouraging for people looking to borrow money or switch mortgage products; likewise for lenders, they can now offer better, longerterm products to borrowers having
The true cost of Britain’s negative savings
The financial crisis has left a big dent in Britain’s savings culture and 28% of people have stopped putting money away since the 2008 crunch. According to a report from the Centre for Economics and Business Research, the UK economy is missing out on billions of pounds as savers continue to invest their money into savings products that fail to beat inflation. The report found that savers with £3,500 in a typical cash ISA account would have seen interest payments of only £23 last year.
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