Putting the saver’s case to the Treasury Select Committee, part one

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The Treasury Select Committee is conducting an inquiry into Quantitative Easing, particularly the way it has redistributed wealth in the UK. After providing written evidence Simon Rose of Save Our Savers and pensions expert Dr. Ros Altmann were asked to give oral evidence to the Committee. The first part of the session concerned the effects of the Bank’s policies on savings and pensions.

Ros Altmann called QE a “tax on pensions”, pushing down the long-term interest rates which underpin the UK pension system. She expressed concern that the Bank of England had failed to recognise or quantify the side effects of QE which had had a negative impact on the economy and reduced the annuity income of pensioners and the income of companies which had had to put more money into their pension schemes. “My fear is that so far the Bank has simply been in denial that its actions and policies have had these distributional consequences… The Bank is saying its impact on pension funds has been broadly neutral. That does not stand up to scrutiny.”

QE’s impact on pensions

Quantifying this, Dr. Altmann said, “the traditional relationship is that a 1% fall in long-term interest rates would typically lead to a 20% increase in pension liabilities for a pension fund with around a 20-year duration and a 6% to 10% increase in pension assets. So, if those relationships hold, and there is strong evidence that they do, it is automatically evident that pension fund deficits will increase. Notwithstanding the fact the assets may have gone up, liabilities will have gone up more.”

Simon Rose agreed, saying that, “from the savers’ point of view, QE has been an utter disaster, whether people are saving through pension funds or through cash deposits.” The Bank, he said, was obsessed with the rise in the price of assets as a result of QE, but showed little consideration about its policies’ effect upon income. “QE is an inflationary policy, as the Bank admits, and, with inflation currently running higher than the increase in wages, it is not just savers and pensioners but everybody who is suffering… savers are suffering from negative real interest rates and unable to preserve the value of their cash. It is quite an appalling confiscation of wealth.”

The wider effects of QE

Simon challenged the Bank’s belief that QE had boosted the UK economy: “You can print money, you cannot print wealth. You get wealth from creating goods and services. So I don’t feel that QE has benefited the economy as a whole. What it has simply done is redistributed wealth.”

The Bank points out in its document on the distributional effects of QE that 5% of Britons own 40% of the country’s assets. That is not the whole picture, said Simon. He quoted figures from the ONS Wealth and Assets Survey which show that 72% of the country’s net financial assets, as well as private pension wealth, is owned by the wealthiest 20% of households. “So, effectively 80%, the majority of Britons, own only 28% of the assets and they have been losing out to the benefit of the very wealthy. QE is increasing wealth inequality.”

The longer-term effects

Simon was quizzed by MP Teresa Pearce on what the Bank’s policies meant for the culture of saving and whether, “one of the results of QE is to erode the culture of savings, because people have saved and now found that it is not worth anything?” Simon concurred, pointing out that savers often contacted SOS to say that they had done what they thought was the right thing, saving for their old age, but felt that they had been taken for mugs and wishing they had racked up debts instead: “The present generation are feeling betrayed, but I am worried what it means for future savings as well.”

Discussing the efforts of the government to make people save for a pension through auto-enrolment, he pointed out that the Bank’s monetary policy is working against what the Department for Work and Pensions is trying to do.”

Ros Altmann, too, was concerned about the effect on long-term saving. “I do have serious concerns that the prolongation of this period of exceptionally low interest rates at the same time as inflation is overshooting will undermine the willingness and ability of many people to save for their own future, which is an aim of another area of Government policy.

“I would argue that there is this generational divide at the moment whereby monetary policy is putting younger people off saving altogether, because they really don’t see the point. But those coming up to or approaching retirement feel very stuck and are not doing what the Bank of England expected them to do, which is to stop saving and go out and spend more because it is not worth saving.

“Actually, fearing for their financial future, they are increasing their precautionary savings. So what QE and ultra-low interest rates have done is hamper the spending power of the groups in the population who are not over-indebted and who would otherwise spend, because they are worried what is coming next. They are cutting spending.”

The session was a long one, so we shall summarise the comments made on the effects of the Bank’s policies on the economy in a separate blog shortly. If you would like to see an edited video of the session, it is available here, while the full session is available on the Parliament TV website.

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10 Comments

1. gareth davies

   February 8, 2013 at 5:55 pm

   What an absolute disgrace this is. I have always been a saver having been bought up by parents who had lived through the 30′s depression and WWII, they taught me be careful with money, never take on HP or buy things that you could not pay for outright, pay off mortgages asap, save wherever possible, be self-sufficient, be honest, be trustworthy, be loyal

   Unfortunately these values are not highly regarded in this country now comprised of spiv capitalists, kids that just aspire to be a “celebrity”, politicians that lie and are unworthy of our trust (DAVID CAMERON PROMISED IN OPPOSITION TO ABOLISH INCOME TAX ON SAVINGS INTEREST – HE LIED!) – gamblers and risk takers are held in high esteem – the effects of bankrupcy have been diluted so far that there is now almost no downside of being made bankrupt – its almost seen as a badge of honour.

   I am afraid that the way I have lived and saved where possible has earnt me no respect, infact I am a fool for having saved as my reward are derisory interest rates that after 40% income tax are far outweighed ny inflation – I should have done what everyone else did – spend everthing I earnt, mortgaged to the hilt to invest in over-valued property that the government will never allow to find its true level (some 30% below current levels).

   You have to remember that the MP’s have the best final salary scheme in the land, that is shielded against the effects of inflation.

   The new governor of the bank of england has indicated that he will free the bank from its inflation targets – that they have always exceeded anyway – and that he will promote low interest for years to come in order to get the economy recovering. Remember he too will be on a public funded inflation linked final salary pension.

   So these people are insulated from the effects of inflation – what does it matter if we have german type 30′s hyper inflation, their cosy retirement is assurred.

   QE has diluted the value of savings and served to reduce interest rates – the biggest blow to interest rates has been the governments money that it has leant to banks and building societies at extremely low rates – these organisations have no need for saver’s money anymore.

   Mortgage rates are again back to the low pre-2008 rates and it is once again possible to get 90+% mortgages.

   Pity the poor saver for he is but a fool.

   Recommend (24)
2. frances

   February 9, 2013 at 1:02 am

   If Carney institutes low Interest rates for years to come he is ROBBING all of my gemeration who had absolutely no option but to save out of taxed income
   Mervyn King is an utter HYPOCRIT saying he had utmost sympathy for savers ……………………knowing full well QE had killed interest rates he then hit us with FLS

   Cameron ,Clegg and Osbourne ALL PROMISED TO HELP SAVERS

   Instead the entire bunch of them have stuck daggers in our hearts and totally destroyed any hope of any dignity in retirement

   I grew up through immense poverty and only ever bought what i could pay for
   Oh how i wish i had racked up massive debts and then gone bankrupt because then i would earn more respect than by living a frugal life
   Prisoners eat far far better than i can because they can order Steak and Chips every day wheras Pensioners like me can only dream of it

   The entire Government along with Bof E are liars cheats and THIEVES

   Recommend (21)
3. Anne

   February 9, 2013 at 7:33 pm

   And…..following on from current comments on this page……

   Cameron,Clegg,Osborne and King are more than likely using their sick policies to cream off the interest from OUR savings (having already taxed it once at source on pay day) to use it for either beneffiting themselves….perhaps ploughing it in to their own pensions; using it to pay towards the 940 billion euros
   that keeps this island in the EU, or perhaps its for the war fund,either way,they are robbing us of what is rightfully ours.

   It is disgraceful that on one hand they try to convince us that they are doing their utmost to lift us from recession and on the other hand,appear to be causing a recession,deliberately.

   It is important to remember that all of the time, the government is looking for ways to raise more and more money for the bureaucrats in Europe,with little return in real terms for this country. Every year that this country remains in Europe,the people who live and work here,can only become poorer.Europe is the root of all financial problems in this country.Europe is a bottomless pit,when it comes to money and we are the mugs. There will NEVER be enough money for Europe.OUR MONEY becomes their money.We are not only contributing to our own economy,but to the whole European economy as well.This is a bottomless pit. This is why every penny of savers money is being creamed off. This is why we are being paid next to nothing on our savings,BECAUSE `they` get more from us by creaming it off,than by paying us a decent rate that we would go out and spend. The Government is using OUR money to help their own cause, which could well turn out to be another Libor type scandal.

   Recommend (16)
4. topcat

   February 11, 2013 at 12:01 pm

   let us make a living for all not a killing for a few this is genocide

   Recommend (13)
5. DL

   February 11, 2013 at 12:29 pm

   Everything said above I totally agree with – I intend to send a copy of this article with the comments to my (I say “my” but I did not vote for his party – Liberal) MP. Whether he does anything about it is in the lap of the gods. I really think that it is time to change the politics of this country and vote UKIP – they couldn’t do any worse could they????????

   Recommend (17)
6. X

   February 13, 2013 at 3:14 pm

   Much of the anger on here is directed towards the MPC and Mervyn King. I can fully understand that and I won’t say any more about it as we all know the role that they have played while at the same time protecting their own wealth via insider trading. I dislike (dislike is a very polite way of describing how I feel here) what they have done just as much as any other financially responsible person.

   I want to just remind everyone that George Osborne (and Vince Cable, the Treasury and Cameron) is even more responsible for the state on the UK economy and the effects on savers and pensioners. It’s his policies which are causing the current mess and injustice to savers, pensioners and the financially responsible.

   I don’t think that the Labour party would be any better, but do not forget that GEORGE OSBORNE is the main person at the moment who is causing the suffering for the financially prudent.

   Recommend (13)
7. drrdf

   February 13, 2013 at 5:09 pm

   Such Treasury Select committees will not change the situation, no matter how many times or how much savers or SOS protest. Look at exactly what SOS has actually accomplished so far; the only thing accomplished is to waste the sponsor’s money! I hope he feels it is well wasted?

   You all need to understand that this government like the last is actually dictating to the BoE and the MPC what they should do; that is why Osborne supposedly selected Carney as the new BoE governor; he knew that he could rely upon him to continue the destruction of the UK economy by even more debasement of the currency, as was agreed in his interview. All Fiat currencies have always ended in the same way. This government like the last is dedicated to destroying the UK economy just like The Wiemar Republic. Anyone who keeps their savings in Sterling or Euros or US Dollars much longer is going to lose most of its value. Be warned and when it happens don’t claim you were not warned.

   The NWO have agreed to destroy all Western currencies because that is the only way they can put their plans for a new enforced global currency into operation. This time once they achieve their aims the new global currency will not be like Fiat money or gold, but more like an implanted debit card, which will also be able to track you and record every transaction you make. The US company Verichip already has the contract and have produced working prototypes. Investigate it and believe it!

   Recommend (9)
8. Z

   February 13, 2013 at 9:29 pm

   ddrf above is correct in explaining that trying to debate with the Treasury Select Comittee will lead to nothing. Neither will it do anything repeatedly sending messages to the MPC or the UK government with your complaints. They will not listen as they are all simply lackeys being paid lots of money to take the flak.

   Do you all want to know what’s going on and who is pulling all the strings in this crisis?

   The answer is that it’s one banking family and they do it through the BIS (Bank For International Settlements). I’m sure that you know who they are. There are many articles on the internet explaining this, but I believe that the following article explains it well:

   hxxp://www.blacklistednews.com/Bank_For_International_Settlements_%28BIS%29%3A_How_The_Rothschilds_Control_And_Dictate_To_The_World/7913/0/13/13/Y/M.html (replace hxxp with http if you want to view the article)

   Here is the chain of command, with increasing authority as you move to the right:
   MPC -> British Government -> Roth$$child banking family

   The righmost body is completely shielded from your views and it is controlling ALL the shots within the UK economy.

   Kicking the Government out is probably about the best way you can fight back at this stage, and it’s better than doing nothing. I’ll never vote for LIB/LAB/CON ever again. Make your vote count.

   Recommend (10)
9. mike

   February 17, 2013 at 4:43 pm

   I’ve said it before why is The Funding for Lending scheme allowed under competition rules it gives the banks Unfair competition with savers can anybody explain why? It wouldn’t be allowed in any other industry Why have the EU Allowed it to?

   Recommend (6)

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