The new Junior ISA – will your child’s money simply be a hostage to inflation?

Giving young people a good start in life is important; so the new Junior ISA which gives parents, relatives and family friends a chance to put some money aside for a child is a welcome prospect.

The Junior ISA is designed to replace the Child Trust Fund (CTF), the eligibility for which ends in January 2011. However unlike the CTF the Government will not be contributing any cash towards the fund.

Announced yesterday by Mark Hoban, the Financial Secretary to the Treasury, the full details have not been published yet but the Government plans for the accounts to be in operation by autumn next year.

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Time to end shoddy treatment by banks and building societies

It’s bad enough having to put up with miserly rates of interest, but banks and building societies ‘ behaviour towards savers just compounds the misery.

Just setting up a new savings account these days can sometimes be a nightmare.  Endless anti-money laundering and security checks make it all horrendously tiresome.

Once you have cleared all these hurdles, you then have the job of managing the account, while keeping abreast of all the terms and conditions, which seem to be getting increasingly complex.

Its all in the detail

For instance, most top paying accounts incorporate an introductory bonus lasting six to 12 months, after which the return is likely to fall off a cliff, so you have to keep shifting your hard earned cash around to keep up with the best rates.

Then there are varying notice periods and limits on the amount and number of withdrawals you can make in one year.

The Nationwide eSavings Plus account, currently paying 2%, can’t be closed after three withdrawals, (when the rate drops to 0.1%), so savers who slip up on this are locked into this paltry rate for the rest of the year. It’s the financial equivalent of being mugged and imprisoned, all in one go! … Continue Reading

2010 Spending Review – How the cuts affect savers

The spending review affects all aspects of Government spending, but in it were a couple of changes with a direct impact on savers, the main one being the rasing of the state pension age retirement age.

Raising of the State Pension Age

The State Pension Age (SPA), which is the age people qualify to receive the state pension, is being increased.

Before the Government came to power there was a plan in place to increase the SPA for woman to 65 by 2020 and for both men and women to 66 by 2026.

The increase in the SPA for women to 65 has now been brought forward to November 2018. This means the retirement age for women will be increased in a series of small stages between now and November 2018. Between December 2018 and April 2020 the retirement ages for both men and women will be increased to 66.

The Pensions Advisory Service Web Site has a very easy to use retirement date calculator that should hopefully be updated with these new dates soon and will help you to see if and how these changes affect you.

The final outcome is that women born on or after 6^th April 1953 and men on or after 6^th December 1953 will now have to wait until they are 66 before they can receive a pension. … Continue Reading

Is the Government its own biggest creditor?

In June the Office for Budget Responsibility forecast that the Government’s interest payments on its debts would be a whopping £43.3Billion this financial year.

Part of this interest is payable to the Bank of England, who created £200 Billion through quantitative easing (QE) and used it to buy government gilts.

Analysts at Société Générale have calculated that if the Bank of England issues a further £50 Billion of QE as is expected and uses it to buy more Government Gilts, the Government could end up paying the Bank of England £7.75 Billion in interest this year. Money that will, of course, eventually be returned to the Treasury.

Shouldn’t it be the Government’s duty to protect the value of its citizens’ savings?

Several months ago I attended an event where Steve Webb, the Minister for Pensions, opened by saying:

“The worse advocates of pensions and savings are retired people who say to their children and grandchildren: ‘I wish I’d never saved. My neighbours got this and that, while I saved and got none of it’.

“There is such a lot of resentment. And the resentment where people who made the effort to save don’t get rewarded is huge. They are the sales force for not saving. We need to tackle that and make sure that people who have savings make themselves better off.”

It was a short speech that went on to talk about auto-enrolment into pension schemes, raising the basic state pension to a level above the benefit threshold, creating a competitive open market for annuities and the necessity to increase retirement age to make state pensions affordable.

Much of this is potentially good news; ensuring people have adequate savings and income to cover their retirement is a win, win, win situation. The first win, because our home grown savings provide an important stable source of capital for the economy; the second, because you will be more comfortably off and financially secure in your retirement and the third because having a retired population who have money to spend is much better for the economy and society than one that doesn’t. … Continue Reading

Dear Saver, If you can spend do, but if you are suffering we are sorry but its for the best

We know that after Charlie Bean’s admission on the Channel 4 news that it was the direct intention of the Bank of England’s policy to get savers to spend by reducing interest rates, upset a great many people. Some of whom took the trouble of writing to the Bank of England to vent their anger and disagreement with the policy.

Below is the reply that one of our supporters received and attached is a strikingly similar one sent to another.

If you would like to view a short clip from the interview and judge for yourself whether Charlie Bean’s comments were taken out of context as suggested in the letter please click here.

Dear …….

Thank you for your e-mail of 28 September to the Governor and Mr Bean, regarding the recent comments by the Deputy Governor, Charlie Bean, during an interview on Channel 4 News. This has now been passed to me for reply.

The Deputy Governor was asked by Channel 4 to explain the impact on savers of the monetary policy measures taken by the Bank of England in response to the sharp contraction of the economy in the wake of the financial crisis.  I am sorry that you feel that Mr Bean’s remarks were provocative and insensitive.  I can assure you that this was not his intention. I should also add that many of the reports of what the Deputy Governor has said have been misleading or incomplete and, of course, his responses were not broadcast in their entirety. Let me explain.

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Dear Pensions Minister – It’s time to act in the best interest of savers

Dear Steve,

Do you have a tin ear? I hope so since, as Pensions Minister, you’ll no doubt have to listen to countless voices trying to wheedle their way on policy – including many from well-heeled and comfortably snug executives woefully manhandling the pensions and savings industry.

Yet, with your nascent responsibility for industry reform – four months into the job isn’t long, I admit – you’d do better instead to hear the distress calls from ordinary savers and workers who mindfully put cash into private retirement savings and pension funds.

In online forums and financial chat rooms bubbles a bilious fount of fear, loathing, distrust and disgust towards the industry for which you’re responsible.

Take a look at the sentiment that venomously drips from these very recent postings on diverse forum discussions on saving, pensions and Charlie Bean – the hapless deputy Bank of England governor – whose sledgehammer sensitivity, see Bank of England admits that its policy is to penalise savers, stuck in the craw of many.

“There was a time when we used to laugh at old people who kept their money under the mattress because they didn’t trust banks – now it looks like the voice of experience talking!” bemoans James B from Wales. … Continue Reading

Bank of England admits that its policy is to penalise savers

In an interview for Channel 4 news Charlie Bean, the Deputy Governor of the Bank of England, has made it clear that the Bank’s policy is that people should spend, not save and that the Bank has no intention to act to encourage saving maybe for as long as the next decade.

However he admits in the interview that preceding the financial crisis the UK was not saving enough. According to Mr Bean the Bank of England had been saying for years that more saving was needed in order to rebalance the economy. It is certainly true, in the years preceding September 2008 the UK savings ratio averaged 3.2%, by far its lowest levels since the 1950’s.  But it begs the question: why did they not act to encourage saving rather than wait until it was too late? The answer is probably because the Bank of England is not responsible for managing the level of saving in the economy and as far as I know there is no government target in place for the savings ratio and it is not actively managed at all. … Continue Reading

Bank of England’s Mr Bean lets cat out of the bag

Channel 4 news at 7pm tonight (27th Sept) will include an interview with Charlie Bean, the deputy Governor, of the Bank of England.

In the interview Mr Bean shows the Bank of England’s true attitude towards savers and makes it quite clear thet the current economic policy is designed to disincentivise saving, he also said “I would certainly not expect the level of bank rate to stay very close to zero for a decade or more.”

Below is a short clip from the interview

A couple of quotes from the interview…

Faisal Islam “Deputy Governor do you accept that one of the side effects of your policy over the last two years is that savers have been hit really badly?”

Charlie Bean “Well I wouldn’t want to call it a side effect I think it is important to realise that actually it is a key way that monetary policy affects the economy by affecting the incentive to save. When we cut bank rate it reduces the incentive to save it gets households to spend more it also encourages businesses to go out and invest more. So when we need to pump more demand into the economy what we do is lower the bank rate when we need to cool the economy we do the opposite so I emphasise it is not really that it’s a side effect.”

Faisal Islam “It does seems a little contradictory when we hear so much about rebalancing the economy towards a high saving high investment economy away from the go-go years of too much borrowing that the incentive save has never been poorer” … Continue Reading

Shareholders fight back

I do policy work for the United Kingdom Shareholders Association. UKSA is a member organisation dedicated to promoting and protecting the interests of private shareholders. It was born out of the Great Utility Pay Scandal of the nineties. Do you remember when public utilities were privatised and the executive directors immediately attempted to get their pay multiplied “to match the competition”? And Cedric the Pig was paraded outside the AGM of British Gas (Chairman: Cedric Brown)? Well, that passion and indignation was the foundation of UKSA. … Continue Reading