One pensioners story of lost savings, poor returns and deaf Government Ministers

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We are always pleased to hear from pensioners and savers who want to share their views and experiences.

When we write about savings, it is usually about the way that savers as a whole are treated. But each saver has his or her own story, which is often vital to their growing problems in funding their retirement. Sometime it is only by looking at particular stories that the magnitude of what is happening is brought home. We are grateful to BW, an SOS member, who sent us the letter reproduced below, who is willing to share his tale, which brings home just what a shambles savings policy in the UK really is.

Dear Save Our Savers

Pensions are a form of saving and successive Governments have encouraged us to save. It wasn’t the savers that caused the banking crisis and recession; it was greedy borrowers, bankers and the FSA. But it is the Savers that are being penalised to fund the bailout for all those who got us into this situation in the first place. That cannot be right.  I have used my own case as an example.

I was unfortunate enough to lose my job at the age of 63. So I accepted that there was no way I was going to get another job and fell back on a relatively small private pension that was paid to me from age 60. I had savings in an ISA so I invested them in bank shares on the grounds that banks would be safe and while shares can go up or down it would be unlikely all the banks would go bankrupt. I had various bits of pension and AVCs from previous short term employments from way back. So I thought well that does not look so bad.

Let down by the banks

Then Northern Rock failed and a run on the Bank finished it off although Mr Applegarth (not a qualified Banker) was able step aside with a cool £760,000 in his pocket. Mr. Brown took charge and said no Investors would lose a penny as a result of his timely intervention! He forgot to mention the thousands of small investors who had shares in the Bank lost everything as he confiscated the shares. I was quite a few thousand pounds down and things did not look quite so rosy.  But worse was to come.

RBS failed dramatically and it was in fact worse off than Northern Rock but Mr. Brown could not allow a second Bank to fail as this would be seen as shear carelessness and it would bring the Country down.  Publicly he propped RBS up and also shuffled a massive clandestine loan their way being careful not to tell anyone what he had done.  Fortunately I did not have many shares in RBS but – I still have them unlike Northern Rock. However they are only worth a fraction of what I paid for them and any dividends are worthless. A similar situation developed with TSB and HBOS.

Trying to get a decent pension

Things were not going my way so I thought I would put the bits of Pension on the Open Market and see what I could get for them in the way of an annuity compared with the rates offered by the holders of the funds. Yes I could get more by going open market but less than in previous years. My remaining savings were going down I needed the annuities so had to accept the reduced rate.

Now I hope you followed the above because I thought long and hard about it and I dare say lots of other people were in similar positions. There were a lot of us born just after the Second World War and who are now retiring only to find the financial climate acting against us in low annuity Rates. Our savings are attracting interest rates less than the inflation rate, through absolutely NO FAULT of ours.

In my age group we suffered austerity after the Second World War as children so a lot of us have made provisions for our retirement only to find that as we reach retirement age it is all taken away from us. A point I tried to make to my MP is that the shortfall of pensions and savings means that actual savings capital is being spent and the derived income from interest is lost forever. This means that the present financial situation affects pensioners and their savings not just during the period of recession but for the rest of their lives. The real nasty thing about this recession is it adversely affects all those people, who the PM advocates as, ‘HAVING DONE ALL THE RIGHT THINGS’. Meanwhile the Government rewards all the borrowers who were partly to blame for the recession with low interest rates.

Successive Governments have over the years allowed the basic State Pension to lapse to a figure that is not survivable on, which means that without a top up you cannot survive. So the Government saves trillions of pounds by not paying those that paid into private pensions or were self employed a proper ‘survivable on’ Pension.

Those that did not pay into a private pension or have savings are means tested and given pension credits to make their pension up to the amount deemed ‘survivable on’. But it doesn’t end there because pension credit’s opens a gateway for all manner of other benefits that the private pensioner does not get.

It is wrong that the State should pay you a reduced rate of State Pension for ‘Doing all the right things’.  This matter can be addressed by reducing income tax for the Private Pensioners and Savers. While the present punitive financial arrangements exist, private pensioners and savers will suffer losses which in turn will affect their income and standard of living for the rest of their lives.

Response from Government Ministers

During the last three years I have letters from various Government Departments either addressed to me or to my MP. The letters never address the points raised. While my MP tries her best clearly nothing is getting through to the Government Ministers. I have written to the PM but he has instructed his secretaries to just send letters on to his Ministers who then prevaricate on irrelevant subjects. Mr. Cameron says he listens to what people have to say!! If that is the case he is in definite need of medical attention because he will not listen to me. He listens to school children because there is promotional publicity for him but refuses to listen to some old decrepit pensioner who has ‘Done all the Right Things’. When I complained about low Annuity rates caused by the recession a letter from Sarah McCarthy-Fry MP on behalf of the Treasury and dated 9^th July 2009 to my MP says;

‘I would also like to take this opportunity to make your constituent aware of the open market option – his right to shop around, when he decides to take an income from his Pension savings, to select an annuity provider. By using this option some people are able to increase their pension income by up to 20%’.

Similar rhetoric is used by Mark Hoban in answer to two Written Parliamentary Questions submitted by my MP on 15^th December 2011.

Clearly neither of them gets it! It is like they are saying the Open market option for annuities did not exist before the recession but you can now make good your losses by going ‘Open Market’ to make up for the lower Annuity rates!!! What a load of ——.

Anyway I hope that most of my letter makes reasonable sense and helps with ‘Save our Savers’. Regrettably I have not got the time to answer any incoming letters on the subject unless of course they are from the Prime Minister and that does seem highly unlikely.

All the Best

BW

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11 Comments

1. frances

   May 21, 2012 at 6:05 pm

   PRECISELY SAID

   Not one single response from Bank of England
   Treasury
   or my MP addresses the HELL that all Pensioners struggling to exist on savings income are being subjetted to

   I was born in 1945 and my Father walked out in 1952 leaving me and my baby sister and my Mother to work 3 jobs 20 hours a day just to keep food on the table
   There was no Social Security for her then
   My Father never paid a penny in Maintenance
   She was 52 before she scraped together the deposit on a 2 bed Bungalow
   From age 13 I worked Saturdays and holidays in a shop

   I got married but had no option but to be a stay at home Mum for my own children who grew up well balanced with good O and A levels and who did the right thing and got Married and had to work to keep qualifications or pay the bills

   I then cared for my Grandchildren till they went to school
   I cared for my Mother till she died age 90 and who grabbed 40% of her tiny Bungalow in IHT ………..HMRC

   Result of my sacrifices a paltry HALF state pension and a miserly £2.60 a week increase

   My savings income has plummetted 25%
   I too had Northern Rock share CONFISCATED
   Bradford and Bingley Shares CONFISCATED
   Not one single one of a wide share portfolio has increased in last 4 years and the dividends have nose dived

   Yet the Bank Of England dares to say assets/ dividends have increased oh yeah JUST WHICH ONES ???????????????

   Its quite clear that not one single word tha
   David Cameron
   George Osborne
   Nick Clegg
   Have spoken in speeches is worth spit
   They all hate us and are determined to RIP US OFF for doing the right thing and try to save for old age

   Worse still they and all MPs their staff, The Civil Service and the entire MPC are all on mega salaries and gold plated pensions paid for by us

   No amount of Growth in the economy will ever replace what we have lost and meanwhile the perpetrators of the mess namely Tony Blair and Gordon Brown and the Banks amass MILLIONS all off our backs

   FAIR ITS NOT

   Recommend (15)
2. Ian

   May 22, 2012 at 9:56 am

   As a baby boomer, brought up after the war on rations and now retired, again on rations, life has been a struggle and will get only worse.

   - My Equitable Life pension was stolen from me.
   - Most of my savings interest has been stolen from me
   - Minimal returns on any investments
   - Low annuity rates
   - High inflation rates
   - Energy costs through the roof

   Life, it’s just a struggle.

   Recommend (17)
3. Scooter

   May 22, 2012 at 4:05 pm

   Governments are just leeching parasites . As long as they are funding a good lifestyle for themselves , by ripping off the taxpayer , they really don’t care a stuff how we struggle to exist .

   Recommend (10)
4. Ez

   May 22, 2012 at 7:08 pm

   A typical hard luck story and I am sympathetic, but what does it really amount to? The poster bought a narrow spectrum of financial shares and they went belly up. Had he diversified and invested in the real economy things would be different.

   As for savings, these are not investments. Long term, you will never make money from stashing cash at no capital risk. Kidding yourself that relatively high real interest rates will last forever is a delusion.

   Recommend (0)
5. frances

   May 22, 2012 at 8:03 pm

   You could have the widest possible basket of shares and cash investments and still be 25% poorer after last 4 years of hell
   Blame stays with G Brown for his total mismanagement of the economy and the change in controls on the Banks which the FSA fudged and escape sanction for

   Recommend (6)
6. Anne

   May 22, 2012 at 8:57 pm

   The government is out to steal as much from us as they possible can. By the time I can have a cost of iving rise of 1% from 2013 I will not have had a cost of iving increase for five years. Any interest accrued on savings ( not forgetting what we have had to do without in order to save some money ) is being stolen by the government and the third robber is inflation; placests us on the breadline and dropping off the end. What I can’t understand is people’s tolerance of this government because I for one are just waiting to shove the pedestal. (Oh and by the way a 1% cost of living rise for me equals £1,50 per week.) Don’t forget the 20% VAT that is levied too. The government encouraged people to borrow and get into debt and then when it backfired on them, they blame us for that as well.

   Still not content, the IMF are now after cutting the 0.5% interest rate on savings. (See Ms Lagarde BBC News 22nd May 2012 ) Oh aren`t we in a mess!!!!!

   Recommend (7)
7. V

   May 23, 2012 at 1:14 pm

   Ez says:
   “Kidding yourself that relatively high real interest rates will last forever is a delusion.”

   I think that most pensioners and savers would be happy with realistic interest rates that simply do not allow current relatively high inflation to destroy their wealth and hence their way of life at the moment. Inflation always destroys savings but at the current rate above savings rates it’s pure theft. I don’t want to work until I’m in my 80′s or 90′s and want to put some money away so that I get some free time away from working to enjoy myself, but the way things are going everyone will have to, except for the politicians of course.

   Osborne is now not only hiding behind the MPC with his ZIRP/QE policies, I see he’s also now hiding behind his new friend at the head of the IMF. Who would have thought that a Tory would steal from the responsible to hand over to the profligate… Also, I assume it’s a case of “we must protect our personal property portfolios at the expense of pensioners and savers”. If this sort of behaviour in the UK was happening outside the West they’d be referring to it as a corrupt country.

   Recommend (10)
8. Ez

   May 23, 2012 at 3:59 pm

   >You could have the widest possible basket of shares and >cash investments and still be 25% poorer after last 4 years >of hell

   Of course: buying high and selling low is never recipe for investment success.

   >I think that most pensioners and savers would be happy with realistic interest rates

   And that is exactly what they are getting over the long term — about 0.5% in real terms. The real returns of 3% or so that obtained a few years ago were historically unsustainable and people who planned on that basis were misguided. That anomaly is now being corrected. Low risk = low return.

   GB and the institutions bungled the money, but that’s what governments do. They always need to bribe the electorate and the electorate always likes the bungs.

   It would be nice if the financially responsible always got rewarded, but the world isn’t like that. No matter how angry savers get or however much they parade their sense of entitlement, they have to ride the ups and downs of the economy jus tlike everyone else.

   Recommend (0)
9. V

   May 23, 2012 at 4:27 pm

   >>I think that most pensioners and savers would be happy with realistic interest rates

   >And that is exactly what they are getting over the long term — about 0.5% in real terms.

   If that’s the case then inflation shouldn’t have been allowed to soar to the levels it has done. I agree with you about Gordon “no return to boom and bust” Brown bungling of the economy and government bribery.

   Yes, riding the ups and downs is par for the course and inflation always eats away at cash savings, but it appears peoples spending power has been reduced by a whopping 20+% within just 3-4 years due to the effects of inflation and low savings rates (source e.g. MarketOracle), whereas those who have lived way beyond their means have had their debt burdens massively reduced. To me that is pushing things too far.

   Recommend (9)
10. Bryan

    May 23, 2012 at 9:20 pm

    In Canada, the issues brought forth by Save Our Saves are not on the radar. However, to a mild degree, the same dynamics are play with regard to interest rates, Really, we’ve got it much easer. Inflation is at 2.00%, and if you shop around and work at it, you can get above up to 2.5% on your Term Bank Deposits (GICs). One thing that we have that I’m sure you would be enthusiastic about is Tax Free Savings Accounts.
    http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html

    Recommend (3)
11. frances

    May 24, 2012 at 5:02 pm

    Oh we have Tax free savings accounts but they are limited in how much cash or shares you can put in each year
    so it would take a lifetime to amass enough to cope

    Also for years the Banks have been paying less interest on these ISA accounts than was correct so often there was little point

    The Banks massage the figures anyway they like just as the Politicians do

    Recommend (6)