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Low interest rates on savings

kabbes said:
Something around £111 to £113 depending on how early in 2021 you mean

This may help

www.bankofengland.co.uk

Inflation calculator

Use our inflation calculator to check how prices in the UK have changed over time, from 1209 to now.
www.bankofengland.co.uk www.bankofengland.co.uk

Your personal inflation will be different depending on what you actually spend your money on. But this gives you the view for a typical person.

(Over more than a few decades, it’s actually a lot harder to interpret inflation than that calculator implies. But over a few years, it’s straightforward.)
Click to expand...
To double check, being paid £100 at the start of 2021 is the equivalent of being paid approx £88 now, in terms of what that sum will get me?
The £100 should increase to approx £112 in order to be able to afford to buy the same things now?

Sorry if that seems a bit dim but I want to get it totally clear before approaching my boss. And I am.
 
danski said:
To double check, being paid £100 at the start of 2021 is the equivalent of being paid approx £88 now, in terms of what that sum will get me?
The £100 should increase to approx £112 in order to be able to afford to buy the same things now?

Sorry if that seems a bit dim but I want to get it totally clear before approaching my boss. And I am.
Click to expand...
Yes, that’s about right. Arguably, the first figure should be more like £89 (i.e.,100/1.12) but it’s close enough
 
Why should Rishi Sunak be compared to Lloyd George, Neville Chamberlain and George Osborne?

The First World War paid off? | The Western Front Association

www.westernfrontassociation.com www.westernfrontassociation.com

According to this article he's in it up to his neck! Lloyd George issued gilt edged stocks called "War Loan" to pay for the First World War. Our present debt crisis is caused by Boris & Rishi paying for Covid - or at least their panic measures to deal with it.

Neville Chamberlain cut the interest paid to depositors on War Loan from 5% to 3½% as an austerity measure in 1932.

George Osborne reaped the benefits of 72 years of inflation to repay War Loan in full, together with some other undated gilt-edged stocks issued for such nefarious purposes as the financing of the 7 years war and the payment of compensation to slave-owners whose slaves were liberated on the abolition of slavery. [4% Consols, 2½% Consols, 3% Exchequer stock and 2.5% Treasury stock].

Quote: "Does the announcement that the War Loan will be "paid off" stand up to scrutiny? Chancellor of the Exchequer George Osborne has stated that by undertaking this exercise, the £1.9 billion currently outstanding to over just over 11,000 registered holders means the First World War is now paid off.

There are two problems with this statement. The first is that the value of the £1.9 billion - a phenomenal amount in the 1930's has been depreciated to the value of "small change" (at least in Government budget terms) by 2015. Inflation has - over time - dissolved the mill-stone of this debt. Whilst the interest on this has been met since 1932 (and before this in the War Loan's earlier forms) the annual value of the interest payments has - like the capital value of the War Loan stock held by so many of the population - also reduced. Anyone who converted into the War Loan in 1932 would have received £35 per year for every £1000 invested, but the £1000 that was invested at the time and is now being repaid is now worth only a fraction of the £1000 that was handed over to the Government in 1932. The value of goods and services that you can now obtain for £1000 would have cost less than £17 in the 1930s. (By the same token, the £35 interest in the first year - under this example - would require £2000 in 2015 to buy the same amount of goods and services).

The second point is that the debt is not being paid off. The repayment of the Consols and War Loan earlier in 2015 simply merged debt which had no maturity date into other government borrowing which will cost less to service. This is just a book keeping exercise and the residual and identifiable costs of this have now been swept up into a bland and unremarkable new gilt which will - in its turn - be refinanced again in perhaps twenty or thirty years' time.[5]"
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and another thing................

back in the day (1980s at least) anyone could buy gilts on the "Post Office register" by getting a form at the Post Office, together with a post-paid envelope and send it off with a cheque to Bootle. Selling was just as easy - you got a redemption form and sent it off, post paid to Bootle and got a cheque back.

Now the goverment (probably Osborne again?) scrapped the Post Office register and privatised gilts dedaling to Computershare - so any member of the public has to pay someone a large commission to trade.
How wonderfully democratic.

FAQs

FAQs
www.dmo.gov.uk www.dmo.gov.uk
 
So my old Tesco ISA is winging its way to Santander, and I have the form filled ready to take to Santander to do the internal transfer - seems bonkers...

The best 1 year fixed recommended by Martin Lewis is with an fscs approved bank with no high street presence and I'm nervous.. for some reason I wasn't scared when I set up my Tesco account ... I've set up the account - it was going to be Skipton which at least has a branch in town ..

Unfortunately they don't have any accounts where I could experimentally send a few quid back wards and forwards to test it ..

Shawbrook Bank - Savings, Loans, Business & Property Finance

Shawbrook is a specialist savings and lending bank, offering personal loans, residential and commercial mortgages, business finance, and savings products.
www.shawbrook.co.uk
 
I don't bother going for the absolute table-topping rate if it's somewhere I regard as "dodgy" by my definition. This would include sub-prime lenders such as Shawbrook and Paragon, as well as sharia accounts and any foreign banks without decent UK-based customer services. I never had any savings in an Icelandic bank.

There are plenty of low-risk providers out there offering similar rates. Also plenty of sound* non-high street banks too, Chase and Marcus for a start. *sound as in their owners are too big to fail

The BoE will raise rates next Thursday so you might wait a week or two if you're going to fix. Savings rates don't typically follow BoE rate rises that closely but the general trend is upward and I would expect better fixed deals to emerge.
 
FWIW I got caught by the dodgy bank thing in '08 (Icesave, history fans).
It was within the FSCS limits and I got a cheque from FSCS within a few weeks of it failing (that I was able to pay into another ISA, so no tax wrapper lost) - so all I lost was a month or so of accrued interest.

Conversely my mother (unbeknown to us all ) had some ISA that was registered in Isle of Man - took about a year for that to be returned to her

So I would say that, if registered in UK FSCS, and is mainland British then there is low / imperceptible risk -
Biggest problem is likely to be admin friction in getting money out of a small inadequately staffed organisation (Not that the Barclays, HSBCs of this world are any better at this and are probably worse)
 
platinumsage said:
I don't bother going for the absolute table-topping rate if it's somewhere I regard as "dodgy" by my definition. This would include sub-prime lenders such as Shawbrook and Paragon, as well as sharia accounts and any foreign banks without decent UK-based customer services. I never had any savings in an Icelandic bank.
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Why do you regard sharia compliant accounts as dodgy? As long as they are fscs protected they are surely safe up to the £85k limit at least.
 
MrCurry said:
Why do you regard sharia compliant accounts as dodgy? As long as they are fscs protected they are surely safe up to the £85k limit at least.
Click to expand...
Whatever they are Sharia accounts are not interest bearing deposits.
In theory Islamic loans/deposits are shares - like unit trusts etc. So if the underlying investment does well they prosper, and if it goes down the reward to the investor goes down.
You say they are safe up to £85,000 - but if the underlying fund goes down, then actually the £85,000 is not safe.
Q.E.D?
 
MrCurry said:
Why do you regard sharia compliant accounts as dodgy? As long as they are fscs protected they are surely safe up to the £85k limit at least.
Click to expand...

There's no contractually guaranteed interest, just an expected profit rate. Sure you could say it always pays out, but that's only true until it isn't. Also these banks tend to be either too small like Gatehouse, which is basically a rental property developer, or else headquartered in dodgy regimes (Sberbank was a darling of some UK investment funds until it was sanctioned).

FSCS protection is all very well, but I don't like to rely on it such that I give my money to organizations that I otherwise wouldn't. Plus it only pays out if the bank actually fails, but there's a whole world of sketchy possibilities including delays and fraud which don't involve that happening.
 
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CH1 said:
Whatever they are Sharia accounts are not interest bearing deposits.
In theory Islamic loans/deposits are shares - like unit trusts etc. So if the underlying investment does well they prosper, and if it goes down the reward to the investor goes down.
You say they are safe up to £85,000 - but if the underlying fund goes down, then actually the £85,000 is not safe.
Q.E.D?
Click to expand...
I don’t believe it’s true that your original deposit can go up or down based on an underlying investment. They wouldn’t be allowed to market themselves as an instant access savings account if that were the case.
platinumsage said:
There's no contractually guaranteed interest, just an expected profit rate. Sure you could say it always pays out, but that's only true until it isn't. Also these banks tend to be either too small like Gatehouse, which is basically a rental property developer, or else headquartered in dodgy regimes (Sberbank was a darling of some UK investment funds until it was sanctioned).

FSCS protection is all very well, but I don't like to rely on it to give my money to organizations that I otherwise wouldn't. Plus it only pays out if the bank actually fails, but there's a whole world of sketchy possibilities including delays and fraud which don't involve that happening.
Click to expand...
Ok, I get the argument to avoid companies like gatehouse or Shawbrook who are basically just acting as risky lenders with savings deposits. How they manage to qualify for fscs is another question, but if the reason for avoiding them is they seem more likely to fail than a bigger bank, then fair enough. But that’s not linked to being a sharia bank is it, so your argument is just that the fact interest (“profit”) payment can’t be contractually guaranteed means the sharia banks are a risk.

I’d look at it differently and say that if the sharia banks are paying an extra 0.25-0.5%, as they are in many cases, then if this perceived risk that they might not pay you the agreed profit deters you, just consider how many months of extra profit is needed before a missed monthly payment is already covered. The perceived risk is surely far higher than the actual risk, in any case.
 
CH1 said:
A look at the potential underlying investments might make you think twice
asia.nikkei.com

Islamic bonds come under microscope after Garuda Indonesia default

Rating agency highlights legal uncertainty as issuance reaches new high
asia.nikkei.com asia.nikkei.com
Click to expand...
Yes, but there’s a difference between the risk involved in the investments a bank makes and the risk you take on as a retail client with a deposit protected instant access savings account. I’m sure the underlying investments of all sorts of banks would scare the bejesus out of us if we were able to trace them, but it’s nothing you need to worry about if you’re accepting a much lower level of return in exchange for a much safer product like a savings account.

Also I’m not aware of any reason to judge sharia complaint banks as more likely to make risky investments than other providers, so as I said to platinumsage above, it can be a reason to not choose one institution over another, but not a reason to define Islamic banks as a risky category.
 
MrCurry said:
Yes, but there’s a difference between the risk involved in the investments a bank makes and the risk you take on as a retail client with a deposit protected instant access savings account. I’m sure the underlying investments of all sorts of banks would scare the bejesus out of us if we were able to trace them, but it’s nothing you need to worry about if you’re accepting a much lower level of return in exchange for a much safer product like a savings account.

Also I’m not aware of any reason to judge sharia complaint banks as more likely to make risky investments than other providers, so as I said to platinumsage above, it can be a reason to not choose one institution over another, but not a reason to define Islamic banks as a risky category.
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If you have confidence in it I suggest you put your money in. I don't think it ethical for you to advocate others to do so unless you have a full understanding of the banks concerned - and to me you seem to be arguing from sentiment rather than knowledge.
 
CH1 said:
If you have confidence in it I suggest you put your money in. I don't think it ethical for you to advocate others to do so unless you have a full understanding of the banks concerned - and to me you seem to be arguing from sentiment rather than knowledge.
Click to expand...
I’m not advocating anyone does anything. platinumsage had made a statement which prompted me to ask his reasons, and you’ve come in with various arguments, none of which seem to me to stand up to any scrutiny.
 
I've already given my reason. You might think there's a risk premium there, but just because a risk premium is in itself good value, that alone isn't a reason to take the risk. And as I said, competitive Sharia accounts are invariably provided by niche lenders or e.g. Qatar-headquartered banks, neither of which I want to trust with my money, regardless of FSCS protection or any moral issues.
 
platinumsage said:
I've already given my reason. You might think there's a risk premium there, but just because a risk premium is in itself good value, that alone isn't a reason to take the risk. And as I said, competitive Sharia accounts are invariably provided by niche lenders or e.g. Qatar-headquartered banks, neither of which I want to trust with my money, regardless of FSCS protection or any moral issues.
Click to expand...
Ok fair enough. You answered the question and it makes sense. Thank you.
 
I see Halifax is doing 4.5%. We were just going to overpay the mortgage as it didn't seem a huge difference then saving it, but this is starting to change things.

Am I right in thinking savings rates will probably go higher still?
 
I'm sure you lot will be delighted to read this stroppy forecast about NS&I from rivals Hargreave Lansdowne
(Citywire): Rising interest rates have prompted National Savings & Investments (NS&I) to boost its own savings rates to a 10-year high but those ‘reluctant’ rises won’t last much longer, warns Hargreaves Lansdown.

The government-backed savings organisation has cheered savers with a raft of rate increases in recent months, including last month’s rise to the rates on its Direct Saver and Income Bond accounts of 0.6% to 1.8% – the highest rates the accounts have offered in a decade. Its Direct ISA rate also nearly doubled, from 0.9% to 1.75%, while the Junior ISA rate climbed from 2.2% to 2.7%.

While NS&I has been forced to make the changes to keep its products attractive as the Bank of England hikes interest rates to curb inflation, the rates being offered are still not the most competitive.
However, Hargreaves Lansdown senior personal finance analyst Sarah Coles said savers should not expect any more bumper increases.

She noted that NS&I is halfway through its financial year and has already raised £3.4bn, meaning it is halfway to its full-year net financing target of £6bn. Inflows were well below half a billion for the first few months of the financial year before jumping to £1.1bn in August following an NS&I savings rate increase in July.

Coles said the last six months have been ‘relatively plain sailing’ for NS&I, which means ‘we’re unlikely to see rate surges rock the boat anytime soon’. ‘In fact, as savers batten down the hatches for tougher economic times and put more cash aside, we could see it fall further behind its competitors,’ she said.
 
platinumsage said:
Also these banks tend to be either too small like Gatehouse, which is basically a rental property developer,
Click to expand...
oh. i wish i'd read this before bunging some of my money into exactly that at the end of last week . I didn't spend much time on it, just thought i was doing a good thing by moving it out of the zero interest account it had been sitting in, and the gatehouse thing came up in a search and then it had lots of stuff about how they'll plant trees with my money and that sounds nice.
Have a done a big stupid?
 
bimble said:
oh. i wish i'd read this before bunging some of my money into exactly that at the end of last week . I didn't spend much time on it, just thought i was doing a good thing by moving it out of the zero interest account it had been sitting in, and the gatehouse thing came up in a search and then it had lots of stuff about how they'll plant trees with my money and that sounds nice.
Have a done a big stupid?
Click to expand...

No not at all, I was just stating my personal preference - your savings are FSCS protected. I'd be a million times more worried getting a mortgage from them, as that's a whole different kettle of fish, but savings-wise they offer a good rate and the risk is not much different than e.g. a regular small building society so I wouldn't worry about it.
 
If you’ve got another 4.5 years on a fixed rate, I’m betting that you can’t pay off more than 10% of the mortgage anyway?
 
UnderAnOpenSky said:
Yes 10% a year. I'm not talking huge sums in the grand scale of things, but everything helps right?
Click to expand...
Of course. As you’re thinking, though, if you have a fixed rate and you aren’t planning the kind of lifestyle change that involves substantially paying off the mortgage, I would certainly agree that there are better things you can do with the money right now than paying off small bits of the mortgage.

My bet is that some time late in 2023 or in 2024, there will be a decision to inject more money back into the system, that money will have to go somewhere and you’ll see a sudden, dramatic increase in the value of stocks (notwithstanding that they’ll probably start an upwards drift before that point anyway). So if you’re putting money away for more than 3 years, I would certainly at least think about options other than cash accounts. Not to mention that in the long run, inflationary rises will accrue to capital (and hence shareholders), not to cash deposits.
 
Through work, I was listening to a presentation from some investments bankers. They were suggesting that bonds are beginning to "look attractive".

I don't really get bonds.. but my understanding is that as interest rates and inflation are both high now - the direction for both in the long term is now down - which should mean bonds rebound.

I can see bond funds have taken a massive hit this year.. e.g.

Vanguard Asset Management | Personal Investing in the UK

:confused:
 
Hollis said:
Through work, I was listening to a presentation from some investments bankers. They were suggesting that bonds are beginning to "look attractive".

I don't really get bonds.. but my understanding is that as interest rates and inflation are both high now - the direction for both in the long term is now down - which should mean bonds rebound.

I can see bond funds have taken a massive hit this year.. e.g.

Vanguard Asset Management | Personal Investing in the UK

:confused:
Click to expand...
Bonds go up and down in value quite readily, so they can be quite volatile in the short term. Fundamentally, however, what you’re getting for any given individual bond is a guaranteed income followed by a guaranteed redemption. As such, if you hold the bond to its redemption, you should know exactly what return you’re getting. That works in principle for bond funds too — as their market value changes, so too does their reinvestment rate in the opposite direction, and the overall return should be fairly predictable over the medium term, although there will be peaks and troughs in the short term.

To be honest, however, bond portfolios are deceptively complicated, despite this simple fundamental concept. I would view them as a good diversifier but not necessarily the right choice for heavy investment for the average punter that doesn’t have some formal technical understanding of their valuation.
 
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