www.telegraph.co.uk/finance/personalfinance/savings/9892056/A-third-of-Britons-fail-to-save.html
1/3 rd of UK people fail to save............no surprise really
However the article mentions Scottish Widows and their spokesperson has his comments on saving.
I would like to have mine - from 1994-2006 I gave £100K to a Pension Provider WHO managed to hand back £100K........i.e. my pension had not grown in 12 years.............
The only people that made money out of my £100K were the broker , the Pension fund and the annuity provider..............
I think the Pension/Insurance industry now needs to clean up their act rather than milk Joe Public!
Thank goodnes I had other assets that grew and I was dependent on the Insurance Company!
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We handed money to Scottish Widows once. It didn't take long to realise that the reality of their 'high income plan' was that they were failing to deliver on their investment projections and paying us income out of our own capital. I'm amazed these sort of people still pop up on TV and radio as pundits. Same goes for Standard Life. But don't get me started...
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Savings are in an odd place these days with such low returns.
We've never taken advice on where to put savings other than our own research and it's worked out OK.
The late in-laws were from that previous generation who trusted "professionals". Some of the advice given to them on retirement and thereafter was bordering on criminal. The very first investment where they placed the funds from sale of a family business lost 30% in just 6mths... and the slimey "advisor" managed to convince them it was only bad luck and to continue with trusting his decisions. It took years of losses before they saw sense.
Last edited by: Fenlander on Mon 25 Feb 13 at 12:30
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I've lost count of the times I've had to point out to people that "Independent Financial Advisor" didn't mean "independent" in the way they thought - all it means is that they are not restricted to advising on particular products or tied to a particular firm(s).
Until recently, nearly all IFA's income came from commissions. If they didn't advise you to but products that paid them a commission, they wouldn't eat.
I would never use an IFA other than on a fee basis anyway. Since December this is the only way they are allowed to charge for investment advice, either as an up front fee or a transparent percentage of what they invest for you.
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markets.ft.com/RESEARCH/markets/DataArchiveFetchReport?Category=BR&Type=UKG&Date=02/22/2013/
Go here and note:
Tr.8% '15 6.58% coupon. 3 years to run, giving £197.40 total per £1000 invested.
Tr.8% '21. 5.42% coupon. 9 years to run, giving £487.80 total per £1000 invested.
These are as safe as any cash investment can be but will we redeemed at par so final yields are poor. You need to apply compound interest to know if these are good punts overall (something beyond me) and, in practice, initial placing, income and final payout will be subject to broker commission.
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Don't get too excited. For example, the first one pays 4% every 6 months based on the face value of £100, which is the capital amount you get back in 2015.
Treasury 2015 8% price is £121.36. You'd actually pay £123.17 today because the coupon (interest) is paid 7/12 and 7/06 every year and you pay for the accrued interest as you will get 6 month's worth on 7th June.
So if you buy today your cash flows are
25-Feb-13 -£123.17
07-Jun-13 £4.00
07-Dec-13 £4.00
07-Jun-14 £4.00
07-Dec-14 £4.00
07-Jun-15 £4.00
07-Dec-15 £104.00 (£100 face value plus 6 month's interest)
If you have Excel, use XIRR to see the annual return held to redemption.
= XIRR(amounts, dates, guess). Use say 0.1 for the guess.
The yield to redemption is about 0.26% by that method, which agrees with published data.
The running yield of 6.59% is spurious because the capital value will go down steadily between now and redemption on 7th December 2015.
I couldn't open the link but there's another here -
www.digitallook.com/companyresearch/13875/8_Treasury_Stock_2015/company_research.html
Last edited by: Manatee on Mon 25 Feb 13 at 14:39
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There was a lady guest from HSBC on Quest means Business the other night, saying much the same thing.
Richard Quest asked her lots of questions, but not, of course, the one we really wanted to hear - "Why would anyone give you money for 45 years, when there is absolutely no guarantee what the return would be, if any?"
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Fidelity didn't prove much better over the years. No point in saving really - interest rates are abysmal and inflation eats the returns in any case. Best to buy wanted goods at the lowest price you can find and then you really do save.
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Plonk funds in one of offspring's bank accounts linked to an offset mortgage and split the interest ?
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Im spending most of my spare money doing up the house. They are selling for about £20k more now than when we bought ours so it seems like adding value with a new kitchen and tidying up the decoration is as sound an investment as any.
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>> Im spending most of my spare money doing up the house. They are selling for
>> about £20k more now than when we bought ours so it seems like adding value
>> with a new kitchen and tidying up the decoration is as sound an investment as
>> any.
>>
Only if you're planning on selling it. You have to live somewhere...
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Improving your house, providing it adds value is always a good investment because you get the benefit of living there as well. You may not be able to access the extra value unless you sell it but that does give you the option of trading down.
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Doing up kitchens and bathrooms does not add value, merely makes them easier to sell. And as they age and wear, it will be need to be done again before you sell. The only improvement that adds value to a house is more bedrooms.
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Yes keeping a house up to date with decorative order and tidy garden is always good value but... particularly in this market... any major upgrade needs careful consideration unless you would do it anyway for your own satisfaction.
We found with our moves of the last two years or so the things that would add significant value (kitchen, bathroom, garden hot tub, conservatory etc) in the times of climbing prices now just serve to make the place easier to sell but often with minimal increase in value.
Last edited by: Fenlander on Tue 26 Feb 13 at 10:53
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>>any major upgrade needs careful consideration unless you would do it anyway for your own satisfaction.
>>
Son bought a house with one of his friends and they have spent a lot of money extending and improving it.
They talked to estate agents to find out what the market wanted in their area and took their advice.
The end result is a stunning house ( of its type) that would seem likely to make them a significant profit.
Houses of my type in my area - kitchen extension and delete the garage are the norm. Two storey extension is the next option.
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>>Only if you're planning on selling it. You have to live somewhere...<<
+1
And if yours goes up the likelihood is that so has everyone else's so you're no better off unless you trade down or sell up. Or, of course, you take 'equity' out of the paper value by borrowing. Sound familiar?
Sometimes I want to bang my fellow Brits' heads together...
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>> And if yours goes up the likelihood is that so has everyone else's so you're
>> no better off unless you trade down or sell up. Or, of course, you take
>> 'equity' out of the paper value by borrowing. Sound familiar?
>> Sometimes I want to bang my fellow Brits' heads together...
Bang away, because I'm missing your point at the moment.
You can waste money on titivation, but spending on maintenance and improvements that add value clearly are an investment and improve the place you live.
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I remember plenty of people barrowing against their house.Never thought of doing this.
We still save a small amount once a month.I can't complain we live comfortable no debts but wife and me both over 60.I was glad when we did pay off the morgage.Paying the rates is a small morgage once a month and Gas and Electric prices have shot up.It's not only Brits Martin,plenty of continentals are in debt.
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>> Fidelity didn't prove much better over the years. No point in saving really - interest
>> rates are abysmal and inflation eats the returns in any case.
That's a sweeping statement. If I had never saved I'd probably be on benefits now. Or is that what you meant?!
>>Best to buy wanted
>> goods at the lowest price you can find and then you really do save.
I agree with that - came home with 36 tins of Baxter's soup at 4 for £2 the other day and 72 bottles of bargain wine the week before - but you can only store so much of that sort of thing before you run out of space, it goes off, or you want a change!
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Had two or three different accounts with Fidelity (my late wife also had one or two) and the overall benefit to me and her was zilch. Only Fidelity made anything out of it over quite a number of years....:-(
Ah, you mean the Scotch Broth offer at 50p a tin for Baxters's soup....:-)
Seriously, it's the only way to save money by buying in bulk when the right offers come along.
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But if you're in your twenties now and not earning an enormous amount, why would you save?
Even if you chuck 15-20% of your income into a pension, in fifty years time it'll still buy a terrible annuity (if they still exist) and if you invest it elsewhere, you'll be means-tested on it and end up at the same (or worse) level as someone who's state-supported and not saved a penny.
So why would you bother?
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you'll be means-tested on it and end up at the same (or worse) level
>> as someone who's state-supported and not saved a penny.
>> So why would you bother?
Thats as be at this moment in time, fast forward even 10 years let alone 25+, interest rates climbing, country unable to service its massive and Still growing debts.
The present rather peculiar and the next incoming terrifying govt are busy trying to extract the last few quid from anyone who managed to accrue, by hard work and dillingence, a few quid to see them through the famine. Though when the last drops of blood are finally squeezed from the few stones where is the next subsidy for a destroyed unviable economy going to come from when the country has no means to support itself other than tax even more the dwindling number of net contributors.
Those who think the state will provide all in the medium or long term future are in for a nasty shock i fear.
Housing won't be so much of a problem, those (without influence) who bought houses deemed then to be too large for their needs may find themselves in a strange position IMO, they are the next target group for the finger pointing to take blame for the country's ills i suspect, such propaganda has already started i fear.
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But that's enough about Zimbabwe, now back to Britain ...
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I wonder how much of investor's money pension companies swallow for their own purposes? There are shareholders to pay, among other needs. Luckily, I don't have to find out as I don't have a private UK pension, only public ones. I do, however, have a private French one, which could serve as a model. The providers do not seem interested in communicating with me in English and I don't have much French but, as far as I can see, all French "Caisses de Retraites" work in the same way.
The money they take in from those working is paid out the same quarter to those retired, less expenses. Thus, the schemes are unfunded. The rate for workers and the "points value" for retirees are decided yearly by committees of workers, retirees and staff from each of the five or so funds in the same group. The number of points is fixed and depends on final salary. I can't find any stock market details and there don't seem to be any shareholders. The group's activities are overseen by an impartial, umbrella organisation. Government control seems very close. The funds seem more like co-operatives or maybe Quangos.
In francs/Euros, the value to retirees has increased year-on-year for the past 22 years with one exception, when there was at least no decrease. I don't know how the increases compare with inflation during the period. Sterling payments are of course affected by the rate of exchange (and yes, I had noticed the looming bonus). This seesaws and, again, I don’t know how increases compare with inflation.
The funds have amazing extras, such as nursing homes, student loans, retirement homes, special family funds and much more. As I am not resident in France, I can’t use any of these but I can use another service, very cheap holiday rentals. I have used four of these, two being Paris hotels. Foreign cruises appear to be subsidised into the bargain. Standard Life and the rest of the gang, take note.
The drawback is of course that there might not be enough workers to pay the pensions and, as private organisations, the funds probably can’t fall back on the French government to bail them out.
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>> But if you're in your twenties now and not earning an enormous amount, why would
>> you save?
>>
>> Even if you chuck 15-20% of your income into a pension, in fifty years time
>> it'll still buy a terrible annuity (if they still exist) and if you invest it
>> elsewhere, you'll be means-tested on it and end up at the same (or worse) level
>> as someone who's state-supported and not saved a penny.
>>
>> So why would you bother?
You've summed up welfare as a lifestyle choice. And there's some truth in it.
Annuities are certainly a waste of money at the moment I've a modest pension kicking in next year, to which I added what are now £47,000 worth of AVCs. I can take my 25% tax free cash out of the AVCs which will use up most of that, or have about £2,000 extra pension with no increases. I think I'll take the cash!
My SIPP won't be used to buy an annuity, I'll use it for drawdown. I'd be very unlucky not to get a lot more out of it that way, when I die what's left can be used to provide a pension for the boss, and if there's anything left when she goes the kids get it minus 55% tax.
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FWIW I began saving a small amount into a pension when I was 20. I appreciated the tax relief, but having always been a lower band tax payer, it wasn't great. After 25 years I stopped paying into my private pension when I saw the writing on the wall.
I took my full 25% tax free when i was 52yo, and together with the sale of my 626 (£950) I bought my current 9yo 330 with the proceeds. Best thing i ever did.I fully intend to take my pension in a few years when i reach 59. And then spend every penny of it whilst i can. Hopefully I will still have my part time job...minimum wage, but enjoyable, walk to work, easy 9 hour working day, long may it continue.
I dont take my reasonable good health for granted, which is the primary reason why i fail to save!
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If someone is going to work for 40 years and then retire for 20, then in simple terms he needs to save 50% of his earnings, invested to maintain their value in real terms, if he wants to retire with the same standard of living.
Of course he might cleverly manage some real growth, or he might not mind being poor in old age, but in simplistic terms it shows that pension saving has to be really serious, and represent a major chunk of someone's working salary.
Then factor in that all recent governments have given themselves the right to steal people's pension pots, and they show no signs of relenting in their pickpocketing, and it becomes obvious that making any kind of saving towards a pension is a waste of money unless you:
a) have a generous employer who funds your contributions
b) work for the state
c) are very rich and can employ advisers to use the remaining pension concessions to manipulate tax avoidance.
The conclusion is that the government is intent on further dividing people into very poor or very rich, and hounding those in the middle.
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It is a risk I will just have to take, one of my uncles worked very hard all his life, so he could have a good retirement. He had it all planned and was going to treat all his family with his millions. He sadly dropped dead of a severe heart attack well before any of that happened.
I really do think the best thing people can do is invest money into propertly, a far better long term bet than any pension scheme.
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>> I really do think the best thing people can do is invest money into propertly,
>> a far better long term bet than any pension scheme.
>>
But a year ago you were lambasting buy-to-let as a deeply unfair obstacle to first time buyers trying to get on the housing ladder. You can't have it both ways!
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True! But really I believe there is no point on planning anything beyond tomorrow.
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>> True! But really I believe there is no point on planning anything beyond tomorrow.
Maybe you should give that just a bit more thought ;-)
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planning to the day after tomorrow is a minimum I would have thought.
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After a drop in my savings rate (thanks govt/BoE for giving the banks cheap money to make banks not need to attract savers... that'll help the country's solvency) to under 2% for a cash ISA, I took a chunk out yesterday and offset it against the part of my mortgage that's currently at SVR.
Most of the mortgage is Base rate +0.39%, but as some may remember (or not) I was thinking about getting a country cottage for weekends/days off - and possibly to (semi) retire to in due course.
I bought said cottage last November with savings and an extension to the mortgage on my main residence (thus the cottage is owned outright and I can do with it as I please if I did decide to let it out in the future).
Anyhoos, still got a little in cash ISA which I'll probably shift to the mortgage soon enough but the bulk of my cash is in Inflation-linked National Savings bonds, and offsetting my mortgage (which has the same effect as paying it off but leaves the option of drawing it back out if needed).
I don't see interest rates rising for at least a couple of years, and expect inflation to jump up a bit more over the next couple of years as sterling weakens further.
If someone had offered me RPI + 0.5/1.0% as a good return 10 years ago I'd have laughed at them....
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We managed to get one cash ISA the tax year before last at just over 4%. And last year 3.25% I think. But both allowed only the max for that tax year, no transfers in, and it's locked in. With a bonus getting about 3% on an online account but the bonus ends in June. And one of the ISAs was for only 18 months.
I currently don't know what we'll do with the money from our two ISAs and the other account. But we don't want to lock it in anywhere long term either. We might be lucky to get 2% somewhere I guess.
So maybe open up an ISA in May with the intention of transferring the other ones in? It's not good.
When we had the money for this house sat in a quick access savings account (we had to buy a house) we only got a few hundred in interest each month. Rubbish and it's got worse.
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Buy real gold: Sovs or KRands and sit on 'em.
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I wouldnt
Gold has tripled in value in the last 30 years,
Shares have increased tenfold in the same term.
Not going to make you the UKIP chancellor are they?
Last edited by: Zero on Tue 26 Feb 13 at 22:41
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And over the last 10 years with the bubble bursting on the global economy?
Gold is up 4-fold, vs shares around double (and that's coming from a huge slump in 2003)
Last edited by: Lygonos on Tue 26 Feb 13 at 22:47
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depends when you buy and sell either, I could show you a 2000% gain in tech stocks at one time, with a 200% drop in gold in that period.
you can only measure relative performance over a long term. And pension planning is long term.
The only true thing is sitting on anything money wise is a bad idea.
Last edited by: Zero on Tue 26 Feb 13 at 22:50
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>> depends when you buy and sell either
Obviously, but looking back over the past 20yrs I'm not impressed by share growth overall.
You pick on 30yrs as there's a huge gold spike where it was around 600 dollars an ounce which then dropped back to 200-300 dollars for the next decade
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No I picked on 30 years because thats a good span for pension investment.
Its fairly simple, when shares do bad gold does good, when shares do well gold does bad.
Over the last 100 years shares have done better,
Over the next 10 years shares will be going up, and gold will be going down.
The secret of course is to have a balanced portfolio
Last edited by: Zero on Tue 26 Feb 13 at 23:02
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And if you picked 28 or 32 it would be very different.
I am suspicious that the share market is simply a giant Ponzi scheme - as more people put money into shares they increase in value (similarly when more people buy houses they inflate in price).
When the time comes that more people are taking out of their pension schemes than are paying in the house of cards comes down.
I certainly wouldn't use gold as a long term investment either - good to get into as equities overheat I guess.
I'll stick to my pyrites-plated NHS pension for now!
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You can't tell what an investment in the FTSE would be worth over time just by looking at the index. That ignores dividends which you don't get on gold.
Shares aren't essentially a Ponzi scheme or bubble. You can put a value on cash flows.
Share prices move en masse with the weight of money going in and out of the market. The fundamental value doesn't change because of that (though it might for other reasons). The Invesco Perpetual Income Fund accumulation unit price (which does include reinvested dividends) has increased by 75% since 2009, but it's still yielding around 3.5% - the price will go down if the market drops but the yield will increase unless dividends drop. If that happens now I'll sit tight. I don't need the money for 5-15 years and the dividends are buying more shares when the prices are low.
That's just an example - the results for a FTSE index accumulation fund over the same period are much the same though the volatility (what you might call the Ponzi effect) is higher.
Zero says timing is the key. It would be if you were psychic. In general you would likely do better long term to stay invested, given you will rarely sell at the highest price and buy at the lowest, the gains and dividends you miss are likely to make you worse off. In general of course.
see Smarter Investing by Tim Hale for the explanation and numerical evidence.
Gold might give you more of a hedge against another crash in share prices but if you'd been holding it since Christmas instead of shares you'd already be about 20% down.
Last edited by: Manatee on Tue 26 Feb 13 at 23:59
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>> planning to the day after tomorrow is a minimum I would have thought.
>>
I wouldn't. It was a terrible film.
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The only absolutely safe investment would be something
1) that is not managed or shared by anyone else
2) is indestructible
3) generates real necessities of life without the need for you to employ any staff or agents
How about a smallholding? Let it until you retire, and then grow all your own food.
It would not matter if the entire economy collapsed, all savings became worthless, income tax went up to 98%, or even Ed Milliband becoming Prime Minister.
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>> How about a smallholding? Let it until you retire, and then grow all your own
>> food.
>>
No inheritance tax to pay either.
There are areas of the of the market which will undeniably do well over the near and longer terms. ARM, for example.
Some commodities aren't being appreciated either - we're very close to exhausting our ground reserves of helium, at which point your average party balloon is going to cost over £40. Our descendants will look back agog and say "You just released it into the air to make your voices squeaky?".
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>> There are areas of the of the market which will undeniably do well over the
>> near and longer terms. ARM, for example.
Do you mean ARM Holdings?
The market agrees the company has profit growth ahead. The problem is that the future, as yet non-existent value, is already in the price which is 50 times earnings, and the dividend yield which is 0.6%.
I try to make it a rule to invest in markets rather than to pick stocks. Occasionally I break it. One such occasion was to buy BP shares just before the Gulf oil spill. I'm still 30% down on that one, and that was far less speculative than ARM.
What many investors don't seem to get about share prices is that unless you know better than the market, you won't beat the market - a good stock is priced accordingly, in theory. So if you want to invest for long term growth, buy the market e.g. in the form of an index fund.
I'm just trying to be helpful BTW, not to win an argument or look clever. If your brother works for ARM and has given you the nod, keep quiet and bet the farm on it.
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>> How about a smallholding? Let it until you retire, and then grow all your own
>> food.
Umm. So, when you retired, you would then start working harder than you had ever worked during your so called working life!
What happens when you are too infirm or ill to cultivate the land? No thanks.
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And a society that broken will result in someone coming and taking it from you, by force if required. Also no thanks.
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>> What happens when you are too infirm or ill to cultivate the land? No thanks.
And if you have a stockpile of loot in the same situation? It pays for your nursing home care.
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>>Umm. So, when you retired, you would then start working harder than you had ever worked during your so called working life!<<
Perhaps but it may have the knock on effect of keeping you mobile and far fitter so that you can enjoy your leisure time for longer. Having purpose that involves a degree of physical exercise is no bad thing.
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Your children might also be looking for a safe pension/saving haven. They could make annual in-specie contributions to the scheme by coming and helping you dig it over, plant or lift potatoes, etc.
Or perhaps there is scope for a wider allotment-based pension SIPP. There would then be a ready market for plots if people became too infirm.
Being produce- rather than money-based there would be none of the ordinary HMRC rules on contributions, drawdown, etc and the entire pot/plot would be tax free, and transferable.
You can't eat gold, drink oil, or live in a tax shelter, but you could live long and healthily on home-grown food.
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Interesting thread.
I am one of the 1/3rd who has never 'saved'...but that statement misses out paying into a once hefty mortgage on a London house that went up a lot in value...so when I sold it I could realise quite a bit....and...paying into a good pension scheme (by chance, I knew or cared very little about the subject at 18.5 years old) that gave me a good lump sum and residual pension.
So in a way I have 'saved', just via a different way.
If Joe Average had a number of options on starting his working life i.e. save, buy a property or invest in a pension or combination of all three...saving on its own would be last on my list...i'd advise him to buy a property for himself...then save for a deposit on another one and 'buy to let'. Even if the property market remains stagnant for ages, or even drops, he'd own it in the end...and could have an income off the rent.
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I think saving comes first, at least until there's say a year's wages in the bank or at least accessible. Use ISAs of course, cash initially then once there's a cushion for unexpected expenses or reductions in income, stocks and shares ISAs.
Pensions, except of course where the employer adds to the fund, aren't very attractive for a lower rate taxpayer. Use ISA funds instead.
I don't disagree about property, but it can go wrong, interest rates, voids, bad tenants etc and it's not very liquid. The main reason we didn't do it was hassle and not knowing if we'd want money for other things, and aversion to debt, but I know a few people it has worked very well for. One friend kept his house in London, bought for under 40k in the 70s, when he married, and let it. He still has it and its probably worth 700k and provides enough rent to live on.
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Tell him to sell it and live life to the full.
Once its gone its gone.
But the memories are there...unless you get dementia.
I know several old folks, in their 60s, with a few properties. who are paranoid about their rental returns. Jeez.
Horses for courses I suppose.
Last edited by: legacylad on Wed 27 Feb 13 at 23:04
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As my commute this morning was just me, extremely unusually, I put on an app on the phone that feeds me live Australian radio.
Apart from the slightly disconcerting messages about it being commute home time, and to watch out for the traffic snarl up on Burrawandi Way, there was an advert for ING Bank, who are offering a straight 5% on an ordinary savings account on anything up to $250000 AU.
I imagine it's not that easy to do if you aren't living there, but is there mileage in having accounts in Australia?
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No Govt backing springs to mind, if you don't want to put your hard-earned at too much risk.
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Currency risk too. The AUD has been strong. Of course the track the pound is on could work in your favour.
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Check out Agribank for the current best "bond" interest. No FSCS but looks OK.
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Trouble at the moment is that I'm having great difficulty in interpreting the messages from the government; should I be saving for my retirement, bearing in mind that the whole thing is MY responsibility and the state pension will not be enough - or should I be spending to help stimulate the economy. Can someone help me with this conundrum? Or, maybe everyone's as confused as I am.
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No wonder everybody is confused any savings you have is losing due to no interest and inflation.
What the future brings nobody knows maybe back to bartering goods.
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Saving - or rather failure to save - Mike Hannon
