What we should be comparing is interest rates vs inflation rates. Taking Rik's 1990, inflation was 9.5% according to **LINK**

so interest was about 4% above inflation. Now it is well below. This of course is good news for debtors, bad news for savers. Who is the biggest debtor in the country, the government, so they are once again inflating their debts away. Forgotten where I read it, but inflation is a slow motion default. When I'm the benevolent despot, givernment will have to offer a saving scheme to private individuals which is inflation proof, and I don't just mean the odd few hundred quid.

There's nothng natural about interest rates.. they've always been an artificial manipulation that those responsible for them can bypass. It;s not even the rate that's so important as the relationship between rate and inflation.

After all the mess-ups with the old fashioned approach of raising rates after a crisis and it rarely helping much some global folk decided to try keeping them ultra-low this time. with a different mess-up.. made worse with the UK's love of mortgage, loans and house ownership meaning they can't raise them fast 'cos the younger generatons haven't thought ahead and prepared for that – it'd be chaos and ruin for them so any increases will be very slow.

There are investment opportunities that do way better than bank/builing society rates (with varying degrees of risk) but the internet does have some benefits there with the availability of crowdfunding sites at pretty low risk. While I'm as diversified as I'm prepared to be my wife plays on some of those sites with a portion of our funds and gets around 6-7% return usng peer to peer lending as allowed for one's own ISA's so it's tax free with the rules. Crowdstacker as example. Yeah, still some risk but then have ISA also has risks.

pgk

We live in strange times. Negative interest rates aren't unusual on large deposits and the policy is marching down towards small investors across the world.

Banks don't pay to borrow money – you pay them to look after it. First done by Denmark in 2014 followed swiftly by several other European Central Banks including Germany. Then much more aggressively by Japan in 2016. Switzerland and Sweden joined the club in 2017. Been seriously considered In the US but not tried so far, their version is to sell Government Bonds for more than the return value, and yes they sell like hot-cakes. Why? Because stocks and shares are risky and trade difficult to predict. I doubt Wesfarmers planned to sell Homebase for a quid last month!

The idea of negative interest rates is to push money into the economy by encouraging spending rather than saving. It's a desperate tactic to unstick a difficult economic situation. Not much sign it's working, just hope it does!

Dave

This is why they want a cashless economy. More control and the banks charge you more for their services.

vintagengineer,

Bit late now, as they say, I took the money and ran. Even with low inflation "the pound in your pocket" will still rapidly lose it's buying value. Wife and I both opted to take the then max tax free lump sum (25%) aand flat rate on the rest. This gave us a handy investment sum and a reasonable pension level on our assumption that we may or may not be drawing a pittance in donkeys years time. Hell of a gamble. We are not wealthy, just comfortable so no worry. As it happened the "Grim reaper" took a swipe at both of us but we ducked! Me, double heart bypass, Wife mild stroke and excellent recovery, possibly because I recognised the symptoms and called the "FAST" blood wagon. Poor wifey has many complex on – going health probs., making life miserable. As a matter of interest, I took the opportunity to work a further 2 years past OAP date and deferred my OAP pension and took a lump sum with a slightly reduced old age pension. All I can say is thank goodness inflation continues to be low.

John

Not done it yet,

Lugging large quantities of coins and notes around their many branches costs the banks a fortune. The more they can persuade customers to use cards, CR/ DR/Swipe, so the less cash they have to shift. I predicted a long time ago that all or very nearly all branches will disappear, saving them staffing costs, business rates capital and maintenance costs of the buildings. More and more customers are doing online banking resulting in massive reduction in footfall in branches. I dont yet use Swipe or online as I'm still very concerned about fraud vulnerabilities and look at the recent goings on blamed on new software. There are already new banks with no or very few branches. Building Societies will probably follow the banks.What other effects of the electronics revolution will happen?

Its a double whammy. We got married in 1974 and couldn't get a mortgage even though we had saved with the Halifax for 10 years. We had a 35% deposit we could put down on a house. Eventually we got a mortgage split between two lenders (Midshires I think). A year later Halifax offered us a low cost endowment. Our endowment interest rose steadily until we were paying about 17.5% interest. Fortunately, our endowment paid off our final mortgage Others were not so lucky.
Sadly, today as pensioners, we have some savings, but as others have said the interest on savings is hardly worth the paper its printed on. I feel that our generation has been robbed twice by the financial institutions (once at the start of married life and now towards the end) and when I vote at the AGMs, I never vote to agree on the directors salary/bonus.
Just to add insult to injury, one of my pensions has failed and been guaranteed by the government, however it is now fixed at the rate that it achieved when it failed with no further increase. Why did the pension fail – because an asset stripping financial company bought out the manufacturing company, sold what it could and stopped financing the pension scheme and just walked away from it.
Now tell me that all this stuff is fair !!
Yours truly
VERY GRUMPY

Many seem to think the goal should be that interest rates should be at a par with inflation.
Don't agree – tax has to be taken and the goal should be to generate real income without depreciation of our cash i.e. interest rates should be (maybe) at least 2%, after tax, above inflation.

Secondly, mortgage rates, although they appear low with initial rates, at the moment are about 4% APR. If you are with a relatively unknown bank you might get 1.5% for a cash investment. So, about 2.5% of a very large sum is disappearing into a hole called "the banks"

And who raided our pensions – that well known idiot – Gordon Brown. The bloke who went around Europe preaching about the idea of freeing up the banks, which he/they did and how responsibly they acted, causing a crash.

That said, I am not sure how we get out of this – if interest rates rise, half of the population may become homeless. There is not much sympathy for an older generation who only bought what they could pay for!

Speedy Builder5, I can sympathise with your predicament over your pensions, I was fortunate with one of my pensions the engineering group that I worked for during the latter part of my career had built a large surplus in the pension fund such that the employer had not made contributions for a number of years because of good management by the trustees bringing in good investment returns. After I left the company the group was swallowed up by another predatory group but the trustees had the foresight to ensure that the huge surplus in our pension fund was segregated and protected giving us enhanced benefits over the pensioners of the group taking over. There have been three further takeovers since then but due to the foresight of our pension fund trustees our pensions are still segregated and administered separately although the present group that owns the original company’s assets that I worked for are actively trying to buy out the original pensioners but without much success. The current owners are a multinational group with assets worldwide and are buying up other engineering groups at an alarming rate, their objectives appear to be grabbing money and asset stripping, they are totally ruthless so how secure my pension will be in the future who knows. Pension worry seems to be a common problem once you retire. Dave W

To his credit, GB stopped TB from taking us into the Euro