Are you stuck in a substandard savings account?

Interest rates have been held down simply because the banks and building societies haven’t needed our money – QI has given them enough. Mark Carney’s 7% was a review point, not a promise. Tough on those with cash squirreled away but good for those with debts – unprecedently low rates for a long time. So some winners and some losers.
I have a view about interest on deposits: first, you are expecting somone else to work on your behalf to make your money work for you- that costs money and you can’t expect a big real return, for sitting back and doing nothing for it. Second, you could actively do something with your money – buy and sell, invest it in stocks and shares, and for your efforts and with more risk you could make better returns. I don’t think just having cash entitles you to great returns with no effort. I’m sure this will be an unpopular comment with some, but I just feed it into the conversation anyway.

QI=QE (!)

Stocks and shares are only suitable for those who have spare money that they can gamble and the time needed to keep a track on their investment. They should be treated as a longer term investment.

By buying shares may be supporting energy companies that pay their senior staff huge salaries, while a significant part of the population is struggling to pay their energy bills. Other companies (either deliberately or incompetence) sell unreliable household appliances that often break down soon after the guarantee/warranty expires, which helps their sales and profits. I would like to see these companies’ shares branded as ‘unethical’, along with unethical companies that sell tobacco products, use child labour, or underpay workers.

Which? Conversation has made me aware of the ways that some companies are exploiting the public. I don’t see any government tackling these issues, so we may be reliant on consumer action.

I do think that the public should be able to able to benefit from reasonable interest rates in simple, safe savings accounts and that the banks and building societies should be banned from playing the ‘zombie account’ game. On the basis that the cost of borrowing money is high, I cannot see why we should be denied a reasonable rate of interest.

wavechange, if we are talking of interest on savings it implies you are not necessarily using the capital. So investing in a selected portfolio of stocks and shares in an ISA will produce an income from dividends of 3 to 3.5% without great risk. Over time the capital will most likely increase – usually significantly better than the purchasing power of cash left in an interest account – which, incidentally, your bank or building society will be investing to enable it to pay interest.
Not investing because you brand many companies as rogues is a personal choice, but you might consider where your pension income comes from? Few of us are detached from the stock market.
I was simply making the point there are other ways of making your cash work for you – clearly depending on your personal circumstances..

Malcolm – I did not brand ‘many’ companies as rogues, though there may be many that are making too much money for senior staff and shareholders at the expense of their customers.

I am very aware that pension funds are dependent on stock market investment and the same is true of many of the financial products on offer to the public.

Going back to one of my earlier points, do you think it is right that senior staff in energy companies are paid more in a week than most people earn in a year, at a time when fuel bills are causing real hardship for some people?

I certainly believe that we should all be taking financial responsibility and saving for a rainy day and towards retirement, but I feel there is too much greed in society.

wavechange, there are many people who, I believe, are paid far more than they should be. However, this is not just energy companies – it is financial organisations, footballers, entertainers, some in public service and local authorities as well as other utilities and private industry. I do not subscribe to the view that if you don’t pay them they will leave, but it is a self-perpetuating system and I have no idea how you put a stop to it.
We are currently being persuaded that energy companies are the source of our financial woes. However, most of us will be spending much more on food, housing, car fuel and commuting – also essentials – with far higher impact on our living costs. We must be careful who we are persuaded to demonise and why. We need facts to back up the claims so that, hopefully, the outcome will be seen to be fair to all.

Malcolm – I totally agree that there are other examples of people being paid too much, but we are all dependent on energy whereas there is no need to contribute to the salaries of footballers and entertainers if we don’t want to.

You are right that the system is self-perpetuating, but it is hardly going to help if we ignore the problem. I accept that food and other costs have risen, but we have to start somewhere and perhaps energy supply may be the easiest target. Prior to privatisation, I wonder how many predicted the involvement of overseas companies in UK energy supply, never mind the high salaries I have mentioned. It seems logical to me that we should have kept control of our energy supply and that the profits of those companies involved should be capped by government.

Meanwhile, back to the topic. I think we can agree that it is important to encourage saving rather than living in debt. One way of helping to achieve this is to encourage people to save by offering safe simple savings accounts that yield a decent rate of interest without the danger of the banks and building societies exploiting customers who do not monitor their savings on a regular basis.

Beryl, you are right with your concern about those with debt – if savers benefit through interest increase, debtors will find life more difficult, and we will then be worrying about whether debt is sustainable. There is a balance – we need to be weaned off living on money we don’t have by excessive borrowing.
The main essential debt is in housing, prices largely fuelled by lack of supply and high land prices. – and providing housing at affordable prices should be our major priority, affecting both those purchasing and those renting. Since local authorities have the power to grant planning permission on land, and see it’s price enormously inflated, perhaps there lies a solution. Limit the price at which land can be sold for housing. It will still be attractive to sell, rather than leave vacant. Perhaps the land should be sold to local authorities and then leased to the house buyers? Any ideas?
Incidentally, I am in favour of simple interest rates wavechange – not with short-term bonusses that get forgotten when they expire.