Savers need to face facts

Retirement has becomes an impossible dream. That’s what one in five people in this country believe, according to a survey for the Association of British Insurers. We all know the reasons. Retirement plans have not delivered the returns needed to fund our ever lengthening lives, and it’s both financially and morally impossible to borrow the necessary money and expect future generations to pay the bill.

But there is more to it than this. My newspaper carries three letters from pensioners all moaning about the poor return they are getting on their savings. “We saved”, they argue. “We paid our National Insurance contributions. We dutifully tucked money away. And then we were robbed by Gordon Brown’s tax on dividends. We were swindled by Equitable Life. And now we are cheated by a regime of low interest rates that is deliberately favouring the spendthrift at our expense.”

All of this comes from people who, of course, rate themselves as worthy and intelligent citizens who were brought up in the era of rationing, fought in the War, have lived within their means, blah blah, blah, and reckon that it is time they were looked after.

Up to a point I have some sympathy with this. Savers do not get the credit they deserve. Low interest rates do favour borrowers. The financial services industry has sold rotten products while presided over by an expensive but nonetheless hopeless regulatory regime. I have some sympathy… But not much.

Savers just didn’t want to face reality

Let us consider – what should we have known? It has been clear for years that life expectancy has been rising. And, if only because interest rates tumbled over the period, we might have reasoned that the investment returns of the 1980s and ’90s were too good to last. We might have concluded that state and private pension funds would not be able to deliver the required returns and that we would have to make provisions by working longer, saving more and determining to make a good return on those savings.

Many people seem to have ignored these trends and trusted that things would somehow be alright on the night. Savers buried their heads in the sand, but the financial crisis dug them out with a vengeance. Many people told themselves they had built up a sufficient nest egg, but they were kidding themselves.

For sure the rate of return on money deposited in the bank is wretched. Interest rates are low, but they have been high in the past and will no doubt be so again in future. I accept that being locked into an annuity now is bad news and bad luck, but there is no excuse for simply accepting the derisory deposit rates of banks and building societies.

Term deposits offer a slightly better rate of interest, while recent months have seen a slew of corporate bonds, all widely advertised and offering interest rates of 5% or so. What about National Savings? I know that NSI has been reducing its rates of late but for years it offered tax free bonds that offered inflation linking plus a small percentage rate. Finally, what about shares? It has not been difficult to construct a portfolio of shares yielding 5% or so, and dividends have been increased annually.

You need to fight back to protect your nest egg

Managing your savings is not a passive affair. Most of the media moaners seem to think that they should be able to just stick their money in the bank and be paid a handsome interest rate, irrespective of the financial climate and the requirements of the economy.

As it happens, many years ago I worked with one of these unhappy newspaper correspondents so I know for a fact that she used to be in the City. She of all people should know better than to complain about shares soaring after Mark Carney promised low interest rates. It is not difficult to work out that low interest rates favour business, and consequently the stock market. And in any case, conventional wisdom dictates that anybody with savings should have at least part of them in shares.

The good news is that more and more people are starting to realise this and take control of their pension pot. I can’t stress enough how important this is. If you haven’t already, you need to make a simple, low cost plan for your savings and stick to it. It’s all part of accepting that times are tough for savers. And this should hardly come as a surprise.

The government is plundering savings for the simple reason that it desperately needs money and this is where it can find it. Unfair? Yes. Unpredictable? No. So here is the point. Managing your savings is not supposed to be straightforward and although savers think they are owed a living the rest of the population does not see it that way. Get real! You need to manage your savings actively. You need to be prepared to buy shares and seek instruments that can give you a decent return. Just squirreling away your nuts is not enough.


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  • Boris MacDonut

    You say one in 5 people in the Uk think retirement is impossible. That would be 13 million people. Really?
    I am more concerned at your interpretation of pensioner.
    To have fought in the war one would need to be a male born before 1927 so at least 86 years old and potentially retired for 21 years already. To be brought up during rationing you would be born betwen 1940 and 1955. So many would not even be a pensioner yet.
    Another poor grasp of facts and history by a MW journalist who is supposed to carry at least some authority if advising folk on investments and their future.

    • Cilurnum

      Once again Boris you are taking a throwaway comment about pensioners having saved all their lives and trying to pick holes in it which misses the crux of the article entirely.

      I’m afraid Mr Bulford is just getting desperate as many fund managers and brokers are now. Without savers you don’t have any capital to fund this thing called ‘capitalism’ so treating them with disdain as he seems to do by telling them that they can’t just put money in a savings account and let it accrue interest? How about savers pull their money out of the financial system then, eh? He then pulls a fantasy figure of a 5% return on stocks from somewhere and probably believe savers should be paying him a management fee for him to ‘manage’ our money.

      My plan for saving does not involve people like you Mr Bulford.

  • Pragmaticaldo

    In addition to Boris MacDonut’s observation, Mr Bulford, you say savers need to face facts and get real?

    By the lottery of shares and “instruments that can give you a decent return”, you mean?

    Thanks, but no thanks. For this pensioner the risk element of National Savings is rather less than the currently unacceptable risk inherent in shares and “instruments that can give you a decent return”!

  • Asaad

    Well i guess, this is the main way He & City so called professionals can make more money by persuading us to take ever more of higher risk & less reward.

  • lost my marbles

    Hmmm,’shares that can give you a decent return.’
    Well not Avanti Communications then.This was the share that Bulford hyped beyond belief a couple of years ago and yes,it has plummeted to earth,big time.
    I invest in shares for both income and growth and also have a SIPP,but no more advice from Bulford for me.

  • Dundun

    I make a comment for the first time ever to express my amazement that this article was firstly, printed by MW and secondly, dignified with the three responses above, however critical.
    A writer with so little knowledge as already pointed out and apparently even less knowledge than that of the advice given to and followed by countless numbers of working people trying to save cautiously for their retirement. Astonishing. Asking not to be required to pay for the profligacy of spendthrift governments and consumers is not the same as asking to be “looked after” or feeling “owed a living”.
    There is so much that is ill-informed here that it is impossible to begin to tackle it. The tone is insulting. The depth of assumption breath-taking.
    My response is I am actually cancelling my subscription.

  • cynicalinvestor

    An elegant reply Boris. For the others who have commentated thanks you the comments. The arrogance and inaccuracy of this article left me at a loss for words.
    As someone stupid enough to put some of my retirement money into Red Hot Penny Shares recommendations and currently at a loss of about 30% I will in future read something useful.

    • Boris MacDonut

      I’m afraid Tom Bulford is very thick skinned. He has been taken to task for very lazy journalism before. Trotting out Daily Mail articles and dressing them up as his own spleen is less than what MW readers deserve. Especially those who pay to subscribe. Even a basic check on the facts he presents would show him how wrong he is, but he blithely ploughs on in the interests of stirring up a hornets nest. Of course Daily Mail readers are rarely in a position to question what they are indoctrinated with ,but MW has better calibre of reader.More aware and definitely more critical.

  • Boris MacDonut

    Oh,I forgot to say. One in five adults in the UK is already retired and I in five people is a child. So the people Tom refers to make up a third of economically active adults. Try a straw poll. Ask the next 9 adults between 18 and 60 that you meet if they will retire. Then see if 3 of them say never.

    • cynicalinvestor

      Boris you are correct it is so like a Daily Mail article. As someone who reads the Daily Mail occasionally to study the art of emotional manipulation – they take it to a hateful art form – I am surprised I missed the pedigree. On a more serious note I do agree that MW investors deserve better than outright fibs.

  • MikeC

    I think TB has tried to make a good point here, albeit he has perhaps bot made it in the best way i.e. some of his reference points are badly chosen and it’s understandable how some might feel insulted. But, take a step back, as I see it all he’s really trying to say is take control of your investment decisions, don’t put all you cash into a savings plan and diversify into other investment channels, such as stocks. Of course there is a need to carry out research before you make all-important investment decisions when it comes to the stock market, but there is plenty of online data that can provide really useful information and research which can help in making those decisions. And independent online sites, such as is a great utility for like minded investors, wishing to take control of and be more proactive in making those investment decisions. It’s a lest worth considering? And by the way I have no affiliation whatsoever to TB, or MW – these opinions are entirely my own.

    • Boris MacDonut

      Why would anyone take advice from someone who either, does so little research that he quotes incorrect statistics and details or otherwise simply churns out assumptions and received wisdom as genuine facts?
      A decent journalist should put in the effort to get it right. A decent journalist should not “try to make a good point”.


    Well I have worked since I was 15 years old, paid lots of tax and NI – never needed the NHS or had time off work – have supported malingerers for all that time and I’m still not able to retire on a state pension at 60 (its been moved to 66 now – no doubt it will move again).
    I’m an active saver and occasional investor and have so far fared OK.
    In 2006, just as the S**t was about to hit the fan I took my money out of the Bank and invested (saved) it with Zopa (peer to peer lenders).
    I have had returns ranging from 10% down to 4.5-5% currently – yes the rates have gone down but they are still worth having.
    I have also invested across the pond in property and other shares because I personally think the USA has had a real recession. I don’t think its worth investing in UK at the moment – we have far too many hangers on and there is no real incentive for a lot of youngsters to go out and find work when they are paid more to have babies and stay at home.
    The current political parties here are far too similar to each other to make any real difference, all they are interested in is keeping their jobs. Its up to us baby boomers to change things and vote them out and get a new party in that can put things right.

    • Boris MacDonut

      Not easy for baby boomers to vote anyone out as they only comprise 29% of the electorate. Maybe if every boomer voted the same way and all other age groups had just a 50% turnout they would have a fighting chance of changing things.

  • RetfordDave

    Yes, it’s that Tom Bulford again, encouraging us to take more risk in our investment choices. Let’s see, would that include such star Red Hot Penny Shares as Orsu Metals and Stanelco, now reorganised as Biome Technologies? I took TB’s advice on these and lost a packet. What prompts me to contribute is the scandalous latest (Court authorised) disenfranchisement of Biome shareholders by way of last week’s capital reorganisation, which helpfully locked in the losses of anyone holding less than around £300 of shares at current valuation by involuntary cashing in of their shares. The justification being the “burden” on the company of having so many small shareholders to communicate with. I wonder who that was down to then, Tom?

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