Savers told to stop moaning and start spending

Savers should stop complaining about poor returns and start spending to help the economy, a senior Bank of England official warned today.

Mr Bean said low returns on savings were part of the Bank of England's strategy Photo: PA

By Robert Winnett and Myra Butterworth

10:03PM BST 27 Sep 2010

Older households could afford to suffer because they had benefited from previous property price rises, Charles Bean, the deputy governor, suggested.

They should "not expect" to live off interest, he added, admitting that low returns were part of a strategy.

His remarks are likely to infuriate savers, who are among the biggest victims of the recession. About five million retired people are thought to rely on the interest earned by their nest-eggs. But almost all savings accounts now pay less than inflation.

The typical savings rate has fallen from more than 2.8 per cent before the financial crisis to 0.23 per cent last month.

Mr Bean said he "fully sympathised". But he continued: "Savers shouldn't necessarily expect to be able to live just off their income in times when interest rates are low. It may make sense for them to eat into their capital a bit."

He added: "Very often older households have actually benefited from the fact that they've seen capital gains on their houses."

In an interview with Channel Four News on Monday night, he said that savers "might be suffering" from the low Bank Rate. But they had done well from higher rates in the past and would do so again.

Mr Bean said that encouraging Britons to spend was one reason why the Bank had cut interest rates. They have been held at 0.5 per cent for 18 months, hitting rates offered on savings accounts.

The strategy had led to Mervyn King, the governor, receiving many letters of complaint.

But it was designed to return the economy to a reasonable level of activity as quickly as possible, he said. "The faster we can achieve that, the sooner interest rates will get back to more normal levels."

Had the Bank not acted, "unemployment would have been higher, wage growth would have been lower," Mr Bean added.

The comments angered groups representing the elderly and those putting money aside. The Daily Telegraph has campaigned for protection for savers.

Ros Altmann, director-general of Saga, said: "Savers are being taken advantage of. They did the right thing and have been let down at the other end of the deal.

"I don't think this is what most people would consider fair."

Dot Gibson, of the National Pensioners Convention, said: "For years we've been told to put money aside for our retirement only to find that interest rates have sunk and now we have to use our savings just to pay the bills."

Jason Riddle, of Save Our Savers, said: "The Bank was aware that there was a lack of saving before the financial crisis, but those who were prudently saving while others spent, are being heavily punished."

Official figures show that savers have lost about £18 billion a year in interest as a result of the Bank's response to the worst recession in a generation.

The amount Britons save has fallen by more than a fifth since the start of the year, a survey showed today.

The average person is saving £102 a month, down from £130 in February, according to Santander.

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kenheart

10/10/2010 07:42 AM

Where do they find these idiots they employ at the BOE there must be a funny farm where they breed them.
They tell people they must save more then kick them in the teeth when they do.
One thing is becoming clearer by the day the BOE is full of brain dead half wits living in that cosy public sector bubble oblivious to the real world.
No wonder it was so easy for us to get into the mother of all financial crisis.
Gerard Schmidt

10/03/2010 04:41 AM

I think we need a concerted campaign to fire them both,
mark fowler

09/30/2010 12:42 PM

Savers are of course the only people with any money left.

I am afraid having savings is viewed as anti social and probably considered unfair. You could not make it up.
rojja

09/30/2010 09:01 AM

Is it not time that the Bank of England made some personnel changes to people who actually understand what it is like for ordinary people, including those who are retired, rather than viewing life from the perspective of receiving a massive annual salary.
This also goes for the members of the committee who set interest rates.
Why not suggest that Banks increase interest rates by using the Bank Bonus money, which would then turn into money which would be spent in the economy rather than being sent or be used offshore.
Idiots, WE certainly are to suffer these fools.
angieg

09/30/2010 08:29 AM

Why should Savers be penalised with low interest rates while those who obtained Liars Loans (fraud) also benefit again with low rates on their mortgages?

When will the FSA and BOE investigate this huge fraud accounting for half of all mortgages in the boom, but which they turn a 'blind eye' to. The FSA and BOE/Banks sanctioned this fraud which still goes on, meanwhile Savers suffer.

Savers should not help Mr Bean by spending their hard earned capital whilst getting such poor returns!
bluebottle

09/29/2010 08:30 PM

How dare Charles Bean to advise savers to stop moaning and start spending. This useless little twirp doesn't even begin to understand what is happening. Perhaps this half baked Bean should advise the government to stop wasting instead. He is a prat and this shows again that the officials at the BOE are behind the curve (as always).
ichweissnicht

09/29/2010 05:51 PM

I do not smoke or drink. Very occasionally I eat cornflakes for breakfast as a bit of a treat instead of my usual porridge. The
continued banking saga where an elite few prosper at the benefit
of the many, may I respectfully suggest that they die soon and in great pain.
unclepeter

09/29/2010 02:59 PM

The question I have is just what investment instruments do you have in Britain? Is it only savings accounts or do you have guaranteed investments, long term investments, mutuals, just what choices do you have?

Can you invest and trade on-line or are you required to use a broker? I can trade and sell on-line through a recognised bank, but can you?

Once again I will say that savings accounts are the absolute worse investment you can make There are no guarantees and very little insurance.

If you have none of these I am truly sorry for you and if you do have these then stop wingeing and get to work investing.
emmiem

09/29/2010 01:48 PM

reebt

The debate is being continued under the 'UK mortgage approvals slide as wary households opt to pay off debts', article.
FRPAdvisory

09/29/2010 01:35 PM

The recession should have signalled the end of the binge borrowing and excessive spending culture – so it is worrying that cautious individuals who have put some money aside for a rainy day, or their later years, have apparently been advised to throw caution to the wind and dip into those savings in an attempt to prop up an ailing economy.

For years we have witnessed unprecedented borrowing levels by individuals. This – and the consequent spending that took place – was largely to the benefit of the High Street, but also contributed to record levels of personal insolvency.

We have also seen unprecedented levels of public sector borrowing. In the same way that the Government’s Comprehensive Spending Review (CSR) will cut spending to ensure the state reduces its debt levels, as a society we also need to learn to live within our means. Now that over-committed consumers are unable to prop up the High Street, cautious investors should not help to boost the economy by raiding their own savings pot.

David Thornhill, partner, FRP Advisory
$3612748

09/29/2010 01:11 PM

Has charles bean been fired yet?
killben

10/03/2010 12:52 AM

such a$%%^&*s get promoted .. See King is still holding on his job (with more powers) for being the main architect in not seeing the crisis , also shoving it up the tax-payers and making his bankster pals all better off!!

Time to rain shoes on such a#$%@^S
richardhu

09/29/2010 01:02 PM

He really is a Mr Bean - earning £200k plus of course he can arrogantly look down his nose at us mere mortals.

Vince Cable and George Osbourne should get hold of this idiot and get him to sweep the streets on £15k a year preferably in Moss side.

How dare he.................
killben

10/03/2010 12:49 AM

And whip him if he does not spend 15k+ .. remember we have to dip into our savings .. that is the way to live .. according to this a#$$%%%
stuart64

09/29/2010 12:10 PM

This Bean bloke is compleyly out of touch with reality, cut-backs and cost of living increases are staring everyone in the face and he advises a "spend,spend,spend" solution for everyone else, well lad you can keep your advice, my brass is staying where it is, in my pocket.
I would'nt trust the advice given by any banker or politician where my finances are concerned.
bleyer

09/29/2010 03:48 PM

Oh no he isn't!

This is exactly what he wants you to do! The economy is like a knackered donkey and they can't flog it any other way.

It's all about to stall but if they could just squeeze it, just squeeze it

a

little

bit

more...

This economy is stacking up like the biggest Ponzi scheme ever. If the people at the bottom stop putting cash into it then it will collapse!

Maybe you should check out some other kind of investment

www.bleyer.co.uk
DKP56

09/29/2010 09:54 AM

http://www.telegraph.co.uk/fin...
James Brown

09/29/2010 08:38 AM

I wholeheartedly agree with Mr Bean-King. I going out right now and I'm spending all my pounds...on GOLD & SILVER
podrag

09/29/2010 08:36 AM

Seriously I agree with the BoE on this one. I'm going to start spending on gold instead of saving.
reebt

09/29/2010 08:52 AM

So would I - but this article has made it to expensive
bleyer

09/29/2010 03:51 PM

You think this is expensive? As the value of your cash gets further and further debased, give it a couple of months and you're going to think £827 was a bargain!

www.bleyer.co.uk
reebt

09/29/2010 07:45 AM

Why have we got to search for this article - it is still hot and should be easy to find. Most of the comments are sensible, the discussion is lively. Please reinstate on the financial page at least.
courtney833

09/29/2010 06:33 AM

This will not do our balance of payments any good at all. I suggest that 75% of consumer goods purchased in the UK are manufactured in other countries so all we will be doing by spending money is helping other countries prosper or get out of debt by sending our hard earned cash overseas.What a great idea Mr Bean
bleyer

09/29/2010 03:55 PM

We hardly make anything anymore. we are a nation of consumers and that's pretty much all we do.

The advice from the BoE is to try to get you consuming again. But we've already got a flat screen telly (and to be honest, there was nothing wrong with the old one), mobile phones, second cars, clothes that last less than a year and what about those new light bulbs we've all been force to change over to? Is it me or are they really crap?

The advice is to behave like Viv Nicholson. Go on, google it.

and whilst you're there...

www.bleyer.co.uk
thumbs

09/29/2010 05:57 AM

God, what a pompous bloated idiot. Yes, we could sell our houses but then it will cost us £40,000 plus to buy another thanks to stamp duty etc. Just because the BOE was asleep at the wheel and couldn't see, or wouldn't see, that consumer debt and spiralling house prices were a false dawn of success. Prof. D Blanchflower still cannot see the MPC's error. Interest rates should have been raised not reduced but Broon would not have liked that. So much for Mervyn King's independence.