U.K.’s prudent savers feel punished
TEXT OF STORY
KAI RYSSDAL: The global economic slowdown has taken all the suspense out of covering central bank meetings. You used to actually have to keep an eye on them to see whether they cut interest rates or raised them. Now the question here is when, not whether, Ben Bernanke’s going to lower the federal funds rate to zero.
Rates aren’t quite that low over in the U.K., but they’re dropping all the time. The Bank of England meets tomorrow, almost certainly to cut again. Last month the bank dropped its rate to 3 percent, the lowest it’s been in more than 50 years. Another cut will help hard-pressed borrowers.
But there’s a group of Brits that won’t be applauding. Marketplace’s Stephen Beard has been talking to hard-pressed savers.
STEPHEN BEARD: Christopher Barton is organizing a petition calling on the U.K. authorities, in his words, “to consider the plight of prudent savers.”
He’s one of them. A 59-year-old retired manager. Here he is online, checking the rate of return on his savings:
CHRISTOPHER BARTON: Oh, dear, look at this, it’s come right down again. Right down.
He has his money in a savings account. He and his wife live mostly off the interest. The recent drop in U.K. interest rates has cut their retirement income in half. And further rate cuts are likely on the way.
BARTON: It will have quite a dramatic effect on our way of life. We will be able to live, hopefully. As long as they don’t go down to zero or something ridiculous. But it won’t allow for any luxuries. And we’ll just have to be extremely careful.
Hundreds of thousands of British retirees depend on interest for at least some of their income. And low interest rates not only affect the return on savings. They reduce the income generated by many pension plans.
Malcolm McLean is a pensions adviser.
Malcolm McLean: We’re finding a lot of people are coming to us quite dismayed at the large reductions and deciding that the only thing they can do is stay on at work.
Economists say the U.K.’s central bank has got to cut rates and cut them hard. They say that saving is not a virtue in a severe downturn, that we need people to borrow and spend to rescue the ailing economy.
That does not console Christopher Barton. He says it was borrowers, not savers, that caused the crisis.
BARTON: Basically, there are a lot of people out there who have been prudent. And now they’ve got no reward. No reward for their prudence. No reward for their savings, and are basically forgotten.
He says he launched his petitiion as a protest but he ruefully acknowledges it will have little effect. The Bank of England is expected to cut rates by an extra half a point tomorrow.
In London, this is Stephen Beard for Marketplace.
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