Before you get the pitchforks and torches ...

Don't be too hard on the bankers over interest rate cuts; it's the money market rate that counts

The world and his wife are all in agreement that banks are pure evil. They have had our money, but they dither when it comes to rate cuts. And boy are we desperate for it. Repossessions are soaring and unemployment is rising; just think what a fillip a 1.5 per cent cut could provide. But before sharpening those pitch forks, lighting the torches and chasing the local banker off the nearest cliff, we must recognise that in the new post-credit crunch world the Bank of England base rate is nowhere near as important as it used to be. Put simply, it's the money market rate that counts and it is moving lower but not as far or quite so fast.

No lender is going to slash all its new mortgage rates willy-nilly and identify itself as a best buy because it would be hit with a demand for remortgage business that it couldn't possibly meet by raising cash on the money markets.

Some will cut their standard variable rates by a big amount – between 1 and 1.5 per cent. But so few customers these days are on SVR that cuts won't make all that much of a difference. The real winners will be existing tracker rate mortgage holders – roughly 30 per cent of the market – who will see their repayments slashed. But fixed rate customers – around 58 per cent of the market – will see little or no benefit, but that's what they signed up for.

The upshot is that, regardless of the furious headlines and the bandwagon jumping politicians, most of us will have to wait for our rate cut jam and although banks – through their lax lending – are in large part responsible for this grim new world we live in, this isn't a case of collective maliciousness on their part.

Saving pensions

The introduction of personal accounts from 2012 looks increasingly as if it may be botched. At present, the Government is reviewing how personal accounts – which will see millions of workers auto-enrolled into a pension scheme – should work and crucially, we hope, how it interacts with the state benefits currently available.

I have always been in favour of personal accounts. Put simply, we must get people saving more and paying for their own retirement. But I have put a big caveat on my support for these accounts, and that: means-tested state benefits need to be reformed at the same time. The danger we face is that millions will save in the accounts only to get to retirement and find that their savings bar them from state benefits, especially pension credit. It's simply not fair that workers make sacrifices and do the right thing and end up with the same amount of money as someone who has saved nothing. It has the potential to be the mis-selling scandal to end all mis-selling scandals. The only way to avoid this is to reduce the benefits paid by the state – which at present are designed to grow markedly over the next few decades.

Following the Pensions Commission report compiled by Lord Turner and the subsequent Pensions Act there were some fine words spoken by politicians of every hue that they recognised that the long-term health of the retirement savings system was crucial to the country and that short-term political considerations would not distract them from doing what was right.

Now politicians think they have bigger fish to fry, and their pledge to do what is right come what may is being forgotten. Sad to say, from the soundings I am getting, we could be returning to the same old short-term approach to pensions, a subject on which we need to take a generational view. It looks as if ministers may back away from reform of the means-tested benefits needed to make personal accounts credible. The emerging attitude is: let's get the accounts up and running and look after the means-tested benefits mess later. However, if they do that, they will find that a lot of the support for personal accounts will disappear overnight.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Arts and Entertainment
Brendan O'Carroll as Agnes Brown in the 2014 Mrs Brown's Boys Christmas special
tvCould Mrs Brown's Boys have taken lead for second year?
Arts and Entertainment
Madonna is not in Twitter's good books after describing her album leak as 'artistic rape and terrorism'
music14 more 'Rebel Heart' tracks leaked including Pharrell Williams collaboration
Sport
Chelsea midfielder Cesc Fabregas
footballChelsea vs West Ham live kicks off coverage of all 10 of Boxing Day matches
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
PROMOTED VIDEO
News
i100
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
News
news
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    The Jenrick Group: Night Shift Operations Manager

    £43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

    SThree: Trainee Recruitment Consultant - LONDON

    £20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

    Day In a Page

    A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

    Christmas without hope

    Gaza fears grow that conflict with Israel will soon reignite
    After 150 years, you can finally visit the grisliest museum in the country

    The 'Black Museum'

    After 150 years, you can finally visit Britain's grisliest museum
    No ho-ho-hos with Nick Frost's badass Santa

    No ho-ho-hos with Nick Frost's badass Santa

    Doctor Who Christmas Special TV review
    Chilly Christmas: Swimmers take festive dip for charity

    Chilly Christmas

    Swimmers dive into freezing British waters for charity
    Veterans' hostel 'overwhelmed by kindness' for festive dinner

    Homeless Veterans appeal

    In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
    Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

    'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

    Yazidi girls killing themselves to escape rape and imprisonment
    Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

    Ed Balls interview

    'If I think about the deficit when I'm playing the piano, it all goes wrong'
    He's behind you, dude!

    US stars in UK panto

    From David Hasselhoff to Jerry Hall
    Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

    Grace Dent's Christmas Quiz

    What are you – a festive curmudgeon or top of the tree?
    Nasa planning to build cloud cities in airships above Venus

    Nasa planning to build cloud cities in airships above Venus

    Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
    Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

    Clocks, rifles, swords, frogmen’s uniforms

    Surrounded by high-rise flats is a little house filled with Lebanon’s history
    Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

    Four months after the bombardment, Gaza’s wounds are yet to heal

    Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
    Gastric surgery: Is it really the answer to the UK's obesity epidemic?

    Is gastric surgery really the answer to the UK's obesity epidemic?

    Critics argue that it’s crazy to operate on healthy people just to stop them eating
    Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

    Homeless Veterans appeal: Christmas charity auction

    Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
    Pantomime rings the changes to welcome autistic theatre-goers

    Autism-friendly theatre

    Pantomime leads the pack in quest to welcome all