Nick Goodway: Savers lose out with Funding for Lending
Outlook First of all quantitative easing hit pensioners because the surge of gilt purchases by the Bank of England created a sharp rise in annuity prices. That meant people about to retire faced much lower potential incomes than they had expected.
Now savers are being hit by the Bank's Funding for Lending scheme. Oh yes, the latest numbers show it definitely had a beneficial effect on home-buyers, with more money available at slightly lower rates for mortgages. But the same Bank of England data also revealed that in December the average interest offered on new savings accounts fell by 0.2 per cent to just 2.11 per cent. That is the lowest rate since the end of the financial crisis in 2009, and way behind the cost of living as measured by the CPI at 2.7 per cent.
No wonder that the man who signs the bank notes, Andrew Bailey, noting that savers' rates have come down far more sharply than borrowers', suggested "the jury is still out on whether we have seen as much adjustment as we ought to see".
Well the jury needn't stay out too much longer. It is pretty clear the banks are using cheap money to bolster profits at the expense of pensioners and savers. Perhaps Mr Bailey should check with his boss, Sir Mervyn King, who in July joins the country's army of pensioners. Except, of course, Sir Mervyn is one of those lucky folk still on a final salary pension, which will pay him just over £200,000 a year.
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