In the nigh on twenty years I worked in retail banking, I could not even begin to estimate the number of customers – chiefly elderly – whom I spoke to about maximising the income from their life savings. They had worked hard to accumulate these savings over a period of many years and wished to invest them that the interest would serve them well in their twilight years and allow them to best enjoy their retirement. An excellent example of forward planning? Of course it is.
I saw many interest rate changes during my years spent working in banking and fielded vociferous complaints about same both from borrowers and from savers. The nature of the market dictates of course that the two can not be happy at the same time and what one gains from any interest rate change, the other loses. The basic answer to this conundrum was that everyone knew the market would fluctuate, the rates would change again and it was just a case of sitting tight and holding on until it was each individual’s turn to benefit.
The events of late 2008 and early 2009 have of course been virtually unprecedented and as many banks themselves are failing – or requiring to be shored up by astronomical government funding – interest rates have plummeted to record low levels. Governments and banks are lauding such measures as necessary to stabilise the economy and stimulate new growth. The TV news each night and the front page of every newspaper features one senior government official, senior banking officer or economist advocating these cuts and predicting how they will in the long term serve to ease the crisis.
Where, precisely, does this leave savers?
There will be a great many who have their savings presently tied up in fixed rate deals for a fixed period of time. These deals – risk free – are generally offered from periods of six months to up to five years. Those fortunate enough to be in such deals at the moment are safe for now – but what about those who are not, or whose deals are due to very shortly expire? Many savings accounts are presently paying zero percent interest! What about the people who were virtually dependant on the income from their savings simply to survive and not just to provide luxuries in life?
As the crisis that is credit crunch continues unabated, more and more elderly people are going to find themselves living effectively below the poverty line. These poor people are going to be unable to afford to eat properly, heat their homes properly, live life on a day to day basis that they as we have come to take for granted. Where is the publicity about the plight of such people? Who is actively stepping in to act on behalf of the people who built the stable economies which have been so grossly mismanaged and abused by their successors?
Yes, it is important to reduce the cost of borrowing to attempt to stabilise the economies of the world. Yes, it is important to at least attempt to save the ailing banks, provided we do not at the same team leave them in the incompetent hands which caused this mess. It is surely, however, at least as important if not more so that we be proactive now – not six months down the line – in doing something to help those who are the silent victims of this mess before their lives and their savings are decimated irreparably.
Mr Obama and Mr Brown – the ball is now most firmly in your courts.