Savers withdraw record amount from banks
The British Bankers' Association said that customers withdrew £2.3bn in January, the biggest drop since records began.
By Paul Farrow
Last Updated: 5:19PM GMT 24 Feb 2009
The BBA said personal deposits fell by £2.3bn as spending drained cash and savers sought alternative ways of getting a return on their cash. The previous high for falling deposits was £1.5bn in 1997.
David Dooks, BBA statistics director, said: "It is the biggest monthly fall in a decade. A fall in deposits in January reflects a tendency to draw on cash to pay off credit cards after Christmas, or to move into alternative financial products paying a higher return."
With interest rates at record lows savers are having to find other ways to get a return on their money. A recent survey showed that savers are preparing to abandon their tax-free Individual Savings Accounts (ISAs) because of lack of money and falling rates.
The uSwitch survey shows that 4.3 million savers are planning on withdrawing money from their accounts, losing the advantage of the tax-free status. The research suggests that, with the average cash ISA saver having a balance of £2,200, savers are set to withdraw £9.5 billion over the next year.
On the other hand, sales of corporate bond funds, which are paying yields of 5pc or more are proving popular among investors looking for a lower risk investment that pays an income. Bonds funds accounted for two in every three unit trusts bought in December and they continue to attract the lion's share of investors' money in 2009.
Dooks played down suggestions that customers had lost faith in the banks and said that deposits had risen in November and December.
http://www.telegraph.co.uk/finance/personalfinance/savings/4799679/Savers-withdraw-record-amount-from-banks.html
Showing posts with label savings. Show all posts
Showing posts with label savings. Show all posts
Wednesday 25 February 2009
Friday 6 February 2009
Savings: Where should I put my money?
Savings: Where should I put my money?
Savers have had a rough time of late, but they really shouldn't despair.
By Harry Wallop, Consumer Affairs Editor Last Updated: 7:50PM GMT 05 Feb 2009
Yes, savings rates are the lowest since the 17th Century. But that doesn't mean you should not lock your hard-earned money into iron chests and place into your cellar, as Samuel Pepys did during the Great Fire of London.
For starters there is the stock market. Yes, really. Unless you genuinely believe capitalism is dead, the stock market should be considered. It has consistently outperformed every other asset class, including property during the last century.
Only last week, I topped up the Wallop children's child trust funds – confident that when they are allowed to touch the money, it will be worth a great deal more than if I put the money into Premium Bonds.
Shares are likely to tread water for the next year or two, but in the intervening period most companies should pay out a dividend to their shareholders.
BP, for instance, intends to pay a dividend of £7.70 for every £100 invested. Okay, it is conceivable in these unprecedented times that this oil giant will cut payments to shareholders, but it seems a risk worth taking.
If you don't have the luxury of time – a prerequisite for investing in shares – there are other options.
Most savings accounts pay out less than 1.5 per cent, but there are banks desperate for your money and prepared to offer unprofitable (for them) rates if you scout around.
Standard Life Bank's Easy Access ISA has a rate of 3.5 per cent – a remarkable rate of return, considering Bank rates have hit just 1 per cent.
Or you can always turn to the last refuge of the desperate: gold, which is proving an impressive, if volatile, performer during the financial crisis.
Either buy the stuff via gold exchange traded funds, which trade on the stock market, or pop down to a bullion dealer and buy a bar of the hard stuff.
You can then store it in your cellar.
http://www.telegraph.co.uk/finance/economics/interestrates/4528415/Savings-Where-should-I-put-my-money.html
Savers have had a rough time of late, but they really shouldn't despair.
By Harry Wallop, Consumer Affairs Editor Last Updated: 7:50PM GMT 05 Feb 2009
Yes, savings rates are the lowest since the 17th Century. But that doesn't mean you should not lock your hard-earned money into iron chests and place into your cellar, as Samuel Pepys did during the Great Fire of London.
For starters there is the stock market. Yes, really. Unless you genuinely believe capitalism is dead, the stock market should be considered. It has consistently outperformed every other asset class, including property during the last century.
Only last week, I topped up the Wallop children's child trust funds – confident that when they are allowed to touch the money, it will be worth a great deal more than if I put the money into Premium Bonds.
Shares are likely to tread water for the next year or two, but in the intervening period most companies should pay out a dividend to their shareholders.
BP, for instance, intends to pay a dividend of £7.70 for every £100 invested. Okay, it is conceivable in these unprecedented times that this oil giant will cut payments to shareholders, but it seems a risk worth taking.
If you don't have the luxury of time – a prerequisite for investing in shares – there are other options.
Most savings accounts pay out less than 1.5 per cent, but there are banks desperate for your money and prepared to offer unprofitable (for them) rates if you scout around.
Standard Life Bank's Easy Access ISA has a rate of 3.5 per cent – a remarkable rate of return, considering Bank rates have hit just 1 per cent.
Or you can always turn to the last refuge of the desperate: gold, which is proving an impressive, if volatile, performer during the financial crisis.
Either buy the stuff via gold exchange traded funds, which trade on the stock market, or pop down to a bullion dealer and buy a bar of the hard stuff.
You can then store it in your cellar.
http://www.telegraph.co.uk/finance/economics/interestrates/4528415/Savings-Where-should-I-put-my-money.html
Monday 22 December 2008
'Savers are going to have to step up to the risk plate at some stage'
'Savers are going to have to step up to the risk plate at some stage'
The real prospect that rates will fall to zero is a nightmare scenario for those that rely on savings income to bolster their day-to-day living expenses.
By Paul FarrowLast Updated: 7:31AM GMT 11 Dec 2008
Comments 2 Comment on this article
It is hard to imagine savings rates at nil - but it happened in Japan, where savers had no choice but to deal with the harsh reality of not getting a return on their money.
Take a look at this excerpt from the newswires in July 2006 when the Bank of Japan decided to raise rates for the first time in six years from zero to 0.25pc.
"Mizuho Financial, Japan's second largest bank, said last week it would raise interest rates on six-month time deposits for the first occasion in almost six years. It raised the rate for six months to 0.1pc from 0.02pc and the rate for three month accounts to 0.06pc from 0.02pc from July 10. Smaller Sumitomo Mitsui Financial also raised rates on time deposits on Monday.''
Apathetic savers are already getting a pittance on their cash - many of Halifax's savings accounts pay 0.5pc or less already.
For the proactive saver, as Emma Simon reports on page 1, there are ways to get a return on your money over and above 2pc. But you will have to get your skates on to grab a decent deal.
As one commentator remarked last week, savers are going to have to take on a little more risk if they are to get their just rewards. With rates around 6pc, the decision to hoard cash in savings accounts made perfect sense, but the landscape is changing.
As I mentioned a fortnight ago, corporate bond funds offer a decent yield as do many equity income funds. They are by no means a substitute for cash but, if rates languish at such low levels for too long, savers are going to have little choice but to step up to the risk plate at some stage.
It is a different ball game for borrowers, however. When interest rates reached 15pc in 1990, I was green with envy of my bosses at Coutts. The longest standing managers at the Queen's bank were fortunate to have fixed rate mortgages of just 2pc. A perk if ever there was one.
It seemed inconceivable at the time that I or anyone else could pay a miserly 2pc on a home loan - until this week, that is. True, many borrowers won't be paying anything like 2pc. For starters, around half of mortgages are fixed-rate, while more 10pc of home owners are on their lender's standard variable rates and they range between 4pc and 7pc.
However, some lucky borrowers will be paying less than 1pc. C&G, for instance, was offering a two-year tracker discounting base rate by 1.01pc. One can only assume that these borrowers now paying 0.99pc will pay zilch interest if rates tumble to zero. Many lenders were predictably slow to react, or did react but failed to pass on the full one percentage point cut.
But it made a welcome change to see a lender put its customers first for once. Nationwide decided not enforce its collar on tracker mortgages. A collar allows lenders not to pass on interest rate reductions once base rate falls below a certain level - in Nationwide's case, it was 2.75pc. Mind you, I'm fortunate enough to have a two-year tracker from the building society at 0.03pc above base rate. I'll leave it to you to do the maths.
http://www.telegraph.co.uk/finance/personalfinance/comment/paulfarrow/3690421/Savers-are-going-to-have-to-step-up-to-the-risk-plate-at-some-stage.html
The real prospect that rates will fall to zero is a nightmare scenario for those that rely on savings income to bolster their day-to-day living expenses.
By Paul FarrowLast Updated: 7:31AM GMT 11 Dec 2008
Comments 2 Comment on this article
It is hard to imagine savings rates at nil - but it happened in Japan, where savers had no choice but to deal with the harsh reality of not getting a return on their money.
Take a look at this excerpt from the newswires in July 2006 when the Bank of Japan decided to raise rates for the first time in six years from zero to 0.25pc.
"Mizuho Financial, Japan's second largest bank, said last week it would raise interest rates on six-month time deposits for the first occasion in almost six years. It raised the rate for six months to 0.1pc from 0.02pc and the rate for three month accounts to 0.06pc from 0.02pc from July 10. Smaller Sumitomo Mitsui Financial also raised rates on time deposits on Monday.''
Apathetic savers are already getting a pittance on their cash - many of Halifax's savings accounts pay 0.5pc or less already.
For the proactive saver, as Emma Simon reports on page 1, there are ways to get a return on your money over and above 2pc. But you will have to get your skates on to grab a decent deal.
As one commentator remarked last week, savers are going to have to take on a little more risk if they are to get their just rewards. With rates around 6pc, the decision to hoard cash in savings accounts made perfect sense, but the landscape is changing.
As I mentioned a fortnight ago, corporate bond funds offer a decent yield as do many equity income funds. They are by no means a substitute for cash but, if rates languish at such low levels for too long, savers are going to have little choice but to step up to the risk plate at some stage.
It is a different ball game for borrowers, however. When interest rates reached 15pc in 1990, I was green with envy of my bosses at Coutts. The longest standing managers at the Queen's bank were fortunate to have fixed rate mortgages of just 2pc. A perk if ever there was one.
It seemed inconceivable at the time that I or anyone else could pay a miserly 2pc on a home loan - until this week, that is. True, many borrowers won't be paying anything like 2pc. For starters, around half of mortgages are fixed-rate, while more 10pc of home owners are on their lender's standard variable rates and they range between 4pc and 7pc.
However, some lucky borrowers will be paying less than 1pc. C&G, for instance, was offering a two-year tracker discounting base rate by 1.01pc. One can only assume that these borrowers now paying 0.99pc will pay zilch interest if rates tumble to zero. Many lenders were predictably slow to react, or did react but failed to pass on the full one percentage point cut.
But it made a welcome change to see a lender put its customers first for once. Nationwide decided not enforce its collar on tracker mortgages. A collar allows lenders not to pass on interest rate reductions once base rate falls below a certain level - in Nationwide's case, it was 2.75pc. Mind you, I'm fortunate enough to have a two-year tracker from the building society at 0.03pc above base rate. I'll leave it to you to do the maths.
http://www.telegraph.co.uk/finance/personalfinance/comment/paulfarrow/3690421/Savers-are-going-to-have-to-step-up-to-the-risk-plate-at-some-stage.html
Sunday 21 December 2008
What hope for investment recovery in 2009?
From The Times
December 11, 2008
What hope for investment recovery in 2009?
We ask the experts for their predictions as beleaguered investors say good riddance to 2008
Mark Atherton
Most people cannot wait to see the end of 2008. Whether you were a saver, a stock market investor or a property owner, the past 12 months has delivered some nasty shocks to the system.
The FTSE 100 index of leading UK shares is down 32 per cent this year and the US stock market has fallen by 34 per cent. Emerging markets such as Russia and China, once the darlings of UK investors, have fared even worse.
Even traditional safe havens, such as bricks and mortar, have proved no defence against this year's chill financial winds. UK house prices are down 17 per cent while commercial property has fallen by about 20 per cent.
One piece of good news is that the situation has grown so bad that experts are not expecting it to deteriorate much in 2009. Here are their predictions of what is in store.
Related Links
A good ten-year bet
Q&A: New Star crisis
The UK stock market
With the UK economy now in recession, most experts are forecasting that shares will struggle to make headway in early 2009. But the green shoots of recovery could begin to show in the latter part of the year as the market starts to expect an improvement in the economy. UBS, the Swiss bank, reckons that the FTSE 100 could recover to 5,800 from its current level of about 4,300. Among the sectors it favours are food retailers, health equipment and household goods. Its preferred stocks include Tesco, Smith & Nephew and Next.
Brewin Dolphin, the stockbroker, also forecasts a recovery, albeit a more modest one. Mike Lenhoff, Brewin's chief strategist, says: “There will be more bad news, but the market is already discounting a great deal of it, so shares are now looking cheap. Governments are making huge efforts to respond to the impact of the credit crunch and next year we should start to see them take effect.”
Brewin Dolphin is looking for good performance from sectors such as general retailing and media stocks. Among the shares it likes are Marks & Spencer and Reed Elsevier.
Global stock markets
The general consensus is that the US, which led the world into recession, will also lead the world out of the downturn, triggering a recovery in the US stock market. Max King, strategist at Investec Asset Management, says: “The US trade deficit is falling and household debt is lower than in the UK. The ability of the US economy to bounce back should never be underestimated.”
Meanwhile, Morgan Stanley, the US investment bank, thinks that emerging markets as a whole could rise by more than 60 per cent in the next 12 months. This reflects the expectation that the economies of the industrial world will shrink by 0.9 per cent, while those of the developing world will rise by 4.3 per cent.
For those wishing to invest through funds, Rob Harley, of Bestinvest, the independent financial adviser (IFA), suggests Aberdeen Emerging Markets and Legg Mason US Smaller Companies.
Bonds
Many experts reckon that a lot of bonds are attractively priced after the recent heavy falls. These price falls mean that bonds are also on comparatively high yields, which is good news for investors seeking income. Darius McDermott, of Chelsea Financial Services, another IFA, says: “Falling interest rates and falling inflation will be good for bonds and are likely to send prices higher. It is possible that investors could benefit from a high yield and a rise in the capital value of their investments.”
Among the bond funds that Mr McDermott favours are M&G Optimal Income, which yields 6.5 per cent, and the Henderson Strategic Bond fund, yielding 7.5 per cent.
Alternative investments
Mick Gilligan, a partner at Killik & Co, the stockbroker, says that popular investments such as fine wines and vintage cars have fallen off the radar as prices have fallen.
Among more widely traded alternative investments, Mr Gilligan thinks that gold could have a strong run, especially when investors realise the enormity of the debt burden in the developed economies. He also thinks that oil, which was trading at about $40 a barrel recently, should be considerably higher this time next year.
Meanwhile, experts say that private equity funds, which rely heavily on borrowing, could struggle.
Commercial property
Bill Siegle, of Cluttons, the chartered surveyor, reckons that commercial property prices are likely to continue falling as we enter 2009. As the recession bites, more tenants, including some household names, are likely to default on rental payments.
“There is still a bit further to go before we hit the bottom, though this is likely to happen sometime next year,” Mr Siegle says.The areas that he thinks will prove most profitable when the market recovers are retail warehouses and some industrial parks.
Savers face a bleak 12 months
Prudent savers are finding it harder to obtain a decent return after the Bank of England cut the base rate to its lowest level for 57 years. And with economists predicting that the base rate could drop as low as 0 per cent next year, the prospect for savers is looking increasingly bleak, writes Lauren Thompson.
The rates on savings accounts have fallen fast as the base rate has dropped by three percentage points in the past three months to only 2 per cent. Michelle Slade, of Moneyfacts.co.uk, the financial website, says: “The 7 per cent deals that were available in October seem like a distant memory. The best accounts now pay about 5 per cent - and these will probably not be around for long.”
Capital Economics, the research consultancy, expects the base rate to fall to 1 per cent in the first quarter of next year. It thinks that it could drop to 0 per cent by the end of the year. The experience of Japan, where interest rates have been near zero for years, provides a worrying indication of what that could mean for savers.
Simon Somerville, of Jupiter Asset Management, says: “The most that you can earn from a Japanese bank account is 0.4 per cent, but most pay no interest. Many Japanese have abandoned banks and put their savings in safes or under the mattress.”
There are still some good deals available in the UK. Leeds Building Society is offering 5 per cent on its Fixed Rate Postal Access Bond until May. Those hoping to lock in for three years can get 4.75 per cent with Cheshire Building Society's Three-Year Fixed Rate Bond.
Some of the highest returns are from foreign banks, such as ICICI, the Indian-owned bank, which offers 4.75 per cent for 12 months on its HiSAVE Fixed Rate bond. Even though the bank is foreign owned, deposits of up to £50,000 are guaranteed by the Financial Services Compensation Scheme.
http://www.timesonline.co.uk/tol/money/investment/article5326730.ece
December 11, 2008
What hope for investment recovery in 2009?
We ask the experts for their predictions as beleaguered investors say good riddance to 2008
Mark Atherton
Most people cannot wait to see the end of 2008. Whether you were a saver, a stock market investor or a property owner, the past 12 months has delivered some nasty shocks to the system.
The FTSE 100 index of leading UK shares is down 32 per cent this year and the US stock market has fallen by 34 per cent. Emerging markets such as Russia and China, once the darlings of UK investors, have fared even worse.
Even traditional safe havens, such as bricks and mortar, have proved no defence against this year's chill financial winds. UK house prices are down 17 per cent while commercial property has fallen by about 20 per cent.
One piece of good news is that the situation has grown so bad that experts are not expecting it to deteriorate much in 2009. Here are their predictions of what is in store.
Related Links
A good ten-year bet
Q&A: New Star crisis
The UK stock market
With the UK economy now in recession, most experts are forecasting that shares will struggle to make headway in early 2009. But the green shoots of recovery could begin to show in the latter part of the year as the market starts to expect an improvement in the economy. UBS, the Swiss bank, reckons that the FTSE 100 could recover to 5,800 from its current level of about 4,300. Among the sectors it favours are food retailers, health equipment and household goods. Its preferred stocks include Tesco, Smith & Nephew and Next.
Brewin Dolphin, the stockbroker, also forecasts a recovery, albeit a more modest one. Mike Lenhoff, Brewin's chief strategist, says: “There will be more bad news, but the market is already discounting a great deal of it, so shares are now looking cheap. Governments are making huge efforts to respond to the impact of the credit crunch and next year we should start to see them take effect.”
Brewin Dolphin is looking for good performance from sectors such as general retailing and media stocks. Among the shares it likes are Marks & Spencer and Reed Elsevier.
Global stock markets
The general consensus is that the US, which led the world into recession, will also lead the world out of the downturn, triggering a recovery in the US stock market. Max King, strategist at Investec Asset Management, says: “The US trade deficit is falling and household debt is lower than in the UK. The ability of the US economy to bounce back should never be underestimated.”
Meanwhile, Morgan Stanley, the US investment bank, thinks that emerging markets as a whole could rise by more than 60 per cent in the next 12 months. This reflects the expectation that the economies of the industrial world will shrink by 0.9 per cent, while those of the developing world will rise by 4.3 per cent.
For those wishing to invest through funds, Rob Harley, of Bestinvest, the independent financial adviser (IFA), suggests Aberdeen Emerging Markets and Legg Mason US Smaller Companies.
Bonds
Many experts reckon that a lot of bonds are attractively priced after the recent heavy falls. These price falls mean that bonds are also on comparatively high yields, which is good news for investors seeking income. Darius McDermott, of Chelsea Financial Services, another IFA, says: “Falling interest rates and falling inflation will be good for bonds and are likely to send prices higher. It is possible that investors could benefit from a high yield and a rise in the capital value of their investments.”
Among the bond funds that Mr McDermott favours are M&G Optimal Income, which yields 6.5 per cent, and the Henderson Strategic Bond fund, yielding 7.5 per cent.
Alternative investments
Mick Gilligan, a partner at Killik & Co, the stockbroker, says that popular investments such as fine wines and vintage cars have fallen off the radar as prices have fallen.
Among more widely traded alternative investments, Mr Gilligan thinks that gold could have a strong run, especially when investors realise the enormity of the debt burden in the developed economies. He also thinks that oil, which was trading at about $40 a barrel recently, should be considerably higher this time next year.
Meanwhile, experts say that private equity funds, which rely heavily on borrowing, could struggle.
Commercial property
Bill Siegle, of Cluttons, the chartered surveyor, reckons that commercial property prices are likely to continue falling as we enter 2009. As the recession bites, more tenants, including some household names, are likely to default on rental payments.
“There is still a bit further to go before we hit the bottom, though this is likely to happen sometime next year,” Mr Siegle says.The areas that he thinks will prove most profitable when the market recovers are retail warehouses and some industrial parks.
Savers face a bleak 12 months
Prudent savers are finding it harder to obtain a decent return after the Bank of England cut the base rate to its lowest level for 57 years. And with economists predicting that the base rate could drop as low as 0 per cent next year, the prospect for savers is looking increasingly bleak, writes Lauren Thompson.
The rates on savings accounts have fallen fast as the base rate has dropped by three percentage points in the past three months to only 2 per cent. Michelle Slade, of Moneyfacts.co.uk, the financial website, says: “The 7 per cent deals that were available in October seem like a distant memory. The best accounts now pay about 5 per cent - and these will probably not be around for long.”
Capital Economics, the research consultancy, expects the base rate to fall to 1 per cent in the first quarter of next year. It thinks that it could drop to 0 per cent by the end of the year. The experience of Japan, where interest rates have been near zero for years, provides a worrying indication of what that could mean for savers.
Simon Somerville, of Jupiter Asset Management, says: “The most that you can earn from a Japanese bank account is 0.4 per cent, but most pay no interest. Many Japanese have abandoned banks and put their savings in safes or under the mattress.”
There are still some good deals available in the UK. Leeds Building Society is offering 5 per cent on its Fixed Rate Postal Access Bond until May. Those hoping to lock in for three years can get 4.75 per cent with Cheshire Building Society's Three-Year Fixed Rate Bond.
Some of the highest returns are from foreign banks, such as ICICI, the Indian-owned bank, which offers 4.75 per cent for 12 months on its HiSAVE Fixed Rate bond. Even though the bank is foreign owned, deposits of up to £50,000 are guaranteed by the Financial Services Compensation Scheme.
http://www.timesonline.co.uk/tol/money/investment/article5326730.ece
Wednesday 22 October 2008
Protect your savings against inflation
Inflation eating into retirement nest-egg of Malaysians
By Jeeva Arulampalamjeeva@nstp.com.my
FOUR out of 10 Malaysians feel the need to continue working after their mandatory retirement age, driven by the fear that they will not be able to support themselves based on current retirement savings.
A survey by life insurer Prudential Assurance Malaysia Bhd in August 2008, called the Prudential Retire-Meter 2008, found that 36 per cent of people approaching retirement age were less confident about their retirement from a year ago."
About 81 per cent of these individuals said that inflation had gone up and had an effect on their lifestyles," Prudential Assurance Malaysia chief executive officer Bill Lisle said at a media briefing in Kuala Lumpur yesterday to release the survey findings.
While close to 72 per cent of the respondents said they saved, about 77 per cent of those who saved invest in low-yielding savings vehicles such as fixed deposits and savings accounts."
About 41 per cent said they don't know how much to save to meet their retirement needs and 64 per cent said they did not separate their retirement savings from their other savings," said Lisle.
Lisle said the lack of awareness for retirement savings needed to be addressed since Malaysians should ensure that their retirement plans are inflation and recession proof.
He added that Prudential will continue with its retirement education programme in November, under the "What's your number" campaign that seeks to identify and revise one's estimated retirement savings on an annual basis.
Global research agency Research International was commissioned to conduct the Prudential Retire-Meter 2008 survey which covered key urban centres in Peninsular Malaysia, Sabah and Sarawak.
A total of 1,024 Malaysians with a monthly household income of RM3,000 and higher were interviewed for the survey.
Mail webheads for site related feedback and questions. Write to the editor or contact sales for other kind of help. Copyright © The New Straits Times Press (Malaysia) Berhad, Balai Berita 31, Jalan Riong, 59100 Kuala Lumpur, Malaysia.
http://www.btimes.com.my/Monday/OurPick/20081022004144/Article
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