A report this week by the charity Independent Age showed that pensioners over 75 – the so-called ‘Silent Generation’– are thousands of pounds a year worse off than their younger counterparts. In fact, the charity estimates that 950,000 pensioners over 75 are living in poverty.
While Pension Credits and other benefits are available for older people who are struggling to make ends meet, many are unlikely to ask for help or apply for benefits they may be entitled to because of the ‘Keep Calm and Carry On’ attitude that pervades Britain’s pensioners who lived through the Second World War.
Yet they are also suffering from an inability to help themselves by gaining access to decent savings rates, because of the government’s continuation of the Funding for Lending (FLS) scheme, which means banks have ready access to cheap money and no longer need to be competitive to bring in savings cash.
Even though three quarters of pensioners age 75+ have some savings, these government measures are reducing the ability of every saver, no matter how old, to get decent returns on their savings income.
The figures speak for themselves. Since FLS was launched in 2012, savings rates have plummeted. For example, the average best buy easy access rate has fallen by almost 2% since July 2012 (from a peak of 3.22% just before FLS was introduced), to 1.28% now.
If you look at the number of existing savings accounts that has seen a rate cut over the period, the acceleration in 2013 was incredible. In 2012, 100 existing savings accounts cut their rates, but in 2013 this rose to a massive 1,470, a figure nearly reached by the 1,451 cut in 2015. So far this year, we have seen 340 accounts suffer a rate cut, but surely there is not a lot left to cut.
The correlation between the start of the FLS and the massive increase in accounts where the rate was cut is clear and given the facility is now not going to be phased out until January 2018, there is little hope in the short term for savers to get a break. It does not seem fair for savers – especially pensioner savers, who rely more heavily on the interest from savings accounts – to be suffering so many years on from the credit crunch because the government is still, in effect, propping up borrowers at the expense of the diligent and careful saver.
The sooner banks need savers’ cash again to lend, the better because that is likely to be when we will see interest rates on accounts become more competitive again.
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