Five years of near-zero returns on deposits have inflicted untold pain on the cautious and prudent – who, it should be remembered, far outnumber the reckless borrowers among us.
Many criminals are made to suffer less than savers have, since the stupid banks took us the brink of catastrophe in 2008-9, thus triggering a recession that has seen the Bank of England impose and maintain a policy of monetary stimulus so savage, it has virtually obliterated what were already poor real returns on private savings accounts.
Some economists are now arguing that enough is enough: a return to some semblance of normality in which individuals who live within their means get a reasonable return on whatever portion of their income they put aside is overdue.
John Taylor, a professor of economics at Stanford University, says that while monetary stimulus helped pull western economies from the edge of disaster it is likely that low interest rates and the highly leveraged boom they generated prior to 2008 pushed us to the edge in the first place. Persisting with them is now serving only to sow the seeds of future crises.
Low interest rates are a double-edged sword that in theory stimulates economic growth (assuming of course that the banks actually lend money where it is needed instead of using it to rebuild their balance sheets) while fuelling risk-taking on the part of those looking for a yield on their money.
It is the second half of that equation that worries us more at The Whitehall Partnership. We are sure that we can best help our clients in a mad and dangerous financial world by protecting their wealth rather than encourage them to chase high risk, high cost, investments in the hope of a few extra basis points of return.
A gradual but significant rise in rates over the course of this year would help allay the renewed fears of a new asset bubble pumped up by cheap money.
What is the likelihood of that happening? In my opinion it is slight.
Politicians such as John Redwood, the former Conservative cabinet minister, pay lip service to the need to reward savers.
“Recent opinion polls show that higher interest rates would be popular,” he tells us in a recent posting on his website. “This is no surprise, as the number of savers is greater than the number of borrowers.” (He would be shoo-in should we ever need a Minister of the Blindingly Obvious).
Central Bankers, on the other hand, are frightened by the perceived awful consequences in terms of business failures, home repossessions and personal bankruptcies of even a tiny rise in base rate.
Mark Carney of the Bank of England, for example, has cast aside inflation and carved himself a brand new yardstick to apply to rates. They will not go up until the unemployment rate falls to seven per cent, he decrees.
That target seems likely to be met by the middle of this year, meaning the BoE is more likely to move the goalposts than begin the process of weaning the economy off its addiction to monetary stimulus.
The money markets themselves are more likely to provide succour to savers than policymakers.
As John Redwood – usefully – points out, the bond markets have raised the rate on UK 10 year gilts to three per cent, double the low point it reached in 2012.
That could begin to trickle down in the form of more attractive long-term personal savings accounts this year, but I personally would not rely on the banks passing too much on to customers.
My guess is that 2014 will be another tough year for savers and investors, one in which there will be no substitute for cost-effective, independent and impartial financial advice from the likes of us at The Whitehall Partnership.
If you want help in finding the best home for your savings, or in reviewing the performance of existing savings accounts or investments, call us today on 0845 43 49 250 and arrange a free initial consultation.