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UK Savers Losing Money on Virtually ALL Instant Access Savings Accounts

Personal_Finance / Savings Accounts Jan 23, 2010 - 02:41 AM GMT

By: Nadeem_Walayat

Personal_Finance

Best Financial Markets Analysis ArticleThe savers and borrowers of Britain are being forced to pay for the crimes of the bankster's by an inept, incompetent, and culpable Labour government that has so far bent over backwards to placate the bankster's to the fullest extent even if it ultimately means bankrupting Britain.


This analysis seeks to evaluate to what degree today's savers are subsidising the high street banks when comparing their BEST instant access savings accounts against the UK CPI inflation rate. The analysis also allows for the fact that most savers in Britain pay a 20% tax on all interest therefore the actual return on a 2% interest rate is 1.6% net of tax, where one can assume that much of this tax goes towards bailing out the bankrupt banks.

The table below illustrates that not one single bank or building society is paying savers a real return on the funds they have deposited in the banks instant access accounts. The real loss of value on savings is anywhere from 0.62% at the Principality to 2.70% with First Direct. Also many of these accounts interest rates include a bonus component that is usually limited to the first 12 months.

UK Savers are not PAID to deposit their cash in the banks as there is NO REAL RETURN on savings. Clearly the objective of savers should be to first beat inflation and then the 20% savings tax. To achieve this savers today need to receive a return of a minimum of 3.48% just to break even after inflation and tax. This IS as a consequence of tax payers bailing out bankrupt banks in that there IS NO FREE MARKET in the banking system. Instead the banking system is manipulated to ensure that the banks are able to generate maximum profits for the purpose of rebuilding their balance sheets. However as we are witnessing with billions being paid out as bonuses this is to a large part NOT taking place.

Whilst the current minimum return should be 3.48% to break even for savers, however my inflation forecast that UK CPI inflation will rise to above 3% and stay above 3% for most of the year suggests that the real break even return level for 2010 should be nearer 4.10%, which means even more loss of value for savers who are in effect risking their hard earned cash at the banks for NO REAL RETURNS, i.e. Deposits are only guaranteed for the first £50,000 ACROSS banking groups, over which your money is LOST.

Therefore my conclusion is that UK savers have NO INCENTIVE to park their cash in any INSTANT ACCESS Savings Accounts, as the banks are generating huge profits from the spread between the high rates that banks lend at (to borrowers) and the ultra low rates that banks borrow at (from savers).

UK Inflation Mega-trend Forecasts

The following are key forecasts generated from in-depth analysis, the full implications of which will be in a FREE Inflation Mega-trends Ebook, ensure you are subscribed to my always free newsletter to receive this in your email in box.

UK Interest Rates Forecast 2010 and 2011

Market interest rates are already on a climb, especially for borrowers with even savings rates recently perking up. I expect the Bank of England to play catch-up mid 2010, with small baby step increases so as not to offer too much distress to the infant like banks as it weans them off excess liquidity. Last weeks in-depth analysis and forecast for UK interest rates for 2010 and 2011 concluded :

UK Interest Rates Forecast 2010-11: UK interest Rates to Start Rising From Mid 2010 and Continue into end of 2010 to Target 1.75% / 2%, Continue Higher into Mid 2011 to Target 3%.

For the full implications of the interest rate trend forecast, read the full analysis here.

UK Inflation Forecast 2010

My inflation forecast for 2010 as of 27th December 2009 forecast UK inflation to rise to above 3% early 2010, spiking as high as 3.6% and stay above 3% for most of the year only dipping to 2.7% by the end of the year as illustrated by the below graph.

UK Economy GDP Forecast 2010

My in depth analysis and forecast as of 31st December 08 forecasts strong UK economic growth of 2.8% for 2010 and 2.3% for 2011 which follows the forecast for 2009 for GDP contraction of -4.75% as of Feb 2009.

Source : http://www.marketoracle.co.uk/Article16705.html

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market . Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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