Just me or too simplistic?

[madibe]

Mornin' all,

Just been reading the BBC webshite and there is an article there about the recession being over yadda yadda yadda.

My interest here though was rather to do with the 'have your say section'.

It is of course vastly polarised and filled with the usual daily hate readers shortsighted opinions (IMHO)... but one little nugget from a 'regular type of reply' caught my eye... :

my husband and I are retired but our pension savings are not gaining interest...

Am I being too simplistic in suggesting that if they gain interest there is inflation therefore everything will cost more in the future, negating the effect of their interest.

I probably shouldn't ask such a stoopid question, but then again, it seems to be what makes the world go around for some people... and if my assumption is correct then it is bolloxed.

Am I missing something?

Point 2.... paraphrase "there are no jobs".... well, again the answer is too simplistic in all probability:

We in the UK have become (or are becoming) customers. Customers spend money. Unless we can become suppliers to earn something then we will eventually spend all our money. End of.

Growth eh? Fun aint it.

[Andy Hunt]

Once citizens, now consumers.

[2 As and a B]

I've almost finished reading and can recommend Fantasy Island (that is not a recommendation to buy from DODGY TAX AVOIDERS!) - it lays bare the dualities of Blair's premiership. Therein you will find all the inconsistencies and conflicting claims exposed!

It was written before the financial crash in 2007 and foretold it - OK, that wasn't hard to predict with such a debt mountain built up, but even so...

[JohnB]

Am I being too simplistic in suggesting that if they gain interest there is inflation therefore everything will cost more in the future, negating the effect of their interest.

I know we've done the subject of interest pretty much to death before, but in simplistic terms isn't interest just a hire charge for borrowing money? You'd pay a hire charge to borrow a car or tools that it's not worth buying, so why should money be different? If I've got some spare money floating around, what's wrong with hiring it out to someone who needs it, and be paid a fair rental for it? The problem is, like most things that humans get involved with, people get carried away with the idea, go too far and screw things up .

[RenewableCandy]

Maudibe you've hit the thumb firmly on the nail: without interest, pensions as we know them today would simply cease to function (although people could still save for their retirement and end up with just the principle money they put in sans interest...and without the concept of interest there'd be a lot less inflation).

You could, for example, save up and buy a small house, which you'd collect rent from while living in another house. The people paying the rent would be young and they'd move on, to be replaced by another young lot, when they want to buy, etc...

[JohnB]

You could, for example, save up and buy a small house, which you'd collect rent from while living in another house. The people paying the rent would be young and they'd move on, to be replaced by another young lot, when they want to buy, etc...

Or better still, buy a big house and divide it into smaller ones, live in one part and let the rest. Living in a small space is more energy efficient, and you're reducing the need to build new houses.

[RenewableCandy]

I'm presupposing (possibly wrongly) that most people, when elderly, would rather have the place to themselves. But yer right: if they didn't, it'd work out much more economical.

[madibe]

RC - yes, so pensions / pension funds are borrowing against future growth... since continual evelasting growth is impossible anything based upon the notion becomes unviable.

I have experience of this: my folks are 86 AND 76. They have worked and saved hard. They too complain about the lack of interest at present. However, to put this into context, they have policies and bonds maturing now (and indeed over the last 10-15 years) that they paid into for years... the value on maturity is ridiculous considering the strain they took to afford to pay into.

For example some policies are maturing that foretold great returns (and have performed on track) but today provide a lump sum that wouldn't cover my mortgage for a year. Y'know, 4-5 thousand seemed like a fortune in 1980.

Ditto for tied in acounts.

So growth, inflation has devalued their investment, or at best just kept up with risng prices. But meanwhile the financial wizz kids have had peoples money to play with, abuse and lose. The only winners are the 'bankers'.

There's no point in being able to say 'I'm making 20 percent interest' if everything costs 21 percent more... sigh. Of course its the missing 1 percent (or more?) that pays the bonuses, oils the wheels and keeps the fat cats on full fat cream. 1 percent of millions of peoples money going to a few thousand individuals back pocket. Or have I over-simplified again?

[JohnB]

I'm presupposing (possibly wrongly) that most people, when elderly, would rather have the place to themselves. But yer right: if they didn't, it'd work out much more economical.

They might prefer it, but isn't it better than struggling to cope with a big house and garden falling apart around them, and then being dumped in a home when they're too ill to look after themselves?

[JohnB]

When my Dad retired many years ago (as he was ancient when I was born!), he had the state pension, and £10,000 in savings that he'd made a lot of sacrifices to save. In 1972 he bought a new car for £1,000, so that would make it worth maybe £100-200k at today's prices, so not a bad sum to live on. The inflation in the 70s wiped out most of the value. His big obsession was that Mum, who was 12 years younger, would have enough to live on when he was gone. In the end she survived on inherited money from her older sisters, and the sale of the family house, so virtually all of it came from rising house prices. That's totally crazy. Dad worked hard and saved for almost nothing, although luckily he did buy a house when it was an uncommon thing to do.

There's something wrong with a system where people can plan for their future, but those plans can be screwed up by a small minority of rich and powerful people. Although I suppose it's always been that way .

[madibe]

So JohnB... ditto for our folks. It sucks. And yet people are still being sold the same line and buying it.

I will repeat; since continual growth is not possible, and really we are reaching towards the edge of the petri dish now, then investment in a certainly uncertain future looks ever more fragile. The only winners being those that take the money NOW and use it to their own ends. ie the financial institutions and players.

Grim.

[revdode]

I lost my first attempt at a pension, spent some time cursing then came to the conclusion that on balance as it seemed likely we would hit a resource wall before I retire then really it was a bad bet. I still contribute to a pension at work but no top ups, just enough to get the max contribution from my employer and the tax man.
In the end I hope to retire if I make it that far to a house where I need less and can provide some of my own requirements. If I get anything out of the pension puggy it's a bonus, if I can draw some out over the next five years to help me reach my goal then I probably will.
In the end investing in the future in something concrete seems to make much more sense, it will always be harder for the tax man to come and take away someones only house than to change the tax regime on pensions.

[PS_RalphW]

My pension:

1. The kids. That is (one) reason I adopted them.

2. The better half's house for rental income

3. The mother in law's house when we inherit it, as a retirement home
(rent out current house)

4. Anything the state throws our way.

5. Company pension. It did well this year. It is worth almost as much as
I (and more to the point my company) have put into it.

These all have risks and may return zero. At least I don't have all eggs in one basket.

[tattercoats]

Maudibe, I like your 'edge of the petri dish' phrase! Very compelling...

RC, people do seem to want to live in smaller and smaller households, don't they? The nuclear family, the empty nesters, the retired, the singleton, the childfree couple - each form a household rather than sharing as part of a larger one.

I wimped out recently at a meeting where affordable homes for single elderly folk were being discussed. I wanted to say 'what about moving in with each other, frienss, family members, and saving resources both physical and emotional?

The main reason I wimped out was because I realised I was probably the only person in the room who was not of retirement age. I balked at telling them they shouldn't expect a whole house all to themselves when they're old and alone.

But really - wouldn't it be better to have company? Quite apart from the obvious green benefits?

Surely we'll see movement soon towards household-sharing at all levels?

[RenewableCandy]

Yup! Prof Sue Roaf (of Oxford solar house fame) in her book "Adapting Buildings..." says the highest risk factor for "weather-related" death is living alone.