Anger from elderly as savings rates fall

Mon Jan 26, 2009 7:59pm EST
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By Kate Kelland

LONDON (Reuters) - Like many Britons of his generation, 66-year-old Ken Bibby is proud to have worked hard, watched his pennies and paid his way, but after 50 years saving for his old age, he says his prudence is being punished.

Sinking interest rates in the United States and across Europe are penalizing millions of the elderly who depend on savings for income to bolster state pensions, and who have also experienced rapid inflation.

As governments facing global recession focus on cutting interest rates to kick-start lending and spur consumer demand, some older people seeing interest income collapse are preparing to protest.

"We are absolutely determined to have our voice heard on this," said David Kippest, a 67-year-old pensioner activist who, like Bibby, has seen hundreds of pounds wiped off his savings income since October as interest rates fell to record lows.

"There is a movement beginning to take shape," said the representative of the National Pensioners' Convention, which he added was one of the strongest elements in that movement.

Britain is the country in Europe most keenly feeling the pain: the Bank of England has slashed Britain's base interest rate to just 1.5 percent from 5.0 percent in the past four months.

Retail banks have been swift to follow suit, with some cutting rates on instant access accounts to as low as 0.1 percent. Rates of up to 4 percent are still available, but only for those willing to lock their money up for defined periods.

Older people, who spend a significantly higher proportion of their funds on food and heat than the young, are still feeling the effects of rapid food and fuel price inflation from 2008. This can mean that in real terms their incomes fall sharply.   Continued...

<p>Two women push their shopping trolleys past a shop advertising a closing down sale in London January 22, 2009. REUTERS/Stephen Hird</p>