Elderly to feel a savage cut in income
While politicians have fought the corner of borrowers, pensioners living on income from their savings have been abandoned.
Many could see their income from savings cut by a third, leaving them struggling to cope with higher energy, council tax and shopping bills.
Over the past 12 months, the income paid by some accounts has halved as a result of falls in Bank of England base rate.
This time last year base rate stood at 5.75%. Following last week’s 1.5 percentage point cut, it has plummeted to 3%.
A year ago, pensioners could earn 5.13% before tax each month in a typical High Street specialist account, West Bromwich’s Oak. Now, the monthly income rate is down at 2.47 %, giving them £266 a year - or £22 a month - less to live on for each £10,000 in their account.
A pensioner who has saved £50,000 through their working life will have seen the equivalent of a £1,333 pay cut annually, during a time when inflation for the over-75s has ballooned.
Research from the Alliance Trust shows that they suffered an inflation rate of 7.8% in September - a six-year high that is 50% higher than the official 5.2 % retail prices index for the same month.
Those who want to preserve a decent amount of their income will have to be prepared to move their money around to earn top rates of interest.
Other options include moving to telephone-based accounts rather than sticking to their local High Street branch, and locking money into fixed-rate deals.
Most savers will have to wait until the start of December to find out how badly they are hit - banks and building societies tend to announce new rates at the start of the month following a base rate move and give savers little or no warning of the changes.
West Bromwich’s Base Rate Tracker and Direct Tracker Saver are down to 2.2% after tax (2.75% before tax), while its Oak account, which is designed for pensioners and tracks base rate, is down to 1.98% (2.47%) from 3.14% (3.93%).
But some building societies have expressed their concern over the pensioners’ plight.
Alan Oliver, spokesman from Nationwide, says: ‘We intend to remain competitive on our Monthly Income 60 account for pensioners and offer good fixed-rate bonds.’
At Yorkshire Building Society, spokesman David Holmes says: ‘In times of high interest rates, we look after borrowers, but with low interest rates it is our duty to protect savers. The bulk of our money comes from savers, so we have to look after them. If it means some borrowers on the standard variable rate do not benefit from the full 1.5 point cut, so be it.’