Friday, November 09, 2007

Well this can't be good.

I'm a member of a financial website called the Motley Fool. It is a great site full of tips and advice for almost every financial issue you can think of. Unfortunately, I don't always follow it's advice. Such is life.

Well they send out newsletters on a regular basis which are always worth a read. One arrived yesterday that was of interest.

Basically it said that with the current rate of taxation, inflation, the real one, and interest payments if you are a top level taxpayer you are losing money by keeping it in a bank. Simple as that. The value of your money deflates over time. I can't find a link on the Email but it will be in the saving pages.

Now what they are saying is that for non taxpayer savers with interest rates less than 4% you lose money. If you are a basic rate taxpayer you need to have a 5% before you make money.

For high tax payers the table is even worse.





Pre-tax interest rate(%)Rate after 40% taxRate after RPI inflation
31.8-2.1
42.4-1.5
53.0-0.9
63.6-0.3

An interest rate of above 6% is required. So even if the rate is 6%, *cough* high rate taxpayers are still losing money. Now I might not be an economic genius but I believe that it is the people with money that save and the people without it that have to go to the banks to get some. If it is not viable for the richer ones to save then the whole banking system falls apart.

Luckily that is clearly not true as there are not queues of people standing outside banks trying to get their money back, ignoring when the banks make a mess. Yes, It is simply because the great general public have not actually cottoned on to this yet. They see a trickle of interest and the monetary figure go up and are happy.

Of course the really well off don't keep their money in savings accounts so it's just the bloke in the street that is being hit by this. Again.

Oh well, We should be used to having our money taken. We live in the UK. It's just another straw. Won't be the one that causes us to break either.

3 Comments:

At 7:54 pm, Blogger Sir James Badger said...

Money, money, money, that's all people can think about. How about thinking of gold for a change?

 
At 5:45 am, Blogger Ruthie said...

Ewww... I hope that's not the case in the U.S., as I save money in the bank....

BTW, there's a syndicated column by the Motley Fool and a radio broadcast on NPR. Do you get those there?

 
At 5:59 pm, Blogger Bag said...

James, It's because most people don't know how to deal in gold and have no way to give it a proper valuations. Money has numbers with it and an idea of how many numbers equates to a loaf of bread.

Ruthie, I have no idea about the rates in the uS but I would envisage they would be no different. I've not seen either of those two things in the UK and I don't recollect seeing them on the updates either. I would guess the answer is that they are not in the UK though. Although they could keep it quiet which is unlikely.

 

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