Inflation and interest rates

Doodledog

Norah

Doodledog: "I have no idea how to work out the value of a final salary pension as a total 'pot' figure for purposes of comparison. Is there a formula?"

There is, but with so many variables. The easiest, to me, is average life expectancy (age in yrs, thus yrs past retirement) multiply by sum of pension with adds for inflation as dictated.

So if we assume an average lifespan of 80 years, a 65 year old with a FS pension of £10k pa would have a hypothetical pension pot of £150k? That seems quite low, compared to figures quoted for money purchase schemes.

And, I meant to say, money purchase schemes are not generally of benefit to the purchaser, rather to the seller, imo.

Norah

M0nica

Growstuff, between those at the bottom of society and in poverty and the 'wealthiest, there are millions and millions of households, with gradually rising incomes and varying amounts of savings. www.nimblefins.co.uk/savings-accounts/average-household-savings-uk Many retired people have savings in building societies and similar organisations. These will all benefit from rising interest rates.

The wealthiest will benefit least, because they, generally , do not have savings accounts. There money is invested in stocks, shares and other more sophisticated investment products.

M0nica is correct, I think.

Generally, stock and share decline in value as interest rises, because people can earn more at interest in savings.

Yes, they can usually, but not always. From 4 August 2016 to 2 August 2018, the BoE increased interest rates from 0.25% to 0.75%. During that time, the FTSE 350 rose roughly 22%.

www.hl.co.uk/news/articles/how-rising-interest-rates-can-impact-the-stock-market

growstuff

Norah

M0nica

Growstuff, between those at the bottom of society and in poverty and the 'wealthiest, there are millions and millions of households, with gradually rising incomes and varying amounts of savings. www.nimblefins.co.uk/savings-accounts/average-household-savings-uk Many retired people have savings in building societies and similar organisations. These will all benefit from rising interest rates.

The wealthiest will benefit least, because they, generally , do not have savings accounts. There money is invested in stocks, shares and other more sophisticated investment products.

M0nica is correct, I think.

Generally, stock and share decline in value as interest rises, because people can earn more at interest in savings.

Yes, they can usually, but not always. From 4 August 2016 to 2 August 2018, the BoE increased interest rates from 0.25% to 0.75%. During that time, the FTSE 350 rose roughly 22%.

www.hl.co.uk/news/articles/how-rising-interest-rates-can-impact-the-stock-market

Correct. However .5% interest rise is not really much compared to inflation. I was speaking of large changes in interest, generally.

Remember the 1970s?

Overall stocks and shares out perform investment in interest paying savings. This has been true for over 100 years. Obviously, it is like a game of snakes and ladders, sometimes share prices soar other times drop like a stone, but over the long term stocks and shares out perform cash savings.

Generally people do not move much between stockmarket and cash savings. These very different investments meet very different markets.

If your savings are relatively small, say less than £15,000 then your savings are best in cash savings. They are more secure there and you can get a steady varying interest return with no danger of losing any of your capital.

Stocks and shares are risky, some you buy will not do well. But the extra interest and growth in the capital value are your reward for being prepared to take (carefully calculated) risks.

Norah

growstuff

Norah

M0nica

Growstuff, between those at the bottom of society and in poverty and the 'wealthiest, there are millions and millions of households, with gradually rising incomes and varying amounts of savings. www.nimblefins.co.uk/savings-accounts/average-household-savings-uk Many retired people have savings in building societies and similar organisations. These will all benefit from rising interest rates.

The wealthiest will benefit least, because they, generally , do not have savings accounts. There money is invested in stocks, shares and other more sophisticated investment products.

M0nica is correct, I think.

Generally, stock and share decline in value as interest rises, because people can earn more at interest in savings.

Yes, they can usually, but not always. From 4 August 2016 to 2 August 2018, the BoE increased interest rates from 0.25% to 0.75%. During that time, the FTSE 350 rose roughly 22%.

www.hl.co.uk/news/articles/how-rising-interest-rates-can-impact-the-stock-market

Correct. However .5% interest rise is not really much compared to inflation. I was speaking of large changes in interest, generally.

Remember the 1970s?

No, but I've read about them in history books.