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Pound

Low interest rates leave savers with few good options

Pound

The covid-19 pandemic has only sharpened the dilemma

In the 1980s comedy, “Trading Places”, Jamie Lee Curtis plays a prostitute who has been saving for her future; she has $42,000 “in t-bills, earning interest”.

If she followed the same strategy today, she would be disappointed with the return.

The one-year Treasury bill yields 0.13%, so her annual interest income would be just $55. If she reinvested the income, it would take more than 530 years for her money to double.

Savers around the world face the same problem.

Bank accounts, money-market mutual funds and other short-term instruments used to offer a decent return.

Not any more 

Rates are lower in nominal terms than they were 30 years ago because of a long-term decline in inflation, but they are also lower in real terms.

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