Negative growth for retirees could start today 31



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Interest rates are set to go lower today if you believe what the financial markets and savings rates are telling us – and over 60s are the ones who are going to get most hurt. A simple 0.25 per cent rate cut will bring retirees ability to earn on their cash into line with the Average CPI growth level for the December quarter of 2.0 per cent, meaning people are pretty much going backwards.

In fact, the pain has already been felt in the last couple of months, with the average rates on savings accounts falling by over 65 basis points, conflicting with an interest rate cut of just 25 basis points this year. It appears the banks want to get themselves in position for a longer period of low rates than we might be prepared for as a nation.

Westpac and National Australia Bank are the most recent major banks to cut interest rates on savings accounts, dropping another 20 basis points in March according to the Financial Review yesterday. These cuts were in addition to the official rate cut that was passed on immediately by all of the four major lenders.

It has many retirees asking whether it is fair that rates are cut outside of the RBA cycle at the whim of the institutions, when we rely so much on the income that can be generated.

25 per cent of the population is over 60 in Australia, and 77 per cent of people over the pension qualification age of 65 receive the pension. Many of these, and all of the other 27 per cent are living off their own savings which has been invested in cash and other higher growth investments. Anyone now relying on cash-based investments could be barely covering inflation with their earnings if a rate cut is seen this afternoon. A 0.25 per cent rate cut will bring rates to 2.0 per cent, below the cost of funds to bring money to Australia.

It seems the savers in our economy will suffer at a time when they most want access to their money.

The Sydney Morning Herald reports that RateCity figures show that over the last year, NAB has cut its bonus saver rates by 88 basis points to 3.05 per cent; Westpac by 86 basis points to 2.95 per cent; Commonwealth Bank by 71 basis points to 3.2 per cent and ANZ Bank by 65 basis points to 3.16 per cent.


How have the cuts in savings rates and the rate cut that is likely to occur today affecting you?

Rebecca Wilson

Rebecca Wilson is the founder and publisher of Starts at Sixty. The daughter of two baby boomers, she has built the online community for over 60s by listening carefully to the issues and seeking out answers, insights and information for over 60s throughout Australia. Rebecca is an experienced marketer, a trained journalist and has a degree in politics. A mother of 3, she passionately facilitates and leads our over 60s community, bringing the community opinions, needs and interests to the fore and making Starts at Sixty a fun place to be.

  1. Still have my super and pension in Growth phase.
    I believe we can go to a very safe option too early and miss out on growth during the draw down phase.

  2. The banks and Government only worry about the people buying homes, they don’t seem to worry about the older people who have bought their homes at a very high interest rate and are now trying to live on their super.

  3. Young people getting sucked into these low interest loans are going to be burnt badly down the track on these highly expensive properties.

  4. Get a good super qualified accountant. With his help my wife and I have lived for the past year and only lost $5k.

    1 REPLY
    • They will probably cost you more than they save or earn you

  5. It’s a crazy situation where we have on one hand the government telling us we are draining the country bare by going on the aged pension, then we have on the other hand those trying to do the right thing and staying ‘self funded retirees’ for as long as possible having our savings depleted by low interest rates and ever rising prices, ultimately forcing us to go on the aged pension earlier than we had planned. The Government can’t have it both ways, and should be giving self funded retirees a fair go to ensure they can stay that way for as long as possible.

  6. Retirees have been going backwards – not even retaining the Status Quo – since the day Tony “No Cuts” Abbott got his knees under The Lodge table. The RBA thinks it is helping young people get into their own homes by lowering the interest rate, but in fact what is really happening is the rich borrow at low rates to buy up more housing and outbid the young. I wonder if overseas buyers are borrowing from our banks as well?

  7. It seems I’m always in the wrong place at the wrong time! I paid the huge interest rates when buying my home. Got divorced, rented for ages then bought at the high prices, sold at the low so made very little profit. Now my little nest egg after buying into a retirement village which I love, is only earning a pittance.

  8. And here thinking about retirement one would 2-5 million bucks to get approx 60k per annum

    1 REPLY
    • I calculated 50k. People who were earning big money for years to have 2.5million in banks or super earning this low interest would find their normal spending seriously curtailed. This is not good for the economy and not good for jobs

  9. It will mean less income or using more superannuation savings. Income earned by super funds will be reduced whether you manager it yourself or have a fund manager.

  10. I have my super in a roll over fund at the moment till I get the pension late 2016 and earned 12% last year…..not too shabby eh?

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