- 'No' votes leave Cameron's mayor plans in tatters, ITV.com, May 4, 2017.
3. THE Financial Times and the Sunday Times are the newspapers that probably have their fingers closest to the pulse of middle-class savers. So it was interesting to see that the personal finance pages of both periodicals went for similar stories over the weekend. The FT money pages had an “inflation special” with a headline “Millions hit by inflation: pensioners face sharp drop in spending power” while the Sunday Times had a double-page spread on “Where to go to beat inflation”. Whatever your forecast on the likely future inflation rate, it is clear that inflation has hurt pensioners in the past. Living 30 years beyond retirement is not an unreasonable expectation these days (while not the average life expectancy, a cautious person might want to plan for such an outcome). Any Briton who retired in 1981 and bought a fixed rate annuity would have seen the real value of their income fall by two-thirds by now; and that is with a long period of disinflation in the 1980s and 1990s. A rational retiree might expect an outcome that is at least as bad over the next 30 years.
There is the option of buying an inflation-linked annuity but that, the FT reports, requires the retiree to take an initial income 40% lower than that for a fixed rate deal. It is a big gamble to take when early death means that survivors lose all the capital.
The political challenge is whether the Bank of England’s failure to meet the inflation target in the last two years undermines the consensus that handed it power over monetary policy. So the column by David Smith, the politically mainstream economics editor of the Sunday Times, was very interesting. He described the Bank’s arguments about slack in the economy as a “figleaf”.
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