Savers told to stop moaning and start spending

Savers should stop complaining about poor returns and start spending to help the economy, a senior Bank of England official warned today.

Mr Bean said low returns on savings were part of the Bank of England's strategy Photo: PA

Older households could afford to suffer because they had benefited from previous property price rises, Charles Bean, the deputy governor, suggested.

They should "not expect" to live off interest, he added, admitting that low returns were part of a strategy.

His remarks are likely to infuriate savers, who are among the biggest victims of the recession. About five million retired people are thought to rely on the interest earned by their nest-eggs. But almost all savings accounts now pay less than inflation.

The typical savings rate has fallen from more than 2.8 per cent before the financial crisis to 0.23 per cent last month.

Mr Bean said he "fully sympathised". But he continued: "Savers shouldn't necessarily expect to be able to live just off their income in times when interest rates are low. It may make sense for them to eat into their capital a bit."

He added: "Very often older households have actually benefited from the fact that they've seen capital gains on their houses."

In an interview with Channel Four News on Monday night, he said that savers "might be suffering" from the low Bank Rate. But they had done well from higher rates in the past and would do so again.

Mr Bean said that encouraging Britons to spend was one reason why the Bank had cut interest rates. They have been held at 0.5 per cent for 18 months, hitting rates offered on savings accounts.

The strategy had led to Mervyn King, the governor, receiving many letters of complaint.

But it was designed to return the economy to a reasonable level of activity as quickly as possible, he said. "The faster we can achieve that, the sooner interest rates will get back to more normal levels."

Had the Bank not acted, "unemployment would have been higher, wage growth would have been lower," Mr Bean added.

The comments angered groups representing the elderly and those putting money aside. The Daily Telegraph has campaigned for protection for savers.

Ros Altmann, director-general of Saga, said: "Savers are being taken advantage of. They did the right thing and have been let down at the other end of the deal.

"I don't think this is what most people would consider fair."

Dot Gibson, of the National Pensioners Convention, said: "For years we've been told to put money aside for our retirement only to find that interest rates have sunk and now we have to use our savings just to pay the bills."

Jason Riddle, of Save Our Savers, said: "The Bank was aware that there was a lack of saving before the financial crisis, but those who were prudently saving while others spent, are being heavily punished."

Official figures show that savers have lost about £18 billion a year in interest as a result of the Bank's response to the worst recession in a generation.

The amount Britons save has fallen by more than a fifth since the start of the year, a survey showed today.

The average person is saving £102 a month, down from £130 in February, according to Santander.