Britons told to start spending

The Bank of England has dropped savings account interest rates to near zero in hopes of kick-starting the economy.

By Kim Peterson Sep 29, 2010 2:19PM
Cash © Jonathan Kitchen/Getty ImagesQuit whining about the economy. You're not making any money from your savings, so start spending!

That's the message from one Bank of England official, according to the Telegraph.

Charles Bean, the deputy governor, said that older people should not expect to live off the interest from their savings accounts. The savings interest rate has dropped to about 0.23%, causing problems for the 5 million or so retirees who try to survive on interest payments, the Telegraph reports.

"Savers shouldn't necessarily expect to be able to live just off their income in times when interest rates are low," he said, according to the Telegraph. "It may make sense for them to eat into their capital a bit."

Older households have benefited in the past from capital gains on their houses, he added.

The Bank of England has dropped interest rates to near zero specifically to get people to spend more. The idea is that more spending will help the economy improve -- and then interest rates will return to historical levels of close to 3%.

The comments are not sitting well with advocates for the elderly, as well as people who like to save.

"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," said a member of one retirement group.

One survey showed the average Briton is saving $161 a month now, down from $205 in February, the Telegraph reported.

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