What? Why? With apologies to any investment professionals reading this (if you are, I’m flattered), here it is in a nutshell. To borrow money, the government issues bits of paper (gilts) which say ‘lend us £100, we’ll pay you 1% a year for 20 years and then pay you back’. Pension funds have to use these to secure your pension (Gordon Brown’s bright idea). If interest rates rise to, say, 4%, no-one is going to pay you £100 for your bit of paper which promises just 1%. That’s going to be worth maybe £25. The same is true of money lent to companies (corporate bonds), and as it’s expected that, to get the zillions needed to pay for those lovely tax cuts, interest rates will have to rise further. So your original paper might be worth only a tenner in the end. A perfect Crisis What Crisis, only saved, for now, by the Bank of England continuing the money-printing it’s been doing since the last (in that case global, not entirely self-inflicted) financial crash. Simples to explain, a tad more complicated to sort.
“Why you should never retire”
On my 50th birthday, I will always remember, amongst the card or two I received was a letter from Saga’ who’d managed to find out my age through the wonder of the internet, and were pleased to tell me I now qualified to join my parents and go on holiday with them.
