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UK Savers Are “Recklessly Conservative”

By Matthew Howard on 12th February, 2015 | Read more by this author

Between us at 4thWay® today we could come up with just one oxymoron that was half as good as “recklessly conservative”. I'll tell it to you later, because first I want to write about the first.

This expression was used in a preliminary paper by The Open University Business School, and I've been saving it and ageing it like a fine cider for some months.

The saving treadmill

It won't surprise any of you to know that the concern is that savers and investors focus almost exclusively on the risk of losing some of their original money and don't consider inflation risk.

This focus on just one of the two most important risks is technically called “insane”. That's not what the report says. The report avoids using jargon.

Instead it defines reckless conservatism as “the reluctance of many people to take investment risk which in turn may jeopardise their longer-term objectives (such as providing an income in retirement).”

In my view, this recklessness is encouraged by the types of risk disclaimers companies have to write and by the questions that advisors typically have to ask to do a risk assessment.

Some typical questions might be to try and assess the willingness to trade “certainty” for returns. But do most investors really understand that the “certainty” is just that they'll become poorer. Aside from that, it's deeply uncertain whether their savings will be 20% or 180% less valuable in the years ahead.

It's also a complete fallacy to call savings accounts and other savings products that generally lose to inflation as “safe”. Yes they have their uses but for the majority of our money they're just a safe bet to decimate our wealth.

It might not be a coincidence that it's in the government's interests to maintain a system where most people let the government inflate away savings if it means that it can inflate away its debts at the same time.

There is way too much focus on savers' capacity to lose some of their original money and not enough worry about an incessant tide of rising prices that erode value.

That other oxymoron

The other apparent contradiction we thought of was “apathetic zealot”. Believe it or not, one of us has heard someone use that oxymoron in a real conversation. We can't think of any savers it would apply to, except perhaps the obstinately indifferent savers who stubbornly don't care about their savings. We're sure that's none of our readers.

Oh, the things I write.

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