The Bank of England on Friday 24th June after the Brexit vote was announced had to make an immediate announcement to calm the nervous markets.

http://www.bankofengland.co.uk/publications/Documents/news/2016/056.pdf

“…these actions, UK banks have raised over £130bn of capital…..”

“…Moreover, as a backstop, and to support the functioning of markets, the Bank of England stands ready to provide more than £250bn of additional funds through its normal facilities…..”

Let’s take each of these two statements to the natural conclusion based on the research carried out by www.asadkarim.co.uk

1. £130bn of new capital. That means the high street banks now hold an extra £130bn inside them (on their balance sheet, as new assets). This money can NOT be used to generate loans or mortgages. It is held by the clearing banks. Thus credit to give to small or medium enterprises (the role of the clearing bank) is now reduced by £130bn. Thus potential economic activity like creating jobs or lending to companies to grow is now reduced by £130bn. This cannot be a good thing for the economy, but it is wise our banks have money to weather any storms ahead.

2.£250bn of additional funds. This means that now savers are going to be potentially punished. Why ?
Banks raise cash to fund themselves by either borrowing on the wholesale markets, such as getting money from pension funds or mutual funds or issuing bonds, or offering savers (regular depositors) attractive savings rates to attract then to deposit their money into savings accounts. Now with £250bn available from the central bank (the Bank of England), then the need to get savers money to deposit money now with them, immediately reduces, and thus no incentive to offer generous savings rates to lure in savers. Potentially they do not need that source of cash, so when times are tough, why offer decent interest rates to savers ?

Thus the irony is that older people who have saved, and have been punished with pathetic interest rates since 2008, now face the potential prospect of even lower rates on their savings due to the £250bn of Bank of England funding, and when one looks at the Brexit demographics of who voted to leave The EU, a large proportion of older people voted to leave. Sadly they are now potentially facing a poorer futures with near zero % savings rates on their long term savings. Perhaps they never  thought about being poorer after voting to leave the European Union. A consequence of the Brexit vote

Finally, two annuity firms, Just Retirement and Retirement Advantage, announced annuity rate cuts yesterday. Just Retirement’s rates are down by around 2pc. Almost certainly, this is the just the start of falling annuity rates. This is just one of the first effects of the Brexit vote on our pensioners and for those who are saving for retirement. Our elderly generation deserve decent pensions. Yet, someone retiring today will have less money from their pension.