Six more lessons to learn from the noughties

by Cliff D'Arcy on 30 December 2009  |  8 comments
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Cliff D'Arcy rounds up six more lessons we can learn from the past decade.

Earlier this week, I wrote six lessons to learn from the past decade. Obviously, there are many more lessons to learn - so without further ado, here are six more!

7.    Pensions took a knock

One of the biggest disasters of the Noughties was the collapse in public confidence in pensions. The reasons for the pensions mess are many and complex, but basically boil down to a combination of the following:

• the closure of thousands of guaranteed final-salary schemes by private-sector firms unable or unwilling to fund the huge cost of providing these copper-bottomed schemes;
• collapsing share prices, which severely reduced the value of many pension funds;
• Gordon Brown's tax raid on pension funds, which reduced their income by £5 billion a year;
• a fall in annuity rates, which drastically reduced the income paid by pension pots;
• rising longevity, as living longer puts more strain on pension funds; and
• rising state pension ages, with some workers forced to work until 68.

Today, only three in seven workers (43%) contribute to a pension, which suggests that the UK faces a retirement bombshell in the years ahead.

8.   Personal debt exploded

We explored the rapid increase in mortgage debt in lesson number six. Now it's the turn of non-mortgage debt, alias consumer credit, which largely consists of credit cards and store cards, car and personal loans, overdrafts and other finance agreements. As you can see, this has also shot up in the Noughties:

The figures show that personal debt almost doubled in the Noughties, rising from £121 billion at the end of 1999 to £228 billion at the end of October 2009. This 89% increase in 118 months works out at 6.7% a year, so debt has risen much faster than wages. Still, at least personal debt has shrunk this year, which is highly unusual...

To get rid of your own debts, adopt our goal: Destroy your debts.

9.    Rip-offs rocketed

For me, the Noughties will be remembered as an era of legal rip-offs. I became a financial writer in 2003 and, for seven years, I've been warning readers to watch out for the tricks played on them by financial firms. At lovemoney.com, we've exposed everyday swindles such as the following:

• card protection plans;
• expensive '08' and '09' telephone numbers;
• extended warranties on cars and other goods;
• foreign-currency exchange fees;
• high interest rates on credit and store cards;
• high-charging, poor-performing investment funds;
• minimum monthly repayments on credit cards;
• mortgage endowments;
• mortgage exit arrangement fees;
• negative payment hierarchy on credit cards;
• overdraft and credit-card penalties;
• pathetic personal pensions;
• payment protection insurance (PPI);
• poor interest rates for loyal savers; and
• secured loans.

I could go on, but this list is almost endless! Regulators have taken steps to improve consumer protection in some areas (particularly in the insurance and mortgage markets), but our watchdogs could do better. Let's aim for better protection for consumers during the next decade.

10. Saving fell out of fashion

The Noughties was definitely 'the decade that saving forgot'. Over the past ten years, the savings ratio (the proportion of our take-home pay which we save) has collapsed, as my next table proves:

During the Nineties, the savings ratio dropped from 11.7% in 1992 to 5.2% in 1999, so our problem with sensible saving is a long-term one. The good news is that our willingness to save has bounced back this year, with the savings ratio leaping to 5.6% by mid-2009.

Another problem for savers came at the end of the Noughties, when banks started toppling like dominos. Fortunately, savers in Northern Rock, Bradford & Bingley, Icelandic-owned Icesave and other UK-based deposit-takers haven't lost a penny.

Sadly, thousands of savers who invested in offshore divisions of high-street names have lost their life savings. Thus, despite a strengthened safety-net for savers (in the form of the £50,000-per-account guarantee from the Financial Services Compensation Scheme), millions of us feel that saving isn't as secure as it once was.

11. Scams soared

Thanks to a boom in broadband usage, the Noughties became the first true 'Internet decade'. Despite the collapse of thousands of much-hyped technology businesses in the early 2000s, online banking and money management are now everyday tools of modern life.

Alas, as our appetite for online finance has increased, so too have the scams and spam (unwanted email) aimed at stealing our online money. In Spam, scams and cyber-crooks and The top ten scariest scams, I show you how to stop the millions of web-based criminals from nicking your hard-earned cash.

12. Shares took a tumble

Investing in companies by buying their shares is a long-term game. It's probably not worth taking the risk if your investment timescale is five years or less. Indeed, most pundits agree that you need to tuck your money away for a decade or more in order to take full advantage of the gains to be made from the stock market.

Alas, the Noughties are shaping up to be one of the worst-ever decades for British investors. It's quite rare for the UK stock market to drop over the course of a whole decade (though it fell slightly in 1964-74 and 1965-75, for example). The bad news is that the 2000s look to be one of -- if not the worst -- decade for investors in modern British history.

On 31 December 1999, the blue-chip FTSE 100 hit an all-time closing high of 6,930. As I write, it stands at 5,325. In other words, the Footsie has fallen 1,605 points, or almost a quarter (23%) during the Noughties.

Of course, this spells bad news for investors, pension funds and for most people with stakes in listed businesses. Still, the evidence suggests that the decades following a down decade are dynamite, so investing for the next ten years could well pay off...

That's all from me for this year. Here's wishing you a happy and prosperous decade to come!

More: Start saving for 2010 onwards | The best credit cards for Christmas | Have a holiday from your mortgage payments