Madam, - The authorities express concern that people do not save money for the needs of their old age. The rate of interest offered on 10-year Government bonds is 3.6 per cent a year, minus income tax and costs.
The rate of inflation has fallen to 2 per cent a year but has been as high as 20 per cent. It takes €15 today to buy the goods costing £1 in 1965. It would require 7 per cent compound interest to maintain the real value of the money saved. Government securities, like most cash savings systems, are a near-certain long-term loser.
Public servants have avoided the inflation problem by negotiating pensions linked to future salary scales. This is not on offer to the ordinary citizen saving for a pension 40 years hence. Buying a house promises security to the elderly. People have learned to avoid saving for a pension, preferring to direct their savings to inflate the price of houses. - Yours, etc,
LOUIS SMITH, The Elms, Dublin 4.