How the big banks are forcing retirees to take on more risk in their portfolio

The pressure on the big banks for their bad behaviour that is exposed at the Banking Royal Commission could leave retirees as collateral damage as they force this group of investors up the risk curve.

The big four that includes Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB), are cutting their term-deposit rates to protect their margins, according to the Australian Financial Review.

I have also noticed that the rates on high-interest savings accounts have also been falling in recent weeks as the big banks are reluctant to lift mortgage rates to cover rising costs as they fear a public backlash.

Nobody likes the big banks. While commentators are saying that the outcome of the Super Saturday elections puts Prime Minister Turnbull on a backfoot, the result is perhaps a more damning indictment on the big four, in my opinion.

It’s widely accepted that one of the reasons for Labor’s clear win is voters distaste for tax cuts for the big banks, who have largely admitted to ripping off customers when put through the wringer at the Royal Commission.

This is happening at the same time that funding costs for the banks are rising sharply. Smaller lenders, the regional banks like Bank of Queensland Limited (ASX: BOQ), have lifted their mortgage rates in response but the big banks are worried about further hurting their poor standing in the community.

But the group they don’t seem to mind putting offside are self-funded retirees that rely on term deposits for income.

This group has to either take a haircut on their income or look for new ways to squeeze extra returns from their superannuation.

Given the rising cost of living from higher energy, fuel and grocery prices, many may have to take on more capital risk to make ends meet.

What’s more, the traditionally dependable high yielding stocks aren’t what they used to be! Just look at our biggest telco Telstra Corporation Ltd (ASX: TLS) and toll road operator Transurban Group (ASX: TCL).

A bank’s bad behaviour doesn’t just hurt their customers.

The good news is that there are stocks on the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) index that are well-suited for those heading into retirement. The experts at the Motley Fool have uncovered four stocks that are ideal for building your superannuation wealth.

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Motley Fool contributor Brendon Lau owns shares of Australia & New Zealand Banking Group Limited, National Australia Bank Limited, Telstra Limited, and Westpac Banking. The Motley Fool Australia owns shares of and has recommended Telstra Limited and Transurban Group. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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