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Savings & Investments Market Assessment 2010
Key Note Publications Ltd, Dec 2010
The savings and investments industry will have to work hard to grow in the next 5 years. Savings and investments are vital to the future prosperity of the economy. The UK is typified by low savings and investment levels, and by high debt levels. The need for investment in 2010 is high, because of the lack of liquidity and uncertainty in the financial markets, and the speed of growth in Asian markets.
This Market Assessment report shows how savings levels have moved between 2005 and 2010, and into which products savings have been channelled.
The Government has reduced the attractiveness of its savings products to boost sales to the retail finance industry. On the other hand, savers prefer products such as cash individual savings accounts (ISAs) that improve the capital reserves of banks, as well as offering some tax relief.
Collective investments, such as unit trusts and investment trusts, are held by no more than 20% of the population, and transfer individuals' savings indirectly into the financial markets for financing commercial investment. These have been hit by the financial crisis in 2008 in particular, but also by the abysmal performance of the Stock Market since 2000. Similarly, investments directly into shares on the Stock Market have suffered a decline because of the lack of profit opportunities and of the cost of transactions.
Investment in insurance-linked products has suffered because of reputational difficulties, as well as from the poor performance of stocks and shares. Pension funds were once major generators of investment. However, these are seen as a drag on the market value of the companies that offer them to employees, because of the poor performance of shares and the increasing longevity of pensioners. Pension investment is increasingly questioned as firms turn to less generous schemes and management fees edge upwards.
This is not just a UK phenomenon, as savings and investments meet an increasingly gloomy economic outlook throughout the developed world.
Results of the consumer survey commissioned for this report show that most of the respondents want better regulation of the industry. Indeed, over a third of respondents are distrusting of banks and other financial services providers. However, saving in a deposit account is very widespread, and cash ISAs have captured a wide spread of savers. Most respondents are keen on private pensions (understandably, as company pensions are becoming less generous and more risky) and are concerned about their old age. Respondents are also concerned that the interest rates on savings should be raised, so as to encourage investment.
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