Savers disappointed by record-low interest rates are looking for new ways to make their money work harder this spring. With savings accounts offering minimal interest rates, some are pondering investing with the hope of reaping higher returns.
Despite many families suffering reduced financial circumstances, others have managed to put away a surprising amount in savings due to lockdown. UK savings hit record levels in early 2020 after surging from 9.5% in Q1 to a record 27.4% in Q2 and have remained at historic highs since1.
To save, or not to save?
Last year, £125bn was put away in savings accounts, and the first half of 2021 is expected to see this figure increase, according to the Bank of England. This means that many people have witnessed their savings accounts grow substantially at a time when they are receiving little to no interest in return – a situation prompting many to consider alternatives to holding cash and think about taking their first tentative steps into the investment market.
Why you should seek advice
With a huge variety of funds available, many would-be investors find it challenging to know where to start. Seeking professional advice enables you to put a sound investment plan in place, with sensible and achievable goals. The effectiveness of taking advice is demonstrated by a study2, which highlights that people have better financial outcomes when they have an ongoing relationship with an adviser, ‘Those who reported receiving advice at both time points in our analysis had nearly 50% higher average pension wealth than those only advised at the start.’ Benefits were greater for less-affluent investors, with a ‘just getting by’ group enjoying a 24% (£35,054) boost to their pension wealth across the ten year study period.
In it for the long haul
Before investing, it’s important to establish a savings safety net, and commit to investing over the long term, at least five, preferably ten years. Historically, although investing in equities has generally delivered better long-term returns than cash, there have been significant short-term falls in the past and there remains a risk the value of investments can fall; we therefore need to establish your risk tolerance before recommending any investments. Whether you’re looking at your pension, establishing an investment portfolio, a stocks and shares Individual Savings Account (ISA), or perhaps a Junior Individual Savings Account (JISA) for under-18s in the family, contact us to take the first step on your investment journey.
1UK Parliament, 2021
2ILC, 2019
The value of investments and income from them may go down. You may not get back the original amount invested. A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.