Report - Scottish Widows

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035610
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A4
Pages
24pp
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Version FEB 13
Operator Info
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KP
07.02.13
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KP
11.02.13
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KP
19.02.13
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Preparing for every. Britain’s savings and
kind of future. investment landscape.
Scottish Widows
Savings and Investment Report
February 2013
8
9
10
11
12
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15
Notes
Much
cept w
Burns
This i
NOT
2
Contents.
Foreword.
4
Executive summary.
5
Savings and Investment Landscape.
6
Part 1. Savings trends
8
Part 2. Savings motivation
10
Part 3. Expenditure12
Part 4. Financial support for the family
14
Part 5. Investments16
Preference for cash-based investments
16
Understanding risk and return
16
Risk aversion and the short term
17
Adviser engagement and point of sale
18
Conclusion and key challenges.
20
3
Foreword.
People’s saving habits, it appears, have not
progressed as well as we might wish over the past
year. But they have not fallen back either, as the
latest instalment of Scottish Widows informative
annual survey shows us.
We should view that positively, given the tough
financial pressures of the past several years. And
with this research showing long-term savings edging
upwards, we should also acknowledge signs for cautious
optimism. However small that rise may be for now, a
range of initiatives are on the way to fan the flames and
embed the benefits of good money management in
people’s mindsets.
The first of these is automatic enrolment into a
workplace pension. While pensions are not strictly within
the scope of this report, last autumn’s adoption of
automatic enrolment by large employers has started to
default millions of people into a savings habit for the
first time. The result, apart from the long-term material
reward of a higher income in retirement, will be millions
of people benefiting in the short and medium term from
the improved health, well-being and peace of mind as
these are strongly associated with increasing financial
resilience and security.
Second is the prospect of a new wave of commercially
viable savings products that meet consumers’ basic
needs, which are easy to understand, and which serve as
a helpful point of comparison for other more complex
products. Analysis carried out for ‘Simple Products’
initiative has identified that savings products that meet
these criteria would be of interest to nearly 30 million
adults in the UK.
And then, of course, there is the Money Advice Service.
As I joined as Chief Executive in early 2013, 30,000
people every week were using our online guides, tools
and action plans, and meeting or calling our money
advisers. My aim is to see that number grow to the
point where the Money Advice Service is an everyday
part of millions of people’s lives, and they are making
more and better decisions with their finances as a result.
4
Ex
Many of those people will use us for budgeting and
planning advice, to take control of their finances and
start reducing debts. For others it will be to ensure they
have the right levels of protection for themselves and
their dependents. For everyone, our advice will help with
decisions and steps towards appropriate savings goals,
and, ultimately, preparedness for life’s ups and downs,
both expected and unexpected.
Given the significance of saving to our overall sense
of stability, security and general well-being, two of our
main aims are to get more people saving regularly and
saving for retirement – and we are making these two of
the key outcomes against which our impact is measured.
With that in mind, I look forward, with both hope and a
little anxiety, to future editions of this excellent report
mirroring research of our own that demonstrates
increasing numbers of people saving and investing.
This i
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Executive summary.
This is the seventh annual Scottish Widows
Savings and Investment Report. As with previous
reports, it is a major survey of the UK population,
based on 5223 interviews carried out by YouGov
between 3rd and 10th December 2012.
The aim of the report is to assess the savings behaviour
of the UK population, observing trends and drilling into
the views of various segments of the population. This
relies on asking consistent questions over many years and
having a large enough sample to provide credible data.
Given the scale of this sample and the long-term nature
of its subject matter, we might reasonably expect to see
relatively small shifts in the results from year to year.
Indeed it might be reasonable to hypothesise that any
major shifts could result only from a step change in
economic conditions. This is what we saw between the
early days of the financial crisis as reflected in the 2009
report and one year later, by which point its impacts were
evident to all.
Moving forward to early 2013, we remain in a
challenging economic environment, with no material
change to the perception of economic recovery.
It’s therefore not surprising that very few of our
headline indicators have changed materially since
last year’s report.
Moving forward to early 2013,
we remain in a challenging
economic environment,
with no material change to
the perception of economic
recovery, however, we have
seen some small signals
of progress, particularly in
relation to long-term savings.
We have, however, seen some small signals of progress,
particularly in relation to long-term savings, but there’s
a very long way still to go. In particular, the savings
perspective of the population remains short term as it
aims to generate rainy day funding. While this is unlikely
to change soon, our challenge is to incentivise additional
longer-term saving, and persuade the UK population
that the sacrifice is worth making. Engaging with savings
goals remains key.
5
Savings and investment landscape.
1. Saving1.trends
Saving trends
3. Expenditur
3. Exp
UK population
UK population
Do you think
Do you
youthink
are saving
you are
enough
savingtoenough
meet your
to meet your
long-termlong-term
needs? needs?
11%
Expect
Expect
an improvement
to see an improvement
11% to see
in the economy
in theineconomy
2013. in 2013.
31%
UK31%
adult population
UK adult population
failing to save.
failing to save.
57%
Individuals
Individuals
believe that
believe
they are
that they are
57%
saving lesssaving
now than
lesstwo
nowyears
than ago.
two years ago.
Amount UK
Amount
adultsUK
intended
adults intended
to save to save
2009
2009
2010
2010
2011
2011
2012
2012
2013
Most likelyMos
to c
27%
Yes
27%
36.5%
No,
but notNo,
far but
off not far off
36.5%
36.5%
36.5%
No,
definitely
No,not
definitely not
Yes
2009
2009
2010
2010
2011
2011
2012
Eating out 65%
Eatin
Short breaks/
Sho
weekends away
wee
Amount UK
Amount
adultsUK
actually
adultssaved
actually saved
2013
What people
Wh
(or not) if(or
the
2012
2013
2013
Least likelyLeas
to c
A
B C
Childcare/nurse
Chil
fees 17% fees
£3,305
£3,305
£2,511
£2,511
£2,283
£2,283
£2,632
£2,632
£2,743
£2,743
£3,467
£3,467
£2,642
£2,642
£2,399
£2,399
£2,764
£2,764
£2,835
£2,835
Prov
Providing finan
on d
on death/critica
2. Saving2.motivation
Saving motivation
Long-termLong-term
savers versus
savers
short-term
versus short-term
savers savers
UK adultsUK
average
adultssavings
averageper
savings
annum
per annum
18-24
18-24
25-34
25-34
35-44
35-44
45-54
45-54
+55
+55
1 in 4 save
1 in
long
4 save
termlong term
Long termLong
(6–10
term
years)
(6–10 years)
£9,072
£9,072
£13,429 £13,429
£16,798 £16,798
£29,777 £29,777
£47,078 £47,078
Short-term
Short-term
savers perception
savers perception
on short-term.
on short-term.
31% less than
31%aless
yearthan a year
52% one to
52%
twoone
years
to two years
15% three15%
to five
three
years
to five years
6
64% of inte
64%
is a maj
£856
££
62%
6
18-24
18
Monthly c
Percentag
4. Financial
4. Financial
support support
for the family
for the family
3. Expenditure
3. Expenditure
ugh
et your
to meet your
What people
What
would
people
choose
wouldtochoose
cut back
to on
cut back on
(or not) if(or
they
not)
had
if they
to reduce
had to
their
reduce
outgoings.
their outgoings.
Most likelyMost
to cutlikely
backtooncut back on
Yes
25% Children
25% Children
TICKET
t notNo,
far but
off not far off
%
%
finitely
No,not
definitely not
2012
2013
40% have40%
given
have
or loaned
given or
family
loaned
members
family members
substantial
substantial
amounts amounts
of money,ofsometimes
money, sometimes
more thanmore
once.than once.
TICKET
9% Parents
9% Parents
6% Siblings
6% Siblings
Cinema/theatre/
Cinema/theatre/
concerts 52%
concerts 52%
Eating out 65%
Eating out 65%
Nights out Nights
55% out 55%
family
Wider
members
family members
5% Wider5%
5% Grandchildren
5% Grandchildren
5.
Short breaks/
Short breaks/
weekends away
weekends
47%away 47%
CD/DVD/computer
CD/DVD/computer
games 47%
games 47%
Investments
5. Investments
Behaviours
Behaviours
2013
£2,764
£2,835
m savers
m.hort-term.
Least likelyLeast
to cutlikely
backtoon:
cut back on:
7% Have7%
consulted
Havewith
consulted
a financial
with advisor
a financial advisor
A
A
B C B C
36% Saving
36%
andSaving
investment
and investment
ISAs, were undertaken
ISAs, were undertaken
directly from
directly
a product
fromprovider
a product
or provider
a
or a
price comparison
price comparison
site over the
site
Internet
over the Internet
Protecting Protecting
£
£
Childcare/nursery
Childcare/nursery
Savings forSavings for
fees 17% fees 17%
retirement retirement
17%
17%
income 15%
income 15%
34% Prefer
34%
to walk
Prefer
intotoa walk
branch
into a branch
£2,835
Providing financial
Providing
security
financial security
on death/critical
on death/critical
illness 15%illness 15%
BroadbandBroadband Products Products
Internet 12%
Internet 12%
Most commonly
Most commonly
held saving
held
products.
saving products.
51% Cash 51%
savingCash
account
saving account
64% of interviewees
64% of interviewees
say that ‘having
say thatno
‘having
money’
no money’
is a majorisbarrier.
a major barrier.
50% Cash 50%
ISA Cash ISA
14% Stock14%
& shares
Stock & shares
£856
£1,187 £1,187
£1,132 £1,132
£1,099 £1,099
£856
£853
62%
62%
62%
68%
62%
73%
68%
73%
60%
60%
18-24
18-24
25-34
25-34
35-44
35-44
45-54
45-54
+55
+55
£853
Monthly cost
Monthly
of running
cost of
home.
running home.
PercentagePercentage
of age range
of with
age range
‘no money
with ‘no
available’.
money available’.
12% Fixed-term
12% Fixed-term
rate
rate
Knowledge
Knowledge
With the impact
With the
onimpact
RDR on RDR
imminent,imminent,
the growing
thetrend
growing trend
of Internet
ofconsumerism,
Internet consumerism,
the
the
implication
implication
of non-advised
of non-advised
purchase purchase
trends is set
trends
to rise.
is set to rise.
7
Part 1. Savings trends.
The headline figure for 2013 shows that 31% of
the UK adult population is failing to save at all, a
very slight drop from 32% last year. This represents
another year of modest progress following the
sharp fall reflected in the 2010 report.
At present, are you saving for the short term, long
term or not at all?
80%
31% of the UK adult
population is failing to
save, 11% of the UK
population expects to see an
improvement in the economy
within the next 12 months.
65%
50%
35%
20%
2009
2010
Total saving
Not Saving
2011
2012
2013
Short term
Long term
Note: some respondents are counted as both short and
long-term savers.
This graph demonstrates the relatively static nature
of savings over most periods, suggesting the need for
a longer-term view and patience when introducing
new initiatives. However it also shows that a change in
economic conditions can have a major impact.
57% of those who admitted to carrying debts have
managed to save money in 2012 (56% in 2011),
compared to 71% of those who were debt-free
(68% in 2011). However on average, debt-carriers
were only able to save around 60% of the money
debt-free people put away.
Only 11% of the UK population expects to see an
improvement in the economy within the next 12
months which is the same low rate as 2012. Some
better news is that it’s the first year since the start of
the financial crisis that this indicator hasn’t continued
to fall after a reduction from 29% in 2010 and 15% in
2011. Last year, there was a noticeable gap between
the levels of economic optimism among younger and
older people. This year this gap has expanded from 12
percentage points to 18, with 25% of 18-24s expecting
economic improvement in the next 12 months,
compared to just 7% (of those aged 45+).
It seems unrealistic to believe that we will see a
significant upturn in savings until people’s experience of
the economy, and their future expectations for it, begin
to improve.
11%
Expect to see an
improvement in the
economy in 2013.
31%
UK adult population
failing to save.
57%
Individuals believe that
they are saving less now
than two years ago.
The av
similar
The di
its long
How m
£
£
How m
£
£
8
y
of
ued
% in
en
and
m 12
ecting
nce of
begin
The average amount that the UK population is saving has
similarly crept up only very slightly since the 2012 report.
The diagram below sets this out, both in the context of
its longer-term trend and relative to expectation.
How much did you INTEND to save last year
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
So we’re seeing modest progress here, with the UK
population being realistic about what they plan to save
and sticking to that plan, indeed demonstrating a slight
out-performance. The average amount planned for the
year ahead is £2,835, with recent experience suggesting
that we’ll beat that number. The bigger question that
we’ll return to later is: is it enough?
57% of individuals believe that they are saving less now
than they were two years ago. This is highest amongst
those aged 50+ and amongst females.
he
.
on
ve that
ess now
go.
£3,305
£2,511
£2,283
£2,632
£2,743
£3,305
£2,511
£2,283
£2,632
£2,743
2009
2010
2011
2012
2013
How much
you ACTUALLY
save
2009 did 2010
2011
2012last year
2013
£3,467
£2,642
£2,399
£2,764
£2,835
£3,467
£2,642
£2,399
£2,764
£2,835
£2,835 is the average amount
of saving planned for this year,
is it enough?
9
Part 2. Savings motivation.
The small movement in the percentage saving is
focussed on an increase in people saving for the
longer term. In this year’s report, we see a stable
percentage (54%) saving for the short term, but an
increasing percentage saving for the longer term –
up to 50% from 46% last year.
1 in 4 save long term
Long term (6–10 years)
Short-term savers perception on short-term.
31% less than a year
52% one to two years
15% three to five years
So despite the significant challenges we’ve identified in
recent reports in engaging on long-term savings, we see
some progress this year.
By way of context, 83% of the population regard the
short-term as two years or less, which is a particularly
short time horizon. Almost a third of short-term savers
(31%) perceive the short term as being less than a
year, with over half (52%) as one to two years and a
further 15% as three to five years. The long term is
anything more than that, though most commonly six to
10 years 41%. This timeframe makes the population’s
short-term bias even more concerning in the context of
longer-term savings.
10
These timeframes make the
populations short-term bias
even more concerning in the
context of longer term savings.
The primary focus of short-term saving for 45% of
short-term savers is on emergencies or for a rainy day.
56% of the population believe that their savings would
last six months or less if they were unable to work. That
is a particularly worrying prospect in an environment of
austerity cost cutting and other threats to employment
which seem like compelling motives to save.
At the other end of the spectrum, the primary driver of
long-term saving is “to provide me with a more secure
future”, representing 53% of long-term savers. While it’s
encouraging that this group of savers understand the
need for long-term saving, we should bear in mind that
this represents around a half of the 50% of the people
who actually save for the long term – so only a quarter of
the UK adult population. There is a clear challenge to get
others similarly engaged.
Almost half of short-term savers are
saving for emergencies or for a rainy
day, there is a clear challenge to
engage and educate savers that
long-term saving is also key.
This is
think y
needs
the lon
off sav
not sa
If we a
positio
level o
consid
18-2
£9,07
gs.
ay.
would
That
nt of
ment
er of
ure
ile it’s
he
that
ople
rter of
to get
This is reinforced by responses to the question “do you
think you’re saving enough to meet your long-term
needs?” with 27% believe they are saving enough for
the long term. Further to this 30% say they are not far
off saving enough, but 37% are definitely sure they are
not saving enough.
If we accept that some people are unlikely to be in a
position to save and ignore zero balances, the average
level of savings is £28,772. As we’d expect, this varies
considerably by age as follows:
18-24
£9,072
25-34
35-44
45-54
£13,429
£16,798
£29,777
+55
£47,078
Aside from the age effect, there is a significant gender
differential here, with 73% of men having savings
averaging £34,517, but only 64% of women with savings
of £22,712 – a gap in average savings of nearly £12,000.
These figures don’t include pension savings (or
property), so don’t give us a complete picture but these
figures are captured in our Pensions Reports for 2012,
and will be again in 2013. However, when we look at
these figures in the context of financial support for the
family (covered later in this report), they seem modest
at best. We’ll see in the next section of the report that
the average savings figure of £29,777 for a 45-54 year
old represents around twice the average amount lent or
given to children (£14,865). This suggests that a parent
making payments to several children and potentially
other family members will quickly erode and potentially
eliminate their savings.
e
ny
11
Part 3. Expenditure.
Throughout the seven years of the Scottish Widows
Savings and Investment Report, we’ve consistently
seen affordability as the major barrier to saving.
This year 64% of the sample say that “having no
money available” is a major barrier, slightly down
from 68% last year.
Interestingly, this figure is relatively constant across
social grade and region, but varies significantly by age:
£1,187
£1,132
£856
£1,099
62%
62%
68%
73%
60%
18-24
25-34
35-44
45-54
+55
£853
64% say that “having no
money available” is a major
barrier, slightly down from
68% last year.
We have also included in the graph the answer to a
separate question about the monthly cost of running
your home, which includes paying the mortgage, rent,
fuel bills and council tax. This initially increases with age,
presumably to reflect a higher standard of living and
the additional taxes that come with it, then reduces as
mortgages are repaid and, in some cases, state benefits
are triggered.
What’
expen
saving
individ
when
alterin
into w
While
made
people
to red
Most
Monthly cost of running home.
Percentage of age range with ‘no money available’.
Eating
TICK
Cinem
conce
CD/DV
Two p
only 1
barrier
by the
good t
unders
12
ng
ent,
h age,
nd
s as
nefits
What’s clear from this graphic is that household
expenses increase and become a major barrier to
saving in the years where we might traditionally expect
individuals to shake off their debts, while also at a time
when financial commitments to their children will be
altering as children may look to move out of the home
into work or education.
So it looks like people have a clear sense of the
difference between discretionary and critical
expenditure (with broadband Internet falling into the
latter category). There’s also a suggestion here that
many could reduce spend on discretionary items if they
chose to save more.
While saving looks difficult, there remain choices to be
made about expenditure. The table below shows what
people would choose to cut back on (or not) if they had
to reduce their outgoings.
In practice, though, it’s less clear what the UK population
is really prepared to do without. Where people have been
faced with the challenge of meeting living expenses over
the past 12 months, they’ve been more likely to turn
down the heating 31%, sell items online 23% or cut
down on fresh food 16%.
Most likely to cut back on
Least likely to cut back on
£
Eating out 65%
Nights out 55%
Broadband
Internet 12%
A
B C
TICKET
Cinema/theatre/
concerts 52%
Protecting
income 15%
Short breaks/
weekends away 47%
CD/DVD/computer games 47%
Two positive trends highlighted in the report are that
only 13% say that preferring to spend money is a major
barrier to saving or investing. In light of the effort made
by the Government to improve financial literacy it is
good to see 45% of people do not find it difficult to
understand how to save or invest.
Providing financial security
on death/critical illness 15%
Childcare/nursery
fees 17%
Savings for retirement 17%
People have a clear sense of the
difference between discretionary
and critical expenditure and could
reduce spend on discretionary items
if they chose to save more.
13
Part 4. Financial support for the family.
We’ve highlighted, in previous Savings and
Investment Reports, the greater reliance on family
members to provide financial support. In this year’s
survey, 40% confirm they have given or loaned
family members substantial amounts of money.
This is not just to children, but also to parents, siblings
and wider family members.
Living expenses 39%
House purchase deposit 34%
Pay-off debt 33%
Cre
25% Children
dit
Ca
rd
Percentage giving or loaning substantial amounts to:
The money given or lent children has been used for a
variety of purposes, including:
9% Siblings
6% Parents
5% Wider family members
Car 30%
2% Grandchildren
Education 20%
Note: answer includes those who lend money to more than
one group.
By far the greatest burden here falls on those aged 45
or over, with 22% of 45-54 year olds and 59% of 55+
year olds having given or lent substantial amounts to
their children.
The mean amounts given or lent to children have risen
to £14,865 up from £13,300 in last year’s report. This
amount increases to £16,617 for 55+ year olds. To put
this into context, this represents 35% of the average
savings of the 55+ age group, so represents a substantial
hit to those savings.
14
Wedding 16%
Travelling 10%
So it’s every bit as much about giving the child a
good start to their adult life as it is about meeting
essential costs. A similar split between essential and
discretionary items exists for money given or lent to
other family members.
In
h
m
a
e
g
t
m
y.
ra
In this year’s survey, 40%
have given or loaned family
members substantial
amounts of money. So it’s
every bit as much about
giving the child a good start
to their adult life as it is about
meeting essential costs.
What remains clear is that around half of the payments
to children or grandchildren involve a demonstrable
sacrifice by the donor, whether in the form of cutting
back on spending elsewhere, increasing debt or reducing
the intended level of saving. They appear to involve
significant amounts that are required when the parent
has limited opportunity to recover the payment through
earning or saving.
The key message is financial
planning is key to coping
with these payments to
family members.
nd
to
15
Part 5. Investments.
The survey reveals interesting insights into investor
behaviour, product knowledge and the types of
advice consumers are seeking to facilitate their
investment decisions.
Preference for cash-based
investments
Investors have a good awareness of cash ISAs with 50%
of investors having some savings in this vehicle but only
14% of people have a stocks and shares ISA. Looking at
this in more detail it is clear that stocks and shares are
much more common amongst older age groups, with
20% of over 50s having one, compared with only 6%
of 18 to 34 year olds.
While direct experience of stocks and shares ISAs is
lower at younger ages, the extent of this difference
reinforces the need for practical financial education
for younger adults.
Over half of cash ISA owners (54%) claim that the taxfree element was the main reason for investing. A third
of stocks and shares ISA owners state that the fact they
are tax-free and the greater rate of return compared to
cash investments are the main reasons for investing.
]
Most investors have a good
awareness of insurance and
protection products, however,
a much lower familiarity of
market-linked investments.
16
Understanding risk and return
Market-linked investments involve risk to capital and
require a longer time horizon than a cash portfolio but
offer considerable opportunity for enhanced returns.
This in turn provides investors with an inflation hedge
and a more effective use of the ISA tax advantage.
They should be particularly attractive to younger
investors who have longer investment horizons
Rather than appealing to consumers as part of a
diversified investment portfolio, it appears market-linked
investments are a residual consideration after home,
car and shorter-term liability considerations. 71% of all
respondents own (or are in the process of buying) their
home, with 35% of 18-24 doing the same, but only
14% of all respondents are planning to invest in a
stock market related product in the next 12 months.
Risk aversion and the short term
There is a significant amount of investor risk aversion
evident in the survey which has continued from
previous years. This is manifested through investment
and product choice and reflects not only ongoing
uncertainty in the financial markets but increased
emphasis by the Government on austerity measures 26% of respondents expected their financial priorities
to change due to Government spending cuts.
Government cuts, real or perceived, will have done little
to encourage investor confidence in the market and will
have supported the preference for short-term assets.
Most
ISAs p
respon
which
are su
also re
of an
nd
o but
ns.
edge
e.
inked
e,
of all
their
nly
a
hs.
Most commonly held savings products
51% Cash saving account
50% Cash ISA
14% Stock & shares
12% Fixed-term rate
ISAs protect capital gains from tax. 50% of
respondents are keeping their money in cash ISAs
which, although benefitting least from tax protection,
are subject to longer-term risk from inflation and are
also readily accessible without capital loss in the event
of an emergency.
The Government, in raising the stocks and shares ISA
allowance to £11,280 for 2012/13 tax year, has done
little to influence consumer behaviour into increasing
investments into market-linked funds. Only 14% of
respondents are investing in stocks and shares ISAs and
32% of respondents stated they don’t have enough
money to save to fill their ISA limits anyway.
A clear pattern of investment risk aversion is reflected
in the following table which highlights the attitude
between younger and older investors and shows a lack of
understanding about the risk of inflation across all groups:
on
ent
es ties
little
d will
s.
17
Imagine you have £5,000 that you wish to invest for a period of 5 years. Which ONE of the following
investment options would you be most inclined to take?
All
Male
A guaranteed increase to £5,250 and no possibility that it will fail
47%
38%
56%
42%
58%
A potential increase to £6,000, but the possibility that it will fall to £4,500
24%
27%
21%
24%
19%
A potential increase to £7,500, but the possibility that it will fall to £3,600
8%
12%
4%
9%
4%
A potential increase to £10,000, but the possibility that it will fall to £0
1%
2%
1%
3%
1%
Not sure
20%
21%
18%
22%
18%
Almost half (47%) of respondents would give up the
potential for higher returns for the certainty that their
original investment would not fall. With this option, the
guaranteed increase of £5,000 to £5,250 over the five
year period results in only a 1% per annum return. While
this seems a sensible and loss avoiding strategy when we
take into account inflation over the same period this
would actually lead to a loss. People’s willingness to
adopt an investment strategy that would see a potential
to beat inflation is limited by their reluctance to see their
investment fall. It is interesting to note that women are
clearly more risk averse than men and over 55s more risk
averse than 18-24 year olds.
Many investors will be prepared to take on more
risks if they are educated to better understand them.
Respondents appear to be unwilling or unable to access
the type of holistic financial advice that might assist
them to construct a potentially higher returning, more
diversified and tax effective portfolio. This could be
because advice is not considered affordable, it is not
readily available, or represents a shift in the way that
investors purchase their products.
14% are planning to invest in a
stock market related product in the
next 12 months.
Female 18-24
55+
Adviser engagement and
Point of sale
Adviser engagement is very low with only 7% of
respondents having consulted a financial adviser
to review their personal finances. Consumer advice
websites and direct internet purchases have become
an increasingly popular mechanism by which to
analyse and acquire investments. 36% of savings and
investment products including ISAs, pensions and cash
savings were undertaken directly from a product provider
or a price comparison website.
The number of investors enjoying face-to-face
engagement on investment products was reasonable
with 34% of respondents preferring to go into the branch
of a provider to invest. With only 41% of all respondents
having a will and 6% having ever used their full stocks and
shares allowance, the risk is that key financial planning
tools will be overlooked with the trend away from
advice. An increase in the number of people choosing
to purchase online, either via a comparison site (14%)
or directly from a financial provider (21%), is further
evidence that this is a trend away from traditional advice
driven models.
The re
online
behav
I sea
I use
suita
I will
(e.g.
to th
Once
com
I will
hear
I will
18
wing
55+
58%
19%
4%
1%
18%
me
and
cash
ovider
e
branch
dents
ks and
ng
ng
%)
r
dvice
The respondents who preferred to purchase products
online were, for the first time, asked about their
behaviour online.
I search online for the best available product.
55%
I use a comparison website to find the most
suitable product. (e.g. moneysupermarket)
54%
I will use a consumer advice website
(e.g. moneysavingexpert) to guide me
to the right product.
42%
Once I find a good product, I will search the
company online to check their reputation.
35%
I will buy from a company I have previously
heard of.
30%
I will buy from any company I find online.
8%
With the impact of RDR and the
growing general trend of Internet
consumerism, the implications of
an increase in non-advised purchase
trends could be considerable.
19
Conclusion and key challenges.
Our seventh report on the savings and investments
arrives just a few months after the introduction of
the RDR and automatic enrolment – perhaps the
most radical change in the long-term savings and
investments landscape in a generation. This makes
it a good opportunity to reflect upon the trends we
have seen over the last few years and consider what
the future holds.
From an international perspective, the UK household
savings rate continues to be relatively low. In recent
years we have seen that what people save is very much
a reflection of the economic climate – a gradual growth
to 2009, followed by a sharp reduction to 2011, with
modest improvement over the last two years. Given that
most economic forecasts suggest that growth will be
weak in the short term, there is no suggestion that we will
see a radical growth in savings for the foreseeable future.
At the same time, consumers are being presented with a
huge challenge in regard to financial advice. Regardless
of the actual price paid through commissions, many
consumers regarded IFAs as a free source of financial
advice. Now a price must be paid up front and we have
yet to get a clear picture of how many people will seek
advice from their IFA, make their own savings decisions,
or even reduce or end their existing savings habit.
20
With greater flexibility
Automatic enrolment could
help people face up to the
twin challenge of saving
for short-term goals and
providing for retirement.
Creating a streamlined simplified advice regime
remains an attractive idea, but getting there appears
as difficult as ever. As an industry we need to reflect
consumer appetite to pay for advice in simpler,
transparent solutions that meet customer needs in a
straightforward manner. And in this we need to work
closely with the regulators.
We also need to develop innovative ways of engaging
consumers at the right time to make long-term saving
attractive and affordable. It’s a self fulfilling prophecy –
if you keep putting it off it will become increasingly
out of reach and difficult to recover. The introduction
of automatic enrolment is perhaps an ideal opportunity
to do this. With greater flexibility this could help people
face up to the twin challenge of saving for short-term
goals and providing for retirement. This might involve a
plan that combines the accessibility of an ISA with the
tax benefits of a pension.
Howev
Impro
of fina
As our
averse
But, on
invest
to take
over lo
Reflec
no eas
domes
from t
balanc
econo
ars
ct
na
ork
ing
ing
ecy –
y
on
unity
eople
rm
lve a
the
However, at the heart of all of this is financial education.
Improving our population’s awareness and knowledge
of financial products is the key to increasing saving.
As our research shows, many people are naturally risk
averse – which can often deliver a negative real return.
But, once they are educated to better understand
investment decisions, people tend to be more prepared
to take on more risk, which should deliver better returns
over long periods.
Reflecting on our research into savings, it is clear there is
no easy answer. But there is clear evidence that a higher
domestic rate of saving has multiple benefits – ranging
from to higher long-term economic growth to a more
balanced economy with less reliance on consumer-led
economic growth and current account deficits.
In this report we have suggested some changes that
might help improve the savings rate and culture in
the UK. While the RDR and automatic enrolment
are initiatives to be welcomed, it remains to be seen
whether they are enough to change the UK savings
culture. This is something to track in our future reports.
Improving our population’s
awareness and knowledge of
financial products is the key to
increasing saving.
21
22
23
Scottish Widows plc. Registered in Scotland No. 199549. Registered Office in the United Kingdom at 69 Morrison Street, Edinburgh EH3 8YF. Telephone: 0131 655 6000.
Scottish Widows plc is authorised and regulated by the Financial Services Authority. Our FSA Register number is 191517.
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