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The savings and investments industry will have to work hard to grow in the next 5 years. 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. The results of consumer research* conducted for Savings & Investments, a new Market Assessment from market intelligence provider Key Note, show that most consumers want better regulation of the industry, with over a third distrusting of banks and other financial services providers. Key Note warns that it found that the savings and investments market was in great difficulties in mid-2010.
Key Note's survey found that the most popular response was to the statement arguing that the Government should regulate savings and investment providers more closely, which drew agreement from 74.2% of the respondents. 39.7% of those surveyed expressed little confidence in financial advisers; while this is a minority, it is a substantial one and should cause concern to financial advisers. Moreover, more than a third (36%) of the respondents expressed little confidence in banks' abilities to handle their savings and investments. When coupled with the 64.6% of respondents that put money in their bank deposit account, it suggests unease about the current situation. Key Note believes that this points to opportunities for new savings vehicles and new types of bank.
The Government has reduced the appeal 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 on banks, as well as offering some tax relief. The 2010 survey found that 57.2% of those interviewed agreed that they contributed to an ISA. Agreement with this statement showed an increase from the 2006 survey, when there was agreement from 46.9% of the respondents.
Key Note's research revealed that most consumers are keen on private pensions - almost two-thirds
(65.5%) of the respondents thought private pensions are a good idea - and are concerned about their old age. Just over half (50.6%) of those interviewed agreed that companies' pension schemes are becoming too complex to understand. This is an urgent issue that pension system planners need to take into account.
Key Note forecasts that, between 2010 and 2014, there will be subdued increase in wealth, as inflation and tax rates exceed the rate of rises in incomes. Regulators are introducing new Retail Distribution Review (RDR) measures that should transform the investment industry in 2013. Some suppliers complain about the cost; others, more astutely perhaps, welcome the change and see commercial advantage in complying, in order to offer better quality financial advice and investment products. However, the key challenge for suppliers is to provide market-leading savings products that compete with cash ISAs.
As governments in the West are seeking the approval of credit rating agencies by adopting precipitate and draconian cuts in public expenditure and capital investment, this generates economic uncertainty and pessimism, and will send savers and investors to the least risky investments, such as foreign sovereign debt or national savings. Key Note hopes that the savings and investments industry will counter this pessimism by, among other things, embracing regulatory reform.
Press enquiries: Lisa Ivey at Key Note at firstname.lastname@example.org or 0845-504 0452. Press/review copies of the report are available on request.
Notes to editors:
* Key Note commissioned NEMS Market Research to undertake an exclusive consumer survey for this report to explore ownership of, and attitudes towards, savings and investment products. The survey was conducted in June 2010 among a representative sample of 1,000 adults in Great Britain aged 16 and over. Respondents were given a list of statements. The responses given are compared, where appropriate, with responses to a similar survey undertaken in September 2006.
Key Note's 2010 Market Assessment, Savings & Investments, covers savings held by individuals in liquid form for providential reasons, expecting to obtain a competitive interest rate on all of their funds. The report also covers investments, which are more long term and difficult to transfer back into cash (they are less liquid than savings).
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