Exclusive: Investors dash for cash savings despite historically low interest rates
Investors are retreating to cash savings as they adapt strategies during the pandemic, despite central banks slashing interest rates.
An independent survey of more than 900 investors, commissioned by broker HYCM, shows the most common asset class is cash savings – 73 per cent – followed by private pensions.
A third of all investors surveyed say they plan to put more money into their savings accounts over the next 12 months.
It is striking that investors are heading to savings, given the Bank of England’s (BoE) decision to keep interest rates low to stimulate the economy during the economy.
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The BoE has slashed its main rate to a record low of 0.1 per cent in response to the coronavirus outbreak. It has also prompted questions about whether it will cut into negative territory. Governor Andrew Bailey has said the bank is keeping them under “active review”.
Giles Coghlan, chief currency analyst at HYCM, suggests that job uncertainty is pushing people towards savings. “People are either being furloughed or, if they’re self-employed there is uncertainty over the implications of the Covid crisis on work,” he told City A.M.
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The uncertainty over jobs was typified by figures released by the Office for National Statistics (ONS). Despite the unemployment rate remaining unchanged, workers on companies pay rolls fell 612,000 between March and May.
The jobless claimant count also increased in May to 2.8m – a monthly increase of 23.3 per cent.
If rates are maintained at their current rate, there could be a move to commodities. “If we keep seeing low interest rates, I can see lots of people investing in gold and silver,” Coghlan said.
The research conducted on behalf of HYCM also shows that 30 per cent of UK investors are looking to “radically” change their investment strategies over the coming financial year because of the pandemic. That said, 36 per cent remain confident in the way they are managing their finances at present.
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