The proportion of UK adults who are investors rose slightly over the past year – a positive sign in a rather disappointing year. But these headline numbers disguise some important inter-generational shifts, according to our latest UK Consumer Insights report.
• The big change in behaviour has emerged among the retired. Low interest rates since 2008 persuaded many in this cohort to buy higher risk investments to generate sufficient returns. Now retirees are shifting their assets back into cash, selling down their ISAs and unwrapped accounts, moving their cash to banks and building societies. Older people are far more knowledgeable and confident about investing, but they are also much more risk averse.
• A squeezed middle – in the peak accumulation years of ages 36-65 – have been negatively impacted over the last year, with fewer saving or investing. Mortgage repayments and inflation have eroded the assets that they would have directed towards investments.
• Younger people are continuing to invest in greater numbers than in the years immediately before the COVID-19 pandemic. This should be a boost to the industry in the long term, as this generation grows older and inherits more wealth.
Mostly, people are still investing. Accumulators continue to accumulate, helping gross investment flows to stay reasonably healthy. The household savings ratio remains high by historic standards, despite the ‘cost-of-living crisis’. But withdrawals by older investors have hit net investment flows hard.
Yet 2024 is likely to remain tough for the industry. Interest rates might decline, but it won’t be enough to induce people with lower risk appetites back into inappropriately risky investments. The long-term nature of investing will continue to draw in those who plan for their financial futures. The medium-term outlook for the industry looks positive, even if the coming months turn out to be painful.
Platforum has recently published UK Consumer Insights analysing the UK’s investing landscape and identifying consumers’ views about financial brands and products. Please get in touch for more information.