Further fall in investor confidence

Investor confidence has fallen for a second consecutive quarter according to the results from the latest Standard Life Savings & Investment Index.

The Index has now fallen back to the levels seen in January and April 2006. The Index score now sits at 19, down from 21 in the last quarter and 23 in October 2006, but it remains well above its launch level of 11 in July 2005.

The fall in the Index can be attributed mainly to a drop in confidence in notice accounts and stocks and shares from the last quarter (Wave 7). Notice accounts have fallen 11 points from 15 to 4, and stocks and shares now stand at 8, compared to 16 in the previous wave. Property, both buy to let (up from 30 to 34) and individuals’ own homes (rising from 50 to 52), remains the most favoured investment category, with both types seeing a small increase in confidence from Wave 7 but not reaching the highs of previous waves in 2006. This indicates that uncertainty continues in light of interest rate rises and the anticipation of further increases. National Savings Bonds are also viewed slightly more favourably than they were in Wave 7.

The number of people who state they are currently saving for the future also fell by 4% from Wave 7 despite interest rate rises. There is only a 1% difference between people who claim to ‘save regularly and only spend what is left’ and those who ‘save occasionally when I get money to do so’.

When individuals were questioned further about their views on specific types of savings vehicles (such as pensions, ISAs, OEICs, insurance policies, mutual funds, annuities), all with the exception of ISAs, showed a fall in confidence, with a significant impact on pension products. Confidence has fallen in personal pensions (down from 22 to 14) and in employer pensions (down from 33 to 21), while confidence in SIPPs as a savings vehicle has fallen by 7 points from 15 to 8. Despite the slight increase in confidence in ISAs, confidence in mutual funds has fallen from 0 to -8.

Commenting on the findings, Trevor Matthews, Chief Executive, Standard Life Assurance Limited said, "It is worrying that The Index has fallen for a second, consecutive quarter and that despite rises in interest rate rises fewer people are saving for their future. We have to hope that after this month’s rate rise people’s savings habits will turn the corner."

Trevor continued, "I am particularly concerned by the fall in confidence in pension vehicles. Only 45% of the people in our survey were saving for retirement, which is less than the percentage of the UK population saving for a holiday. With only 28% of people saying they are satisfied with their savings for retirement, further effort is needed to address this imbalance. As an industry we must continue to work hard to engage consumers and help them to plan for their future financial well being."