Appetite for saving drops as re-opening kicks in
- Slight increase in Savings & Investment Index, buoyed by investment sentiment
- Confidence about life in retirement continues to strengthen
- Worries about everyday bills and job security lessen
While Bank of Ireland’s Savings and Investment Index, which was declining pre-pandemic, has surged over the past year, the first signs are emerging that the appetite for saving is dropping. In May last year, 55% of people surveyed indicated they saw it as a good time to save, but this has now dropped to 47% (June 2021). The re-opening of the economy is contributing to this, as pent up demand begins to get released.
By contrast, attitudes to investing have begun to move upwards. In June 2021, 36% of people surveyed saw it as a good time to invest, the highest since the survey started (it stood at just 23% in February 2020). The Savings and Investment Index increased slightly to 104 in Q2 from 103 in Q1, its highest level since 2018, buoyed by the Investment Index while the Savings Index dropped.
According to Kevin Quinn, Chief Investment Strategist at Bank of Ireland, “Government pandemic supports have bolstered consumer financial confidence, while higher savings rate has provided an added layer of financial reassurance over the past year. But this quarter’s survey results suggest a shift in attitudes on saving, which is understandable as things reopen and there are more options to spend. We are also finding a growing awareness amongst Irish consumers about low interest rates on savings and increased activity in investing as a result. We see this with our customers who are increasingly open to conversations about investing rather than leaving surplus cash on deposit. I believe that this trend will continue given how long this dilemma is likely to be with us”.
Retirement Optimism index
Confidence about life in retirement has also continued to strengthen. In June 2021, 45% said that they see life in retirement as quite or very easy. This contrasts to 36% in February 2020. When asked about financial preparedness however, the change is less dramatic. In February 2020, 58% saw themselves as prepared or somewhat prepared, which rose by just 3% to 61% for June 2021.
“We are seeing a persistent trend throughout the pandemic period when it comes to how people feel about retirement. On the one hand there’s little improvement in how people view their financial preparedness, and when we look deeper behind this we often find that individuals simply aren’t aware of what it costs to fund retirement. However, putting the financial part aside, it appears that lots of people have grown more comfortable about how they view life in retirement, perhaps a consequence of the very changed working and living environment of the past year” said Kevin Quinn.
Research shows significant changes to consumer concerns
In Q2 2021, as the economy started to re-open and vaccinations reached more of the population, the Bank of Ireland Savings and Investment Index recorded some significant changes in attitudes and a marked improvement in confidence. Most particularly, when asked about their concerns in light of the pandemic, there was a significant improvement in a number of the responses:
Health – concerns about family and personal health are easing
In March 2021, concerns about personal and family health were understandably elevated amongst peoples’ concerns. Back then 71% of those surveyed indicated they were concerned about their family’s health. By June 2021, as lockdown measures begin to ease, this has dropped back to 54%. Asked about their personal health, this was cited as a concern for 53% in March 2021 but by June it had dropped to 39%. Clearly as the vaccination programme has intensified concerns about family health are being alleviated.
Another outbreak – despite vaccination levels, concerns remain about a further wave
In March, 80% of those surveyed indicated that a further wave of Covid was a concern for them. By this June the number has fallen back to 64%, suggesting that while the concern is easing, the majority of people continue to be worried about a further wave. With concerns about the Delta variant creating a further wave in August/September, it is clear that mood is still one of concern despite the reach of the vaccination programme.
Worries about everyday bills and job security lessen
In March 2021, one in three (34%) surveyed were concerned about paying every day bills. By June this had dropped to one in four (25%). Concerns about job security had fallen from 27% to 22% and concerns about income reductions from 41% to 34%.
According to Kevin Quinn, “Clearly the roll-out of the vaccination programme and start of the re-opening of the economy has begun to gradually change how people view the world. While the concerns that have dogged us for over a year remain elevated, Q2’s survey results very clearly show a marked improvement in confidence. Concerns about family health, income and job security and meeting day to day bills have all fallen back significantly. There remains a long journey to normalisation but the Savings & Investment Index findings are very consistent with a resurgent consumer confidence evident across the developed world. Assuming that the reopening continues I expect to see a further strengthening in confidence in the coming months, even if concerns about a further wave remain elevated”.
About the Bank of Ireland Savings and Investments Index:
The Bank of Ireland Savings and Investment Index tracks household attitudes towards savings and investment as well as monitoring their perspectives on the current and future savings and investment environment. Understanding savings behaviour provides insight into how households smooth consumption, plan to make big purchases and build up buffers which can be drawn down in times of economic stress. Monitoring household investment patterns gives an understanding of how they are putting their money to work, their financial diversification, and their appetite for risk. The Bank of Ireland Savings and Investment Index also provides a Retirement Optimism Index to give insight into household retirement planning. The Bank of Ireland Savings and Investment Index is produced quarterly from a nationally representative sample of 1,000 consumers aged 16 years and above. The fieldwork is conducted by Ipsos MRBI, an independent research agency.