‘TINA’ effect boosts investing as savings appetite ebbs

  • Bank of Ireland Savings & Investment index dips in third quarter
  • Investing reaches highest level since 2017 on ‘TINA’ (There Is No Alternative) effect
  • Savings attitudes retreat to pre-pandemic level

27 October 2021: More people are now investing than at any time since the Bank of Ireland Savings & Investment Index started in 2017, as consumers seek an alternative to low returns on cash and the appetite for savings drops with the re-opening of the economy.

The number of people investing regularly rose to 38% in Q3 (up from 36% in Q2), the highest since Bank of Ireland’s quarterly survey started tracking consumer sentiment towards saving and investment. Meanwhile, enthusiasm for saving continues to wane and just 44% of consumers in the September survey say it is a good time to save, the lowest since February 2020.

The overall Savings and Investment Index, which had registered a marked increase over the past year, dipped slightly in the third quarter to 102 (vs. 104 in Q2) as the Savings index weakened while the Investment index held steady.

While the percentage of people who thought it was a good time to invest declined in Q3 (33% vs 36% in Q2) – reflecting recent conditions in investment markets – the figure remains higher than in pre-pandemic surveys (23%). A larger percentage (37%) felt it would be a better time to invest in six months and this figure has remained above pre-pandemic levels for the third quarter in a row.

According to Kevin Quinn, Chief Investment Strategist at Bank of Ireland: “The normalisation in everyday life as restrictions ease is feeding through into how people view their savings and investment plans. There is perhaps less of a cautionary motivation to save and also a recognition that zero/near zero interest rates are providing less rewarding outcomes for savers. By contrast more people are investing as the so-called ‘TINA’ effect prompts a shift away from cash toward investments in the search for better returns. These findings are consistent with the path to a more normal, post-pandemic environment and I expect these trends to continue in the months ahead, even if the changes we are seeing in the investment environment make for more headwinds”.

Retirement optimism falls

The Retirement Optimism Index, which is tracked alongside the Savings & Investment index, weakened to 114 in Q3 from 118 in Q2. The number of people who said it would be easy to live comfortably during their retirement years dropped to 40% from 45% in June. Three in ten (30%) consumers – higher amongst lower income earners – believe it will be difficult to live comfortably in retirement, up from 26% in June.

“Over the past year our survey has tracked how people have become more optimistic about retirement, probably because lock down gave us all a greater exposure to life beyond work,” said Kevin Quinn. “September bucks that trend somewhat, which may well reflect the realities of the ‘back to work’ environment and a greater appreciation of the challenge in achieving a comfortable retirement, particularly as our spending increases again.”

Concerns about further Covid wave – but job worries lessen

When asked about the pandemic, three in five people (63%) said they remain concerned about a further wave of Covid-19 emerging. This speaks volumes about how mature Irish public opinion has become about the remaining risks despite the successful roll-out of the vaccination programme. The next highest concern was family health at 57% (which is down from 75% in May 2020). One in 5 are concerned about their job (18% compared with 38% in May 2020).