Savings Index reaches 3 year peak during lockdown

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  • One in two consumers think it’s a good or very good time to save
  • One in three believe now is a good time to invest
  • Optimism is growing about the future
  • 61% say they are prepared or well prepared for retirement

Wednesday 21st April 2021: In Q1 2021 the Bank of Ireland Savings and Investment Index reached its highest level since 2018, increasing to 103 from 98 in Q4 last year. Demand for savings in particular has been exceptionally strong and reflective of the lockdown environment during the first quarter of the year. 

When asked whether it’s a good time to save, 51% of people saw it as either a good or a very good time to save compared to just 38% in February 2020 before the pandemic began. This number reaches 56% for those under 50 compared to 43% pre-pandemic. When asked if they see 6 months’ time to be a good time to  save the  overall number drops back a little to 48% and for under 50’s it  also drops to 53.5%.

Asked how they feel about their savings, 44% believe they are still not saving enough which compared to 55% pre-pandemic, perhaps reflective of the level of savings that has taken place during this past year. 

According to Kevin Quinn, Chief Investment Strategist at Bank of Ireland: “The increase in savings in the Irish economy is likely to be a tailwind to a consumption boom in the coming year. With nearly €16bn amassed in savings since the start of the pandemic, Ireland has experienced exceptional growth in savings – an experience it shares with the rest of the developed world. Alongside supportive monetary policy and expansive fiscal policy, the release of pent-up savings will, I believe, provide a further impetus to strong growth later this year – both here and internationally.

“It is hard to predict how fast these surplus savings will be run down, but it is inevitable a significant portion will be spent once reopening begins. If we look across the Atlantic, with vaccinations at a more advanced stage, and an estimated $2 trillion in incremental savings amassed during the pandemic, the evidence is already apparent that consumers are beginning to splurge with retail sales surging. We can expect to see something similar in the months ahead in Ireland. That said, it’s also an uneven recovery with many continuing to struggle.”

Attitudes to investing – significant increase in those seeing it as a good time to invest

When asked about attitudes to investing, a great deal more people believe now is a good time to invest compared to a year ago. In February 2020, 23% of people saw it as a good time to invest whereas by March 2021 that figure had grown sharply to 33%. Asked how they felt about investing in 6 months’ time, that figure rises to 38%, suggesting a growing optimism about the future.

“We are seeing an increased interest in investing – especially in today’s interest rate environment. Perhaps a part of this is down to an increasing awareness of returns that have been achieved in particular in equity markets in the year since the pandemic. There is also a growing optimism that the recovery will be very robust, which should be supportive of investing for the longer term. Many individuals and companies are looking for solutions to the low or negative environment currently being faced. It is an area in which we are advising increasing numbers of customers on a daily basis how to adjust using solutions from the investment world,” added Kevin Quinn. 

Attitudes to retirement – lockdown creates a greater preparedness, once again

Overall the Retirement Optimism Index has been gradually rising over the past 3 years. There was a notable increase in optimism about retirement during the early stages of the pandemic period and that appears to have been repeated during the current lockdown.  When asked about preparation for retirement, 61% say they are prepared or well prepared, a figure that compares to 58% just before the pandemic broke last February. When asked about their optimism for a comfortable life in retirement this has increased from 36% to 41%. 

“The financial preparedness for retirement has improved only marginally in the past three years but optimism about a comfortable life in retirement has improved significantly. While life has been exceptionally difficult during lockdown perhaps one of the side-effects has been that individuals have adapted their way of life outside of the work environment to a point where life in retirement looks more appealing. The concern however remains the level of funding that individuals are undertaking as we know that the levels of retirement funds currently being built remain insufficient for large parts of the population” added Kevin Quinn.

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