Savers seek better returns through investments

Wednesday, 03 February 2010 10:06

By Matthew West

Savers poured money into the stock market last year at a record rate as they sought for ways to maximise the value of their finances, new figures showed today.

Investment fund sales were at there highest ever at £25.8 billion, 45% higher than the previous year, as a result of poor returns being offered by other savings vehicles.

The recession had pushed savers towards the stock market as investments began to recover from March onwards and traditional savings accounts failed to offer the sorts of returns they were used to. Banks have cut the interest they are willing to pay on savings accounts in some cases to 0.1 per cent or even zero in response to the Bank of England slashing the base rate forcing savers to look elsewhere.

The Investment Management Association (IMA), the trade body which published the figures, said ISA sales also had their best year since 2001 with a total of £2.8 billion invested in the tax free wrapper.

Meanwhile, the amount of funds under management was £480.8 billion, its highest ever amount and significantly higher than last year's total of £361.7 billion.

Richard Saunders, chief executive of the IMA, said: "2009 has seen investors adding to their savings at record rates. This trend can be traced back to the autumn of 2008 in the immediate aftermath of the Lehman crash and the ensuing market falls. Investors have prudently chosen wide diversification both across asset classes and geographically - in marked contrast to the previous record year of 2000.

"And it is good to see people once more investing via ISAs, after five years in which ISAs saw higher levels of withdrawals than investments."

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