Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing.

Households are saving more since lockdown but how can they get better returns?

Lockdown has affected everyone’s lives in different ways over the last few months. Some people have had to adjust to a lower income with 43% of self-employed workers and 16% of employed workers1 saw a drop in income since lockdown measures were introduced.

Others have found that they are spending a lot less due to not eating out or going on expensive holidays. This has meant a lot of households have been putting this money towards paying off debts and increasing savings.

Households saved more than £30 billion extra in March-April 2020 according to figures from the Bank of England published in June 2020. This compares to saving £10 billion extra from January-February 2020.

Most people opt for opening a savings account with their existing bank, however this is unlikely to get you the best returns on your savings. Interest rates have hit record lows of 0.01% which means that major providers such as HSBC and Natwest now only pay 0.01% on easy access savings accounts. This equates to just £1 for every £10,000.

It is worth looking at all of your options when choosing where to put your savings. If you need instant access to your money then your options will be limited. However, if you are looking to save for longer term goals, you may want to consider investing your money as opposed to leaving it in cash.

Investing can provide you with the potential of higher returns than cash, particularly when interest rates are so poor. Returns depend on the performance of your investments and the value can go down as well as up. However, over the longer term historically stocks generally outperform cash.

A Barclays study found that stocks kept for any 10-year period since 1899, have had a 91% chance of outperforming cash2.

Since 1983, the FTSE 100 has returned about 7.08% a year (with re-invested dividends)3, this means that investments have exceeded inflation rates.

A popular way to start investing is to open a Stocks & Shares ISA. In the 2020/21 tax year, you can contribute a maximum of £20,000 per year, either as a lump sum or as monthly savings. All investment growth in an ISA is free from further liability to Capital Gains or Income tax meaning that you are getting more from your money.

Find out more about investment planning

Find out more about making the most of your savings

You can book a no-obligation financial review of your existing savings with one of our financial advisers by phoning us on 0117 973 0500. They will then write to you with recommendations to help you make more of your money.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than you invested. Equities do not provide the security of capital which is characteristic of a deposit with a bank or building society.

The favourable tax treatment of ISAs may not be maintained in the future and is subject to changes in legislation.

1Scottish Widows, 2020, Survey of 2,251 workers during Covid-19 crisis

MoneyWeek, 2019, ‘Stocks beat cash and bonds over the long term’

3 Data from Bloomberg

FTSE International Limited (“FTSE”) © FTSE 20. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings invest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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