In this Market Assessment report, the savings gap in the context of media concerns that the State will provide inadequate pensions for up to half the population, and that there is limited provision through company schemes has been examined. Also considered is the current state of the economy and the changes in the savings ratio, interest rates and household wealth. Demographic pressures will place a greater burden on the shrinking working population if the elderly or early retired have to be supported from investment returns.
The wealthy invest large and increasing sums in bank deposit accounts and building society savings accounts. Banks compete for those deposits by cutting the cost of access to funds and making it easier to withdraw them. The increase in wealth caused by extra investment by depositors outweighs the growth in consumer debt so, in the aggregate, banks continue to increase the capital under management.
Also considered is the development of state-sector savings and investments designed to encourage saving, which have generally been less successful than hoped.
Unit trusts and investment trusts suffered from the stock market falls between 2000 and 2003. Although they are recovering in terms of performance, they have yet to regain their former popularity with households who had considered them much safer investments than they really turned out to be. Pension funds and insurance company funds are more cautiously managed than before the crash, but the expectations and regulatory demands have increased significantly.
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