The Bank of England's decision to keep the base rate at 0.5 per cent for the 11th consecutive month is discouraging savers, 76 per cent of whom have had enough of dismal savings rates, saying they are not interested in investing in cash.
Research by independent financial service providers, Fair Investment Company (
www.fairinvestment.co.uk) has found more than three quarters of investors would not consider investing in cash in the current climate, preferring to put their money into riskier investment options in the hope of better returns.
When asked what type of investment product they were most likely to opt for, only 24 per cent of respondents said cash. The remaining 76 per cent said they would look at riskier assets, with almost half (49 per cent) of those respondents choosing structured products, nearly a quarter (24 per cent) equity funds, while a fifth (20 per cent) said they would opt for corporate bond funds as their preferred investment type.
"With the average cash
ISA rate at just 2.12 per cent and easy access savings accounts paying out just 0.76 per cent on average [source: Moneyfacts], it is no wonder that most people looking to invest are steering away from cash in order to get better returns," said Nick Scarrett, head of pensions and investments at Fair Investment Company.
"Structured products are basically fixed term investments - usually of between 3 and 6 years - that aim to beat cash returns while also providing some level of capital protection. They are popular because they offer a ‘halfway house' between low-risk cash savings and full risk stock-market investing."
The survey found that of those who would choose structures, 58 per cent said it was for the capital protection element that the asset class provides and 38 per cent said it was for income.
"Structured products have received some bad press over the years, and obviously, like any investment type, there are good and bad products," said Nick Scarrett.
"Structured products are not suitable for everyone and anyone considering structures should make sure they understand the product and the risks involved before making a decision.
“But with the financial climate as it is, and the base rate unlikely to increase before the year is out, a diversified
investment portfolio including some structured products is certainly worth considering."
