Consumer attitudes fuel bounce in Bank of Ireland Savings and Investments Index in November

• Saving and Investment sentiment increases, fuelled by improving attitudes
• Savings Index increases as over half of consumers now regularly save
• Investment Index increases as investment in pensions grows further
• Only 11% of people believe they are fully financially prepared for retirement

The Bank of Ireland/ESRI Savings and Investments Index, which measures Irish peoples’ sentiment towards savings and investments increased to 103 points in November from 100 in October. The monthly Savings and Investment Index is composed of two indexes, the Savings Index and the Investment Index, each comprising two sub-indexes the Attitudes Sub-Index and the Environment Sub-Index.

Savings Index

The monthly Savings Index increased to 104 points in November from 100 in October. The monthly Savings Attitudes Index, which asks people about their saving behaviour and how they feel about the amount they save, increased by 8 index points to 108 in November 2017. Consumers’ attitudes toward saving continue to strengthen, demonstrated by an increase in the proportion of regular savers from 49% in October to 53% in November. At the same time, the proportion of people not saving at all declined from 33% to 30%. This most likely reflects the deepening economic recovery which is providing more people with some financial capacity to save spare cash.

The Savings Environment Index, which explores households’ views on the environment for savings, increased by only 1 index point to 101 November – this more muted gain could indicate that Irish peoples’ enthusiasm for saving is tempered a little by the low interest rate environment. Looking at the different demographics; over half (57%) of under 50s are saving regularly compared to 46% of over 50s.

Investments Index

Like its savings counterpart, the Investment Index measures how consumers feel about their ability to invest and monitors their investment patterns. The monthly Investment Index increased to 103 points in November from 100 in October.

As with the Saving Attitudes Index, attitudes towards investing also improved noticeably in November with the index increasing from 100 to 106. It is likely that the improved economic backdrop also boosted Irish peoples’ willingness to invest in November. In addition, the tax deadline for income tax relief on pension investments could have prompted a greater eagerness to invest last month. This is backed up by the finding that more people invested in pension funds in November (32%) compared to October (30%).

Retirement Optimism Index

The findings from this month’s Retirement Optimism Index show that Irish people appear to have some financial ‘plan’ in place for retirement – for example, 55% of people indicated they had some degree of financial preparation in place for retirement.

However, despite this Irish people appear anxious about how they will far financially once they retire. 37% of people indicated that they would find it difficult to live comfortably in retirement and this number rose to 41% for the over 50s. In fact only 11% of people felt fully prepared for retirement from a financial perspective.

Commenting on the Bank of Ireland Savings and investments Index, Tom McCabe, Global Investment Strategist, Bank of Ireland Investment Markets said: “November’s findings from the Bank of Ireland/ESRI Savings and Investment Index clearly show that the improving economic environment is helping sentiment towards saving and investing. This is most visible in the savings data with rising numbers now indicating they are regular savers. There were also initial signs of this feeding into investment although the tax deadline for self-employed and employee Additional Voluntary Contributions pension contributions could also have explained a pick-up in investment activity last month.

 “Meanwhile, the Investment Environment Index slipped back slightly this month. Stock markets were slightly down in November (ISEQ fell 1.5% while world stock markets were down 0.4%) – this coupled with some Brexit related uncertainty could have been factors in the lower November reading. However generally investors have done well this year and the outlook for markets in 2018 is still positive driven by continued growth in the world economy.

“Despite pensions being in the news, retirement planning remains a ‘work in progress’ for many Irish households – while 55% of people have some planning in place there is a question mark around whether this planning is sufficient. This is best illustrated by the finding that only 11% of people feel they are fully financially prepared for retirement.”

About the ESRI/Bank of Ireland Savings and Investments Index:

The Bank of Ireland/ESRI Savings and Investment Index tracks household attitudes towards savings and investment as well as monitoring their perspectives on the current and future savings and investment environment. Understanding savings behaviour provides insight into how households smooth consumption, plan to make big purchases and build up buffers which can be drawn down in times of economic stress. Monitoring household investment patterns gives an understanding of how they are putting their money to work, their financial diversification, and their appetite for risk. The Bank of Ireland/ESRI Savings and Investment Index also provides a Risk Barometer and a Retirement Optimism Index to give insight into household risk taking and retirement planning. These will be presented on alternate months.

The Bank of Ireland Savings and Investment Index is produced monthly from a minimum sample of 800 consumers aged 15 years and above. The ESRI carries out the Savings and Investment Index research to ensure the indices represent a national sample.