Savers rush to invest in stocks and shares ISAs as sales bounce back strongly after a subdued first quarter
- Launch of Scottish Friendly’s New Investor Index reveals a surge of new investment to stocks and shares during Q2 2020
- In the three months to June, the total value of new investments increased by +71% quarter-on-quarter
- Men contributed most to the rush of new investment, as female investors pulled back from the market
Investment in stocks and shares ISAs surged in the second quarter of 2020 increasing by a staggering +71% in the three months to June, Scottish Friendly’s inaugural New Investor Index reveals.
The index tracks sales of adult investment ISAs and the total value of new policies among Scottish Friendly’s customer base, with quarterly activity measured against a base rate of 100.
The outbreak of Covid-19 and the start of lockdown in March coincided with a quarterly -22% drop in new policy sales between Q4 2019 and Q1 2020. There was also a -31% reduction in the value of investments among new customers between the two quarters.
However, in Q2 2020 investors came rushing back as new policy sales increased by +40% while the total investment among new customers soared well above 2019 levels.
The quarterly index reading of 118 for the overall value of new policies represents an 18% increase year-on-year, suggesting Brit’s capacity to save has increased dramatically compared to this time last year.
Official data from the Office for National Statistics reveals that the UK household savings ratio soared to an all-time high of 29.1% in the second quarter of 2020, up from 9.6% in the first three months of the year.
The data collected by Scottish Friendly suggests that women’s saving and investment habits were initially hardest hit by the pandemic. The number of new female investors fell by -27% between the final quarter of 2019 and the first three months of 2020 when the outbreak of Covid-19 began.
In comparison, the number of men who began investing dropped by just -17% quarter on quarter and rebounded more quickly than women.
The index also highlights the value of new investments fell away more sharply among women in Q2 2020, down by 37% compared to a 26% drop in the value of all male policies.
However, the index does clearly reveal that new female investors have consistently saved more into stocks and shares ISAs then their male counterparts since Q1 2019.
Meanwhile, the analysis of different age groups shows that new investment is higher among older investors, but the biggest decline in sales of investments ISAs in the first quarter was among 50 to 64-year olds.
The recovery seen in the second quarter of 2020 was apparent among all age groups, but it was greatest among investors aged 50 to 64, where there was a massive 84% spike in the value of new investment.
Kevin Brown, savings specialist at Scottish Friendly said: “We have seen a surge of new investment between April and June, following a period of relative inactivity in the first three months of the year.
“The initial shock of a major pandemic seemed to discourage investment in stocks and shares, but this has quickly given way to much higher levels of engagement as investors came flooding back in the second quarter.
“Although furlough led to many workers experiencing a drop in income and also to heavy redundancies, generally spending opportunities have been limited by the effects of lockdown restrictions.
“This has led to an increase in Brits’ capacity to save, as official data shows, which has resulted in a rush of new investors to stocks and shares ISAs.
“We expect our New Investor Index to show a slowdown in the level of investment as we head towards the end of the year, but there could be severe fluctuations as lockdown measures are dialled up and down over the next six months.”