Investors are missing out on better returns: Henderson

Investors are missing out on better returns: Henderson

Advisers must encourage people to look beyond cash and seek better returns, an investment trust specialist has claimed.

James de Sausmarez, director and head of investment trusts for Henderson Global Investors, said people were missing out on better returns.

He said: “Interest rates have been at a minimal level for several years, meaning people are making next to nothing on their hard-earned cash savings.

Article continues after advert

“The bad news is this is set to continue for some years. The banks and building societies are benefiting from very cheap financing, but the savers are simply throwing vast sums of money away every year by not considering better investment alternatives.”

In its January 194-page market study Cash Savings Market Study Report, the FCA noted that 93 per cent of UK adults had cash savings accounts, holding a total of £700bn.

It said: “Providers have significant amounts of consumers’ savings balances in accounts opened long ago.

“Yet these accounts pay lower interest rates than those opened more recently. Around a third of balances in easy access accounts are held in accounts opened more than five years ago.”

Mr de Sausmarez added: “People obviously fear losing capital, yet history demonstrates that a long-term approach to investment mitigates those risks, and provides the possibility for capital growth.”

Reasons consumers open savings accounts
Investing: Consumers seek to generate interest income
Building up a savings pot: consumers seek to build up savings for a specific purpose, such as a house deposit or a ‘rainy day’ fund
Transacting: Consumers use their savings account as an additional transactional account, for example so they can set aside money to cover bills

Source: FCA Cash Savings Market Study Report

Adviser view

Chris Williams, chief executive of Bristol-based Wealth Horizon, said: “It is really important that savers understand the level of risk they might be exposed to, rather than focus on the most marketed products.

“Nor should they fall back on the easiest option, such as the product being offered by their high street bank or simply leaving the funds in cash accounts that are typically paying out low rates of interest.”