Clients are prioritising pension and Isa saving over general investments amid the rising cost of living, according to research from Abrdn.
Between Q2 and Q3 2022, the average amount invested in a general investment wrapper on Abrdn’s Elevate platform fell by 11 per cent.
This compares to a 3 per cent increase recorded between Q1 and Q2 2022.
Jonny Black, strategic director at Abrdn, said: “This data suggests the rising cost of living is forcing people to reconsider what they do with the money they can afford to invest.
“We can see while people are cutting back on general investments, they are maintaining, or even increasing, pension and Isa saving.”
Black added: “This is understandable. Isa saving offers clear tax benefits – which may become even more attractive now the government has announced the capital gains tax (CGT) exemption will be reduced from April.
“And pension savers benefit from tax relief on their pension contributions at their rate of income tax, up to their annual allowance limit – essentially ‘free money’ back from the government.”
In contrast, the average amount invested in self-invested personal pensions (Sipps) between Q2 and Q3 2022 saw no change, while the average value of investment in stocks and share Isas increased by 2 per cent.
Previously, average Sipp investments increased by 1 per cent between Q1 and Q2, while Isa investments fell by 1 per cent.
Black said: “Ultimately, investors will continue to take steps to adapt their financial habits as inflation works towards its peak, and will continue to seek advice and guidance on what they should be doing, with what may be less money, to ensure they remain aligned with their financial goals.
“Advisers will continue to play a critical role in providing this support and in helping ensure clients continue to take a long-term view – keeping the right mix and balance of investments to deliver against their overall aims.”
What do you think about the issues raised by this story? Email us on FTAletters@ft.com to let us know