Majority of people maintain conservative approach to savings

despite lack of returns according to new research from Aviva

Notwithstanding the protracted low interest rate environment that we have experienced in recent years, the majority of savers in Ireland have maintained a very conservative approach to their savings, having deposit accounts in a bank or credit union.  In contrast, only 17% of workers claimed they are saving into their pension fund, with only 7% of those in employment holding a savings plan from a life insurance company/investment manager. These are some of the key findings from a nationwide savings survey by iReach Insights of 1,000 adults commissioned by Aviva Life & Pensions Ireland DAC (Aviva).   The Aviva savings survey found that:

  • Deposit accounts are the most popular savings option, with banks only marginally ahead of credit unions for savers, 55% as opposed to 50%
  • Credit Unions are still a popular choice even with the younger end of the spectrum – more people in the 25-34 age bracket save with a CU (54%) than a bank (48%)
  • Men are slightly more likely to save with the bank than women – and the opposite is true for the post office
  • Men are marginally more likely to have a savings plan from a life insurance company/investment manager at 8% than women at 4%, most of whom are aged 55+
  • Just 1 in 10 people have discussed their savings with a financial broker, and those aged 55+ and over are most likely to have spoken to a broker about their savings
  • Only 1 in 10 simply don’t save

Commenting on the findings, Eoin Kennedy, Aviva said: “How and where we save is interesting because saving is something that most of us are familiar with and are encouraged to do right from our earliest experiences with money – be that our confirmation money, our first summer job, right through college, and into adulthood to save for a home, family, or a pension.

When examining the various approaches that people take – one very apparent trend is that, as a nation, we still take a predominantly conservative approach to our savings habit, with traditional banks and credit unions still holding sway when it comes to where people choose to hold and build their savings – right across the age profiles. This is despite the fact that there is zero interest on most deposit accounts at present and, in some instances, it can end up actually costing the saver to put their money on deposit.

Eoin Kennedy, Aviva

The Aviva savings survey further probed respondents as to what savings/investment mechanisms saw the greatest return over the last 10 years – property, the stock market or deposit accounts.  Almost half of those surveyed (47%) selected property, 31% choose the stock market, while only 22% said deposit accounts.

Eoin Kennedy continued: “With more than €136 (as at December ’21) billion sitting on deposit in financial institutions, and strong awareness amongst savers that deposit accounts are the worst performers in terms of returns, it is surprising that more people don’t actively seek better returns on their hard-earned cash.  We all know that we need to hold some funds on deposit – with a general rule of thumb around six-months income.  However, savers should look to get a return from their savings when they don’t need access to the funds over the medium to longer term.  

“The survey findings around pension savings are disappointing with just 17% of workers saying that they save into a pension fund, which is another missed opportunity.  Those who do not are missing out, not only on the chance to build a financial nest egg for the future, but also to take advantage of the tax relief available. Unfortunately, the gender imbalance when it comes to retirement planning was evident yet again in this research with 16% of male respondents saying they save into a pension, while just 9% of women said the same.”

Savings Advice

The Aviva Savings Survey also found that just 1 in 10 people had discussed their savings plan with a financial broker in the last two years.

“While 9 in 10 people said they had some form of savings, just 1 in 10 said they had discussed this with their financial broker. On one hand, it’s understandable in that people might view saving as a straightforward financial habit – it’s simply putting money aside for a rainy day. However, on the other, there’s a lot that should be considered, including an expectation of a better return.

“The chart below highlights the returns achieved to August 2022 from investing in multi-asset funds over three and five years.  These funds invest in a number of different asset types, which may include equities, bonds, property, and cash, providing investors with a greater degree of diversification than investing in only one asset class.  Despite the stock market volatility over recent months driven by to a large extent by the war in Ukraine, investing in a diversified portfolio of assets, has over the medium to longer term, produced strong returns.  Financial brokers can help provide guidance to savers on how to get the best return, whilst considering their individual circumstances and their risk appetite”, concluded Eoin Kennedy. 

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Aviva Insurance Ireland Designated Activity Company, trading as Aviva, is regulated by the Central Bank of Ireland. A private company limited by shares. Registered in Ireland No. 605769. Registered Office: Cherrywood Business Park, Dublin, Ireland, D18 W2P5.