There is every danger the UK could be turning into a nation of savers with last week’s IMA figures revealing the strongest savings into Isas for nearly a decade.
This could all simply be a reaction to the fact most people have realised times are going to be tough once the next government knuckles down to dealing with the deficit. However a more hopeful scenario is after years of living beyond our means the UK is finally sobering up to personal and national fiscal prudence.
As IMA chief executive Richard Saunders pointed out when announcing the March figures:
“Savings held in UK funds have topped £500bn for the first time, something that would have been unthinkable a generation ago.
Isa sales for the last tax year are the highest since 2001-02, as was the year-end Isa season. The strong propensity to save, as seen in 2009, has continued this year.”
The growth in popularity of the Strategic Bond sector, which was the highest grossing with £477m of inflows, points to increased investor uncertainty over growth prospects both locally and globally.
But it also shows investors now realise the value of allowing managers greater freedom to seek both safety and returns in volatile times.
While the election debates continue to dominate the airwaves, the market consensus seems to be clear – whoever gets in will have to be a lot stricter on spending, taxing and cutting than they are currently letting on.
However, from an investment point of view the danger of increased taxation concerns some asset managers most.
Tax too highly and it will mean fewer incentives for entrepreneurs and risk takers, who will be the ultimate creators of jobs and growth in the economy.
Already many top earners, with their high tax bills, technically have less to lose than the Government if they find themselves out of a job.
Last week’s warnings from Greece were all too clear for any politician who is unable or unwilling to grasp the nettle.
And while there are clearly differences between the situation facing Greece and the UK, not least the fact UK government debt has longer duration than most European countries, the speed at which markets can turn against dithering policymakers has now be graphically illustrated.
