The research found that savers who left £100,000 in cash accounts paying the Bank of England base rate would have gained just £3,500 overall. But due to the bull market that followed on from the crisis, those who invested have fared significantly better. For example, savers putting £100,000 into the average fund in the IA UK Equity Income sector would today be sitting on returns of £132,400 on top of their initial investment.
Meanwhile, those who bought the average IA Sterling Corporate Bond fund instead of holding cash would have made a £68,100 return on the same investment over the seven years. Even by investing in the less risky average UK Gilt fund, savers netted a £43,400 return in the period. And, those who put their money in the average fund in the IA UK Smaller Companies sector would have added a remarkable £234,200 to their pots.
“Even without any investment growth, the yields reported by funds targeting income-paying stocks have rewarded investors far better than the Bank of England’s 0.5% base rate,” said Guy Sears, interim CEO at the Investment Association.
Sears urges savers to consider the benefits of investing in stocks and shares as the deadline for filling out the tax-free ISA allowance for 2015/16 fast approaches.
“It is of course impossible to predict what the next seven years may bring, but with good-quality advice and a long-term horizon, more savers may be able to benefit from the profits that investing your savings can offer. In addition, investment managers have innovated in recent years and now offer product ranges that can help savers to back the markets with controlled levels of risk,” he added.
