Investors are nervous of moving away from cash assets despite low interest rates, a new report claims

News - Savings

Written by Ray Clancy

Thursday, 11 March 2010 09:17

A quarter of investors are planning to stick to cash investments despite low interest rates with many too nervous of the current climate to change, according to a new report.

More than half, some 51% of investors have most of their investments in cash, the research report from the Fair Investment Company also shows.

According to the research, although the current low interest rate environment has made 67% of people review their investments in search of higher returns and to boost their incomes, 33% have done nothing, with 12% saying they are too nervous of the current climate to change their investments.

‘There is a lot of talk of diversifying assets and opting for riskier investments in order to improve returns and this suits many people, but the bottom line is, most people are happiest in cash,’ said Nick Scarrett, head of pension and investments at the company.

‘Our research reveals that for 51% people, cash is the asset class to which they currently have the greatest exposure and for 25% of people surveyed, that is the way it is going to stay,’ he added

If you are investing in cash and you are not getting the returns you want it is worth looking at other investment options such as funds, structured products and OIECs which may have more risk, but also offer potentially much better returns, says Scarrett.

‘If you do want to stick to cash it is still worth reviewing your current investments and seeing if you could do better from a different product. For example, if you are not using your cash ISA allowance, then you should remedy that right away as ISA investments are tax free, whereas a basic rate tax-payer will pay 20% on your savings in a normal savings account,’ he explained.

The company claims there are some great cash ISA rates available at the moment including RBS’s Royal Deposit ISA, a three year fixed rate cash ISA that is currently returning 4%.

For instant access to cash it recommends the new Barclays Golden ISA issue 2 with a market leading rate of 3.1%, the ING Direct Cash ISA offering 2.5%, and Alliance & Leicester and Santander instant access ISAs.

Even wealthy investors are hanging onto cash. ‘Clients still prefer to hold a lot of cash, and the word risk is mentioned far more often than five of six years ago,’ said Rolf Boegli, head of private banking at Credit Suisse.