Savers withdraw £4.3 billion due to poor savings returns, according to Prudential research

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Prudential research reveals that nearly half of people with savings and investments have made unplanned withdrawals totalling £4.3 billion in the past year alone.

Poor rates of return on savings and investments may be to blame for more than £4.3 billion of unplanned withdrawals, reveals new research from Prudential(1), which coincides with the tenth anniversary of the launch of its unique multi-asset fund, PruFund Growth (2).

More than two-fifths (43 per cent) of savers have raided their savings or investments to cover unplanned expenses, such as household repairs or spontaneous purchases, in the past year. The average amount withdrawn is equal to £1,373 per saver – a collective withdrawal of just under £24 billion(3).

However, 18 per cent admit they would not have made these unplanned withdrawals – which collectively amount to more than £4.3 billion – if they had received higher rates of return. A further one third of savers (32 per cent) admit they would have withdrawn less for the same reason.

It’s perhaps not surprising, therefore, that 41 per cent of these ‘savings raiders’ say they regret some or all of the withdrawals they have made.

Needing to cover everyday living costs, such as food shopping, is the main reason why people raided their savings or investments (27 per cent). Funds to cover the cost of holidays (21 per cent), unexpected bills such as emergency home repairs (21 per cent), cars (18 per cent) and home improvements (18 per cent), complete the top five reasons.

Andy Brown, investments expert at Prudential, said: “Household budgets are under a lot of pressure so some unplanned withdrawals from savings or investments are inevitable, but raiding these hard-earned savings to fund one-off or impulse luxury purchases, such as holidays, should ideally be avoided. Establishing a regular savings habit that’s sustainable and having a clear understanding of your long-term savings goals is the best way to maximise returns and help reduce the need to make unplanned withdrawals.

“For those who are able to set money aside over a longer period of time, there are a number of investment options that offer smoothed returns and the potential for attractive growth. Investing in funds such as Prudential’s PruFund range, has helped protected investors against some of the short-term market fluctuations of the last decade, while allowing them to make the most of their money over the medium to long-term. For example, £10,000 invested in the PruFund Growth Life Fund 10 years ago has grown to £16,332 - an increase of over 60 per cent over the decade.4”

Access to funds also appears to be driving the number of unplanned withdrawals, with one in five (22 per cent) admitting that instant or penalty-free access to their savings and investments increases the likelihood that they will raid their accounts.

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Media enquiries

Louise Wilkie     020 7004 8280             louise.wilkie[at]prudential[dot]
Celine Plum         020 7004 8009        celine.plum[at]prudential[dot]
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Notes to editors
1. Research conducted by Consumer Intelligence, 9 to 16 October 2014, amongst 2,019 UK adults.
18% of those who have made an unplanned withdrawal say they would have avoided withdrawing any of the money had the rate been higher:
£23.977 * 18% = £4,315,960,529

2. PruFund Growth Fund - a unique multi-asset fund in the market, offering growth potential using a transparent smoothing process, designed to remove some of the extremes of market volatility.

3, 34.67% of all people have made an unplanned withdrawal from their savings in the past year averaging £1,373. Based on a total population size of 50,371,000 (ONS):
50,371,000*34.67% = 17,463,626
17,463,626*1,373 = £23.977 billion

4. The figure is based on the standard version of the PruFund Investment Plan, invested into PruFund Growth Life Fund. The figure does not allow for any withdrawals and is after charges (AMC, Establishment Charge and Policy Fee, if applicable). The past performance figure assumes investment on 15/09/04 and valuation at 05/12/14.

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Louise Wilkie
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Celine Plum
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