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Savers increase interest in cash account alternatives

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Advisers are seeing a surge in demand from clients who want low-risk investments that can generate higher returns than traditional cash-based accounts, exclusive research from Prudential reveals.

Nearly two out of three (64 per cent) of advisers have reported a rise in inquiries from clients about switching cash savings into low-risk alternatives, the nationwide study for Prudential found.
 
The Bank of England’s decision in July to cut interest rates to 0.25 per cent sparked increasing interest in alternatives to cash accounts. Just two out of five advisers (38 per cent) expect the base rate to rise this year highlighting the need for savers to find homes for cash currently earning low rates.
 
The demand for better returns is driving interest in smoothed multi-asset investment products among advisers – about 60 per cent of advisers rate smoothed multi-asset solutions as the most appropriate alternative for savers who are prepared to take more risk with their savings and do not need instant access to their cash.
 
The launch of new National Savings and Investments (NS&I) products outlined in the Autumn Statement also attracts support – 38 per cent say they regard NS&I products as the most appropriate alternative for cash savers.
 
Paul Fidell, investment expert at Prudential, says: “The base rate has been at an historic low since March 2009 and the post EU Referendum rate cut simply added to the pressure on cash savers. 
 
“There is a real demand for advice from cash savers who believe that interest rates are unlikely to rise soon and are prepared to take more risk to get better returns. They value the support from advisers when finding a home for their money that can potentially generate better returns than cash.
 
“Smoothed multi-asset products had a strong year in 2016 and look likely to continue to prove popular this year given the continuing investment market volatility and low interest rate environment.”
 
Prudential’s study found just 6 per cent of advisers say fixed-rate savings bonds are the most appropriate alternative for cash savers while only 2 per cent would say cash ISAs are a good alternative.

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