For Immediate Release: Monday 12 February 2001
INTEREST RATE CUTS DON'T HAVE TO MEAN A CUT IN RETURNS
Following last week’s interest rate cut, savers could be
looking elsewhere to boost their bank or building society
savings; and they might do well to consider investment funds.
Over the ten years to January 2001, £1,000 invested in the
average UK All Companies fund would be worth more than double
an equivalent deposit account investment. Income-seeking
investors would also be interested to learn that over the same
ten year period, corporate bond funds and equity income funds
would have also provided higher total returns than deposit
accounts. (See charts 3 and 4).
Although your capital is secure when you save in a bank or
building society deposit account, your money may well not be
working for you as effectively as it might. A well-managed
portfolio has a spread of both cash and stockmarket
investments. However, it is important to get the balance right
so that it suits your needs, but not just for today, as your
needs will change over time. AUTIF’s Investment Guide
explains the different levels of risk and reward of long term
fund investment, to help you choose the products that match
your financial goals. The guide is available free from the
Unit Trust Information Service on +44 (0)20 8207 1361 and can also
be accessed on the AUTIF website.
- Over 10 years to 1 January 2001, the annual income on
£1,000 invested in an average Corporate Bond fund reduced
to £61 after 10 years. The income from a UK Equity
Income fund rose to £74; while the savings
income on an average building society deposit account
dropped to £24 in the tenth year, falling from £78
in 1991. [Chart 1]
- The capital invested in an average Corporate Bond fund
in December 1990 had grown by 35% over the 10
years, compared to 126% in an average UK Equity
Income fund. [Chart 2]
- A lump sum of £1,000 invested in an average building
society deposit account in December 1990 added £424
to its value over 10 years, whilst the investment in an
average Corporate Bond fund (including both income and
capital growth) more than doubled to £2,284.
The equity income fund grew by 225% to £3,251 or
£3,559 in an equivalent ISA/PEP. [Charts
3/5]
- Over the ten year period to December 2000 average
returns from UK Equity Income funds were similar to those
achieved by UK All Companies and Global Growth funds.
After 10 years, £1,000 invested in the UK Equity Income
sector had become £3,251, compared to £3,397
in the Global Growth sector and £3,465 in the UK
All Companies sector. [Chart 4]
- On regular savings of £50 a month, an equity investment
in a UK All Companies fund outstripped the savings account
deposit after 5 years by £528. The
difference increased to £4,205 over 10 years and £10,190
after 15 years. [Chart 6]
- A £1,000 investment in a UK Equity Income fund was 20%
higher than an equivalent Managed Life Fund investment
after 10 years, but 128% higher than the average
building society deposit account for the same period. The
difference on a £50 regular savings plan over 10 years
was 11% on the Managed Life Fund and 54% on
a deposit. Charts 7/8]
- After 15 years, a £1,000 lump sum investment in a UK
Equity Income Fund ran 191% ahead of the deposit
account and 59% ahead of the Managed Life Fund;
while the £50 regular savings unit trust/OEIC plan ended 79%
higher than the deposit account and 20% higher
than the managed life fund. [Charts 7/8]
- After 10 years, £1,000 in an average UK Equity and Bond
Income Fund beat the Retail Price Index by 110% or 134%
in an ISA/PEP. The deposit account was 8% ahead
of the Retail Prices Index. [Chart 9]
- £1,000 invested in an average fund in the following
sectors over ten years, would have achieved returns of
more than £4,000 – Europe ex UK, Europe inc UK,
European Smaller Companies, North America, North American
Smaller Companies and UK Smaller Companies.
A £50 per month regular savings plan over ten years, would
have achieved returns of more than £14,000 in the average
funds of the following sectors – Europe excluding UK, Europe
including UK, European Smaller Companies, North America and
North American Smaller Companies sectors. [Chart 10]
For further information please contact:
Anne McMeehan, Director of Communications,
AUTIF - +44 (0)20 7831 0898
Dorian Carrell, Head of Statistics, AUTIF - +44 (0)20 7831 0898
Clare Arber, PR Manager, AUTIF - +44 (0)20 7831 0898
Attachment 1 - Charts
1 - 9 (in PDF Format)
Attachment 2 - Chart 10 (in PDF
Format)
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