Stocks and shares investment in Scotland slumps by -14% in the final quarter of 2020

  • Scottish Friendly’s latest Investor Index reveals a -14% decrease in the value of new stocks and shares investments opened in Scotland in Q4 2020 on the previous year

  • The number of new policy sales also dropped by -6% quarter on quarter in the final three months of 2020

The value of all new stocks and shares ISA policies opened by savers in Scotland in Q4 2020 fell by -14% on the previous quarter (see figure 1), with only the North East and the East of England registering bigger decreases.

The value of new adult ISA investments made by Scottish customers in the final three months of 2020 was also down by more than a quarter (-26%) on Q4 2019.

By comparison, the value of all new policies from UK customers remained flat between Q3 and Q4 of this year (see figure 3), while year-on-year total UK policy sales dropped by just -10% in the final quarter of 2020.

Scottish Friendly’s Investor Index tracks sales of adult investment ISA policies and the total value of these new policies among Scottish Friendly’s UK-wide customer base, with quarterly activity measured against a base rate of 100.

It reveals the number of new adult investment ISA policies opened in Scotland in the final three months of 2020 decreased by -6% on the previous quarter. Only London and the North West saw bigger drops in the number of sales over the same period.

However, looking back to Q4 2019, the volume of sales in Scotland in the final three months of this year are up by +7%, compared to a UK average of +5%.

The latest Index figures show new investment into stocks and shares has levelled off across the UK following a rush of activity in the second quarter of 2020, when official data revealed that the UK household savings ratio had reached an all-time high of 29.1%.

The amount invested into new policies by UK investors in the final quarter is down -24% on the peak seen in the three months to June.

Since Scottish Friendly started tracking the Index data in Q1 2019, older investors have consistently been the most active.

However, while new policy sales and new policy value dropped among investors in the higher age brackets (35 to 49 and 50 to 64) in Q4, demand has increased among younger investors (see figure 4).

The number of stocks and share ISA policies opened by people aged 18 to 34 rose by +4% quarter on quarter while the value of new investments was up +9% on Q3.

However, latest figures show that amid a surge in retail investor activity, Scottish Friendly ‘s January sales hit a new high last month, up by a third (+33%) year on year.

Kevin Brown, savings specialist at Scottish Friendly said:

The past 12 months have been particularly volatile for the Index and in Scotland, people’s interaction with stocks and shares has clearly ebbed and flowed.

In 2019, the Index was relatively stable, with minor fluctuations in new policy sales and value across the UK, but as the pandemic struck in Q1 2020 we saw a huge drop off in activity before a big spike in the three months to June.

A period of levelling off then followed in the second half of the year and in the run up to Christmas, which traditionally impacts households’ capacity to save or invest.

However, when comparing Scotland to the rest of the UK, demand has fallen away more sharply over the past six months. This suggests fewer households in Scotland are in a position to benefit from the restrictions on spending which have enabled some people to save or invest a little more.

Remember that the value of investments can go down as well as up and you could get back less than you paid in.

Tax treatment depends on individual circumstances which can change in the future.

Methodology (defined by Union Data):

The Scottish Friendly New Investor Index measures the quarterly status of the UK savings and investment market using adult stocks and shares ISA sales data from Scottish Friendly.

The Index was initiated in Q1 2019 and this quarter was scored as 100, providing a benchmark for future editions of the New Investor Index. A score greater than 100 indicates performance higher than in Q1 2019 while a score lower than 100 will indicate contraction in the savings and investment market vs that quarter. Similarly, a lower index than a previous quarter indicates market contraction while a larger index score indicates an increase in the savings and investment market.

This index is designed to be as reflective of the whole of the UK savings and investment market as possible. To ensure that any observed changes in the Index are not directly associated to Scottish Friendly’s specific market performance or marketing strategies our data analytics partner, Union Data, have converted the raw sales data to indices using models to:

  • Protect commercial sensitivities within the data

  • Remove seasonality inherent within the data, for example, ISA sales tend to peak at the beginning and end of the tax year (April 5th)

  • Remove factors specific to Scottish Friendly’s performance within the wider savings and investment market including the size of the customer base and marketing budget

More technical details available on request.

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