MEDIA RELEASE: Financial wellbeing has become a priority for almost three quarters of people since the outbreak of the COVID-19 pandemic, but investor return expectations remain unrealistically high, according to the Schroders Global Investor Study 2021.
In all, 74 per cent of people globally and 68 per cent of people in Australia say they are more focused on their finances since the pandemic started.
In terms of spending priorities as the world comes out of the pandemic, investing in or purchasing property is the front runner for 43 per cent of respondents globally. For Australians, investing in or purchasing property came a close second at 39 per cent, behind paying off debt including a mortgage, at 40 per cent of respondents.
As with previous years, the survey found that investment expectations remain unrealistically high. Australian investors are expecting total investment returns of 10.6 per cent over the next five years, an increase from 8.9 per cent last year but slightly lower than the global average of 11.3 per cent.
Older Australians over the age of 71 and Australians aged between 38 and 50 are even more optimistic, expecting an 11.4 per cent total return in their investments over the next five years. This is compared to an expectation of a 9 per cent return over the next years for people aged over 71, globally.
Australian men are more optimistic than women about investment returns over the next five years, expecting an 11.1 per cent return, compared to 10 per cent for women. The difference in return expectations for men and women globally were less pronounced with men expecting 11.6 per cent and women expecting 11 per cent.
Remarkably, in spite of the turbulent year, the majority of people have been able to save either as much as they planned to or more (80 per cent globally and 81 per cent in Australia). But there is a notable pattern emerging among different age brackets, with older age groups less likely to meet or exceed their saving goals versus younger age groups.
In all, 84 per cent of 18-37 year olds globally either saved more than or met their saving plans (85 per cent in Australia). But this was the case for only 65 per cent of people over 70 (globally and in Australia).
While the pandemic seems to have bolstered saving behaviour across the board, women were able to save more than men. In all, 38 per cent of women say they have saved more over the past year as they planned, compared to 30 per cent of men.
Encouragingly, savings habits look set to continue after the pandemic with 48 per cent of Australian investors and 46 per cent of investors globally saying they will save more after pandemic restrictions lift. The findings were more pronounced in the younger age groups with younger people (aged between 18 and 37) more likely to save (52% globally and 51% in Australia) compared to older generations.
Equally, almost half of people aged between 38 and 50 globally (59 per cent in Australia) anticipate saving more post-lockdown compared to only 39 per cent of 51-70 year olds (35 per cent in Australia).
For people over 71 globally, an even smaller proportion (30 per cent) are looking to add to their savings post-lockdown; however this isn’t the case in Australia with 39 per cent of those over 71 stating they will save more.
Sam Hallinan Schroders Australia CEO commented on the results:
“The pandemic seems likely to have a long-lasting effect on people’s finances, with many investors looking to save more for retirement and prioritise saving over spending.
“In terms of post-pandemic priorities globally, while property is the front runner, luxury and leisure purchases are also a priority, with 35 per cent of people looking forward to spending more money on holidays, vehicles and special occasions. Around the same number of respondents (34 per cent) say that gifting to a charity is also a priority.
“The findings were similar in Australia where the three most popular priorities were paying off debt (40 per cent), investing in or purchasing a property (39 per cent) and giving to a charity (37 per cent).
“For many, the pandemic has presented an opportunity to recalibrate their personal finances and focus on financial wellbeing and, due to decreased spending on non-essentials, investors around the world have been able to save according to plan or indeed exceed their targets for savings.
“While it may be too soon to predict the longer lasting legacies of the pandemic in the round, it’s clear that increased saving is set to continue even when lockdowns lift and ‘normality’ resumes.
“With Australians becoming more fiscally conscious by changing their spending and saving behaviours going forward, it is ever more important that the financial industry provides sound advice to help navigate people through these turbulent times.”
He added that, in spite of the challenges the coronavirus pandemic has presented, people around the world are still feeling optimistic about their return on investments.
“As we come out of the pandemic, Australian investors continue to have high expectations for returns on their investments over the next five years, and in fact these expectations have risen since last year.”
The Schroders Global Investor Study 2021 explores the behaviours and attitudes of more than 23,000 people who invest from 32 locations around the world, including Australia. The research defines “people” as those who will invest at least €10,000 (approximately A$15,400) in the next 12 months and those who have changed their investments within the last 10 years.