With savings levels at an all-time high many people have started looking for things to spend their money on. Unsurprisingly, top of the list for people with lump sums to spend after almost two years of restrictions are holidays. According to consumer research carried out on behalf of Permanent TSB by Kantar last year, 65 per cent of people intend spending some of their savings on holidays.
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The next most popular option is home improvements. That shouldn't come as a surprise either, according to Bank of Ireland head of pensions and investments Bernard Walsh. "A lot of people are spending more on their homes," he says. "That's linked to people working from home. Many people have been spending so much time there that they started getting annoyed by the crack in the wall or the draughty windows. They may also have had to contend with a lack of space for the home office. The shortage of housing supply is proving to be a challenge for those people who would otherwise wish to trade and that is helping to drive the renovation and extension market."
New cars are back on the agenda as well. “We’re in the middle of the new car season for motor dealers,” Walsh adds. “We are hearing anecdotally that people are looking at new cars again having pushed out the purchase for a year or two because they weren’t driving as much during the pandemic. Of course, challenges linked to the supply chain are dampening the new car market somewhat.”
But many people want to hold on to their money as well. "A lot of people are treating themselves to holidays that they've put off but many of the people who have saved during Covid are reinvesting their money," says Rockwell Financial Management managing director Robert Whelan.
Changing investments
And those investment intentions are showing signs of change. “People are starting to have conversations around growth versus value stocks,” Whelan says.
“Growth stocks are mainly the tech stocks which have increased in value quite rapidly in recent years. Value stocks are things like banks, utilities and so on. Value stocks haven’t kept pace with the growth stocks in recent years, but the sentiment in the market is that is about to change. Inflation-linked bonds represent a good opportunity for investors. They make sure you preserve the value of your money even in times of high inflation. Renewable energy investments also represent a phenomenal opportunity.”
People are also looking beyond stocks and fixed assets to more exotic homes for their money. “Things like whiskey and gin investments are starting to grow in popularity,” says Walsh. “We are seeing groups of people getting together to buy shares in founders’ cask investments offered by many of the newer distilleries. Music royalties and other investments outside the usual asset classes are starting to grab attention as well.”
The latter option is enjoying renewed interest thanks to the back catalogues of artists like Bob Dylan, Bruce Springsteen and David Bowie being sold for hundreds of millions of dollars. Indeed, in the case of Bowie this is the second time the catalogue has been sold to investors for an eye-watering sum – the first “Bowie bonds” reverted back to the artist after 10 years.
Walsh also points to the new trend in the purchase of digital assets such as ownership of the first text message sent on a particular mobile network. “These non-fungible tokens are attracting a lot of interest,” he says. “You’ve also got collectibles like comics and art is always popular. Classic cars are up there as well.”
But if you go back to the tried and trusted, people with a lump sum to invest may have the option of putting it into their pension fund. That will generate a tax deduction worth 40 per cent of the investment in the year that it is made – a very handsome return indeed.