An AXA research has found more and more people are buying financial products and protection despite confidence in UK economy having hit an all-time low.
The 18 page report, titled the Big Money Index, finds financial optimism in the country has tanked by 7 percentage points in the last twelve months, since the first quarter of 2010.
Only 16 percent of the respondents now have a positive outlook towards the economy while optimism among those on lowest incomes have fallen by more than 100 percent to 11 percent from 24 percent a year ago.
However, despite lack of optimism, more people across all income levels spent more money on buying protection and financial products compared to last year, the report found.
“Perhaps as a result of the deep financial pessimism across all sectors of Britain, there has been a clear mood shift in the purchasing of financial products”, the report observed, citing fear of falling into debt and higher degree of risk aversion as the reasons.
“Fearing the burden of debt if things go wrong, such as illness or mortgage default, consumers have clearly become risk averse. They want to ensure they are protected both now and in the future, buying products that will reduce worry”, the report said.
The survey, which examined quarterly data from 2010 to the first quarter of 2011, found number of people buying life assurance products have gone up by four percentage points while those buying critical illness cover went up by 2 percent. Number of people with a personal or company pension however, recorded a marginal growth.
“Paying off debt and reigning in unnecessary spending continues to be a priority for Britain, with that caution extended to keeping or buying financial products to protect or grow their assets”, said Eric Lhomond, chief investment officer for AXA.
However, sales of investment and savings products were down marginally in the last quarter and 82 percent of people had savings and 62 percent had some sort of investments. Even 58 percent of people on lower incomes had some form of savings, the survey found.