Savers pulled a record £6.6billion from stock market funds in the two months ahead of the Budget as uncertainty ‘played havoc’.
Trading network Calastone said £3billion was withdrawn from equity funds in November after £3.6billion was extracted in October. They were the most severe two months of outflows on record.
Edward Glyn, head of global markets at Calastone, said savers were acting amid fears of a raid on pension lump sum withdrawals or capital gains tax.
It brings the total taken out of share investments by UK savers over the past six months to more than £10billion – in what was described as ‘the longest and most severe period of selling’ ever.
In addition to the Budget, investors have been nervous about all-time high stock market valuations as fears grow of an artificial intelligence (AI) bubble in the US.
But Calastone’s data suggested clear evidence that the anxiety mainly centred on the Chancellor’s plans.
Budget uncertainty: Trading network Calastone said £3bn was withdrawn from equity funds in November after £3.6bn was extracted in October
Glyn added: ‘The political narrative has played havoc. Never have we seen such consistent or large-scale selling before.
‘The sudden halt in equity-fund outflows after the Budget was delivered is clear evidence that many investors were selling holdings as concerns rose at the possible curtailment of pension lump sum withdrawals or further capital gains tax hikes.
‘The recent policy uncertainty has clearly unsettled investors and, in some cases, prompted reactive decisions they may later regret. Savers benefit most from clarity and consistency, so they can plan properly for long-term goals.’
A breakdown showed November was another grim month for the London market, with £847million pulled from UK-focused equity funds. But it was also negative for North America-focused funds, which shed a record £812million.
The figures revealed £1.25billion instead flowed into money market funds, which hold low-risk investments such as government bonds.
Glyn said: ‘It’s hard to disentangle Budget jitters from nerves about equity valuations, but inflows to safe-haven money-market funds indicate rising risk aversion.’
Calastone’s findings echo those of wealth manager St James’s Place, whose chief executive, Mark FitzPatrick, yesterday said savers had withdrawn hundreds of thousands from pension funds amid pre-Budget speculation.
He told the BBC: ‘People’s pensions have been damaged due to the speculation. The flying of kites is unhelpful when it affects people’s lives.’
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