A new report has revealed the shocking low level of investment in shares by the general public, with most people preferring to savings in cash – which hurts their bank balances and the nation as a whole.
Did you know there is £1.8 TRILLION sat in cash savings accounts around the country? That sounds good, until you realise the value of those savings is being hammered by high rates of inflation and people are actually losing money in real terms.
A report out this month called Retail Therapy, for the Centre for Policy Studies and supported by the Personal Investment Management & Financial Advice Association (PIMFA) has shown that only 12% of UK shares are held by UK residents, compared with 50% in the 1960s.
Investing in the stock market or ‘retail investment’, is available to anybody and in the longer term, will generally deliver an increase in wealth, yet the take up is very low despite the modern age of apps and instant access to information.
Instead, most choose cash savings. There is £300 billion alone in Cash ISAs – as opposed to Stocks and Shares ISAs – yet savings accounts are doing little for them. Until recently, the near zero rates of interest meant their savings didn’t grow at all.
Rates may currently be around the 4-5% mark, but inflation is at 8.7%, so those savings are losing you money.
The Financial Conduct Authority (FCA) believes that there are 9.7 million people with investable assets of more than £10,000 in the UK, mostly or entirely in cash.
Of these, more than four million want to take some form of investment risk but either don’t know how or are not receiving the advice and guidance they could be.
The report says more retail investment is good all around – better for the wealth of individuals, but also the economy as a whole. It also gives people a stake in that economy and the ability to vote at corporate AGMs on a range of issues.
The pattern of savings and investment is unequal, as those with the smallest savings choose Cash ISAs or similar – and get the lowest returns.
The report is calling for a raft of measures to make share investment more accessible. The government supports retail investment because it is seen as good for the economy and the report is calling for it to introduce a new strategy to encourage more private savings into public markets.
It suggests a public campaign such as the 1986 ‘Tell Sid’ advert campaign to encourage people to buy British Gas shares. It also argues that off-putting and strict disclaimers about retail investing should be more realistic, as should the strict ‘suitability requirements’ surrounding financial advice which prevent many people from accessing services.
In the meantime, if you have savings that are sat in a Cash ISA or savings account and earning you next to nothing, why not speak to an independent financial adviser, to discover the options available to you?
In the longer term, something such as a Stocks and Shares ISA or Pension generally gives a better return. You can decide the level of risk you prefer and in any case, a wide-ranging portfolio will spread that risk rather than being concentrated on a limited number of investments.
You can read the full Retail Therapy report at https://cps.org.uk/research/retail-therapy.
