With over two-fifths (42%) of the UK holding savings worth over £10,000 and over half (58%) keeping all or at least 75% of their savings stored in cash savings accounts, Barclays has “conservatively estimated” account holders could earn almost half a trillion pounds if they invested the money instead.
By taking a less conservative approach to the individual savings figures from the Financial Conduct Authority’s (FCA’s) Financial Lives Survey in 2022, the number could reach a staggering £735bn worth of potential investment returns.
However, there is a reluctance by many Brits to try their hand at investments, with a quarter admitting they do not know where or how to start their portfolio.
Further factors preventing potential investors from making the move include an inability to compare products, with 63% of those surveyed wanting more help in that regard.
Risk and knowledge gap putting off savers
Another reason is the fear of risk that comes with investing, which is apparent with 43% worried they’d lose all of their cash.
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There would be an uptick in investors for people with over six months of savings if there were accessible online tools on offer to help decide what to put their money into, according to 63% of UK adults.
Also, a fifth would feel better equipped if the investments on offer were tailored towards their personal financial position.
Further, around one in seven (14%) want a better visualisation of their returns so the benefits of their funds can be seen more easily.
The investment gap present in the UK is worsened by the funds languishing in the high street banks’ lower rates.
As it stands, the ‘big five’ of HSBC, NatWest, Santander, Lloyds Bank and Barclays pay an average of just 1.64% gross on their flexible rates, compared to the market average of 3.08%.
To address this gap in investment potential for UK savers with thousands of pounds in their accounts, the bank outlined five recommendations for the Government to consider.
They include:
- An FCA badge to identify entry-level investment products that meet specific diversification/asset allocation criteria
- Simpler sign-up journey for entry-level investments
- Regulatory changes to enable firms to suggest investment actions to customers with large cash balances, based on “people like you” personas
- An online tool from the Money and Pensions Service (MaPS) that guides individuals to the broad set of financial investment products that they may wish to consider
- The development of comparison tables for entry-level investment products.
‘Lack of clarity preventing savers from investing’
Sasha Wiggins, CEO at Barclays private bank and wealth management, said: “Lack of clarity and practical advice is preventing savers from engaging with investing, leaving £430bn of possible investments remaining in cash savings.
“If this UK investment gap can be narrowed, we will address two major untapped opportunities – one for the 13 million potential investors who could be earning better returns on their cash savings over the long term, and the other for UK capital markets, which could see a boost if more savers were to invest.”
Wiggins added: “The industry needs to work with Government and regulators to break down these barriers and help more savers to invest. Key to this is regulatory change. A more balanced environment is needed – one that protects investors but also allows financial providers to deliver more targeted support, without crossing the boundary between guidance and advice.”
