Britons have £430bn of excess cash savings, research finds

British savers have at least £430bn of excess savings sitting in cash, putting them at risk of missing out on potentially higher returns from investments, according to a new report.

Research by Barclays suggests that about 13mn adults could be earning more through investments, noting that regulatory changes are needed to encourage savers to put their cash to work.

The bank said the figures were based on savers who already held more than six months’ income in cash savings, which underscored the “scale of the opportunity” if more individuals were to invest.

Andrew Hagger, founder of consumer finance site MoneyComms, said: “For people who are sitting on piles of cash with a savings safety net, then putting some of this into investments could help them achieve a better retirement.”

The research comes as the Financial Conduct Authority finalises plans to make it easier for companies to provide financial guidance — rather than full-blown advice — as a way to help people invest. Offering advice can be cumbersome for firms as it requires additional regulation and costs.

The FCA said in its consultation last year that one option was to allow companies to provide “targeted support” without upfront fees, so that firms could suggest products or courses of action based on a target market relevant to the consumer — rather than individual advice.

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Another option is to enable “simplified advice” so that firms can advise individuals with smaller sums to invest and with less complicated needs, without being economically unviable for the firm.

Barclays said a fifth of people who do not currently invest think they have insufficient knowledge, according to its survey of more than 2,000 people. A quarter also thought investing was too complicated.

Policymakers are attempting to encourage investment into UK stocks, which have suffered from a lengthy period of outflows as investors have moved their money into global stocks in search of higher returns.

Sasha Wiggins, chief executive at Barclays Private Bank and Wealth Management, said: “If this UK investment gap can be narrowed, we will address two major untapped opportunities — one for the 13mn 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.”

Tom Stevenson, investment director at Fidelity International, said the UK stock market was trading “pretty close” to “absolute bargain territory”. By comparison, he said the value of US stocks was “close to their recent peaks”.

He added that falling interest rates and economic growth could help fuel “a further unwinding of the discount that’s been applied to UK shares ever since the Brexit referendum in 2016”.

Wiggins said the key to unlocking savings was “regulatory change”. Barclays has made a series of recommendations, including calling on the FCA to develop a “badge” for “entry-level” investments for less experienced investors.

It called for regulators to pare back the red tape — such as declarations, risk warnings and documentation — currently required for novice investors to get started. Comparison tables showing how entry-level products compared with each other on costs and performance would also help, it said.

Kitty Ussher, group head of policy development at Barclays, said: “Our research suggests two broad barriers that prevent savers from engaging with investing: difficulty identifying the right investment product to suit their financial needs, and the inability to make side-by-side comparisons of products.”

The FCA said in a statement it would soon set out its next steps. “Working with government, the FCA wants to build an advice and guidance framework which consumers can trust, recognising the complexity faced by consumers in making financial decisions,” it said.

“To achieve this, we need to create a system that ensures consumers get the help they want, at a time they need it and at a cost that is affordable.”

Letter in response to this article:

Wealth managers need a nudge to avoid this pitfall / From Greg B Davies, Head of Behavioural Finance, Oxford Risk, London SW12, UK