Cash savers to be given confidence boost to make the jump into investments

Savers who could benefit from investing their money but are missing out are to be given more support, under a new strategy set out by the City regulator.

Nearly 8.6 million people currently hold more than £10,000 of investible assets in cash.

The Financial Conduct Authority (FCA) aims to reduce the number of consumers who could benefit from investment earnings but are missing out by a fifth (20%) by 2025.

This could potentially mean 1.7 million people, each with £10,000-plus put away, making the jump from cash savings to investments.

Laura Suter, head of personal finance at AJ Bell, said if 1.7 million people, each with £10,000 held in cash, all invest the money, they could potentially make £9.8 billion extra in returns over 10 years.

She added: “For many of these individuals investing is a logical route, as they don’t need the safety of cash or immediate access to their money, but it’s often a job on the to-do list that people don’t get around to.”

The regulator is exploring changes to make it easier for firms to provide more help to people who want to invest in relatively straightforward products, such as stocks and shares Isas.

Some 3.2 million people currently hold £314 billion collectively in stocks and shares Isas.

Cash savings rates have hit rock bottom in the low interest rate environment – and against a backdrop of rising inflation the value of many savers’ pots is shrinking in real terms.

Consumer Prices Index (CPI) inflation jumped from 2% in July to 3.2% in August, figures released on Wednesday show.

However, investments do come with the risk of losing money. There have been concerns about people being influenced by investment opportunities they see online, such as in cryptocurrencies, which they may not fully understand.

The regulator wants to reduce the number of people investing in high-risk, inappropriate products, or being scammed.

It is launching a new £11 million investment harm campaign, to help consumers make better-informed investment decisions and to reduce the number of people investing in inappropriate high-risk investments.

The awareness drive will include social media and partnerships with influencers, the FCA said.

The FCA’s strategy said: “Our campaign objectives are to provide information for consumers to identify investments that are suitable for their needs and risk tolerance.

“We plan to use a range of channels to reach our audience including partnerships with influencers, social media, online videos, paid ads on Google and more.”

Some 6% of consumers increased their holdings of higher risk investments during the coronavirus pandemic and often these tended to be younger adults, the FCA said.

Consumers lost nearly £570 million to investment fraud in 2020/21 and losses have tripled since 2018.

The consumer investments market accounts for £1.6 trillion held or invested through the services of more than 6,000 wealth managers, advisers and investment platforms.

Sarah Pritchard, executive director of markets at the FCA, said: “Investors have never had more freedom – technology has democratised the market, new products have become available, and people have better access to their life savings than before.

“But that freedom comes with risk. We want to give consumers greater confidence to invest and to help them do so safely, understanding the level of risk.

“The package of measures we have announced today are intended to support that – we want people to have greater confidence to invest. We also want to be able to adapt more rapidly to the changing market and be assertive where we see poor conduct and consumer harm.”

Hargreaves Lansdown chief executive Chris Hill said: “Firms at the centre of the investment space could do so much more to guide clients through their lifetime as an investor.

“This would both build confidence in investment and help fight scams, with better-informed consumers.”

Kevin Brown, savings specialist at Scottish Friendly, said: “Mainstream investment firms need to make the case for steady investment over time into a diversified basket of assets that have appreciable track records and transparent valuations to underpin them.”