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UK savers 94 per cent worse off as their money is ’put on pause’ through cash savings

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An investment gap has opened up over the last decade as savers opted for cash savings and typically received 94 per cent lower returns than investors, according to online investment platform, Charles Stanley Direct.  For example, GBP10,000 invested in global markets in 2010 would now be worth approximately GBP30,742, compared to GBP11,230 in a cash savings account.

 
Despite these stark differences in returns, new research from Charles Stanley Direct highlights the barriers that are preventing two in five (39 per cent) people from investing, with financial jargon and complexity topping the list.
 
The main reasons that prompt people to consider investing are poor returns on cash savings (33 per cent), followed by saving for retirement (32 per cent), or for a house (16 per cent). These do, however, vary across demographics. Among Gen Z, investment appetite is driven by the desire to save for a house (30 per cent) and being worried about running out of money (27 per cent), for Millennials it is poor returns on cash savings (28 per cent) and saving for a house (26 per cent), while for Gen X it is saving for retirement (43 per cent) and poor cash returns (38 per cent).
 
Despite a quarter (24 per cent) of UK adults wanting to invest, barriers are preventing many from doing so – it all boils down to four Cs. 
 
Communication – Not speaking my language: Off-putting financial jargon is probably the biggest barrier of all. Well over half (55 per cent) the people weren’t confident they understood financial terms. And this is particularly true among women (45 per cent of men said they felt confident versus only 37 per cent of women);

Complexity: A fifth (20 per cent) said they found keeping on top of the data too challenging;

Concerns over Risk v Reward: Performance is a key factor. Two in five (40 per cent) said they were concerned about market volatility and felt investing was just too risky, and; 

Choice: 14 per cent admitted they were overwhelmed, didn’t understand how to invest and thought it was too difficult, and the same number said they thought it would be too time consuming.
 
Of the financial terminology often used, less than half (45 per cent) have heard of and fully understand inflation, just over a third (35 per cent) know and understand what dividends are and this number drops to just a fifth (20 per cent) when it comes to compounding.
 
Rob Morgan, Investment Analyst at Charles Stanley Direct says: “Whatever your reason for building a nest egg, it’s essential to have a strategy in place. While it’s sensible to keep some money in a cash savings accounts, with low or even zero rates of interest you can significantly lose out by putting all your eggs in one basket. Many people don’t realise if your savings don’t grow in line with inflation, they are actually losing money.  To put this into perspective, today you need over GBP1.20 to buy you the same that GBP1 would have bought you 10 years ago, but cash on deposit has typically only increased to around GBP1.10 per pound saved.

“Transferring some savings into investment products like a stocks and shares ISA can make your money work harder, but we know that taking those first steps on the investment journey can be a daunting experience. That’s why we’re helping UK savers find the confidence to close that investment gap.”

To support first time investors on their investment journey, Charles Stanley Direct has launched a New to Investing hub, which provides a selection of resources including a free guide, articles and tips and a series of videos following the progress of novice investor, ‘Erica’.

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