Investors call on Government to create culture of investment to boost UK households’ financial resilience

19^th September 2024 - Investors are urging the Chancellor to deliver a budget on the 30th of October that creates a culture of inclusive investment to drive growth for the UK economy and boost households' financial security.

It follows recent research from the Investment Association (IA) which found:

• Just 1 in 10 (10%) UK pension holders over 55 are confident they are saving enough into their pension to live comfortably in retirement.

• Only 1 in 5 (23%) people hold Stocks and Shares ISAs, whilst 2 in 5 (43%) aren’t confident they would know how to open and place their money in one.

• Comparatively, almost three quarters (72%) of people would feel confident opening and placing their money into a cash ISA – suggesting many are missing out on the long-term benefits investing can bring.

   

The IA is calling on the Chancellor to launch an Inclusive Investment Strategy that will bring the benefits of investing to more households, increase investment levels and, channel greater investment into productive capital.

Key policy asks include:

• Reset the approach to risk and bridge the gap between precautionary cash savings and long-term investment. The Government must reform risk disclosures across all asset classes to focus on informing, not just warning, and empower consumers to take appropriate risk and understand the benefits of investment.
• Reform the UK’s ISA regime to make it easier and simpler for investors. The IA is calling on the Government to reset the balance between Stocks and Shares and Cash ISAs to encourage long-term investment. A lower limit should be placed on Cash ISAs, while the Stocks and Shares allowance keeps pace with inflation. The Stocks and Shares ISA should also be rebranded as an Investment ISA and include all suitable funds, including Long-Term Asset Funds (LTAFs) to encourage greater investment in productive capital.
• Supercharge pensions growth to build future financial resilience. With only four in ten (42%) of UK pension holders confident they are saving enough into their pensions to live comfortably in retirement, the upcoming Pensions Review is a welcome and critical opportunity for reform. The Government must build on the success of auto-enrolment by recognising that contribution levels of 8% are not high enough for most people, and act now to look at appropriate saving rates for different groups (including the self-employed).

• Accessible financial advice for all. Government and the FCA must continue their vital work on advice guidance reform, to empower consumers through accessible and inclusive financial advice. This will break down barriers to consumer investment and enhance financial resilience. 

   

Chris Cummings, Chief Executive of the Investment Association, said: “This year’s Autumn budget comes at a critical moment for the new government, and is a clear opportunity for Rachel Reeves to recognise the role the investment management industry can play in securing the future of our nation.

“Too many people in the UK are taking one of the biggest financial risks of all: taking no risk. This needs to change. We must create a culture of investment that allows more people to benefit from the UK’s position as an international centre for investment management, and work together to move away from ‘safetyism’ – the overemphasis on avoiding risk without considering the unintended consequences.

It is not only the UK economy that will reap the rewards, but millions of households across the UK that could benefit from the boost investment can bring to their long-term financial resilience.”

Notes to Editors

Unless otherwise stated, all data was gathered by Opinium Research on behalf of The IA. Online surveys were conducted of 2,000 UK adults (18+) between 30th August - 3rd September, and 3rd - 6th September 2024. Results have been weighted to be nationally representative.

Policy asks from the IA budget submission, September 2024

An Inclusive Investment Strategy  

• 1A: Disclosures should be rebalanced to highlight both the risks and rewards of investing. The goal should be to inform, not just warn, empowering consumers to make informed decisions across all asset classes, including cash and cryptocurrencies.

• 1B: Limit the cash ISA allowance, while the Stocks and Shares ISA allowance continues to keep pace with inflation. Rebrand the Stocks and Shares ISA as the Investment ISA, and ensure that it includes all suitable funds.  

• 1C: Support work to create a simpler advice regime to help more people to invest

Boosting Investment Levels

• 2A: An Investment Roadmap, extending the tax roadmap to cover adjacent taxes including those which might impact people’s confidence to invest.  

• 2B: The Pensions Review must look at appropriate savings rates for different groups of people (including the self-employed), and how we can get there.

Putting Investment to Productive Use

• 3A: The Pensions Review has an opportunity to help drive a change in the culture of investment decision-making alongside structural changes to the pensions system.  Sophisticated scale needs to be a key guiding concept. 

• 3B: Open up private markets to more Pensions and ISA savers, capitalise on new tech to boost their operation