A third of savers (33%) are put off investing by the high costs involved.1 Given that the UK is currently in its seventh year of record low interest rates this could further exacerbate the UK’s savings crisis.
The failure to move money out of cash or low interest savings accounts into higher return investments will leave savers struggling to accumulate enough money to pay for major life events, such as buying a house or retiring. Ultimately savings pots may even be reduced as inflation eats into their capital.
The asset management industry need to drop unnecessary charges in order to improve investor returns and encourage more to save.
In addition to cost, almost a quarter (23%) of respondents said that the complexity of current investment products was another major factor causing them to shy away from investing.
With the technology available to us today, cost and complexity should no longer be a concern when it comes to investing.
There is no reason why the use of apps and smart phones cannot deliver savers a simple and intuitive way to invest that delivers a high quality wealth management product without the unnecessary fees eating so dramatically into returns.
Investing, especially for the first time, can be daunting but the Financial Services sector is not making it any easier for savers to take this important step.
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If savers fail to invest their funds, these are likely to deplete over time. This can have very serious repercussions later in life when it comes to buying a home, having children or retiring.
Cost and complexity are two of the major factors putting savers off investing – however these are both elements of the investment process that can actually be controlled.
It is up to the Financial Services sector to provide savers with competitively priced and simple investment products which allow them to feel confident and safe in their financial decisions.
“As inflation continues to rise and interest rates remain low, money sitting in a cash or low interest savings account is actually falling in value. In order to avoid this happening, money needs to be invested.”
“It is the industry’s duty to ensure the vehicles that enable investment are consumer-friendly in order to ensure this happens.”
A recent study by Moneyfarm found that that UK cash savings (£167 billion) are providing such poor levels of interest that they actually fall in value over the next year by £4.1 billion as inflation continues outpaces interest returns. This translates to a loss of £340 for every £100,000 kept in a cash savings account – as opposed to an increase in value from cash savings that savers expect.
1 Survey of 761 savings / ISA account holders carried out by Atomik Research on behalf of Moneyfarm, April 2016