A new report has revealed that the UK’s working adult population has missed out on a staggering £94 billion over the past five years through failing to invest in the stock market and holding their money in savings accounts. The figure comes from public policy think tank, The Social Market Foundation, which has also found that savers are holding more than £200 billion worth of cash in excess of the recommended three months’ worth of income or ‘rainy day’ level of savings that should be kept available.
The think tank has urged the government to do more to inform and encourage savers about diversifying their savings and investments, as the figures suggest many are devaluing the money they’ve worked hard to put away, thanks to the effects of inflation and low interest rates. More worryingly, the report reveals that more than 14 million working adults in the UK are not saving whatsoever and more than 26 million have inadequate pension savings.
Had UK savers invested in peer-to-peer loans instead of the stock market, the returns they would have seen could have amounted to £40 billion. As such, the report recommends the government markets up to 25% of both its ‘Future Britain Funds’ and ‘National Productivity Investment Fund’ to the public. This would not only give people the opportunity to grow their savings, but would also allow them to invest in the country’s future. This could lead to investment of at least £30 billion in these ‘Britannia bonds’ in the next five years, which would provide greater funding for infrastructure.
Another recommendation from the report suggests that the government should give £1,500 to every 15-year-old from 2020 to be used to invest in a range of asset classes assisted by real life financial education. This would be funded by money saved by reducing the ISA allowance. This would not only help young people to learn the benefits of wise saving and investment practices, but would also ensure they have at least some financial assets as they head towards life outside secondary education.
Note – The value of an investment may go down as well as up and you may not get back what you initially invested