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If “start as you mean to go on” is sound advice, the FTSE 100’s record-setting beginning to 2026 should be good news for existing UK savers. This year will bring rule changes and other initiatives meant to help them spread their investing wings. But even surging markets and new incentives may not persuade them to abandon their penchant for holding cash.
UK households have the lowest proportion of direct stock holdings among G7 countries, at 8 per cent of wealth, Aberdeen Investments calculated last year. At that time they held almost twice as much in cash — and about £280bn sits in zero-interest accounts, according to the Bank of England. Just shifting a chunk of that could reduce the pain of inflation and lift the stock market still further.
To further that end, this month individuals will find fewer frictions if they wish to participate in initial public offerings. And changes in November’s Budget have already lowered the cost of trading in newly listed stocks.
There are sticks as well as carrots. From April, the amount of cash that can be held in tax-free individual savings accounts falls to £8,000. To get the full £20,000 a year allowance, the rest must be held in stock-based Isas. City firms from Barclays to Vanguard are lined up to fund a campaign to help savers with the forced shift.
Why are UK savers so reluctant to buy stocks, though? One factor may be that more of their financial life is taken care of by the state. US individuals, for example, have long borne far higher direct costs for healthcare and higher education, encouraging investing diversification.
There are linguistic influences too. Americans are accustomed to talking about their 401(k) investment plans, while Britons use the word “pension” to describe long-term private investment schemes. Severing the association with the state retirement subsidy of the same name might encourage UK savers to be more engaged in managing their retirement pots.
Notable campaigns to push households into share ownership have had limited success. British Gas’s 1986 “tell Sid” campaign touted its newly privatised shares to ordinary people rather than suited City types. It duly started listed life with private individuals holding 62 per cent of the stock, but that dropped to 15 per cent in a decade. Similarly Abbey National, which led a series of building society demutualisations, saw its small shareholder base drop from the 5mn society members who got free shares in its 1989 conversion to 1.7mn when it was bought by Santander in 2004.
There are several other changes under way, such as broadening the scope of investment “support” as opposed to the more expensive “advice”, as well as reconsidering the sometimes-stark risk warnings carried by regulated investments. It’s a lot for the target audience to take in. Tell Sid he’s got a daunting task ahead — although at least this time he has the FTSE on his side.
Letter in response to this column:
British savers could do with champions like Nvidia / From Mark Nelson, Washington, DC, US
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