Households aren’t putting enough money aside and even the wealthy seem reluctant to invest, the Financial Conduct Authority (FCA) has warned.
The latest update on the nation’s finances from the City watchdog shows 61% of adults with £10,000 or more in investible assets are holding at least three-quarters in cash.
The Financial Lives Survey from the regulator warns those holding so much in cash are missing out on the longer-term returns from investing even despite savings rates hitting high levels in recent years.
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While the wealthy aren’t investing enough, the research also shows that one in four people in the UK have low financial resilience, with a tenth holding no cash savings at all and another 21% having less than £1,000 to draw on in an emergency.
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Sarah Pritchard, executive director of consumers and competition at the FCA, said: “Our data shows that finances are stretched for many - with some unable to save for a rainy day. And we know that some do not have the confidence to invest.”
Here is what the nation is – and more importantly isn’t - doing with its savings and investments.
Low levels of saving and investment
The FCA research shows that when people are saving, the median amount set aside remains at between £5,000 to £6,000.
The FCA highlights that those with low savings are more likely to be overwhelmed by their commitments or shock bill and estimates that 13.1 million adults (24%) are classed as having low financial resilience.
At the other end of the scale, 61% of people with more than £10,000 in investable assets are holding this money in cash rather than investments.
One in five adults have cash savings of £25,000 or more, and around one in ten have savings exceeding £50,000.
Rachael Griffin, tax and financial planning expert at Quilter, said: “It speaks to a broader cultural reluctance to invest, and perhaps to a lack of confidence or understanding in navigating financial markets.
“This is exactly the kind of behavioural challenge Labour has committed to tackling in its mission to build a stronger culture of investing in the UK. While the proposed British ISA has now been sensible shelved, the conversation has shifted toward how we can use existing products more effectively to encourage long-term investing.
"Broadening participation in capital markets is sensible and necessary, but any reform must strike the right balance between encouraging investment and protecting savers.”
Griffin suggests the root cause is financial education, or the lack of it, adding: “Until people feel confident making informed decisions about risk and reward, investing will remain the preserve of the few. That’s why improving financial literacy from the ground up is critical, alongside ensuring accessible support, whether through guidance, targeted support, or regulated advice.”
A nation unprepared for retirement
The report also highlights low levels of pension savings even despite auto-enrolment.
The FCA found that one-fifth of non-retirees have no private pension, while two-fifths are not currently contributing to a pension
Where people are saving into a pension, contribution levels remain low.
A third of adults with defined contribution (DC) pensions have less than £10,000 saved for retirement, according to the Financial Lives Survey.
Many people also feel unprepared for retirement, with 22% saying they don’t understand their options and 31% admitting they hadn’t thought about how they’d manage financially in retirement.
Dan Coatsworth, investment analyst at AJ Bell, said: “Many individuals appear to be setting themselves up for a nasty shock later in life by not putting enough money away for the future.
“The FCA’s Financial Lives survey implies that a lot of people will be too reliant on the state pension to pay the bills and support their lifestyle once entering retirement. The full state pension currently adds up to £11,973 a year and while that should help keep a roof over your head, it doesn’t leave much left over for any of life’s luxuries.”
Risk of scams
A lack of engagement and knowledge of financial products is also putting people at risk of scams.
The FCA report found that one in seven adults experienced a financial scam or fraud in the past year, with card fraud and Authorised Push Payment (APP) fraud leading the list.
Griffin added: “This remains a financial resilience issue. Falling victim to fraud can have lasting consequences, particularly for those already struggling with low savings or debt. The FCA’s data shows that younger adults and vulnerable financial individuals are often disproportionately affected, while scammers are becoming increasingly sophisticated in exploiting both digital platforms and psychological triggers.
“Firms must not only invest in better fraud detection and consumer education, but also ensure victims receive fast, fair treatment when things go wrong. A strong, trusted financial system depends on more than just security, but on responsiveness and support when customers are at their most vulnerable.”
