Failure to invest could see millions of Brits face financial difficulties, report warns
Poor understanding and low take-up of long-term investing could see millions of Brits heading for financial difficulties in later life, according to fresh analysis from online investment platform Investengine.
The research found that only a third of adults in the UK would prefer to invest their money rather than save it, compared to nearly half of adults in Germany. This is despite Investengine finding that UK and German consumers share similar financial goals and put aside similar amounts each month in order to ensure a comfortable retirement.
The investment platform found that one major area of difference between the two nations is that German consumers are much more confident when it comes to the idea of investing their money. They were also investing earlier.
Nearly half of Germans said they had learnt enough in school about financial education, compared to just under a third of adults in the UK. This confidence may explain why Germans were investing earlier than their UK counterparts.
Investengine found that Germans aged between 18 to 34 were the ones saving or investing most of their money, compared to those aged 35 to 54 in the UK. This, Investengine argued, gave them a greater chance of building up their finances in the long-term.
Separate data from wealth manager Netwealth on Thursday has painted a similarly concerning picture about the lack of retirement preparedness in the UK.
It found that 41 per cent of UK savers aged 40 and over admit it is unlikely that they will have enough money saved for a comfortable retirement, currently estimated at £430,000. Nearly half admitted they haven’t even calculated the cost of retirement.
Charlotte Ransom, CEO and founder of Netwealth, said the findings were “alarming.”
“In a challenging economic environment, the risk of not being able to afford the type of retirement that you expect is greater than ever. Without adequate planning, you may find yourself having to make difficult choices, such as cutting back on everyday expenses, compromising on healthcare, or foregoing luxuries you had hoped to enjoy.”
For Andrey Dobrynin, CEO and co-founder of Investengine, more needed to be done to improve financial education in the UK and to promote the benefits of saving and investing from a young age.
“Little and often investing has the potential to help many secure their financial future, but there is still apprehension. There is a role for industry and government to help solve this, particularly given the government’s reported desire to simplify ISAs and remove barriers to people investing in the stock market,” Dobrynin said.
According to a report from the Financial Times, UK Chancellor Jeremy Hunt is planning the biggest shake-up to ISAs in years.
The paper has reported that UK Treasury officials have discussed how to simplify the current array of ISA products and remove barriers to investing in the stock market with investment industry executives.
One option reportedly being considered is an additional ISA allowance for investing in UK companies. Other ideas include enabling cash savings and stock market investments to be held within a single ISA.
Andrew Prosser, head of investment at Investengine, said: “As the Autumn Statement approaches, we’re encouraged to see the UK government exploring ways to simplify the ISA landscape to make it easier for people to save and invest, but there needs to be further action to simplify the system and boost financial literacy. This will be crucial if we’re to ensure more people can achieve greater financial security later in life.”