Investors Risk Foregoing £37,000 Due to Reluctance to Dive into Stock Market Investments
The UK government's push to improve investor confidence, as detailed in the Chancellor's recent Mansion House speech, could unlock a significant amount of retail investments, potentially boosting the economy. This initiative aims to foster a cultural shift by promoting investing in a "positive light."
According to Brian Byrnes, head of personal finance at Moneybox, for this push towards investing to be effective, regulatory change must go hand-in-hand with boosting the financial confidence of the nation. Byrnes emphasized the importance of equipping individuals with the knowledge to choose what's right for their situation, and making the full range of options available to them.
A lack of financial confidence has been a concern, with the government's previous attempts to boost financial knowledge failing to make a substantial impact. This lack of confidence has also negatively affected the economy, with an estimated £137bn in potential retail investments being left untapped.
Moneybox's latest survey reveals that only 11% of individuals polled chose to transfer their money from savings to active investments. A third of respondents expressed discomfort towards the unpredictability and volatility of investing in the stock market, while two-fifths indicated they would feel more comfortable investing if they knew the basics.
The lack of confidence among UK individuals could potentially cost them an average of £37,000 compared to investors, according to Moneybox's financial confidence index. Nearly 40% of respondents expressed concern over potential financial loss if a stock performs badly.
However, there has been an improvement in confidence, up to 39% from 33% in 2024, according to the index. Over a quarter of individuals indicated they would feel reassured if they received guidance from a trusted source, such as a financial adviser.
The importance of both saving and investing in building wealth and financial security was highlighted by Byrnes. He stressed the need to respect the "value of saving" while encouraging investing. By bridging the gap between confidence and true understanding, through better financial education, individuals can make informed investment choices, reducing underestimation of future retirement income and aligning confidence with practical knowledge, which stimulates participation in financial markets.
Europe-wide research shows that redirecting household savings into investments can boost household wealth and fund the economy. Reducing complex jargon and leveraging technology can demystify pensions and investments, improving engagement and empowering better financial decisions. This supports a more active retail investor base that fuels economic growth.
Increased retail investments supply capital essential for UK retail businesses to manage cash flow, expand operations, adopt new technologies, and innovate — all critical for competitiveness and resilience in a challenging economic environment.
[1] Source: Moneybox Financial Confidence Index, 2024 [2] Source: UK Retail Industry Report, 2023 [3] Source: HM Treasury, 2024 [4] Source: European Central Bank, 2023 [5] Source: Moneybox Financial Confidence Index, 2024
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