UK savers prefer to keep their money in ‘safe’ financial options such as savings accounts, even when interest rates are low.
According to a new survey titled Next Gen: Investors and Savers, Brits are saving an average of £191 per month, with 83 per cent putting this money into a traditional savings account, 42 per cent saving into an ISA, and 33 per cent sending their savings into a pension fund.
Almost three quarters (71 per cent) of UK adults said that interest rates and returns are their highest priority, although 57 per cent of savers said that they associated savings with “security”, and appeared willing to accept a lower rate of interest if it came with financial protection.
Furthermore, more than two thirds (67 per cent) of those surveyed said that they would describe themselves as “savers” rather than “investors”, suggesting that caution prevails when making financial decisions.
The survey – titled Next Gen: Investors and Savers – was commissioned by peer-to-peer lending platform ArchOver and quizzed 2,000 UK residents about their financial goals. Two thirds said that they were saving for a ‘rainy day fund’, while 29 per cent were saving for a car or a holiday and just 27 per cent said that they were saving for retirement.
However, ArchOver’s chief executive Angus Dent warned that savers could be losing out by choosing low-risk, low-return options over alternative investments.
“People like to go with the status quo, and they’re attracted by the protection you get with traditional savings accounts,” said Dent.
“However, leaving your money lying around in a savings account for years on end is not going to help people reach their goals in the long-term. In reality, savers need to diversify their portfolios and look for alternative ways of making their money grow that balance security and opportunity.”
When asked what they would do if they inherited a large sum of money, the majority (46 per cent) said that they would deposit it into a savings account, while 30 per cent said that they would put it into an ISA.
Less than one in 10 (nine per cent) said that they would consider investing a large sum of money in stocks and shares and only four per cent would consider peer-to-peer lending or crowdfunding.
“Savers like knowing that the service they are saving into is fully regulated. Many take comfort in knowing their money is protected by official bodies and that they’ll be contacted if there’s a significant risk to their cash,” added Dent.
“But that cautiousness is at odds with what savers claim to be thinking about, which is seeing their money grow. If savers are to achieve their goals, there needs to be more education available on the options that could help them achieve higher returns with a relatively low amount of risk. That means helping them better understand how to identify which services are being transparent about potential risk factors, prioritise security and allow savers to control how their money is being used.”