16 May 2016

While the saying goes that cash is king in times of intense stock market volatility, in reality it appears that cash is king for UK savers in pretty much all market conditions.

According to our latest Investor Pulse survey, the average Briton with more than £100,000 of assets to invest is holding 41% of their savings in cash. This has happened in spite of a prolonged period of record low interest rates.

For those we spoke to who are currently not advised, or who’ve never had financial advice, cash holdings are even higher at 47% and 52% respectively. Those with financial advisers, who have helped them to devise a plan, typically have a lower cash position of 30%. Interestingly, this is around the amount that people think they should hold.

So how can savers be supported through the process of reconsidering their allocation to cash, and their potential need to look beyond it? Our findings suggest that consumers understand the rationale for investing across different asset classes to achieve their long-term goals, even though they are clearly cautious to take action. Perhaps this is down to the fact that 47% of our sample felt there are similarities between investing and gambling.

Close to half of respondents cited ‘saving/investing to ensure a comfortable retirement’ as their top financial goal, while 43% said they wanted to preserve their wealth.

The bad news is that neither of these worthy goals are likely to be met with the high cash positions that too many people hold now.

The good news is that three-quarters said they would like some equity exposure. There was also a recognition across the sample that they should ideally hold less cash than they currently do – the average desired cash position came in at a third of assets.

Retirement shortfalls

What is particularly worrying about our findings is the sheer volume of money that is sat in cash accounts, likely earning very little interest. According to our research many savers understand the value of investing for the long-term but may feel unsure where to start. The perceived similarities between investing and gambling suggests a challenging starting point.

So what can be done? We need to engage, explain and educate young people about their finances. Question marks remain over how this issue can be resolved across all ages, particularly at a time when people are having to take greater control of their financial futures.

In particular, there seems to be a distinct lack of confidence in the benefits of investing among Generation Y – those born from 1981 onwards. Only 51% of these respondents felt in control of their financial future – far lower than the 68% of Generation X (those born between the sixties and eighties) and 75% of the 51-69 year-old baby boomers.

Whatever age they are, people preparing for their golden years need to ensure they have a robust financial plan in place to help provide a sufficient income for retirement – and that their investments are aligned to this. This will inevitably involve putting cash to work by investing across different asset classes to achieve the outcomes they want.

For this to happen, investing needs to become more inclusive, and the benefits of investing need to be better understood. But most of all, consumers need to feel more comfortable about pursuing financial advice. Breaking down the artificial barriers between ‘guidance’ and ‘advice’ could facilitate this. Simple rules of thumb would help people to navigate the plethora of financial challenges they face.

Fortunately, the issue is on the agenda for the UK financial regulator, the Financial Conduct Authority. Its recent review of the financial advice market concluded that advice must become more accessible for all ages. We hope this will become a reality in the near future.

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This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or financial product or to adopt any investment strategy. The opinions expressed are as of 02/03/2016 and may change as subsequent conditions vary.

BlackRock Investor Pulse was conducted in association with Cicero Group between July and September 2015. A nationally representative sample of over 31,000 people in 20 countries was surveyed. 4,000 of the surveyed were UK residents. All participants were aged between 25 and 74 years old. The results of this survey are provided for information purposes only. The conclusions are intended to provide an indication of the current attitude of a sample of citizens in the UK to saving and investing and should not be relied upon for any other purposes.

While the saying goes that cash is king in times of intense stock market volatility, in reality it appears that cash is king for UK savers in pretty much all market conditions.