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The FCA wants 1.7m Brits with over £10k in savings to invest instead by 2025

The FCA wants 1.7m Brits with over £10k in savings to invest instead by 2025
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The Financial Conduct Authority (FCA) is launching a new financial guidance and support strategy. Its aim is to give consumers the confidence to invest and unlock the full potential of their money. Here is everything you need to know about this new initiative.

Why is the FCA encouraging Brits to invest?

According to the FCA, millions of UK savers could be missing out on wealth creation by holding too much cash.

There are currently 8.6 million consumers in the country who are holding more than £10,000 of investible assets in cash.

The financial watchdog aims to reduce the number of people who could be missing out on possible investment earnings by 20% by 2025. This equates to approximately 1.7 million Brits with more than £10k in cash savings making the switch to investments.

This particular goal is part of a larger initiative that also aims to reduce the number of people who invest in higher-risk products as well as the amount of money consumers lose to investment scams.

To achieve these aims, the FCA is launching a new £11 million ‘investment harm campaign’. This will be used to promote better investment decision-making among consumers. 

The FCA is also exploring rule changes “to make it easier for firms to provide more help to consumers who want to invest in relatively straightforward products”.

What do experts think of the FCA’s new initiative?

Chris Hill, CEO of Hargreaves Lansdown, has lauded the new move to encourage savers to invest their money.

He explains: “For too long, consumers have not achieved the rates of return that they could have done, had their savings been invested. This holds back their ability to build their financial resilience over the longer term.”

He adds, however, that more measures are needed to support the FCA’s goal of moving Brits into investing. He says: “Building confidence in investment choices will require relevant guidance for customers at the point of sale, as well as ongoing support over the longer term.”

Is it better to invest or save?

Savings rates have been hovering around all-time lows since the global financial crisis more than 10 years ago. The coronavirus pandemic has only exacerbated the situation.

With inflation on the rise, the value of money held in many people’s savings accounts is being eroded sharply in real terms.

In this environment of low interest rates and rising inflation, investing provides consumers with a proven hedge against their money losing value. Over the long-term, stocks have historically brought investors significantly higher returns than savings accounts.

If you want to start investing, it’s relatively easy to do so with an online share dealing account.

Here in the UK, investors can also enhance stock market returns by investing through a stocks and shares ISA. This is basically a tax-free wrapper that shields your investment returns from tax.

Are there any downsides to investing?

While investing can help you build wealth more quickly, it comes with a degree of risk. For the most part, the risk will depend on how long you plan to hold your investment.

In the short term, the value of your investments may rise and fall. Over the long-term, however, the bumps tend to even out and there’s a good chance of making positive returns. As a rule of thumb, five years is usually enough time to ride out any bumps and potentially grow your money.

When investing, remember not to put all your eggs in one basket. Aim to Diversify your portfolio by investing in different companies, industries and regions.

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