An ongoing problem in the financial services industry is how much capital people hold in cash. According to the FCA’s Cash Savings Market Review, in 2023, UK consumers held £1.5trn in savings accounts.[1] With recent market volatility and higher interest rates, it is unsurprising that some people may assume that their money is better held in cash.
Although cash can be useful for short-term needs and emergencies, the current dynamic is concerning. Too many consumers are holding large sums of money in low-yield deposit accounts and missing out on the potential for growth. The fact that many set and forget their funds and do not switch to better-paying accounts when the opportunity arises exacerbates this underperformance. HM Treasury suggests that more than 29 million adults across the UK have cash sitting in a low-interest rate account offering around 1%, compared to an average return for stocks and shares over the last 10 years of around 9%.[2]
With interest rates already falling from 2024’s 15-year highs, and further cuts expected later this year, the government is renewing its efforts to foster a stronger retail investing culture in the UK. In her Mansion House speech this week, the Chancellor, Rachel Reeves, announced an industry-led campaign to help unlock retail investment.[3] With this in mind, now seems like a really good time to outline the benefits of including equities in a well-diversified financial plan.
Eroding Value
Taking advantage of high-interest savings accounts is a good idea for those needing access to funds within a fairly short time horizon, but holding a lot of capital in cash can be problematic. Returns on deposit accounts are unlikely to beat inflation over time, and through inertia or lack of knowledge, the individual is unlikely to actively switch to accounts that continually secure the best rates.
Data from Tesco Bank found that 39% of adults weren’t aware that inflation impacted their savings, and 11% thought it actually improved their savings.[4] This suggests that there’s a knowledge gap among ordinary consumers that needs to be addressed. Often people feel that their money will be safe and secure in a savings account, without fully realising that the impact of inflation will erode its real value. Unfortunately, sheltering savings from the ups and downs of stock market investing can also mean limiting their growth potential.
Opportunity in equity
According to a report by RetailBook, collectively British people have missed out on an estimated £1trn over the last 60 years by not investing in the stock market.[5]
Investing in equities may mean that the portfolio value can be hit by market swings, but historically, it has been the best option for growing wealth over the long term. Data from Barclays shows that equities have outperformed holding cash in 91% of ten-year periods over the last 124 years.[6]
Even when markets experience significant fluctuations, they often recover relatively quickly. For instance, although markets saw sizable falls following the US tariff announcements on ‘Liberation Day’, the losses had been largely recouped in little over a month.[7]
Striking the right balance
While historically equities have outperformed cash over the long term, investors will often see their funds go down as well as up during the investment period.
Seeing funds take a dip can be distressing, especially if they are delivering an income, such as during retirement. However, holding a sufficient cash buffer for short-term needs, alongside a well-diversified investment strategy aligned with the individual’s risk tolerance and capacity to withstand losses, can help ease anxiety and support long-term confidence.
There is a range of products available to meet different requirements or that correspond to the different levels of risk that an investor is willing to undertake. For instance, alongside our risk-rated portfolios aimed at investors building their wealth, we also offer a retirement-focused portfolio that includes a portion of the investment in guaranteed income assets, with the aim of providing some certainty of income alongside capital growth.
Cultivating a UK investment culture
To encourage a culture of investing in the UK and give consumers the confidence to move their cash into equities, we need to build greater trust and understanding of the benefits. We also need to support people to stay invested during times of volatility so they can see their returns grow.
Cash savings will always be a key fixture within the financial landscape, but a move towards greater exposure to equities within an appropriately diversified, risk-rated portfolio can help to deliver enhanced growth and support wealth accumulation within the UK.
[1] https://www.fca.org.uk/publication/multi-firm-reviews/cash-savings-market-review-2023.pdf
[2] https://www.gov.uk/government/news/leeds-reforms-to-rewire-financial-system-boost-investment-and-create-skilled-jobs-across-uk
[3] https://www.gov.uk/government/news/leeds-reforms-to-rewire-financial-system-boost-investment-and-create-skilled-jobs-across-uk
[4] https://www.moneymarketing.co.uk/news/the-morning-briefing-monday-14-july
[5] https://citywire.com/wealth-manager/news/profound-failure-1trn-loss-for-retail-investors-study-exposes/a2469378
[6] https://www.barclays.co.uk/smart-investor/news-and-research/longer-term-investment-options/
[7] https://www.businessinsider.com/stock-market-today-china-trade-deal-tariffs-sp500-dow-nasdaq-2025-5
1st August 2025
Holding too much cash could be costly
An ongoing problem in the financial services industry is how much capital people hold in cash. According to the FCA’s Cash Savings Market Review, in 2023, UK consumers held £1.5trn in savings accounts.[1] With recent market volatility and higher interest rates, it is unsurprising that some people may assume that their money is better held in cash.
Although cash can be useful for short-term needs and emergencies, the current dynamic is concerning. Too many consumers are holding large sums of money in low-yield deposit accounts and missing out on the potential for growth. The fact that many set and forget their funds and do not switch to better-paying accounts when the opportunity arises exacerbates this underperformance. HM Treasury suggests that more than 29 million adults across the UK have cash sitting in a low-interest rate account offering around 1%, compared to an average return for stocks and shares over the last 10 years of around 9%.[2]
With interest rates already falling from 2024’s 15-year highs, and further cuts expected later this year, the government is renewing its efforts to foster a stronger retail investing culture in the UK. In her Mansion House speech this week, the Chancellor, Rachel Reeves, announced an industry-led campaign to help unlock retail investment.[3] With this in mind, now seems like a really good time to outline the benefits of including equities in a well-diversified financial plan.
Eroding Value
Taking advantage of high-interest savings accounts is a good idea for those needing access to funds within a fairly short time horizon, but holding a lot of capital in cash can be problematic. Returns on deposit accounts are unlikely to beat inflation over time, and through inertia or lack of knowledge, the individual is unlikely to actively switch to accounts that continually secure the best rates.
Data from Tesco Bank found that 39% of adults weren’t aware that inflation impacted their savings, and 11% thought it actually improved their savings.[4] This suggests that there’s a knowledge gap among ordinary consumers that needs to be addressed. Often people feel that their money will be safe and secure in a savings account, without fully realising that the impact of inflation will erode its real value. Unfortunately, sheltering savings from the ups and downs of stock market investing can also mean limiting their growth potential.
Opportunity in equity
According to a report by RetailBook, collectively British people have missed out on an estimated £1trn over the last 60 years by not investing in the stock market.[5]
Investing in equities may mean that the portfolio value can be hit by market swings, but historically, it has been the best option for growing wealth over the long term. Data from Barclays shows that equities have outperformed holding cash in 91% of ten-year periods over the last 124 years.[6]
Even when markets experience significant fluctuations, they often recover relatively quickly. For instance, although markets saw sizable falls following the US tariff announcements on ‘Liberation Day’, the losses had been largely recouped in little over a month.[7]
Striking the right balance
While historically equities have outperformed cash over the long term, investors will often see their funds go down as well as up during the investment period.
Seeing funds take a dip can be distressing, especially if they are delivering an income, such as during retirement. However, holding a sufficient cash buffer for short-term needs, alongside a well-diversified investment strategy aligned with the individual’s risk tolerance and capacity to withstand losses, can help ease anxiety and support long-term confidence.
There is a range of products available to meet different requirements or that correspond to the different levels of risk that an investor is willing to undertake. For instance, alongside our risk-rated portfolios aimed at investors building their wealth, we also offer a retirement-focused portfolio that includes a portion of the investment in guaranteed income assets, with the aim of providing some certainty of income alongside capital growth.
Cultivating a UK investment culture
To encourage a culture of investing in the UK and give consumers the confidence to move their cash into equities, we need to build greater trust and understanding of the benefits. We also need to support people to stay invested during times of volatility so they can see their returns grow.
Cash savings will always be a key fixture within the financial landscape, but a move towards greater exposure to equities within an appropriately diversified, risk-rated portfolio can help to deliver enhanced growth and support wealth accumulation within the UK.
[1] https://www.fca.org.uk/publication/multi-firm-reviews/cash-savings-market-review-2023.pdf
[2] https://www.gov.uk/government/news/leeds-reforms-to-rewire-financial-system-boost-investment-and-create-skilled-jobs-across-uk
[3] https://www.gov.uk/government/news/leeds-reforms-to-rewire-financial-system-boost-investment-and-create-skilled-jobs-across-uk
[4] https://www.moneymarketing.co.uk/news/the-morning-briefing-monday-14-july
[5] https://citywire.com/wealth-manager/news/profound-failure-1trn-loss-for-retail-investors-study-exposes/a2469378
[6] https://www.barclays.co.uk/smart-investor/news-and-research/longer-term-investment-options/
[7] https://www.businessinsider.com/stock-market-today-china-trade-deal-tariffs-sp500-dow-nasdaq-2025-5