Years of paltry interest rates and a baffling savings system have left the British population unprepared for a rainy day. According to data from Momentum Investment Management, half of us have little or no savings or investments.
A survey of 2,000 people aged 16-75 conducted for Momentum by University of Bristol revealed that Britons did not feel confident in their long term financial planning abilities.
A third of those surveyed admitted they have savings of less than £100, while a do not have any assets to draw upon at all – including a workplace or private pension, a buy-to-let property, or cash savings.
Ferdi Van Heerden, chief executive at Momentum believes the lack of long term savings among Britons is due to the complicated rules surrounding savings and investment products.
“All the changes in pension regulation have not simplified the system. It is crucial for the Government and regulators make long-term savings a simpler world for people.
“Pension providers should be consistent with their information and there should be a blueprint of advice for those financial advisers to follow.”
Young People in Debt
The research also showed that more than half of people aged 16-34 years old struggle to fund an unexpected expense without borrowing money.
A third rely on credit to assist their money management, and 36% of them had been unable to meet their minimum payments on credit commitments at least once in the last year.
The overreliance on credit among millennials is a real concern, particularly considering the punishing rates often imposed on people accessing credit, Van Heerden said.
He also believes digital payments, including Apply Pay and contactless payment, are convenient factors which contribute to poor organisational skills of young people when it comes to their finances.
“I don’t think young people have the discipline to save,” Van Heerdan said. “It is imperative that we give the next generation a real chance to build their finances.”
Financial Illiteracy to Blame
A lack of financial knowledge is to blame, according to data provided by an online trading platform Selftrade. It revealed that two thirds of adults aged 29 and younger have no plans to save into any investment based products over the next year as “they don’t understand the stock market”.
When the same question was asked of respondents aged 40 and older 22.5% do not have plan to save into any investment based products over the next year, indicating a generational divide.
The report also unveiled a quarter of young adults admit to spending more than they earn, compared to only 9% of those aged over 40.
The uncertainty surrounding the UK’s economic future does not help. Bank of England Governor Mark Carney has hinted that there will be a second interest rate cut in as many months in September, meaning savers will continue to suffer from record-low saving rates.
