Exclusive TISA and Oxera research reveals consumer disengagement with investing, even whilst inflation bites at savings

by | Nov 2, 2022

Inflation rose to an all-time high of 10% last month. For many, the cost-of-living crisis has reduced or eliminated their ability to invest for the future. Once the crisis eases, a key financial priority will be resuming saving and improving their financial resilience. For others fortunate enough to have savings right now, they are seeing high inflation eroding the purchasing power of money held in cash ISA’s or bank accounts.

TISA and Oxera have announced the launch of their joint research on Stocks and Shares ISAs (S&S ISAs) funded by Abrdn, Coutts and Nationwide Building Society. The research was commissioned to understand people’s motivations for buying S&S ISAs, what the barriers to investing in them might be, and the implications of this for policy and regulation.

The research confirmed findings from the FCA in 2020 that many consumers are saving thousands in cash when it could be invested. According to HMRC, over 60% of the money in Junior ISAs is held in cash, despite the decades-long savings horizon. The inflation crunch means hard won savings are losing purchasing power at an increased rate.

Consumer disengagement remains the major problem, with the research showing that over 70% of people holding large cash balances who have not invested in S&S ISAs have never even considered doing so. People perceive S&S ISAs to be riskier than they are and avoid them as a result.

The research reveals a strong pattern associated with the ‘type’ of person currently getting the benefits of a S&S ISA. Consumers are more likely to buy a S&S ISA (as opposed to a Cash ISA) if they: think that ‘people like you’ are very likely to buy one (40% more likely), live in London (16% more likely) and are male (8% more likely),

Research participants were 18% less likely to buy a S&S ISA (as opposed to a Cash ISA) if they came from a lower socio-economic background, and 18% less likely if they were highly loss averse.

Informing people’s misperceptions of the probability of realising a loss as well as the benefits of investing is likely to be effective in encouraging consumers to consider S&S ISAs. All types of consumers would welcome simpler information and a simpler consumer experience. More inclusive marketing could help increase the appeal of S&S ISAs and help address social, regional and gender inequalities.

Find Out More – Attend the free virtual launch of the TISA and Oxera report by signing up here – https://www.tisa.uk.com/product/tisa-oxera-joint-report-benefits-and-risks-of-stocks-and-shares/?event_date=2022-11-03

Prakash Chandramohan, Strategic Director at TISA said:

“The current cost-of-living crisis is affecting millions of households.  For those fortunate enough to have a store of savings, they are seeing high inflation eroding the purchasing power of money held in cash ISAs and bank accounts.  At a time when many should be seeking ways to protect their savings from the corrosive impacts of inflation, by investing in a product like a Stocks & Shares ISA for instance, most people remain disengaged.  To the industry S&S ISAs are seen as a relatively simple product, but people actually perceive them to be a complex product, that is not for them and too risky.  We need a concerted effort by industry, government and the regulator to create a retail investment industry that works much better for UK society, helping improve outcomes for all cohorts of society that would benefit from investing.” 

Alastair Black, Head of Regulatory Change at Abrdn said:

“In the current environment we know many will be struggling to save anything. And for those who can save – even a small amount – they really need to consider where they are putting their savings to ensure they are enjoying the best rate of return possible, while understanding the risk implications of certain savings or investment options.

“These findings are of particular interest in the current climate when many will be even more nervous about their money. We all need to work together to help promote the benefit of long-term savings for long term growth, while making it more accessible to understand and approach.”

Nick Johnson, Head of Digital Investing at Coutts said:

“The initial research presented by TISA displays a concerning but very real feeling around investing in the UK. It has been great to work with TISA on this research and looking forward we hope that small and simple changes to the way Stock and Shares investments are discussed, will make a big difference to the outlook for many savers across the country.”

Steven Tait, Head of Investments at Nationwide Building Society said:

“We’re very pleased to have been able to support TISA in conducting this research. The findings emphasise the need for industry, government and the regulator to simplify the customer experience with clearer information and easier access, so more people can benefit from investing.”

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