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Savers should stop hoarding cash and invest, City watchdog says

cash savings
cash savings

Savers need to stop hoarding so much cash and invest it in the stock market instead, the City watchdog has urged.

The Financial Conduct Authority warned many consumers are "likely to experience harm" as the real value of their assets fall against the "upside potential from investing".

It said that 4.2 million savers had at least £10,000 mostly held in cash, even though they are open to investing.

In a consultation paper published today, the FCA outlined its proposals for cutting the number of people with savings languishing in cash by 20pc over the next three years.

Deposits in savings accounts hit £1 trillion for the first time in September 2022, according to new analysis by Paragon Bank – up £25bn year-on-year.

Consecutive Bank Rate rises have pushed savings rates up to record highs from rock-bottom lows, with the top-paying fixed-rate accounts now offering interest of over 4pc, yet many savers are still failing to take advantage of the best rates. 

Paragon's Derek Sprawling said the new analysis showed “substantial sums continue to be held in accounts offering low returns”.

Over £428bn is held in non-Isa "easy access" savings accounts offering less than 0.5pc interest while £142bn is held in accounts paying 0.25pc or less.

The FCA said it aimed to make financial advice more accessible to consumers in order to get more savers investing their money. 

Just 8pc of adults reported taking financial advice over the previous year, the FCA’s research found, which it said proved the established financial advice model does not suit the needs of consumers with simple investment goals or lower amounts of money to invest.

The average adviser charges 1.9pc a year to help clients manage their money, according to FCA research published in 2020, while many advisers will not accept customers with investable assets below £100,000.

The FCA plans to reduce the level of qualifications needed for firms to advise on some basic financial products such as stocks and shares Isas for clients with straightforward needs.

Sarah Pritchard of the FCA said: “Now more than ever, people across the UK should have access to useful and affordable financial products and services which can improve their quality of life and support the economy.

“These proposals are part of our work to deliver a consumer investment market where people can readily access support and firms aren’t deterred from providing it.”