UK retail investment in equities lowest in the G7 and ‘streets behind’ the US, as abrdn urges action to address risk culture and boost capital markets in new report

• Outside of pensions, UK retail equity exposure as a percentage of wealth is the lowest in the G7, according to abrdn analysis
• UK adults are focussing wealth towards property and cash while counterparts in the US and other developed countries are much more likely to invest
• Levelling the playing field with the US could inject up to £3.5tn into capital markets over the long-term, abrdn estimates
• The UK needs a ‘big bang’ moment, such as scrapping stamp duty on shares, to get people investing
• The findings come from abrdn’s new report – ‘Tell Sid and tell him again: Lessons for the UK from overseas in how to encourage healthy retail participation in capital markets’

UK capital markets are being held back by low levels of retail investment, as a new abrdn report shows the extent to which wealth is being skewed towards property and cash compared with some other G7 countries.

Looking at what percentage of people’s wealth is held in different kinds of assets outside of a pension, abrdn found that, in the UK, adults hold the smallest amount in equities and mutual funds of any G7 country (8%).

Much British wealth outside of a pension is tied up in property (50%) and cash (15%). The UK has the third highest proportion of wealth held in property and the third highest proportion of wealth held in cash. The findings were based on analysis of government accounts from G7 nations.

This imbalance has inspired abrdn’s ongoing ‘Savings Ladder’ campaign, calling on Government to spearhead a culture that gets people on the ‘savings and investing ladder’, and to keep climbing - much like we see with Britain’s engrained ‘property ladder’ culture.

One of the starkest comparisons is with the US. UK savers hold double the amount of wealth in property than their American counterparts (50% of their total assets vs 26%) and are streets behind on investment wealth. In the US, outside of a pension people hold almost four-times more of their wealth in investments compared with the UK (33% vs 8%).

Xavier Meyer, CEO Investments at abrdn, said: “Housing accounts for around half of household wealth in most European counties, reflecting a more concentrated asset allocation compared to the US. But when it comes to investing in equities outside of our pensions, the UK is streets behind many other developed countries, and particularly the US.

As we argue in our report, establishing a national culture of long-term share ownership will be crucial if we want to ensure healthy capital markets and shore up individuals’ long-term savings. We need a virtuous circle of good regulation, good products and both institutional and retail participation. Getting the UK investing is a critical challenge for society and, as an asset manager and investment platform owner, we aim to be part of the solution.”

How people's personal wealth is split across asset class, by country

Based on abrdn analysis of data from individual countries’ financial accounts. Figures are the latest available data, released in 2023. Some of these data points are accounted slightly differently across countries, so we should be wary of looking at small differences and making strong conclusions. When comparing pension data, it is worth remembering that there are variations in state pension benefits.

UK adults hold c£14tn in total assets. abrdn analysis suggests that if UK adults held as much of this wealth in investments as their US peers (33%) it could unlock up to £3.5tn for capital markets, including UK stocks.

James McCann, Deputy Chief Economist at abrdn, said: “Investing culture is a very real part of American life. As an economist who has lived and worked in both the UK and the US, I have seen first-hand the stark differences in attitudes between the two countries around participating in financial markets.

Equity ownership is more common in the US, where households hold a much greater share of their wealth in stocks and shares compared to their UK peers.

Culturally, there is a greater focus on using financial markets to build financial independence in the US. I have been particularly struck by the prominence of the FIRE movement – Financial Independence Retire Early.”

Lessons from the US – ‘Tell Sid’ versus ‘Own Your Share’

While this issue is far more complex than being country specific, and heritage will jostle with the needs and wants of our time, there are tentative learnings that we might take when we compare investing rates amongst populations.

The report also looks at educational and cultural factors that may have helped to inspire America’s strong retail participation in stock markets – such as the New York Stock Exchange’s ‘Own Your Share’ campaign that ran from 1954 to 1968 and, in more recent times, the role of social media platforms and popular culture. It then compares this with the UK’s attempts to inspire a culture of share ownership, including the one-year ‘Tell Sid’ television campaign of 1986.

Separate research, released as part of abrdn’s Savings Ladder Index earlier this year, suggests that one of the big factors holding Britons back from investing is their low risk tolerance. It found that many UK adults (55%) have a “low risk tolerance” when it comes to investing, which would see them holding their savings mostly in cash or bonds.

The findings come as the debate continues about how to inject new life in the UK capital markets.

Richard Wilson, CEO, interactive investor, and COO, abrdn, said: “The single biggest, and most simple, near-term boost would be to scrap stamp duty on UK shares – a ‘big bang’ moment to get Britian investing and a vote of confidence in UK PLC.

If stamp duty wasn’t a barrier to investing, why is it that we are losing systematically to the markets that don’t apply it? Sweden, famed for its personal investing culture, applied a Financial Transaction (FTT) Tax of 0.5% between 1984 – 1991. Having removed FTT, the market has grown and the burgeoning activity in Swedish capital markets is enough to make the rest of Europe blush, if figures compiled by New Financial earlier this year are anything to go by.”

Verona Kenny, Chief Distribution Officer, abrdn adviser, said: “When I first moved to the UK in 2003, I was surprised just how far behind the UK’s pensions industry was compared with my home country of Australia.

While things have moved on since then, being automatically enrolled into a pension or a superannuation scheme is not an active choice to invest but it does begin everyone’s investing journey. If we want people to invest more broadly, then we need to get them engaging with the topic and with their financial future.

No one country has solved this problem completely. But Australia has taken substantial steps in the right direction, as seen through the Quality of Advice review. In the UK, the Financial Conduct Authority is looking to do a similar thing with its Advice Guidance Boundary Review. Under these proposals, financial services companies would be able to nudge people towards good decisions – called ‘targeted support’.

By getting people engaged with their personal finances and helping them to make what are critical financial decisions, this should, in theory, boost confidence, improve knowledge and get more people saving and investing for the long-term. There is a lot to do, and it is the responsibility of everyone in our industry to improve consumer engagement, at abrdn we are doing all we can to achieve this goal.”

Ends

Media enquiries

Jemma Jackson

Head of Campaigns and Media, abrdn

jemma.jackson@abrdn.com

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Notes to editors

About abrdn:

abrdn is a global investment company that helps clients and customers plan, save, and invest for the future. Our purpose is to enable our clients to be better investors. 

abrdn manages and administers £506.7bn of assets for clients (as at 30 September 2024).

Our strategy is to deliver client-led growth. We are structured around three businesses – Investments, Adviser and ii – focused on the changing needs of our clients.

The capabilities in our Investments business are built on the strength of our insight – generated from wide-ranging research, worldwide investment expertise and local market knowledge.

Our Adviser business provides financial planning solutions and technology for UK financial advisers, enabling them to create value for their businesses and their clients.

interactive investor, the UK’s second largest direct-to-consumer investment platform, enables individuals in the UK to plan, save and invest in the way that works for them.