Mission to make us a nation of savvy savers

THE MONEY watchdog is today launching a major new drive to make us a nation of savvy investors. The Financial Conduct Authority (FCA) has pledged to slash the number of savers with nest eggs wasting away in poor-paying savings accounts.

At the same time, the regulator promises to halve the number of investors ploughing money they cannot afford to lose into highrisk investments.

As part of this, it will launch an £11 million campaign to help naive investors make better-informed decisions with their money and protect them from losses.

Sarah Pritchard, executive director of markets at the FCA, told Money Mail: ‘Investors have never had more freedom — technology has democratised the market, new products have become available, and people have better access to their life savings than before.

‘But that freedom comes with risk. We want to give consumers greater confidence to invest and to help them do so safely, understanding the level of risk.

‘We are not saying investing is right for everybody but we want those who could benefit to have the confidence to do so.’

The watchdog says nearly 8.6 million of us are holding more than £10,000 in cash savings accounts that could bring much greater rewards if invested.

FIGurES from investment firm AJ Bell show that £10,000 saved in a cash account paying 0.5pc will be worth £11,614 after 30 years. Yet the same sum invested, assuming a 5pc annual growth, would be worth more than £43,000.

The FCA has also pledged to cut the amount of money lost to investment scams facilitated by firms it regulates. Consumers lost £570 million to investment scams in the 2020/21 financial year — three times what was lost in 2018.

Some £1.6trillion has been invested by consumers through 6,000 wealth managers, advisers and investment platforms. But the FCA says 45pc of those who had invested without advice did not understand that they could lose money.

The FCA says 6pc of investors put money into more high-risk products during the pandemic.

High-risk investments could include unlisted stocks, foreign currency trading or volatile cryptocurrency. Ms Pritchard says young people were twice as likely to invest in high-risk products, adding: ‘We are concerned that some of those investing, particularly in high-risk products, don’t understand the risks.’

The FCA is also working with the Government to address concerns over financial promotions.

Money Mail has warned of the dangers of celebrities and sports stars promoting high-risk investments such as cryptocurrency or foreign exchange trading to fans.

Laura Suter, head of personal finance at AJ Bell, says: ‘The pandemic has boosted lots of people’s savings pots but most of it is idling in current accounts getting paltry returns.

‘Anything the regulator can do to make investing for the first time easier and to allow providers to offer more hand-holding should be applauded. If 1.7 million people, each with £10,000 sitting in cash, all invest their money then collectively they could make £9.8billion extra in returns over ten years.’

And she adds: ‘The pandemic has introduced more people to investing for the first time, but it has also led to a spike in people investing in risky assets, such as forex trading and cryptocurrency, without fully understanding the risks involved.

‘The worst outcome for someone in their first foray into investing is to put their money in something too risky and wipe out a large chunk of their savings.’