Millions with cash savings to get recommendations from banks on investing

British people with cash savings in their bank accounts will be contacted by finance firms recommending investing options under a new government-backed support scheme to help people grow their wealth.

At present, fewer than one in ten people (9 per cent) receive paid-for and regulated financial advice tailored to their circumstances and needs. Millions of others fall into the bracket of not wanting or being able to afford financial advice, but could still benefit from such advice.

Targeted support is intended to be the bridge step for that large group of Britons, who already have a cash safety buffer behind them and who could earn more with their extra money over longer periods if they invested it. The cut to cash ISA limits announced in the Budget is part of the same push to encourage people to consider investing.

Under the new plans, banks and other financial establishments, such as the Financial Conduct Authority (FCA), regulated investment platforms or wealth managers, will now be able to contact customers and offer help to show how they might be better off with some investment products.

The scheme is still subject to legislation, but The Independent understands the government is on track to complete this in time for the new tax year in April.

Sarah Pritchard, deputy chief executive of the FCA, claimed the move would be “game-changing”. “It means millions of people can get extra help to make better financial decisions,” she said. “We also hope it will build greater confidence to invest. While investing will not be right for everyone, we know people in the UK invest less compared to the EU or US.”

Some consumer groups have shown concern that, because recommendations will not be personalised, there is a risk that people are guided towards or choose the wrong options. But the FCA is understood to believe it is a bigger risk that people continue to get no support or guidance at all.

Around one in ten UK adults have no savings at all, said the regulatory body. But around seven million UK adults have £10,000 or more in savings, according to their research.

The data also suggested a significant number of people who were in a financial position to invest did not do so because they were uncertain or concerned about their options.

Why does the government want more people investing?

Ministers believe that developing a greater investment culture across the UK will drive long-term wealth and help economic growth.

Over longer periods of time, investing returns tend to be better than what your money can earn in interest while sitting in savings accounts.

However, that does come with more volatility – the potential for ups and downs – along the way, meaning at some stages your investments might be worth less than their original value.

This, along with negative language around investment products and a general lack of early financial education for Brits, has put many off getting started.

What information can be given with targeted support?

Companies will not tell you what shares to buy or give any other details about your specific circumstances.

The idea is that they’ll be able to explain properly how to lower or mitigate risk, how cash from a savings account might be better allocated or spread out and why any proposals they offer might put consumers in a better financial position. They will also have to confirm and explain this to the regulator beforehand.

”Commission [for providing targeted support] is banned, we’re expecting most firms that do provide it, subject to our regulation, will be providing it free of charge to consumers,” Ms Pritchard added.

How do you get started investing?

UK-based adults get a £20,000 ISA allowance each year. One product within the ISA family is a stocks and shares ISA, or investing ISA. Any gains made from investments within one (like dividends or share price increases) are tax-free, so opening one of these should be the starting point for most people.

Many banks or finance apps offer different versions, as do specific investing platforms, so it’s important to choose one which suits your needs based on fees, usability or experience. Some offer ready-made portfolios which you can simply choose according to how much risk you want to take.

For more information on starting to invest, you can read here.

What do industry experts say on the proposals?

“Targeted support will allow millions of people across the country to supercharge their savings and invest with confidence,” said Lucy Rigby KC MP, economic secretary to the Treasury. “This extra support for savers has the potential to be transformative for retail investment in Britain.”

Chira Barua, the chief executive of Scottish Widows, called it “an important step in the process to close the advice gap and financially empower millions,” while debt charity StepChange’s CEO, Vikki Brownridge, said “targeted support creates a structured way for firms to guide people toward suitable products and services to meet their financial needs.”

“Millions of people on lower incomes now engage with financial services—through workplace pensions or savings—but often lack the confidence or support to make good choices,” she added. “In future, we’d like to see targeted support go further to help build the long-term financial resilience of people currently underserved by the market.”

Holly Mackay, founder of consumer finance website Boring Money, called targeted support “the most exciting regulatory change in a decade” and said it could change the nation from “an environment of millions being perfectly wrong instead of approximately right.”