UK households are saving more of their disposable income, but those savings are not finding a productive home, with consequences for both retirement prospects and the UK economy. Supporting consumers on the saver to investor journey could create a transformative virtuous circle.
- Since the pandemic, savings behaviours in the UK have changed, with households setting aside more of their disposable income than even high saving nations like Germany. However, very weak business investment suggests these savings aren’t connecting with domestic opportunities.
- Low business investment is creating all manner of macro problems – most importantly, persistently weak productivity. This is adding to pressure on government finances and compounding the fiscal challenge of supporting an ageing population.
- Our newly commissioned research into attitudes to saving and investing suggests UK households are over-reliant on cash and house price appreciation, while their expectations of the role of the state in their later life may be unrealistically high.
- People start planning for retirement too late in life, lack financial confidence and are risk averse. They are unsure where to find help when planning for the future, with many turning to family and friends rather than seeking professional advice. This leads to sub-optimal investment choices and wealth outcomes.
- Those in the wealth management industry can play an important role in helping people to make better choices for their own futures, in turn strengthening the outlook for UK growth.
The macro backdrop
The UK economy faces a persistent productivity challenge. Could the savings households have begun to accumulate hold the answer?
Savings behaviours have changed…
Before the pandemic, the UK, like the US, was a nation of consumers, with savings rates chronically low. That picture has changed. By our calculations, UK households have put away £870 billion since the pandemic, despite the challenging and persistent cost of living pressures they have faced over the intervening years.
…but savings do not appear to be driving investment
Global capital markets provide households with a range of options when deploying their savings. But one might have expected at least some of the savings to have flowed to UK companies, providing more capital for businesses to invest. However, business investment remains very low, suggesting savings are not connecting with worthwhile opportunities. Low investment is likely to be a contributory factor in the UK’s stubbornly weak productivity.
Worsening pressures on government finances
Productivity makes everyone happier. It secures real wage growth for households, real profits for businesses, and it certainly makes a chancellor’s life easier. Continual low productivity has been one of the key challenges to UK growth and therefore to government receipts.
The Office for Budget Responsibility (OBR) anticipates some recovery in productivity in the coming years. However, even if this materialises, government debt is on an uncomfortable path. If productivity stays as low as it has been in recent years, the OBR believes debt is heading towards over 600% of GDP.
Breaking the cycle
A lack of investment creates a vicious circle in which UK households face uncertain futures, the UK economy flatlines and the government struggles to provide public services. And yet the picture could look very different if more of those household savings found productive homes.
To understand what might break the cycle and put both household and government finances on a more secure path, we commissioned some research into long-term saving attitudes and behaviours among the UK population.
The savings picture
The survey, conducted by Opinium in April and May 2025, identified a confluence of beliefs and attitudes regarding the choices households are making. It provides an understanding of why people are saving but not investing.
Risk aversion and overreliance on cash
One of the main findings was a concerning attraction to cash as a means of long-term saving. Of course, some savings in cash are needed to meet emergency payments, but beyond that level, households are missing out on the higher returns available if they invest, and are likely to struggle to keep pace with inflation.
More respondents expected cash to deliver better long-term returns than stocks, despite the evidence of history. When questioned further about what made cash an attractive investment vehicle, the biggest driver of this belief was a preference for easy access, while more than a quarter of those who favoured cash said they were afraid of losing money if they invested in stocks or other assets.
This goes some way to explaining why half of the £870 billion saved since the pandemic is sitting in cash or cash-like deposits, despite the corrosive effects of inflation over this period. Had those savings gone into a global portfolio of stocks – for example, the MSCI All-Country World Index – they would have returned 39% in real terms. In cash, they have lost 9%.1
The survey also revealed that most respondents were unsure of what would deliver the best returns when saving for retirement, with just over a quarter saying they didn’t know.
Overreliance on housing
Another factor emerging strongly from the survey is that past experience has caused consumers to place too much reliance on housing wealth. In the UK, property is a significant component of overall wealth, accounting for 48% of household assets. This compares with just 28% in the US, where stock and mutual fund ownership is significantly higher.
The past two decades have been a period of extraordinary house price growth, contributing to a mindset that housing is the best way to accumulate wealth. Past gains are being extrapolated into future expectations, with almost 60% of survey respondents expecting house prices to rise by more in the next 25 years than the 200% they have in the past 25 years.
Over the long term, house prices should rise broadly in line with the average earnings of the population: after all, a house is only worth what someone is able to pay for it. This relationship broke down over the past quarter century for two reasons. First, deregulation of the banks and lower interest rates allowed people to borrow more for a given level of earnings. Second, very low housebuilding and relatively high migration created a supply-demand imbalance that forced people to devote more of their earnings to buying or renting a home.
The tide has now turned. Regulation has focused on tying lending back to earnings, rather than to the value of the house, while interest rates look set to remain higher, limiting borrowing. And correcting the supply-demand imbalance is a cornerstone of the current government’s growth strategy, with very ambitious homebuilding targets now in place.
Households are thinking about retirement too late
The pressures on young people to pay off student loans and buy their first homes challenge their ability to put money aside for retirement. However, of the younger cohorts with no plans to think about retirement, a half said this was because it is too early to think about it. Among those who were saving but leaving their savings in cash, some stated they didn't need to think about long-term returns because they don't plan on retiring for a long time.
That means they are missing out on the sharpest tool in an investor’s armoury: the time to benefit from compounding and take advantage of the higher potential returns available from higher risk assets.
For example, based on our assumptions, an individual who starts investing in stocks at the age of 25 would have to put £34,000 less into their investment pot to make £100,000 by the age of 67, compared to someone who starts investing at the age of 50.2
Consumers lack the knowledge and confidence to make decisions about deploying their savings
The mood of the 2025 Opinium survey referred to previously can be summed up simply as ‘Saving is good, investing is scary.’ Numerous findings point to a lack of confidence about how much to save and where to save it. Most dishearteningly, just 14% of the UK feel very confident they will have the standard of living they want in retirement.
Family and friends are the main source of financial advice. Just 17% use a professional financial adviser, while one in 10 are turning to social media or ‘finfluencers’, rising to a quarter for those aged 18-27.
It is also evident from the responses that cost of living pressures are inhibiting people’s ability to save. Therefore, making every pound of savings work as hard as possible is vital. The right support is essential to closing the knowledge gap.
High expectations of the state
Suboptimal investment choices today will result in lower levels of private wealth and increased pressure on the state to provide support in the future. Indeed, the survey highlighted widespread optimism about the role the state will play in supporting people in retirement. Expectations were particularly elevated in higher income brackets and among younger cohorts, with 40% of those aged 18-34 believing the state will be equally or more generous when they retire compared to today.
However, government finances are already under pressure, and an ageing population will only compound the challenge. At different stages of their lives people pay more into or draw more from the state, on average. Those aged 80 and above are the biggest beneficiaries of state support – and this cohort is growing fast.
A productivity miracle might help future chancellors live up to the expectations of current and future retirees. If not, governments will continue to face difficult decisions about how to spend and meet the needs of an ageing population.
Conclusion: Supporting the saver to investor journey could be transformative for both individuals and the economy
UK households have taken an important step for their own futures by beginning to save more of their disposable income. But cost of living pressures mean this isn’t easy and – perhaps unsurprisingly for a nation new to saving – the cash that is set aside is not being used to the advantage either of households themselves or UK PLC.
Instead, widespread misapprehensions about saving and investing are keeping money on the sidelines. Consumers are risk averse, underconfident and unsure where to turn to for help – so they delay thinking about retirement and rely on the value of their homes and on state support that successive governments may struggle to maintain. Addressing these challenges of financial confidence and education could get more people taking advantage of the returns available from stocks and shares, earlier in life, putting households on a path to a more secure future.
The consequences at the macro level are equally significant. While it wouldn’t be sensible for the government to mandate investments to be solely deployed domestically, policies that support the outlook for growth in the UK would naturally encourage some of that capital to support UK business investment. This would reduce the pressure on the state to meet the needs of an ageing population, freeing up government funds for further investment. A healthier UK economy, in turn, benefits households themselves: a genuine win-win.