Abrdn’s ‘The Savings Ladder: A Manifesto To Get Britain Investing’

The British economy is in many ways built on the idea of home ownership as the route to financial stability. It’s an impulse that successive Governments have harnessed, from stamp duty holidays to mortgage support schemes – and property may well prove another key battleground in this year’s UK election. But what can be learned from the nation’s devotion to the ‘property ladder’ that can be applied to another critical issue that society faces – the savings gap?

With the state pension age increasingly edging up, retirement provision resting more on the individual, and increasing numbers facing housing costs in retirement, abrdn is pointing out the growing need for the nation to embrace a ‘savings ladder’ culture where saving, investing and pensions become a much bigger part of how people view their finances throughout their lives.

With pressure on how far governments can go to support an ageing population, retirement pots will increasingly fall far short of what people need and deserve.

stephen bird, ceo, abrdn

In an election year, and ahead of the UK spring Budget, abrdn has published ‘The Savings Ladder: A Manifesto to Get Britain Investing’.

With a series of policy recommendations aimed at helping to foster a culture of saving and investing, the report also contains new research exploring the gap in attitudes towards property as the dominant consideration in people’s financial lives compared to their saving and investing habits.

While pension tax relief and employer contributions add up to ‘free money’, only one in six (16%) of UK adults think pensions are a better investment strategy than property. Almost half (48%) favour property, with the rest either undecided or not persuaded on either.
Only a fifth (19%) of the British public hold shares outside of their pension, and four in 10 of these don’t use an ISA. That extrapolates to 3.4 million retail shareholders with no tax shelter. When it comes to pooled funds, just under a fifth of investors don’t use an ISA.
Outside of pensions, the most common ways people save and invest includes current accounts (75%) and cash savings (72%), with a considerable drop to premium bonds (26%).
When people do invest, they are almost twice as likely to own direct shares than they are pooled funds (19% versus 11%), highlighting the importance of considering portfolio diversification.

The research was conducted for abrdn by Opinium Research amongst 2,000 UK adults between 29 December 2023 – 3 January 2024.

Policy recommendations

Most imminently, abrdn is calling for the government’s planned advertising campaign around the NatWest share sale to be broadened out to encourage tax efficient investing as a general aspiration that needs to be encouraged across society. abrdn has also set out the need for a radical reimaging of what minimum pension contributions should look like, with minimum contributions on defined contribution schemes ideally doubling over time.

The urgent need for UK financial literacy levels to be measured, paving the way for better policy, better funding, better long-term outcomes and a shake-up of financial education in schools is also called out. As highlighted in their new research abrdn has also identified the need for ISA simplification, given the number of retail shareholders not utilising this allowance. Finally, the firm is demanding that stamp duty on UK shares and investment trusts should be scrapped.

Stephen Bird, CEO, abrdn, says;

“With pressure on how far governments can go to support an ageing population, retirement pots will increasingly fall far short of what people need and deserve. The NatWest share sale could be a once in a generation opportunity for government to start a broader campaign.

“Just as the ‘property ladder’ concept has crept into cultural consciousness, we need to develop the same enthusiasm for a ‘Savings Ladder’ where people can see the benefits of starting early, building their pot, and investing to grow it. Minimum contributions into defined contribution pensions still need to radically increase, and ideally double. That’s not easy, but nor is an ever-increasing state pension age.”

“As an asset manager who also has a significant footprint in the retail and adviser investment platform space, it’s certainly in our interest to see more people plan, save and invest for the future, but it’s also a critical challenge for our society. If we can encourage more people to get on the Savings Ladder, that’s good news for everyone.”

Commenting on abrdn’s Savings Ladder Manifesto, Julia Hoggett, CEO, LSE Plc, says;

“The development of a greater saving and investing culture in the UK, and having more straightforward ways to save and invest, are critical to people up and down this country securing the futures they want for themselves and their families.

“Ensuring that the UK has the right frameworks and products to provide savers with the returns that meet their needs and companies across the country with the funds they need to grow (and in turn to employ those same savers and their families) is a critical project. I welcome abrdn’s report which shines a straightforward light on a problem statement and solution that can seem complex, but in its intent is both simple and essential.”

You can read our full manifesto and recommendations here.