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Obsession over property, cash costs UK trillions: abrdn

Obsession over property, cash costs UK trillions: abrdn

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

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

UK investors are in love with property

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 in cash. The findings were based on analysis of government accounts from G7 nations.

This imbalance has inspired abrdn’s ongoing ‘Savings Ladder’ campaign.  It calls on the British government to spearhead a culture that gets people on the ‘savings and investing ladder’, and to keep climbing.  This is 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%).

Why property investment is making Britain poorer

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 abrdn argues in its 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. The UK needs 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,” said Meyer.

UK stocks missing out on trillions

UK adults hold c.£14tn in total assets.  The analysis suggests that if they 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.  McCann says he has been particularly struck by the prominence of the FIRE movement –  Financial Independence Retire Early.

This issue is far more complex than being country-specific, and heritage jostles with the needs and wants of our time.  But 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.  Examples include 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 compares this with the UK’s attempts to inspire a share ownership culture, including 1986’s ‘Tell Sid’ television campaign.

British investors have a relatively low risk tolerance

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 Britain 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 at 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.”

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