Is how we manage our money dictated not just by how much we have, but also by which country we grew up in?
In light of the UK’s looming retirement savings crisis, and the need to boost domestic capital markets, we set out to discover which countries have the highest levels of equity ownership and what we might learn from them.
Following an in-depth analysis of national financial accounts for the G7 countries (the UK, the US, Germany, France, Italy, Japan and Canada), we found that UK adults hold the smallest percentage of their wealth in investments (8%). Instead, the vast majority of UK adults’ wealth is tied up in supposedly ‘lower-risk’ assets such as property (50%) and cash or cash-type products (15%). The UK has the third-highest proportion of wealth held in property and the third-highest proportion in cash.
How people’s personal wealth is split across asset classes, by country:
|
|
Housing | Pension fund | Cash (e.g. currency deposits and money-market funds) |
Debt securities (e.g. bonds) | Equities and mutual funds | Life insurance and other annuities | Other |
|---|---|---|---|---|---|---|---|
| UK | 50% | 19% | 15% | 0% | 8% | 5% | 3% |
| USA | 26% | 17% | 10% | 3% | 33% | 1% | 9% |
| Germany | 57% | 6% | 16% | 1% | 9% | 6% | 6% |
| France | 52% | 12% | 13% | 0% | 13% | 1% | 9% |
| Italy | 46% | 9% | 14% | 2% | 19% | 0% | 10% |
| Japan | 37% | 16% | 35% | 1% | 9% | 0% | 2% |
| Canada | 43% | 15% | 11% | 1% | 22% | 0% | 8% |
Based on abrdn analysis of data from individual countries’ financial accounts. Figures are the latest available data, released in 2023.
This imbalance inspired abrdn’s ongoing ‘Savings Ladder’ campaign, in which we call on the government to spearhead a culture that gets people on the ‘saving and investing ladder’ and then encourages them to keep climbing – much as we see with Britain’s engrained ‘property ladder’ culture.
Our own consumer research found that almost half of UK adults think that property is a better long-term investment strategy than a pension, with a quarter undecided and 10% choosing neither option. [1]
The UK isn’t the only country with a significant skew towards supposedly lower-risk assets. In Germany and Japan, people are also likely to hold a significant amount of their wealth in cash and/or property, and little in investments.
In the US, by contrast, wealth is much more skewed towards investments – and far less, proportionately, is held in property than in most other G7 countries.
Financial literacy encourages a retail investing culture
The UK’s low levels of financial education could well play a role in Britons’ low levels of appetite for holding stocks and shares, and their preference for property.When looking at the origins of America’s much more ingrained retail investing culture, it’s hard to overlook the public-relations campaign that ran for almost 15 years in the mid-20th century, called ‘Own Your Share of American Business’. The British equivalent, ‘Tell Sid’, by contrast, was a brief TV campaign in 1986 that focused on a single stock.
The US campaign landed two powerful messages that would help to ingrain a long-term investing culture in American society:
Buying shares can help people meet their or their family’s life goals, such as saving for retirement.
- Investing is a form of patriotism and is part of a virtuous circle, whereby funding domestic companies improves the economy and, in turn, everyone’s prospects.
Changing the British public’s attitude will take more than a simple publicity campaign. But arguably policy changes alone will also not bring about the cultural shift that the UK needs. Measures to boost financial literacy, supported by a sustained effort to educate the UK public in the way the US did, could go a long way towards changing attitudes.
Stamp duty on shares a key barrier
If the UK was able to encourage a healthy culture of retail investing – how could it ensure that domestic stocks benefit from that growth in investment?
Richard Wilson, COO of abrdn and CEO of interactive investor, believes that scrapping stamp duty on UK shares would also provide a ‘big bang’ moment to get Britain investing (and investing in British companies). abrdn research bears this out: over two-fifths of the British public say they would be more inclined to buy UK shares if they did not have to pay 0.5% stamp duty.
We should also ensure that the process of investing is as simple and frictionless as possible. The UK’s cumbersome ISA system has arguably been a big barrier here. By simplifying this, the government could create a smoother, clearer path for first-time investors.
No-one has all the answers. But with capital markets and public finances in a precarious state, the UK must face up to the question of how it can encourage a culture of long-term investing among the public. In doing so, there is much we can and should learn from overseas.
[1] Research conducted for abrdn by Opinium Research in Q1 2024 among 2000 UK adults, weighted to be nationally representative.