Financial independence campaigners are famously investors, but how do most people in the UK invest?
I was involved in a Reddit thread (discussion? Thread? Whatever.) the other day. Someone had posted a story claiming that “40% of high net worth” people in the UK had invested in cryptocurrencies (which is possible but doubtful).
From that, the question naturally came up: “what does everyone else invest in?”
Well, I said that I’d do some research into it. Here’s what I’ve found.
TL,DR:
This is a long post filled with data porn and not actually much excitement. For those of you short on time, the summary is:
- Most people have no investments outside of pensions.
- Most people are good at having (some) savings.
- If you have a stocks and shares ISA, you’re the weird one of your friends. In my age group (early 30s), only 1 in 15 have a stocks and shares ISA.
- The data is a bit sketchy, but as at 2020 differences in age and income affect whether you’re likely to invest or not, but don’t seem to affect what you’re likely to invest in.
Where does the data come from?
A lot of this post is just data porn. You probably wonder where it all comes from.
My primary sources are from the Financial Conduct Authority and the Office of National Statistics. I’ll link to the sources as we go, especially if they’re a bit sketchy.
Investments held by the whole population
So here’s something odd: only 15% of UK adults hold a stocks and shares ISA, according to the 2020 Financial Lives Survey by the FCA. The 2022 survey is currently underway and the survey is only conducted every two years, so this is the most up-to-date information publicly available.
In fact, only 33% of UK adults hold an investment at all.
4% of that 33% includes peer-to-peer lending, innovative finance ISAs and crowdfunding. Now, it might be that some people own both equities and invest in crowdfunding (like me!), so there’s that.
The figures for all equities comes to 35% according to the survey, so presumably a large chunk of those overlap if the maximum is 33%. Still, that means two things:
a. If you’re reading this blog and are making your own investments, well done. You’re in the top third of UK adults for financial future planning.
b. The odds are that when you tell anyone – friend, colleague, family member – about your financial independence plan based on equities, they’re not going to have a damned clue what you’re talking about. 2 out of 3 people will think you’re mad for investing at all, never mind heavily for financial independence.
In fact, as that hypothesis has enough basis on data, I think it deserves a pull-quote!
2 out of 3 people will think you’re mad for investing
Me. I said that, based on the data above.
How much is everyone squirreling away?
The data in this section ends in 2020, since that’s the most recent (6 May 2022) publication of stats by the ONS on wealth in the UK.
The data comes in Excel, so I had to make a tasty-looking graph to show it off. [If you want to steal it for your own site, go ahead – but be kind and backlink!]
I don’t think the data here is particularly useful, but it’s a fun snapshot of what the country typically has stashed away. This includes properties like a residential home, so it’s basically a net worth survey.
Then most interesting thing for me is the choice of brackets that the ONS uses. Greater than £100k is quite a low-level cut-off, and I think that kind of tells you how rare £100k net worth is outside of pensioners.
I’m presuming that “income less than £10,000”, where the net worth seems oddly high (check out the over-65s) is because people are living on realised capital gains. I can’t really see how those aged 18-44 with less income that the personal tax allowance can have over £100k net worth otherwise. 9% seems quite high for it to be all due to inheritances.
People in the UK aren’t bad at saving…
77% of UK adults have a savings account of some kind, according to the FCA Financial Lives survey 2020.
The popularity breakdown looks sort of like this:
What kinds of asset people are holding – by age
Appendix A to the 2020 Financial Lives survey is a big table of data, broken down into things like age, protected characteristic and so on. It includes every financial product the FCA could think of, which will include insurance products.
I’m only interested in percentages of the whole population who have savings and investments. If you’d like raw numbers or want to looks at who has life insurance, the data is out there.
Below are some beautiful graphs showing what percentage of people within any age bracket in the UK holds each kind of savings/ investment.
What do people aged 18-24 typically have?
So what’s cool is that at least a third of young people have some kind of private pension provision. A lot of these people will be in their early career, higher education or some other training, so that’s not too bad.
These categories are mutually exclusive, by the way. So the 3% in investment funds means 3% of the population holding units in an investment fund outside an ISA.
In theory, someone who has maximised their £20k ISA allowance and buys units in a regular General Investment Account will be double-counted.
4% of young people have a stocks and shares ISA, and 6% have shares of any kind outside of an ISA. Makes you wonder if people did the research before opening a general investment account, or if people get confused by the ISA rules.
Despite the hype, only 3% of young people actually had crypto in 2020.
I thought the number (5%) that bought “real” assets was quite high to be honest. 1 in 20 young people deliberately holding jewellery, gold and suchlike? I wonder why that is.
Ages 25-34
Pension provision jumps up to 76% for this age bracket, which is reassuring.
More of these millennials seem to own equities of some kind, although still only 7% have a stocks and shares ISA. I guess that pensions are the majority of peoples’ investments at this age?
Ages 35-44
Midlife crisis, anyone?
Now we’re hitting the midlife population, but still only 16% have equities outside of a pension. It’s not on the chart, but 77% have a private pension of some kind at this age.
Property investment seems to be popular in the UK, probably due to the rapid capital growth since the 1990s. Almost as many investors own a property investment as those who hold a stocks and shares ISA.
I think crypto is the interesting thing for me here. Uptake has been consistent at 3% of adults in these charts so far, regardless of age. The 2021 bull market might have changed things, but we won’t know until the 2022 data comes out, probably in 2023.
Ages 45-54
Gen X are knocking on the doors of early retirement at age 55/58, but still only 23% of them hold equities outside of a pension and only 14% have a stocks and shares ISA. 82% have some kind of private pension provision. I sincerely hope the 18% have public sector pensions…
I suspect that part of this is due to the ISAs being fairly new. The investors amongst this generation didn’t grow up with the same account options we have now and I guess if you’re well established in how you want to operate then you’re unlikely to change plans just because of new account types.
Plus, if you’ve been an investor for a while, the movement of £20k from your epic investment pot might be trivial.
I guess there’s also a possibility that some of these are shares of private businesses, given the age and how advanced into careers Gen X are right now.
Ages 55 to 64
This is the last group I’m going to look at, purely because this is a blog about financial independence and retiring early – and after this age group we’d be looking at conventional retirees.
Now we’re seeing a big push into equities. It’s still smaller than I’d expected, with 32% of the soon-to-retire crowd holding equities investment outside of an ISA and only 23% taking advantage of the ISA tax-free savings.
I suspect that there’s quite a bit of overlap, too. I would presume that someone who maximises the £20k ISA allowance would be double-counted in the shares/equities and investment fund pots.
Common traits across the pre-retirees
I was surprised at how small the gilt/government bond portion is. Remember, holding any gilts outside of an ISA should have been enough to be counted in this percentage, but it’s consistently low.
Outside of private provision, making investments of any kind is clearly weird. Most people don’t have a stocks and shares ISA. In fact, if I were to speak to my colleagues at work or people my age in the park/ pub/ gym or wherever, only one in 15 would be able to relate.
Conclusion: investing is weird and most people don’t do it.
What kinds of assets people are holding – by household income
One of the things that came up in the Reddit discussion was about whether wealth made a difference, so I’ve split out the data by income, too.
I think the data here sucks. The top income band is just £50k, which is easily beatable by a couple who both work full time. It’s hardly as if we can work out what the genuine top earners are investing in. Still, I did what I could.
Less than £15,000 income per year households – what investments do people have?
So what’s interesting is that 19% of the poorest in our population have some investments.
Crazily, 4% own additional property.
I’m presuming that realised capital gains are excluded here. Capital gains are treated separately to income for tax purposes, so it would make sense that these low-income investors rely more on capital gains than income.
£15,000-£29,999.99
30% of households in this income bracket hold investments of any kind outside of pensions. That might sound high considering the relatively modest income level, but I think that pensioners will be a big chunk of this bracket. These will skew the data as pensioners will likely have owned these assets before retirement, when they were in a higher income bracket.
You can see that although the percentages of the population that invests is different, the proportions of assets that those investors hold aren’t markedly different to the lowest income bracket.
£30,000-£49,999.99
35% of households in this income bracket have investments.
Nothing significant to remark here – it looks a lot like the previous two, doesn’t it? Let’s see if the top bracket makes a difference
£50k plus household income
Well, that was less dramatic than hoped. That said, 46% of households with an income of over £50,000 hold investments.
You can see from the tree maps that, to be honest, it doesn’t seem to matter how much money investors have – their preferences and asset allocations are likely to be the same.
Final thoughts
The obvious conclusion here is that while a lot of the UK population is happy to save, they’re at the mercy of inflation. Given that CPIH (Consumer Price Index, plus Housing costs) is up 7.9% since last year, the majority of the population is in fact getting poorer at a rapid rate.
This should emphasise the need to invest your money, or at least get it out of cash into, erm, pretty much anything else. Within reason. A YOLO play on SAFEMOONELONCOIN or whatever is obviously Not A Good Plan. However, a suboptimal but sensible investment strategy is still a great play compared to cash.
I have to wonder if the COVID-19 lockdowns impacted this data. If it did, would that be a temporary or permanent change?
What was interesting is that the balance/ proportion of what people invested in didn’t change much with age, which leaves me with one final thought: does this mean that your average member of society stops their financial education early in their lives?
If they do, then a significant risk to personal finance is a change in the norm. When bond yields fall, economies stop their endless growth and housing actually equalises, most people won’t adapt. Which is why this blogger is always trying to look at different options and read books on new investing ideas, even when I don’t agree with them. Complacency is its own risk.
