New research shows the importance of savings habits in achieving a shift within UK consumers towards a more investment-oriented mindset, as the UK prepares to roll out new ‘targeted support’ rules.

It finds savings will play an ‘indispensable role’ in supporting an emerging nation of investors but also reveals significant confusion around when to save and when to invest.

The report highlights that cash savings remain popular not only because they provide security, but because their simplicity makes them the preferred choice for goals such as saving to buy a property, paying for a holiday or saving for retirement.

‘A Nation of Investors: The Indispensable Role of Savings’ is an independent report by the London Foundation for Banking & Finance, supported by Leeds Building Society, which explores the broader savings and investment landscape and the intention of building a nation of investors in the UK.

It shows that many consumers misjudge the level of risk involved in different products, with some viewing investments as suitable for emergency funds or short‑term goals, while others see cash savings as appropriate for long‑term objectives.

These gaps in understanding underscore the importance of building financial capability and confidence alongside greater promotion and access of investment opportunities.

From April 6^th, changes to regulation will usher in ‘targeted support’, a new form of financial help that aims to sit between general guidance and full financial advice. Targeted support will allow authorised firms to give suggestions to consumers with similar characteristics, without giving full advice which can be costly for many consumers.

The changes are being introduced alongside a widescale promotional campaign funded by retail investment firms aimed at increasing the take up of investments.

Leeds Building Society has more than 750,000 savings members and advocated last year to protect Cash ISA allowances after its members voiced their concerns over the impact of proposed changes.

The research, carried out among a nationally representative sample of 1,000 people^[i], indicates that gaps in understanding can influence when people choose to save versus when they might consider other options for long-term goals.

While 59% of people say they feel confident managing their money, only 26% were able to answer the report’s financial capability questions ^[ii]correctly. Strikingly, almost half (46%) of those with low capability scores still believe they make decisions confidently.

Key findings from the report include:

• Consumers are potentially exposing themselves to too much or too little risk, with widespread misunderstanding of the differences between saving and investing: 22% said investments were suitable for emergency funds and 31% for short or medium-term goals, while 23% identified cash savings for long term goals.
• Only just over half (51%) of consumers with more than £10,000 to invest described their savings as “significant”, emphasising the need for financial choices to be based on individual circumstances not illustrative thresholds.
• In an uncertain world, the security provided by savings gives psychological safety for consumers: a third of consumers with “some” or “significant” savings are put off investing by global instability, and high-profile political figures such as Vladimir Putin (net 30% unfavourable) and Donald Trump (net 26% unfavourable) make them less likely to invest.
• Consumer preferences are strongly influenced by the purpose of their savings, with many saying they are drawn to cash savings for their accessibility (49%), predictable returns (46%) and simplicity (45%), which in turn help to reduce financial stress. There were major gaps in understanding of concepts which are key to good financial security: 45% of respondents did not know that buying a single company’s stock is riskier than a diversified fund and 47% of respondents did not understand that money loses value when inflation outpaces interest rates, despite inflation dominating the headlines in recent years.
• Consumers are generally open to receiving financial recommendations based on “people like me” (48%) but large numbers were neutral on topics around segmentation and how well financial providers knew them, suggesting these are areas of focus for providers of targeted support.
• The need for trustworthy information from regulated financial guidance channels is high: 61% of respondents said they distrust social media and 48% are put off investing by the fear of scams.

As the drive towards building a nation of investors gathers pace, the report’s findings highlight the risk of overlooking the enduring importance and popularity of savings, which can provide the security that many people need before they can consider investing.

It says if targeted support relies on a consumers’ self-reported readiness, then it alone may not close the gap between savings and investing.

Andy Moody, Chief Commercial Officer at Leeds Building Society, said:

“Cash savings are the backbone of achieving good financial outcomes and they remain extremely popular. This research shows why Cash ISAs and cash savings in general must play a central part in any shift towards building a nation of investors in the UK.

“Savings need to exist alongside greater investing to help people maintain financial resilience, achieve their money goals and withstand the volatility of the markets. We must ensure the role of cash savings within the mix of financial opportunities is treated fairly and we build people’s financial capability to manage the risks and opportunities properly.”