Two thirds (63%) of Generation X are holding their savings in cash, putting them at risk of losing out on better returns and diminishing value in real-terms, says Just Group.
The retirement specialist’s GenVoices survey found that 63% of Generation X (those born between 1965 and 1980) have a cash savings account such as a cash ISA or easy access savings account.
The average amount held in cash savings is £34,114, with nearly one in 10 (8%) of this group holding over £100,000 in cash. There were regional variations, with those living in London holding an average of £54,508 in cash, with one in six (16%) holding over £100,000 in cash. At the other end of the scale, those living in Scotland had the smallest amount of cash savings at £21,844.
Just Group said the significant volumes of cash savings held by Generation X reflect a reticence to invest in stocks and shares. Nearly half (46%) of this generation believe that owning stocks and shares is ‘too risky’ for them, compared to 27% who disagree.
The result is that less than a third (32%) of Generation X with cash savings accounts also hold personal investments such as stocks and shares or mutual funds.
Yet, 84% of those with cash savings accounts do have a pension which is likely to be invested in a range of non-cash assets, suggesting a potential psychological barrier between actively choosing to invest in stocks and shares themselves and passively allowing their money to be invested for them.
The data comes amid growing speculation that the Chancellor could reduce the annual tax-free cash ISA allowance from £20,000 to £4,000 to stimulate greater investment in the stock market.
Stephen Lowe, group communications director at Just Group, said: “Our research into Generation X demonstrates the significant cash reserves that many savers are holding with hundreds of thousands of people in this generation stashing away more than £100,000 in cash.
“The research raises important questions around how Gen X get help to organise their savings and investments in the years before giving up work. Historically, cash tends to underperform shares and its buying power is more vulnerable to inflation. Apart from holding a cash reserve for emergencies, most Gen X should be thinking carefully whether their fondness for cash is undermining their preparation for retirement.”
Main image: dan-cristian-padure-hguxpsaUpBk-unsplash
