Savers in the UK plan to use spare cash to boost their overall financial resilience, a new survey by Quilter has revealed.
Of the 66% of people who intend to use their spare cash to boost their financial wellbeing, two fifths (39%) plan to top up their cash savings, while a quarter (26%) want to pay off or reduce their debt and 11% plan to overpay on their mortgage.
Just shy of a quarter (24%) of those surveyed said topping up long-term savings and investments such as pensions and stocks and shares ISAs was their leading priority.
However, Quilter warned that there remains a significant number of people who risk missing out on the benefits of investing by choosing to keep their money as cash.
If the Bank of England cuts interest rates during 2024, the wealth manager said people sitting in cash could lose out considerably. Quilter’s analysis found that following the first rate cut in the 1990s, the MSCI UK Index returned 46.1% over the next 12 months. In 1976 after interest rates were cut from 15% the UK market subsequently rose by 95.8%.
According to Quilter, those not prioritising long term savings and investments could not only lose out on investment gains, but as interest rates are cut, cash savings rates offered by banks will fall quickly too which will have an immediate impact on their cash savings returns.
Emma Prince, financial planner at Quilter, said: “Increasing financial resilience by building cash savings, paying down debts and making overpayments on mortgages are among the top financial priorities for Brits this year, but it is key that people do not overlook the benefits of investing for the longer term.
“Though cash has felt like a relatively safe place to be for some time now given the higher interest rates on offer, our analysis shows just how much could be at stake if people miss out on elevated returns following any rate cuts by the Bank of England. Not only is boosting long term savings and investments such as pensions and stocks and shares ISAs important, but staying invested rather than ripping money out to put into cash holdings is also vital.”
