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In our latest blog, Clare Francis, Head of Customer Engagement and Content - Direct Investing, outlines why the British public must take greater responsibility for their future financial security.

Drawing on new research from Barclays, Clare examines customer attitudes towards saving and highlights the importance of aligning savings behaviour with current and future income needs. Clare also urges the financial services industry to re-think the way it helps people make suitable financial decisions, from saving regularly to planning for all eventualities.  

The current picture

The majority of people in the UK recognise the value and importance of saving. But a lack of awareness and understanding means many are at risk of not saving adequately for the future. This must be addressed now.

There also appears to be a marked difference between perception and reality. A recent Barclays report, ‘The Changing Shape of Savings’ (PDF 1.1MB), found that whilst 80% of people said they have some form of savings and 65% would feel uncomfortable without any savings, in many cases the money they have put aside won’t last as long as they think it will.

*The survey only measured savings among individuals and not households. It did not cover debt.

Put simply - we need to be saving more. The state pension isn’t enough to provide the retirement many seek, or hope for. Additionally, many parents want to help their children cover the rising costs of further education and spiralling house prices are making it increasingly difficult for people to get their foot on the property ladder.  

In the immediate aftermath of the financial crisis, it looked like people had rediscovered financial prudence with the savings ratio leaping to 11.8% in 2010. However, it has now lapsed to below 5% and there is a risk that UK citizens will fail to align their savings behaviour with their current and future income needs.

So what is being done?

The issue of the savings gap is widely recognised. In recent years we’ve seen a number of legislative changes and initiatives launched by the government to try and encourage people to save more. These include pension freedom, increased ISA flexibility and the introduction of the Personal Savings Allowance (PSA). However, it’s not been enough to significantly change behaviour thus far. There are a number of reasons for this but one specific reason can be attributed to market complexity.

On the one hand, it’s great that people have more freedom to make more of their own financial decisions. But choice isn’t always a good thing, especially if the options available are complex and confusing. Simplifying these options so they are easy to understand will ensure more people utilise what’s out there. Ultimately, competition is good for consumers and the industry.

There is no easy solution to fix this problem but there are a number of ways banks and other financial institutions can help empower people and give them the confidence to make the best decisions.

What is Barclays doing to help customers?

Generation X say they’re the most squeezed of the age groups and in many instances can’t afford to save - but they need to. So we have to start looking at ways of shifting mindsets and getting people to start putting money away for future financial goals.

Education is essential when it comes to tackling inertia, helping individuals recognise their needs and understanding the options available to them.

For example, as part of our recent tax year end activity, we focused specifically on improving awareness of ISAs and how they work.

Research from Barclays found that even though more than 21 million people have a cash ISA, 40% hadn’t made a single deposit during the 2015/2016 tax year, despite holding an average of £42,000 in cash savings – more than double the annual ISA limit. Collectively, this cost savers almost £1bn in lost interest.

The PSA has also created a need to ensure people understand the difference between it and ISAs. It recognises that ISAs still have an important role to play in financial management, while understanding that tax rules could change in the future and that their effects depend on the circumstances of the individual.

Another area of focus is the ‘leap’ from cash savings products to investments. In this low interest rate environment, it’s important that people are informed of the risks of loss involved and at least consider investing in other asset classes but often many don’t – they see investing as complicated and with reduced options for affordable advice and guidance they don’t have the knowledge and confidence to ‘take the plunge’.

So we’re looking at how we can break down these obstacles and create tools and support that will help inform people, giving them the confidence to act.

While face-to-face financial advice may not be as readily available as it used to be, technology is presenting other ways of helping people make the best decisions regarding their finances.

Digital empowerment was a key theme of the recent FAMR report (PDF 1MB), and one of the things we are focused on at Barclays is leveraging technology to make the customer experience simpler, easier and quicker.

Action we must take

The savings gap can’t be ignored but there are steps we can take – and are taking – to educate, inform, encourage and empower customers to be more proactive when it comes to planning their finances and thereby securing their futures. Helping people make the best decisions based on their needs and financial goals is critical to the future financial health of the UK.

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Supporting the future of UK small businesses

Rebecca McNeil, Barclays Managing Director of Debt Product and SME Lending, answers questions about access to finance and alternative sources of borrowing.

27 Apr 2016, 07:00 BST

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