£1.5trn currently stashed away in UK cash accounts

Savers currently have £1.5trn in cash stashed away in bank accounts in the UK, the biggest cash pile on record, according to findings from Janus Henderson Investors.

The asset manager said that £1.2trn of this cash is not needed to meet household contingencies, suggesting it is “sitting unproductively” in cash accounts earning minimal interest.

The research revealed that the vast cash pile is equal in size to the UK’s collective mortgage debt, and the group suggested that savers are missing out on the opportunity to earn “billions of pounds extra return” on their savings.

Janus Henderson also stated that the yields on equities remain “attractive”, despite record low savings interest rates and the number of dividend cuts last year. In the period from November 2019 to September 2020, the group’s findings revealed that savers missed out on £38bn of income – equivalent to £1,350 for every household.

“In my view, interest rates are set to stay low for a long time with the possibility of even turning negative being a part of the conversation and then cash will depreciate, even excluding inflation, if sat in cash accounts,” commented Janus Henderson director and head of investment trusts, James de Sausmarez.

“Whilst everybody should save some spare cash for emergencies if they can, money that is being saved for the medium to long-term – minimum three years – can be made to work harder for the saver rather than be used by the banks to increase their profits. Banks call this ‘muppet money’ because they know savers are missing out on much better opportunities elsewhere.

“This is why talking about money is essential, with a financial or professional adviser or even with your family.”

The asset manager suggested the structural benefits of investment trusts make for an attractive option for income seeking investors.

“Investing in the stock market does involve risk as the value of your investment and the income from it can go down as well as up but if you are investing for the medium to long-term then this risk to your capital is reduced,” Sausmarez said.

“By investing in a professionally managed investment company with a broad spread of investments, this risk is further reduced.

“For investors who do not have a need to spend their savings in the short-term, an investment in an investment trust is likely to be a more rewarding experience in terms of both income and capital, than leaving it languishing in a bank account earning little or no interest.”

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