23 Jun 2025
Karen Ward, Chief Market Strategist for EMEA | Zara Nokes, Global Market Analyst
UK households are saving more of their disposable income, but those savings are not finding a productive home, with consequences for both retirement prospects and the UK economy. Supporting consumers on the saver to investor journey could create a transformative virtuous circle.
The macro backdrop
The UK economy faces a persistent productivity challenge. Could the savings households have begun to accumulate hold the answer?
Savings behaviours have changed…
Before the pandemic, the UK, like the US, was a nation of consumers, with savings rates chronically low. That picture has changed. By our calculations, UK households have put away £870 billion since the pandemic, despite the challenging and persistent cost of living pressures they have faced over the intervening years.
UK households are now saving like their European counterparts
UK vs. peers’ saving rates
% of disposable income
Source: Bundesbank, LSEG Datastream, ONS, Oxford Economics, J.P. Morgan Asset Management. Data as of 31 May 2025.
…but savings do not appear to be driving investment
Global capital markets provide households with a range of options when deploying their savings. But one might have expected at least some of the savings to have flowed to UK companies, providing more capital for businesses to invest. However, business investment remains very low, suggesting savings are not connecting with worthwhile opportunities. Low investment is likely to be a contributory factor in the UK’s stubbornly weak productivity.
Weak business investment and productivity suggest savings are not connecting to opportunities
UK real business investment and labour productivity
Real business investment is % of GDP; Labour productivity is % change year on year
Source: LSEG Datastream, ONS, J.P. Morgan Asset Management. Data as of 31 May 2025.
Worsening pressures on government finances
Productivity makes everyone happier. It secures real wage growth for households, real profits for businesses, and it certainly makes a chancellor’s life easier. Continual low productivity has been one of the key challenges to UK growth and therefore to government receipts.
The Office for Budget Responsibility (OBR) anticipates some recovery in productivity in the coming years. However, even if this materialises, government debt is on an uncomfortable path. If productivity stays as low as it has been in recent years, the OBR believes debt is heading towards over 600% of GDP.
Weak productivity could compound the challenge for current and future chancellors
UK public sector net debt
% of GDP
Source: Office for Budget Responsibility (OBR), J.P. Morgan Asset Management. Data is taken from the OBR’s September 2024 Fiscal Risks and Sustainability report. The public sector net debt ‘lower productivity scenario’ assumes productivity growth of 0.5%. Data as of 31 May 2025.
Breaking the cycle
A lack of investment creates a vicious circle in which UK households face uncertain futures, the UK economy flatlines and the government struggles to provide public services. And yet the picture could look very different if more of those household savings found productive homes.
To understand what might break the cycle and put both household and government finances on a more secure path, we commissioned some research into long-term saving attitudes and behaviours among the UK population.
The savings picture
The survey, conducted by Opinium in April and May 2025, identified a confluence of beliefs and attitudes regarding the choices households are making. It provides an understanding of why people are saving but not investing.
Risk aversion and overreliance on cash
One of the main findings was a concerning attraction to cash as a means of long-term saving. Of course, some savings in cash are needed to meet emergency payments, but beyond that level, households are missing out on the higher returns available if they invest, and are likely to struggle to keep pace with inflation.
More respondents expected cash to deliver better long-term returns than stocks, despite the evidence of history. When questioned further about what made cash an attractive investment vehicle, the biggest driver of this belief was a preference for easy access, while more than a quarter of those who favoured cash said they were afraid of losing money if they invested in stocks or other assets.
This goes some way to explaining why half of the £870 billion saved since the pandemic is sitting in cash or cash-like deposits, despite the corrosive effects of inflation over this period. Had those savings gone into a global portfolio of stocks – for example, the MSCI All-Country World Index – they would have returned 39% in real terms. In cash, they have lost 9%.1
The survey also revealed that most respondents were unsure of what would deliver the best returns when saving for retirement, with just over a quarter saying they didn’t know.
Respondents rated cash over stocks as the best long-term investment
UK households' perceptions of what asset will deliver the best long-term returns when saving for retirement
% of UK population that selected each response
Source: Opinium, J.P. Morgan Asset Management. Respondents were asked, ‘Thinking about saving for your retirement over the long term, which of the following do you believe has the potential to provide the BEST overall returns?’. Data does not sum to 100% due to the exclusion of “other”. Data as of 31 May 2025.
Overreliance on housing
Another factor emerging strongly from the survey is that past experience has caused consumers to place too much reliance on housing wealth. In the UK, property is a significant component of overall wealth, accounting for 48% of household assets. This compares with just 28% in the US, where stock and mutual fund ownership is significantly higher.
UK households are heavily reliant on housing wealth
Source: (All charts) Federal Reserve, ONS, J.P. Morgan Asset Management. Data is from 2023 for US and 2022 for UK (latest available). Data does not sum to 100% due to rounding. Data as of 31 May 2025.
The past two decades have been a period of extraordinary house price growth, contributing to a mindset that housing is the best way to accumulate wealth. Past gains are being extrapolated into future expectations, with almost 60% of survey respondents expecting house prices to rise by more in the next 25 years than the 200% they have in the past 25 years.
Over the long term, house prices should rise broadly in line with the average earnings of the population: after all, a house is only worth what someone is able to pay for it. This relationship broke down over the past quarter century for two reasons. First, deregulation of the banks and lower interest rates allowed people to borrow more for a given level of earnings. Second, very low housebuilding and relatively high migration created a supply-demand imbalance that forced people to devote more of their earnings to buying or renting a home.
The tide has now turned. Regulation has focused on tying lending back to earnings, rather than to the value of the house, while interest rates look set to remain higher, limiting borrowing. And correcting the supply-demand imbalance is a cornerstone of the current government’s growth strategy, with very ambitious homebuilding targets now in place.
Ambitious homebuilding targets should begin to correct the supply-demand imbalance
Net additional dwellings in England
Thousands
Source: Ministry of Housing, Communities and Local Government, J.P. Morgan Asset Management. Data as 31 May 2025.
Households are thinking about retirement too late
The pressures on young people to pay off student loans and buy their first homes challenge their ability to put money aside for retirement. However, of the younger cohorts with no plans to think about retirement, a half said this was because it is too early to think about it. Among those who were saving but leaving their savings in cash, some stated they didn't need to think about long-term returns because they don't plan on retiring for a long time.
That means they are missing out on the sharpest tool in an investor’s armoury: the time to benefit from compounding and take advantage of the higher potential returns available from higher risk assets.
For example, based on our assumptions, an individual who starts investing in stocks at the age of 25 would have to put £34,000 less into their investment pot to make £100,000 by the age of 67, compared to someone who starts investing at the age of 50.2
Consumers lack the knowledge and confidence to make decisions about deploying their savings
The mood of the 2025 Opinium survey referred to previously can be summed up simply as ‘Saving is good, investing is scary.’ Numerous findings point to a lack of confidence about how much to save and where to save it. Most dishearteningly, just 14% of the UK feel very confident they will have the standard of living they want in retirement.
Family and friends are the main source of financial advice. Just 17% use a professional financial adviser, while one in 10 are turning to social media or ‘finfluencers’, rising to a quarter for those aged 18-27.
It is also evident from the responses that cost of living pressures are inhibiting people’s ability to save. Therefore, making every pound of savings work as hard as possible is vital. The right support is essential to closing the knowledge gap.
High expectations of the state
Suboptimal investment choices today will result in lower levels of private wealth and increased pressure on the state to provide support in the future. Indeed, the survey highlighted widespread optimism about the role the state will play in supporting people in retirement. Expectations were particularly elevated in higher income brackets and among younger cohorts, with 40% of those aged 18-34 believing the state will be equally or more generous when they retire compared to today.
However, government finances are already under pressure, and an ageing population will only compound the challenge. At different stages of their lives people pay more into or draw more from the state, on average. Those aged 80 and above are the biggest beneficiaries of state support – and this cohort is growing fast.
An ageing population will put massive pressure on government cash flows
Source: (Left) Office for Budget Responsibility (OBR), J.P. Morgan Asset Management. Data is taken from the OBR’s September 2024 Fiscal Risks and Sustainability report and is based on the expected net fiscal contribution in 2028-9. (Right) United Nations, J.P. Morgan Asset Management. Data as of 31 May 2025.
A productivity miracle might help future chancellors live up to the expectations of current and future retirees. If not, governments will continue to face difficult decisions about how to spend and meet the needs of an ageing population.
Conclusion: Supporting the saver to investor journey could be transformative for both individuals and the economy
UK households have taken an important step for their own futures by beginning to save more of their disposable income. But cost of living pressures mean this isn’t easy and – perhaps unsurprisingly for a nation new to saving – the cash that is set aside is not being used to the advantage either of households themselves or UK PLC.
Instead, widespread misapprehensions about saving and investing are keeping money on the sidelines. Consumers are risk averse, underconfident and unsure where to turn to for help – so they delay thinking about retirement and rely on the value of their homes and on state support that successive governments may struggle to maintain. Addressing these challenges of financial confidence and education could get more people taking advantage of the returns available from stocks and shares, earlier in life, putting households on a path to a more secure future.
The consequences at the macro level are equally significant. While it wouldn’t be sensible for the government to mandate investments to be solely deployed domestically, policies that support the outlook for growth in the UK would naturally encourage some of that capital to support UK business investment. This would reduce the pressure on the state to meet the needs of an ageing population, freeing up government funds for further investment. A healthier UK economy, in turn, benefits households themselves: a genuine win-win.
1 Source: LSEG Datastream, MSCI, ONS, J.P. Morgan Asset Management. MSCI All-Country World Index is used to calculate returns for a global portfolio of stocks. The UK 3-month deposit rate is used to calculate cash returns. Real returns have been calculated by deducting UK CPI inflation.
2 Both individuals are investing in MSCI All-Country World Index, which is estimated to deliver a 6.3% nominal annual return, based on the 2025 Long-Term Capital Market Assumptions produced by J.P. Morgan Asset Management. The individual who begins investing at the age of 25 adds a total of £20,636 to their investment pot, while the individual who starts investing at the age of 50 has to add £54,880 to their pot in order to have accumulated £100,000 when they retire. Forecasts are not a reliable indicator of future performance.
The Market Insights programme provides comprehensive data and commentary on global markets without reference to products. Designed as a tool to help clients understand the markets and support investment decision-making, the programme explores the implications of current economic data and changing market conditions. For the purposes of MiFID II, the JPM Market Insights and Portfolio Insights programmes are marketing communications and are not in scope for any MiFID II / MiFIR requirements specifically related to investment research. Furthermore, the J.P. Morgan Asset Management Market Insights and Portfolio Insights programmes, as non-independent research, have not been prepared in accordance with legal requirements designed to promote the independence of investment research, nor are they subject to any prohibition on dealing ahead of the dissemination of investment research.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature or other purpose in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical and for illustration purposes only. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yields are not a reliable indicator of current and future results. J.P. Morgan Asset Management is the brand for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our privacy policies at https://am.jpmorgan.com/global/privacy. This communication is issued by the following entities: In the United States, by J.P. Morgan Investment Management Inc. or J.P. Morgan Alternative Asset Management, Inc., both regulated by the Securities and Exchange Commission; in Latin America, for intended recipients’ use only, by local J.P. Morgan entities, as the case may be.; in Canada, for institutional clients’ use only, by JPMorgan Asset Management (Canada) Inc., which is a registered Portfolio Manager and Exempt Market Dealer in all Canadian provinces and territories except the Yukon and is also registered as an Investment Fund Manager in British Columbia, Ontario, Quebec and Newfoundland and Labrador. In the United Kingdom, by JPMorgan Asset Management (UK) Limited, which is authorized and regulated by the Financial Conduct Authority; in other European jurisdictions, by JPMorgan Asset Management (Europe) S.à r.l. In Asia Pacific (“APAC”), by the following issuing entities and in the respective jurisdictions in which they are primarily regulated: JPMorgan Asset Management (Asia Pacific) Limited, or JPMorgan Funds (Asia) Limited, or JPMorgan Asset Management Real Assets (Asia) Limited, each of which is regulated by the Securities and Futures Commission of Hong Kong; JPMorgan Asset Management (Singapore) Limited (Co. Reg. No. 197601586K), this advertisement or publication has not been reviewed by the Monetary Authority of Singapore; JPMorgan Asset Management (Taiwan) Limited; JPMorgan Asset Management (Japan) Limited, which is a member of the Investment Trusts Association, Japan, the Japan Investment Advisers Association, Type II Financial Instruments Firms Association and the Japan Securities Dealers Association and is regulated by the Financial Services Agency (registration number “Kanto Local Finance Bureau (Financial Instruments Firm) No. 330”); in Australia, to wholesale clients only as defined in section 761A and 761G of the Corporations Act 2001 (Commonwealth), by JPMorgan Asset Management (Australia) Limited (ABN 55143832080) (AFSL 376919). For all other markets in APAC, to intended recipients only. For U.S. only: If you are a person with a disability and need additional support in viewing the material, please call us at 1-800-343-1113 for assistance.
Copyright 2025 JPMorgan Chase & Co. All rights reserved.