In summary:
- Not enough people invest, and regulatory risk warnings are part of the problem. Our behaviourally-informed, human-centred design tools can show us how to fix them.
What should people do with their extra savings?
The Chancellor and the FCA want them to invest it. That’s good news for investment platforms. But planned changes to rules and regulations will prove to be the easy bit. The knottier challenge will be convincing savers to think differently about risk and act appropriately.
Here's where our human-centred design tools can help.
Near-term resilience, longer-term uncertainty
Over three million UK adults who have emergency cash reserves and who aren't burdened by high-cost loans also hold extra money in savings. That's according to Boring Money's 2025 research.
Many would envy their position, but these people can't take their long-term financial security for granted. Their savings may be silently shrinking, returning an interest rate that's lower than inflation. Some will be working-aged people who count among the 14.6 million that the Department for Work and Pensions (DWP) believes aren't preparing enough for retirement.
The obvious strategy
There's a simple solution to their slow-burn problem: if they move their surplus cash into, say, an index fund, history suggests they'll get higher long-term returns, giving them more security and comfort in later life. If enough of them do it, it will ease the growing bill we all pay to support our ageing population.
Rachel Reeves is quite keen on it, understandably. The chancellor is exploring ways to get savers investing, hoping that it will also boost economic growth.
Will throttling cash ISAs help?
It's a measure announced in the recent budget. Today, you can pay up to £20k each year into cash ISAs, but for working-aged people the limit will drop to £12k. MoneyWeek suggests that two million people will be affected.
What will they do with the rest of their spare money? Will they inevitably invest it? If we want that to happen, we need to address why they didn't already.
The real barrier – a muddled understanding of risk
It’s clear from extensive research into the advice gap – many people think investing is too risky.
Regulatory risk warnings are part of the problem. Investments can go down as well as up, they remind us. This blanket warning is stamped across products with very different risk profiles, because the FCA requires it. And the warnings are presented discretely, which doesn't help would-be investors weigh risk against reward. That’s a head-scratching trade-off that most of us need more help with.
Where we are today
The budget has created a new segment: people with more than £12k in annual savings but no Stocks and Shares ISAs. When the changes kick in, a poor grasp of risk may drive these people to put that money under the mattress, or worse – into standard savings accounts, favouring a higher tax bill and lower returns over the perceived risk of investing. The FCA is working on several ways to address this, including a new flexible and proportionate product information framework, aimed at helping consumers better understand risk and reward. Another is the introduction of Targeted Support, which will allow firms to offer specific recommendations to consumers who need more support than they get today.
A new lever: Targeted Support
It aims to bridge the gap between generic guidance and full financial advice. Authorised firms will be able to give group-based, scenario-specific suggestions – without needing a full fact-find or providing a personalised recommendation. It’s designed for the millions who currently receive little meaningful help, despite having money to manage and decisions to make.
If implemented well, Targeted Support could finally give hesitant investors the clarity they need to weigh risk, understand their options and move beyond cash-only thinking.
Choose the right tools for the job
It's not trivial to change human behaviour, but we have the right tools.
We can use evidence and models from behavioural science. That means thinking about motivations as well as barriers. For example, we know that women are more likely to invest to meet life goals such as security, retirement, family stability, home ownership, while men more often focus on maximising returns or beating benchmarks.
Context matters, of course. Products, trust levels, customer expectations, vulnerable situations – all these things and more come into play. But using human-centred design, we can put theory to the test and learn what really works in each scenario.
Thinking bigger
In 2021, I wrote that It’s time for a different approach to design in financial services. The Consumer Duty has moved the industry in the right direction, and Targeted Support is generating genuine excitement rather than the groans that FCA changes usually provoke. That's largely due to the smell of £135bn sitting in the 'advice gap'.
But it seems a win for consumers too – it should give them more of the help they so obviously need. If we design Targeted Support services the right way, using the right methods, they will help consumers understand their options, balance risk with reward, and improve their financial situations, confidence and literacy too.