The savings gap – the chasm between what savers need to attain to live comfortably in retirement versus what they actually achieve – has long been acknowledged and yet never fully addressed. In addition to leaving many Britons unprepared for their retirement, it also means millions of Brits are now woefully unprepared for the cost-of-living crisis that is now beginning. 

The dual pressures of inflation and rising taxes will hopefully lead to immediate action to close the savings gap and improve the financial foundations of households across the UK. Whilst we may not have prepared well for the current crisis, it must serve as a lesson to be ready for the next one.  

To do so, we first need a more joined-up approach between regulators and the financial services sector. A major rethink of the current regulatory landscape is the place to start: for too long debt has enjoyed a lighter regulatory touch than investing, despite there being millions of small savers in the UK, i.e. those with £10,000 or less to invest, struggling to access advice about what to do with their money. 

This regulatory rigidity toward innovation in prudent investments has created a situation in which some savers are making irresponsible and ill-informed financial decisions as a result of flashy advertising about “the next big thing in investing”, while key players in the financial services sector fail to embrace new ways of working and serving savers.    

In a recent YouGov poll commissioned by my company, True Potential, we found that, despite the FCA’s ongoing campaign to encourage small savers to invest, a third of Britons aren’t interested in investing any of their savings at all. Put differently, government and regulators’ best efforts haven’t been able to convince people to eat their investment vegetables.

Instead, an increasing number of savers are turning to spending and speculation due to the failure of regulation to move with the times. One example is the proliferation of Buy Now Pay Later (BNPL) schemes, which encourage debt accumulation at a time when savers need to be protecting their purchasing power by investing their savings sensibly, ideally at a rate above inflation.  

Recent figures showed that UK consumers have sunk themselves into £3.3bn worth of BNPL debt over the Christmas period. Some 40% are yet to repay and thus risk incurring heavy debt penalties that will eat into savings.  

The crypto industry, meanwhile, is forecast to reach almost $5bn in value by 2030. These get-rich-quick schemes are enticing people away from regulated forms of investing to something that increasingly resembles gambling, a gateway drug to financial ruin.

While they are different products, cryptocurrencies and BNPL exist in the same Wild West of financial consumerism that regulation must address. The FCA should clamp down harder on speculative products.  

If regulators change tack, companies like mine must then hold up their end of the bargain and find ways to encourage smaller savers to be more proactive with their savings. This will inevitably involve a shift to easy-to-use digital platforms, which offer convenience plus advice, attracting more people toward small but regular investing, thereby putting them on a path towards sustained engagement with financial institutions and financial advice. 

By increasing scrutiny on products that are fuelling debt, we can simultaneously encourage people to begin a marathon of prudent investment over a trip to the financial casino.

Let’s turn Britain into a nation of investors. 

The author is the CEO of True Potential.