With plans for the new British ISA hanging in the balance in the election, and doom and gloom over the poor performance of London’s stock exchange, everyone seems to agree that we need more UK cash in our own market.
But the number of Brits investing in the stock market currently sits at only 23 per cent, compared to 61 per cent for Americans.
Why are Brits so reluctant to actually put our money into the stock market?
Well, 26 per cent of Brits said it was probably because Americans are more comfortable with risk, according to a study by Opinium for Hargreaves Lansdown.
Some 25 per cent cited cultural differences, while 21 per cent thought financial incentives were better in the US.
Meanwhile, 21 per cent said the US offered better financial incentives to invest in the stock market, 20 per cent said it was because Brits preferred to invest their money in property instead, and 16 per cent said financial education was superior in the states.
Finally, a whopping 12 per cent had a simple answer: Americans are greedier.
“Given the vertiginous heights the US stock market has reached in recent years, the FOMO effect is likely to have kept up intense interest among American shareholders,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.
Although the FTSE 100 reached fresh record highs in May, it’s still considered to be undervalued and unloved by many investors.
“Increasing retail participation could be a game changer for UK stocks, but many people are still hesitant to take the plunge and follow in the footsteps of American investors,” added Streeter.
Another key factor is the relatively high level of pension participation in the UK compared to the US. The workplace pension participation rate here in the UK is 79 per cent, thanks to auto-enrolment, compared to only 53 per cent in the US.
Indeed, recent Hargreaves Lansdown research has shown that only 36 per cent of people know their pension is invested in the stock market.
“Understanding how and where their pension is invested might kick start more curiosity and persuade more people to move their money from savings accounts into investments,” said Streeter.