Gen X cash stashers: Nearly one in 10 have £100,000 in savings – should they invest?

The average Generation X saver holds £34,114 in a savings account or cash Isa, with almost a tenth of those aged between 45 and 60 holding more than £100,000 in cash savings, figures reveal.

Eight per cent or around 673,000 people in the age group have a six-figure savings pot, according to retirement finance firm Just Group. Some 14 million people make up Generation X, a quarter of the UK’s adult population.

Londoner in that age bracket have the most saved, an average of £54,508, with a sixth of savers holding more than £100,000. 

Those in Yorkshire and the Humber and the East Midlands hold an average of over £40,000, while people in Scotland have an average cash holding of just £21,844.

Almost half, 46 per cent, of the generation said owning stocks and shares is ‘too risky’ an investment, and only 27 per cent disagreed. 

While 63 per cent of Gen X have a cash savings account, just 32 per cent of these also have investments such as stocks and shares or mutual funds.

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Should they invest some of their cash? 

There is an argument that those with large pots should consider investing some of it, as stocks and shares tend to outperform cash over the medium to long term. 

Stephen Lowe, communications director at Just, said: ‘The research raises important questions around how Gen X get help to organise their savings and investments in the years before giving up work.

‘Historically, cash tends to underperform shares and its buying power is more vulnerable to inflation. 

‘Apart from holding a cash reserve for emergencies, most Gen X should be thinking carefully whether their fondness for cash is undermining their preparation for retirement.’

Lowe added: ‘It is important for anyone holding significant levels of cash savings to get help to review whether this is the best approach to meet their short, medium and long-term objectives.’

Despite an apparent lack of enthusiasm for investing among the generation, 84 per cent of those that have cash savings accounts also have a pension, which is most likely to be invested in non-cash assets.

While some may feel uncomfortable choosing to invest but are happy to let their pension provider do so for them, the likelihood is that many don’t realise that their pension is invested.

Data from Hargreaves Lansdown indicates that more than a third, 36 per cent, of people didn’t think their pension was invested, while a further 30 per cent were unsure.

This reluctance to invest comes after the Government revealed in its Spring Statement document that it is considering reforms to the Isa landscape, with speculations suggesting this could see the cash Isa allowance slashed as low as £4,000.

The announcement follows calls earlier this year from the bosses of financial firms to reduce the cash Isa allowance in a bid to promote a ‘culture’ of investing.

Louise Halliwell, group savings director at Kent Reliance, said: ‘Cash Isas remain a vital part of the UK’s savings landscape, with around 42 per cent of the population holding one. 

‘They offer a simple, tax-efficient way to grow savings, ensuring that individuals – whether retirees, those building an emergency fund, or cautious savers – can earn interest without the burden of tax deductions.

‘While there have been recent discussions about whether reducing or removing cash Isas could encourage more people to invest in stocks and shares, the reality is that many savers do not have the risk appetite for investments, nor do they want to navigate the complexities of the market without professional advice.’

‘A cash Isa suits our savings needs perfectly’

Historically, investments have proven to deliver better returns than cash, but that doesn’t mean a stocks and shares Isa is the right product for everyone.

For one thing, it is recommended that investors should be able to leave their money untouched for at least five years. 

For many though, especially if they are saving up for a specific purpose, this simply isn’t an option.

One such case is that of Linda and Dave Greenway. The couple, while not Gen X, being aged 72 and 74, said: ‘it provides us with certainty and peace of mind, which is very important at this stage in our lives.

‘We like knowing exactly where our money is and that it is secure, without worrying about changes in value. While we are hopeful that we won’t need to withdraw from it, life can be unpredictable, and it’s good to know that the money is accessible should we ever require it.

‘The fact that we can access the funds if an emergency arises is very reassuring, as we prefer to have the flexibility to withdraw our savings if needed. 

‘We wouldn’t consider switching to a stocks and shares Isa because there is always the possibility that the markets could decline, and we don’t want to take on that kind of risk.’

The couple, who live in Bedfordshire, currently hold £20,000 each in cash Isa accounts, and earn interest tax-free.

The Greenways said that if the Government was to reduce the cash Isa allowance, they would decide instead to use the money for other purposes instead of leaving it in account with tax liability.

‘Having tax-free interest means we don’t have to worry about setting money aside for tax payments, making our financial planning much simpler and more straightforward,’ the couple told This is Money.

Their cash Isa savings are earmarked for house renovations, which could change if they lose their ability to save tax free.

They said: ‘We would then look at our current needs and priorities at the time and decide how best to use the funds. 

‘This could include spending on home maintenance, making improvements or repairs that might be needed, booking holidays to enjoy our retirement, or even putting the money towards a new vehicle if necessary.’

‘Ultimately, it would depend on what felt like the most sensible and beneficial choice for us at that particular moment.’