The Global Shift From Saving to Investing

While moving more individuals from saving to investing remains a focus in many markets, there’s no one-size-fits-all approach for success.

During a recent webinar, Chief Policy Officer Andy Pettit and Senior Analyst, Government Affairs Lia Mitchell discussed findings from Morningstar research on what’s being done internationally across market structures, policies, and investor environments to support this transition.

Following the presentation, attendees asked about topics ranging from the role of commercial banks to policymaker priorities. Explore their questions and our strategists’ answers.

Mitchell: For most of these governments, the transitioning of savers to investors is not to say don't be a saver at all. It is to not have excess savings and to instead have a reasonable amount of savings. 

There are different definitions of what that means. However, it is not financial assets for households should be moved into the market, but that some of the assets could be doing more for the families to grow wealth over the long term.

Some of the focus is on helping individuals and households understand what is that reasonable level of savings that should be achieved first and should be maintained even once savers become investors as well.

Mitchell: This is something we did not look at in particular in this report, but there’s other Morningstar research on how wealth is spread across different households in the US.

Some of the research produced by our Center for Retirement & Policy Studies explores this specifically in the retirement arena.

In terms of data sets or data sources, the most commonly cited is the Survey of Consumer Finance, which is produced every three years and includes data that provides breakdowns across how household wealth is spread by different demographics.

Pettit: The UK stands out for its breadth of tax advantage investment options, the success of auto enrollment in boosting the number of employees saving into pensions, and generous contribution limits to both those Individual Savings Accounts, or ISAs, and pensions.

Yet with all of that, it has struggled to make significant inroads to moving those savings into investments, although newly released figures show signs of encouragement with an additional 800,000 investment ISAs subscribed to in the 2024/25 tax year. 

New promotional campaigns and more balanced risk warnings should help continue this trend.

Mitchell: We looked at what is the main investment environment open to individuals in terms of retail oriented collective investment options, whatever those may be called in the market, and how investors are supported both initially and on an ongoing basis through their investment journey.

Things like regularly communicated disclosures, clear information, transparent fees, understandable risk information, and strong governance all influence investor confidence, engagement, and how likely someone is going to continue to be an investor for the long term. 

Starting with fees, transparent disclosure, with only relevant costs included, is critical in allowing investors to easily compare options. 

Risks and returns is another area where comparability is very important. 

Canada stands out for how they're providing context for the returns and volatility that investors might experience with the product, in part by requiring disclosures of the best and worst results over fixed time periods, providing more context for what ups and downs an investor should expect before they purchase the product and setting expectations. 

We also looked at ongoing information availability such as portfolio holdings, annual or semi-annual reports and the requirement to maintain pre-sale documents. 

Policies and regulations such as these can help investors understand what they are invested in for the long term and make sure that matches with their expectations and needs.

Pettit: This has been a hugely topical subject, and we did want to look at what shape that was taking in the different markets.

That said, it did not factor into our grading because of the newness of many of the developments and also because prospective investors in all of the markets we looked at already had a wide choice of broader investment types.

What we did find were different approaches in different places, from the launch of new fund types in Europe and the UK with Long-term Asset Funds, or LTAFs, and European Long-Term Investment Funds, or ELTIFs, which come with ongoing efforts to expand their distribution.

There is also the use of business development companies in the US. Other markets, such as Japan, have moved to increase the proportion of less liquid assets that can be held within existing established open end fund types as well.

As that evolves, it would get looked at more closely. But that is the extent we went to this first-time round.

Mitchell: As private markets become more a part of the retail investor journey the importance of things like the investor environment, transparency and disclosure grow in emphasis.

And that is one area all markets are still trying to figure out how to balance when it comes to the private markets.

Mitchell: One thing that we touched on in the report is the importance of clear communication with investors and building investor confidence when it comes to policy changes.

There is certainly scope in some markets to enhance things like product information transparency and we see efforts to do that and to modernize disclosure and bring it into a more digital world.

In terms of encouraging people to invest in the first place, it is not as easy as offering just a tax advantage to account, although tax breaks can definitely help.

The Nippon individual savings account, or NISA, is an example in Japan where there has been clear communication about changes that are going to be made to that regime, and that enables investors to think about and invest for the long term and not need rash decisions.