Why the government wants you to invest

Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

Of course, there were some bumps along the way and past performance is no guarantee of the future - but still the difference is striking.  

One of the reasons people aren’t investing is the fear of losing money. This doesn’t just impact novice investors - even some experienced investors hamper their long-term financial resilience by holding far more money in cash than they need.

Fidelity’s own Be Invested report found that more than a quarter of people have a low risk tolerance for investing - meaning they’d hold most of their savings in low-risk options like cash and government bonds.¹

To tackle this, the government is planning to review the risk warnings that appear on investments to make sure they aren’t scaring too many people off investing.  

It was also announced that from next year, investors will be able to buy Long Term Asset Funds (LTAFs) via their Stocks & Shares ISAs.

What is a Long-Term Assets Fund?

Long Term Asset Funds (LTAFs) are a fairly new type of fund that have been used by professional investors to access niche areas. The hope is that LTAFs will encourage pension funds to direct more capital toward these niche investments - and now the government is making them available to individuals too.

They are generally focused on private investments (i.e. those that aren’t publicly traded on a stock exchange) in areas like major property or infrastructure projects and unlisted companies. Think windfarms, hospitals, fast-growing artificial intelligence companies and so on.

The theory is that these are areas that could potentially offer better returns to everyday investors than stock markets. They also have the potential to offer diversification. When stock markets wobble, they usually wobble together. But, if stock markets wobble, it’s possible that the value of a hospital or windfarm would remain stable.

However, investors need to be aware that, because these investments aren’t publicly traded every day, they won’t be able to sell their holdings in an LTAF wherever they want. If you want to sell up, there will be a set notice period before you can access your money.

These are very sophisticated investments that won’t be for everyone, so it will be crucial to do in-depth research before dipping a toe in.

Does this mean cuts to the cash ISA allowance won’t go ahead?  

Until very recently, the government was looking to cut the cash ISA allowance in an attempt to nudge more people towards stock markets. Now it looks like Rachel Reeves has temporarily backed away from that stick - although it is said to be still under consideration.

• Read: How might the government change Cash ISAs?

Will there be any sweeteners?

There have been calls for the Chancellor to scrap the 0.5% stamp duty that is charged when investing in UK shares or offer some other kind of financial incentive to encourage people to invest. So far, there has been no mention of such sweeteners.  

Should more of us be investing?

UK adults hold far less of their wealth in investments compared with other G7 countries. With too little in long-term investments, many of us face the prospect of running out of money in retirement.

Happily, history would suggest that investing with a long-term time frame (such as for retirement) should reduce your risk of losing money. As the chart below shows, the longer you are invested, the less likely you are to suffer a loss.

Looking at the best and worst annualised returns investors would have experienced had they held shares in the S&P 500 (a proxy for the US stock market) for one year, five years, 10 years or 20 years, you can see that, over a one-year period, there was potential for both big gains and big losses. But looking at a 20-year period, even the worst-case scenario made investors money - although past performance is no guarantee.

Investing is a key part of ensuring you have long-term financial security - but the important thing is to get the balance right between cash and investments. This will be different based on your personal circumstances - and for people in a precarious financial situation, investing may not be right at all.

As a rule of thumb, you should have at least 3-6 months’ worth of spending in cash savings at all times. If you’re investing for a major milestone, like buying a house or saving for retirement, you’ll need to start thinking at least a few years in advance about reducing your investment risk and moving towards cash.

How to start investing

If you’re unsure about investing, our five principles for good investment is a great place to start. Beyond that, our investment finder and Select 50 list of favourite funds can help you make your first selection.

• Get started here: Choosing your investment

Source:

¹ Based on a survey of 2,000 retail investors conducted between February and April 2025