UK savers prefer domestic investments: Are they limiting their earnings potential?

But could this run the risk of losing out on more earnings potential from overseas stocks and shares?

According to research from the Pensions and Lifetime Savings Association (PLSA), as much as 53% of UK savers prefer that their pension money be invested domestically, as opposed to internationally.

With data suggesting that 69% of pension savers believe they lack, or are unsure they have, the skills needed to choose where their pension scheme should invest, keeping holdings in the UK may seem like a suitable strategy. After all, tracking stocks and shares across different markets could further complicate their ability to monitor their pensions effectively.

But could a more domestically-focused approach to investing be more of a hindrance than a help? Let’s take a deeper look at how investing in United Kingdom stocks and shares measures up to a more international, diversified portfolio.

Are UK Investments Enough?

Firstly, it’s important to note that there’s nothing wrong with prioritising UK investments over international options. In fact, this approach can be great for boosting the economy and the overall economic health of the country.

However, historically speaking, investment options in the United Kingdom have consistently been outshone by the rest of the world–and by Wall Street in particular.

Between 2020 and Q1 2025, the UK’s FTSE 100 index of the nation’s 100 largest public companies has grown by 13.14%. Meanwhile, the S&P 500 has returned 71.86% over the same timeframe.

These differing fortunes underline the strength of Wall Street compared to the United Kingdom and highlight the high growth potential of US tech stocks amid the ongoing artificial intelligence boom, which is being led by leading ‘Magnificent Seven’ American stocks like Nvidia, Apple, Google, Microsoft, Meta, Amazon, and Tesla.

For investors in the United Kingdom, the average return on a Stocks and Shares ISA has been 9.64% annually, while Cash ISAs, which generally offer a fixed rate of return, have averaged 1.21% over the same period.

Over the past 10 years, the S&P 500 has provided an average annual return of 15.3%, highlighting that exposure to US stocks and shares can be a highly beneficial strategy for investors looking to make the most of their portfolio’s potential for growth.

Diversification Could Be Key

If you’re an ISA holder looking to expand your growth potential while managing your exposure to risk, your best solution may be to adopt a more diversified approach in a Stocks and Shares ISA that includes international assets.

The advantage of a Stocks and Shares ISA is that you can access an annual £20,000 tax-free allowance each year, which means you can put up to £20,000 into your account, and you won’t be liable to pay any capital gains tax (CGT) on the earnings you make. This also applies to dividends, which can be compounded into even larger tax-efficient portfolios.

Using your ISA allowances to create a diversified portfolio that incorporates positions in UK stocks, US securities, and other international investments helps to deliver more resilience for your earnings. In practice, this means that if Wall Street growth slows, you’ll still have plenty more stocks that are well-positioned to provide resilience for your Stocks and Shares ISA.

It’s also a good idea to diversify your holdings to accommodate stocks and shares from different industries, which similarly helps you to protect your wealth against market downturns that unevenly affect different stocks.

Whether you’re selecting your investments yourself or are using an account manager to look after your ISA on your behalf, communicating your willingness to diversify for greater resilience can be the best way of looking after your portfolio while accessing some of the world’s stocks with the highest potential for future returns.

Investing On Your Terms

There’s no right or wrong way to build your wealth, and it’s entirely up to you whether you choose to invest domestically, internationally, or in your preferred industries.

Most ISA providers also allow investors to choose whether they want to buy into ethical stocks as a means of creating a savings account that aligns with their environmental, social, and governance expectations.

When it comes to building a Stocks and Shares ISA that matches your financial goals, it can be tempting to stick to UK-based investments due to their locality, but they risk causing you to lose out on the historically high returns of international stocks and shares.

For those seeking to balance risk and opportunity, a diversified portfolio that caters to the best of the FTSE 100, S&P 500, and other international indexes can offer more resilience in the face of wider market downturns as well as greater long-term earnings growth.

It can be a challenge knowing where to look when it comes to building your investments for the future, but oftentimes, the best strategies borrow from different approaches to keep your holdings higher regardless of what’s on the horizon. By diversifying effectively, you can work with a truly future-proof portfolio that continues to pay off over the long term. un