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Investment complexity deterring ISA savers

Joanna Faith
Written By:
Joanna Faith

Savers are happy to leave their money languishing in cash accounts paying derisory rates because they find investing too confusing.

Research by F&C Investments revealed that six in 10 savers felt investments were confusing to understand, with almost one in five thinking cash can provide similar returns to investments for less risk.

This finding is reflected by Britons’ buying habits during ISA season – the run up to the end of the tax year on 5 April. HMRC figures show a staggering 80% of ISA customers save in cash-only products, and only 20% in a stocks and shares ISAs.

F&C highlighted the benefits of investing in the financial markets, pointing out that if the average UK household invested half of its estimated £100 a month average savings into a stocks and shares ISA, it could receive a return of £43,143 over 25 years, almost triple the amount invested in a cash equivalent product.

“While the end of the tax year is an important part of the investing calendar, what is startling to see is how many active savers choose not to invest, instead keeping their money in cash, particularly when interest rates are at historic lows,” said Ross Duncton, head of direct to consumer, at F&C Investments.

Today marks the fifth anniversary since the Bank of England base rate dropped to a record low of 0.5%.

Campaign group Save Our Savers said five years of 0.5% bank rate has cost the nation’s savers a total of £326bn, the equivalent of £5,123 for every man, woman and child in Britain.