According to fund manager Schroders, if savers continue to draw-down savings to pay for rising living costs at the same rate as they did last year (3.5%), which the manager says is likely due to rising living costs and static incomes, this will equate to a net increase in investment value of just 0.5% in the next 12 months despite market growth in 2013.

On a £10,000 investment portfolio this would mean investors are placing just £50 in new money into investments in 2013, despite the FTSE 100 being up 9% so far in 2013.

Schroders is urging investors to ‘seize the opportunity’ offered by recovering markets and to rethink how they plan their portfolios over the next few months – or risk losing the growth opportunities offered by rising markets

Robin Stoakley, managing director UK Intermediary at Schroders, said: “While many in the UK continue to feel the squeeze and incomes are under pressure, we think investors must act to re-balance portfolios or risk missing an excellent opportunity to boost their wealth.

“The fact that UK investors still believe that low-risk assets like cash offer the best potential is staggering but does reflect the bruised confidence that still abounds as a result of the recession. However, markets are recovering fast and there is a risk that investors holding back will find they miss a bull-run.”

According to the report, UK investors continue to hold cash and say they will allocate just 12% of new investments to higher-risk assets such as equities in 2013, with 50% likely to be invested in low-risk cash-based savings, despite interest rates at 0.5%.