New research from Scottish Friendly indicates that more than half of savers are so concerned about investing that they are seeing their savings eroded by inflation instead.
49% of those surveyed indicated that the fear of potential losses was their main concern. 53% responded that they wouldn't be willing to invest in stocks and shares at all.
By doing this however, inflation eroding savings becomes a real concern, as it's currently running at 2.4%, while the savings rate is only 1.33%.
According to Calum Bennie of Scottish Friendly:
" Every pound you save becomes less valuable when it’s held in an account that pays less than the rate of inflation. Brits are being driven by a nagging fear of losing money, which may be clouding their personal judgment when it comes to important financial decisions."
A gain of only £162 in 2016/2017 would have been earned by investing in a cash ISA in the 1999-2000 tax year, a very small return by any standard.
The exact same investment in the FTSE All Share would have increased by £841 in the same period.
Since 1999, cash accounts have increased by less than stocks and shares ISAs two thirds of the time.
Some of the reasons that are holding investors back are the idea that they can't afford it, the perceived complicated nature of financial products and the lack of comfort with non cash holdings.
Callum Bennie says:
"Investing is not without risk, of course, and ultimately you shouldn’t feel uncomfortable about where you’ve put your money. But interest rates on cash accounts have been rock-bottom for a very long time now, and inflation is consistently eating away at the value of that money."
Your financial adviser can help to make sure you are sufficiently diversified and in the right investments that will help you to achieve your long term goals.
The value of investments and income from them may go down as well as up and you may not get back the original amount invested.
Information is based on our current understanding of taxation legislation and regulations which is subject to change.
Past performance is not a reliable indicator of future performance.