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Over half of people consider investing ‘too complex’

Over half of people consider investing ‘too complex’

Over half of people are put off from investing because they consider the products and processes too complex, and therefore are missing out on an estimated £24bn by not investing wisely, new research has found.

Research commissioned on behalf of the Open University Business School’s dedicated research centre, the True Potential Centre for the Public Understanding of Finance, found the mystery of investing is the biggest barrier to potential financial gains.

Many of these respondents simply felt that investing was either not for the likes of them, or that you have to be very wealthy or employ a stock broker to even start investing.

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A quarter of those surveyed are put off investing by the risk, with one in three saying they would always take the safest option with their money, limiting their return and putting their future prosperity at risk.

However, while 76 per cent of consumers know how to open a cash Isa, less than 40 per cent know how to buy shares and only 30 per cent could choose an investment.

The survey found that 44 per cent said they cannot afford to invest. Most people in the UK believe you need upwards of £200 of spare cash every month to be in a position to do so, despite the fact that an Isa can be opened for as little as £1.

Lastly, the survey found that 38 per cent do not know the main difference between a cash Isa and a savings account at the bank or building society.

True Potential said that 35 per cent of people, the ‘saveocrats’, are saving regularly into a bank account, but earning little for it; 8 per cent, the ‘investocrats’, put their spare cash to work, actively investing it for the future and 20 per cent, the ‘spendocrats’ spend all their spare money, with over a third of these borrowing more and living for the moment.

The ‘austerocrats’ at 11 per cent spend less so they can pay off their debts, whilst the ‘non-voters’, 26 per cent, do nothing at all.

Alongside these figures, less than half of us - 43 per cent - are regularly saving or investing anything at all, and as a result of not exploring more productive investment options the average UK saver could be missing out on almost £1,500 a year, a total of £24bn every year across the UK.

David Harrison, managing partner of True Potential LLP said: “This research confirms the importance of personal financial education.

“Many people wish to invest and see their money work harder, but they lack the know-how. Savings and investments are now so complicated and tied up in disclaimers that most are simply put off or are fearful of the potential for loss.”

ruth.gillbe@ft.com