In recent months, investing has become a hot topic as individuals face reduced cash saving allowances, leading many to feel uncertain about diving into the investment world.

During the Autumn Budget, Rachel Reeves revealed that the cash ISA allowance for those under 65 would be cut from £20,000 to £12,000. This move is part of the Government’s effort to encourage UK consumers to embrace retail investing.

The Chancellor aims for this reduction in cash ISA limits to prompt savers to maximize their ISA opportunities by investing in stocks and shares.

Investing in this manner could potentially allow individuals to grow their wealth faster than inflation and offer a significant boost to UK companies listed on the stock market.

However, despite these initiatives, a growing number of savers find investing to be a perplexing endeavor, as highlighted by data from Columbia Threadneedle Investments, exclusively shared with This is Money.

Currently, 61 percent of savers express confusion and difficulty in understanding investing, a notable increase from 44 percent a decade ago.

As many as 75 per cent of women said they find investing confusing, up from 57 per cent ten years ago.

Some 61 per cent of savers said they find investing confusing and difficult to understand, compared with 44 per cent ten years ago

Meanwhile, the firm said the number of people choosing to avoid investing any of their money is almost the same as it was ten years ago, at 37 per cent, compared with 40 per cent in 2015.

Almost half, 45 per cent, of women don’t invest anything, while 29 per cent of men don’t invest.

At the same time, however, the average monthly saving has risen from £354 to £480.

Ross Duncton, head of direct at Columbia Threadneedle Investments, said: ‘The number of people who don’t invest in stocks and shares remains high – with little change over the last ten years.

‘Over the same period, we’ve seen significant market growth – meaning millions of people may have missed out on potential returns, and recently high inflation has eroded the value of their cash savings.’

In the long term, investing does offer significant better opportunities for growth over cash saving.

There have been countless studies comparing how cash saving stacks up against investing, and over the long term there is only one winner, with investing outpacing cash at every turn.

Figures from Chelsea Financial Services indicate that UK savers have missed out on £1.9trillion worth of returns since 1999, based on global equities have returned some 474 per cent over the past 25 years based on the MSCI World Index, compared with just 80 per cent for cash, based on the Bank of England base rate.

This is based on the potential return form £856billion added to cash Isas since 1999.

However, the has been much concern that the Chancellors move could backfire, with savers instead stashing their money in lower-yielding savings accounts.

In fact, people are more likely to choose products they understand over those that might offer better returns.

Even among consumers who want to invest, some 74 per cent said they would rather pick an investment that is easy to understand than something they don’t understand that offers better returns, Columbia Threadneedle Investments said.

This number has increased from 68 per cent a decade ago.

What needs to change

More than half of people, some 55 per cent, said their confusion around investing comes from the risk that is involved in investing.

While investing does come with risk, by keeping their money in low yielding accounts, savers risk seeing the value of their money eroded over time by inflation.

However, savers also struggle with performance data and explanations of how products work.

Almost two in five said a simplification of product explanations would encourage them to invest more.

Duncton said: ‘Our research shows that there is no one silver bullet to bridge the confidence gap between cash savings and investing, but ongoing efforts to provide clear, simple, consistent and accessible guidance remains crucial.

‘The findings also point to the importance of financial education starting at an earlier age, alongside more open conversations to help build confidence and knowledge.

‘The important thing is to get comfortable with the process – the earlier people start; the more familiar and less daunting investing becomes.’

The data shows that some 70 per cent of people think financial education needs to begin before secondary school.

DIY INVESTING PLATFORMS

AJ Bell

AJ Bell

Easy investing and ready-made portfolios

Hargreaves Lansdown

Hargreaves Lansdown

Free fund dealing and investment ideas

interactive investor

interactive investor

Flat-fee investing from £4.99 per month

Freetrade

Freetrade

Investing Isa now free on basic plan

Trading 212

Trading 212

Free share dealing and no account fee

Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence.

Compare the best investing account for you