According to online investment platform, Charles Stanley (LON:CAY), the average saver received 94% lower returns than investors in the last ten years. This divergence can be seen with a typical investment of £10,000 in global markets in 2010, which the company said would now be worth around £30,742, versus £11,230 in a cash savings account.

Now, for either investors or savers, both of these figures might seem a tad optimistic. Regardless, Charles Stanley Direct notes that there is indeed an ‘investment gap’, and that two in five people are prevented from investing by perceptions of complexity and the breadth of financial jargon.

According to the company’s research, the top reason for ‘savers’ switching to ‘investors’ are the poor returns achieved by tucking cash away in a savings account (33%). Some 32% were prompted to invest by a desire to save for their retirement, while 16% said they were trying to save for a house.

The Group’s research did note, however, that these trends vary between demographics, with 30% of Gen Z investors influenced by their desire to save for a house, while 27% said they were worried about running out of money. For Millennials, the top reason was poor returns on cash savings (28%), then saving for a home (26%). Among Gen X, the main drive for investors was saving for retirement (43%) and poor cash returns on savings (38%).

Charles Stanley’s research indicated that 24% of UK adults aspire to be investors, but there are four key barriers standing in the way. First – jargon. Some 55% of respondents said they weren’t confident understanding financial terminology (with 45% of men saying they felt confident, versus 37% of women). Second – complexity. A fifth of people said they found staying on-top of data too challenging. Third – performance. For 40% of respondents, market volatility and risk were their main fears. Fourth – choice. Finally, 14% said they felt too overwhelmed by the perceived difficulty of investing, and the amount of time it would take them to manage their portfolio.

When faced with a list of common financial terminology, only 45% of respondents had heard of and fully understood inflation, 35% know and understand what dividends are, and only 20% know what compounding is. 

Speaking on the reason more people are becoming investors during a low-interest and potentially high-inflation environment, Rob Morgan, Investment Analyst at Charles Stanley Direct, said: “Whatever your reason for building a nest egg, it’s essential to have a strategy in place. While it’s sensible to keep some money in a cash savings accounts, with low or even zero rates of interest you can significantly lose out by putting all your eggs in one basket. Many people don’t realise if your savings don’t grow in line with inflation, they are actually losing money.  To put this into perspective, today you need over £1.20 to buy you the same that £1 would have bought you 10 years ago, but cash on deposit has typically only increased to around £1.10 per pound saved.

“Transferring some savings into investment products like a stocks and shares ISA can make your money work harder, but we know that taking those first steps on the investment journey can be a daunting experience. That’s why we’re helping UK savers find the confidence to close that investment gap.”