High fees that take a chunk out of profits put off a third of savers from investing in funds, survey finds
Many savers are put off investing either because of the high costs involved or because they find it too complex, new research suggests.
A third of Britons said they did not move their money from low paying accounts into higher return investments, like equity funds, as the fees charged are too high.
A survey of 761 savings account holders by MoneyFarm also found that almost a quarter said that the complexity of current investment products was another major factor causing them to shy away from investing.
Too expensive: Fund management charges put off a third of savers from trying to invest their money
MoneyFarm said this risks to leave savers struggling to accumulate enough money to pay for major life events, such as buying a house or retiring.
‘Ultimately their savings pot may even be reduced as inflation eats into their capital’, MoneyFarm said.
Savers have been suffering very low returns since the financial crisis, when the Bank of England cut interest rates to 0.5 per cent, a level at which they are still today, more than seven years later.
The survey comes after another study by MoneyFarm found that cash savings, which are worth £167billion in the UK, are providing such poor levels of interest that they will actually fall in value over the next year by £4.1billion as inflation continues outpaces interest returns.
It said this translated to a loss of £340 for every £100,000 kept in a cash savings account – as opposed to an increase in value from cash savings that savers expect.
MoneyFarm has called on fund management industry to drop unnecessary charges in order to improve investor returns and encourage more to save.
Paolo Galvani, Chairman and co-founder of MoneyFarm, said: ‘Cost and complexity are two of the major factors putting savers off investing – however these are both elements of the investment process that can actually be controlled.
‘It is up to the Financial Services sector to provide savers with competitively priced and simple investment products which allow them to feel confident and safe in their financial decisions.
He added that with the technology available to today, cost and complexity should no longer be a concern when it comes to investing.
‘There is no reason why the use of apps and smart phones cannot deliver savers a simple and intuitive way to invest that delivers a high quality wealth management product without the unnecessary fees eating so dramatically into returns,' Galvani said.