Investors shunning risk as inflation runs riot with their savings

People are becoming increasingly risk averse with 38% not willing to take any risks with their savings, pensions and other investments, according to a new survey.

This is up from less than one in three (32%) people at the same time last year, the study from discount broker Willis Owen shows.

‘In the current uncertain economic climate it is easy to understand the reluctance among savers to take any risk with their money. But people need to be aware that the value of their savings is being eroded by inflation and low interest rates. People are making a sub conscious decision to erode their wealth if they don't take action now,’ said Alan Easter, director of Willis Owen.

‘This ISA season, there are a wide variety of options open to investors depending on their appetite for risk. From cautious funds that invest at least 30% of their funds in fixed interest assets and cash, to more adventurous funds that invest in markets around the world. There is the potential for growth if people are willing to take some risk,’ he added.

The research also revealed that women are the most risk averse with 45% not willing to take any risk compared to 31% of men. And less than 1% of women are prepared to take a substantial risk with their savings and investments for the chance of substantial returns while the figure is only 4% for men. While 16% people are willing to take a reasonable risk, if there is a good chance of a return.

‘It may be that women have been harder hit by the recession than men. In particular unemployment among women has now hit its highest level for 15 years. This may in part explain the reluctance to take any risk with their savings,’ said Easter.

‘But there are a variety of options available even if you don't want to take too much risk. From shopping around for the best savings account, looking for the best Cash ISA deal to investing some of your money in low to medium risk funds. The most important message for consumers looking to save for the future is not to lose out on your ISA allowance,’ he explained.

A suggested low risk portfolio from Willis Owen would include Fidelity Cash (34%), which provides a low risk support to the overall portfolio by providing access to bank deposits and near cash investments; a Fidelity Moneybuilder Income (32%); M&G Property Portfolio (10%) that invests directly into commercial property, providing the overall portfolio with the immediate benefit of asset class diversification.

It also suggests Newton Global Higher Income (24%), that provides investors and the portfolio with exposure to global equities through an unconstrained approach but within a framework that pays close attention to the risks being taken.