The Investment Association is calling on the government to launch an "inclusive investment strategy" in this October's Budget.
The trade body carried out research which found less than a quarter of people hold stocks and shares Isas, while 43 per cent are not confident they would know how to open one.
However, almost three quarters (72 per cent) of people said they would would feel confident opening and placing their money into a cash Isa.
The Investment Association concluded this shows many are missing out on the long term benefits of investing.
Chris Cummings, chief executive of the Investment Association, said: “This year’s Autumn Budget comes at a critical moment for the new government, and is a clear opportunity for Rachel Reeves to recognise the role the investment management industry can play in securing the future of our nation.
“Too many people in the UK are taking one of the biggest financial risks of all: taking no risk. This needs to change."
The body is calling for the government to reform the Isa regime to make it simpler for investors, including a lower limit placed on cash Isas while the stocks and shares should keep pace with inflation and be rebranded an Investment Isa.
It also said the government should reform risk disclosures across all asset classes to focus on informing, not just warning, and empower consumers to take appropriate risk and understand the benefits of investment.
With just 42 per cent on UK pension holders confident they are saving enough into their pensions, the body thinks the auto-enrolment contribution levels should be increased.
Finally, the Investment Association thinks the government and FCA need to ensure accessible financial advice is available for all.
Cummings added: "We must create a culture of investment that allows more people to benefit from the UK’s position as an international centre for investment management, and work together to move away from ‘safetyism’ – the overemphasis on avoiding risk without considering the unintended consequences.
"It is not only the UK economy that will reap the rewards, but millions of households across the UK that could benefit from the boost investment can bring to their long-term financial resilience.”
tara.o'connor@ft.com
What's your view?
Have your say in the comments section below or email us: ftadviser.newsdesk@ft.com
