A survey of 3,451 small investors showed the number planning to invest has dropped from 30 per cent to 17 per cent.
Most investors saw a brighter outlook for global markets but remained sceptical about the UK. Despite this, confidence in UK markets is still up from this time last year.
Investors signaled their frustration over low returns offered by cash savings but maintained a low appetite for risk. More than half said they are finding it difficult to find a good place for their savings.
An IMA spokesman said: “The survey results reflect a bit more caution than we’ve been seeing but the interesting thing is the reason behind the caution.Normally it is based on the markets but these results are much more based on a lack of disposable income.”
Property remains the most popular sector for retail investors, with £417m of net sales in November, compared with just £35m in January when it was one of the least popular investments.