The Scottish Widows Savings and Investment report 2009 shows 60 per cent of individuals do not intend to take advantage of the Isa tax breaks available.
The research shows amongst 18-24 year olds, 27 per cent have no knowledge of Isas.
The report identifies five barriers to saving: having no money available, lack of trust in providers, lack of confidence in the financial sector, finding it too hard to get the best deal, and having debts to pay off.
The report suggests lack of money is by far the biggest barrier to saving and the perception of this barrier has increased significantly from last year.
Parents are also dipping into their savings or going into debt to help support their adult children financially, forcing them out of saving anything for the future, according to the report.
Scottish Widows says a new simplified product regime would help encourage more people to save.
Scottish Widows head of savings and investments Gordon Greig says: “We would like to see simple products with simple literature designed to achieve simple goals. The research indicates the industry must continue to innovate and produce simplified equity-based savings products. The financial services industry needs to play its part in bringing attractive products to market that meet clients’ needs and wants.”