Pensions…for life, not just for Christmas
Two in five (39%) are unwilling to take any financial risk at all with their pension savings, a marked spike from 26% in 2017. This could store up problems for the future. A pension pot for someone aged 50 could have to last 30-40 years. There is a danger that if retirees take no investment risk (i.e. leave their pot in cash), their investment may not keep pace with inflation.
The sentiment index also showed that those willing to take a reasonable amount of risk for a good chance of a favourable return has also fallen to its lowest level since the index began three years ago – to 17% from 28% last year and 29% in 2015.
Nearly half (45%) of over 50s still consider certainty as the top priority for their retirement income. This is unchanged from last year. And 18% value instant access as the most important factor (up from 12% in 2017).
Andrew Tully, pensions technical director at Retirement Advantage, said: “Savers have been spooked by the recent market volatility which shows no signs of abating. If anything, the volatility is likely to continue, with global uncertainties permeating major economies, the prospect of interest rates rising and quantitative easing programmes being unwound.
“This is understandably not an ideal backdrop for anyone planning for their retirement, and our research paints a picture of the over 50s being ill-prepared but wanting to take risk off the table when looking at their finances.”
Tully said that hybrid products, which give retirees the certainty of an annuity as well as the benefits of investing their savings, can help limit the potential impact of shocks.
He added: “Ruling out all risk in managing pension savings may seem like a sensible idea, but retirees need to bear in mind that this may reduce the amount of money available – and therefore the retirement lifestyle they are able to afford…there is an emerging trend for people to treat their pension funds like a bank account. While the pension freedoms have opened up Pandora’s Box, we need to keep pushing the message that pensions are for life, not just for Christmas.”