Shift in attitudes as over 50s take risk off the table due to global uncertainty (adviser)
- 39% of over 50s unwilling to take any financial risk with their pension savings (up from 26% in 2017)
- 17% willing to take a reasonable amount of risk in return for a good chance of a reasonable return (down from 28% last year)
- 45% of over 50s still consider certainty as No1 priority from their retirement income (same as last year)
- While 18% value instant access as the most important factor (up from 12% in 2017)
Recent stock market volatility and continued economic uncertainty have led to a sharp spike in how many over 50s say they wouldn’t take any financial risk with their pension savings, according to new research from Retirement Advantage.
The findings are published in the firm’s latest Retirement Sentiment Index, which tracks trends in how those approaching retirement think about their finances. The report reveals that nearly four in ten (39%) over 50s say they would not take any financial risk with their pension savings – a significant increase on last year’s figure of 26%. The proportion who say they would take a reasonable amount of risk for a good chance of a favourable return has also fallen to its lowest level recorded since the Index began three years ago – to 17% from 28% last year and 29% in 2015.
Andrew Tully, pensions technical director at Retirement Advantage, said: ‘The stock market volatility we have experienced over the past few months has clearly spooked investors who are looking to take risk off the table. The report findings are set against a backdrop of major change in the retirement market post freedoms. Drawdown is now the default option for the mass market while many consumers are treating their pension funds like bank accounts. These actions are creating their own risks around sustainability of income and also the level of tax paid on cash withdrawals.’
Another indicator of a more wary outlook among over 50s revealed by the research is that more than ever say having instant access to all of their pension savings is their main priority for their retirement income (an Index-high of 18%, up from 12% in 2017).
Certainty of income remains the most popular priority for retirement income, cited as the most important factor by 45% of over 50s – level with last year. The biggest fall has come in how many prioritise the flexibility of having some guaranteed income while managing the rest to generate further income (an Index-low of 28%, down from 36% last year).
Andrew Tully also said: ‘There is a growing trend for people to use drawdown on a DIY basis, with around a third of policies sold since pension freedoms without advice. We need to continue to work hard to continue to overcome the barriers preventing people from valuing advice, namely cost and trust.
‘We also need to acknowledge there is an advice capacity issue. We currently have around 25,000 registered advisers in the UK and that simply isn’t sufficient to service the needs of 400,000 potential clients set to retire each year. Defaults have been suggested as one solution but I don’t believe a default solution can deal with the complexities of retirement. We need to think outside the box and look to develop more streamlined advice models, where advisers can engage with more clients or clients who are unwilling or unable to pay for face-to-face advice.’
- Censuswide polling conducted online between 06/03/2018 and 09/03/2018, surveying 1,003 UK adults aged 50 and over who are not retired and have a defined contribution or individual pension in place.
- Censuswide polling conducted online between 28/06/2017 and 29/06/2017, surveying 1,005 UK adults aged 50 and over who are not retired and have a defined contribution or individual pension in place.
- YouGov polling conducted online between 20/05/2015-25/05/2015 and 06/08/2015-11/08/2015, with each wave surveying 1,000 UK adults aged 50+.
The figures on the popularity of drawdown vs. annuities are taken from the FCA’s September 2017 Data Bulletin: https://www.fca.org.uk/publication/data/data-bulletin-issue-10.pdf