Cryptocurrencies have taken the investment world by storm, especially in the last couple of years with an increasing number of retail and first-time investors buying into the frenzy.
Research by price comparison site NerdWallet found that this is particularly true for the younger segment. Almost a third (31%) of Brits aged 18 to 24 said they would rather invest in crypto faucets than in a traditional workplace or personal pension. They will most likely study the bitcoin exchange rates closely before making an investment decision.
Surprisingly, over a quarter (26%) are reluctant to put money aside for retirement due to the risks involved; despite cryptocurrencies being among the most cited products by scam victims.
This also follows a recent warning from the Financial Conduct Authority saying that crypto “provides a serious potential for exploitation and harm”.
NerdWallet discovered that only one-in-five (21%) young people said they understand the risks of the funds in which they invest their retirement pots, suggesting that “there is limited awareness of the risks involved in both”, the firm added.
Stocks and shares Isas and cash Isas are more popular among young Brits – 36% and 35%, respectively – than contributing into a pension. In comparison, for those aged 45 to 54, just 14% preferred cash Isas and 7% stock and shares Isas.
The problem is not only one of preference, however.
Around 28% of those in the 18-24 age bracket revealed they opted out of their workplace pension to save money in other ways, and an additional 23% reduced their contributions in the last 18 months.
Priorities
NerdWallet also surveyed young Brits about their financial planning goals.
More than a third (34%) would prioritise paying off a mortgage over saving for retirement.
The firm also discovered that 82% of 18-24-year-olds have not yet worked out how much they will need to save for a comfortable retirement.
When asked about why they would make such choices, 34% responded they would rather spend the money they have today than save for the future, while 30% believed they could not make regular contributions to a pension due to a “lack of disposable income”.
At the same time, 29% have no plans to start a workplace or personal retirement pot because they think the state pension will be enough to support them in their later life, and 24% admitted putting it off because they don’t understand how pensions work.
Richard Eagling, senior pensions expert at NerdWallet, said: “The younger generation seem to be re-writing the retirement rulebook, with cryptocurrency a bigger draw than pensions for almost a third of young adults.
“Our survey shows that many youngsters are in danger of overlooking the unique advantages that pensions offer, in pursuit of the thrill of higher risk and potentially higher reward investments such as cryptocurrency.
“At the same time, a significant number of 18–24-year-olds are not engaging with retirement planning at all, or prioritising other financial goals. It is vital that young adults not only take steps to save for their retirement as early as possible, but also understand which products are most likely to give them the best chance of a comfortable retirement.”
