Research from Standard Life has revealed that three-quarters (76%) of over 50s cite appetite for risk as an important factor when planning what to do with their pension pot.
Examining how the age group thinks about market uncertainty in relation to retirement, Standard Life, which is part of the Phoenix Group, found two fifths (41%) of over 50s yet to retire expect their risk tolerance to reduce as they approach retirement.
According to Standard Life, this suggests the vast majority of those in the age group are aware they either have less time to recoup losses ahead of retirement or may be running down their savings more quickly if taking an income from a pension in drawdown.
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Indeed just 8% of the 2,000 surveyed – which took place between 25 July 2024 to 12 August 2024 – anticipated an increase in their appetite to take on more risk with their pension savings as they approached retirement, which could be driven by the need to close a savings shortfall.
“Investment risk is an ongoing area of focus for regulators, the industry and customers,” said Claire Altman, managing director of individual retirement at Standard Life. “The FCA’s Retirement Income Review highlighted that decisions for those approaching or in retirement have become much more complex with the potential for more risk, with a focus on the level of income withdrawn and the investments where savings are held.”
She added: “Attitudes towards risk will differ from person to person, but recent market volatility has clearly shown the impact this can have on an individual’s pension savings. Research from Oxford Risk has also shown that emotional reactions to market movements costs the average investor around 3% per year in lost returns.
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“Retirement income products, such as smoothed managed funds, offer a solution to the conundrum around investment growth versus risk, and over half (56%) of over 50s say their preference would be for steady medium-long term growth if sheltered from the short-term ups and downs of the stockmarket.
“Smoothed funds can be especially helpful during periods of volatility and are well worth considering as part of the wider mix of retirement income solutions.”
