Majority of young savers adverse to risk in their pensions

Just over a quarter (26 per cent) of savers aged 18-30 feel they can afford to take on some risk with their pensions, even though they are many years away from retirement, new analysis from PensionBee has revealed.

The survey, which included responses from over 500 British savers, discovered that only 7 per cent of young savers reported that they were currently invested in a high-risk pension scheme, despite having the longest time horizon to recoup any losses.

PensionBee also found that almost a third (32 per cent) of young savers were in a low-risk plan, despite over half (59 per cent) of this age group identifying themselves as having a medium risk appetite.

Respondents reported their motivations for staying with their current plan, with 17 per cent pointing to the excessive price of moving plans, 15 per cent showing aversion to high-risk plans due to the importance of their pension and 13 per cent believing pensions to be too complicated.

The survey also found that when asked to rate various financial products and services, where ‘1’ is low risk and ‘5’ is high risk, 32 per cent rated pensions as a ‘2 out of 5’, a perceived safer investment than cryptocurrency, which 35 per cent of young savers rated as a ‘4’.

PensionBee CEO, Romi Savova, commented: “Our findings suggest that, broadly speaking, young savers lack confidence in investing their savings in the stock market.

“Selecting a higher-risk pension plan may seem daunting for young savers, especially if they are just starting out in their pension saving journey. However, while higher-risk investments can see sharper increases and decreases in their value, they’re likely to provide a higher rate of growth than lower risk investments over the long term.

“It’s crucial for young savers to remember that short-term fluctuations are unlikely to cause any lasting damage, especially for those who are at least 30 years from retirement. Low-risk plans tend to usually only be considered for savers who are withdrawing their entire pension imminently.

“If we are to see the younger generation fulfil their retirement ambitions, the pensions industry needs to work together to combat young savers’ lack of risk appetite.”

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