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Retirees unfazed by market conditions but shouldn’t be complacent

24 November 2018

The majority of retirees are taking a wait and see approach to their pension, despite concerns about widespread market volatility, according to new research by Aegon. However, retirees should not be complacent, the pension provider warned. 

Aegon said 43% of the 650 retirees surveyed expressed concern about the impact of current market conditions on their retirement income sustainability, yet 67% were not taking any action, opting to leave their money where it is. Just one in ten (11%) is reassessing their current investment strategies in order to diversify.

The research also showed over half (52%) of those surveyed have not decreased their rate of drawdown withdrawal and despite significant outflows from equities in recent times, 58% have not reduced their exposure to equities in the last 12 months.

With data from the Financial Conduct Authority* showing that those taking regular sums from drawdown policies have increased their rate of withdrawal from 4.7% in 2016-17 to 5.8% in 2017-18, there are concerns that retiree’s drawdown withdrawal may not be sustainable against current market conditions.

Nick Dixon, investment director at Aegon, said retirees must be careful not to become too complacent, with some at risk of running out of money later in life.

He commented: “Current market instability comes after over a decade of strong gains and this coupled with the introduction of pension freedoms may put some retirees at risk of running out of money in later life at a time when their pension pot is at risk of falling in value.

“It is positive to see that overall retirees aren’t fazed by current market conditions, but this shouldn’t turn into complacency. Retired investors would be wise to reassess their pensions to consider the amount of money they are taking out of their pension pot and ensure their investments are diversified enough.”

*FCA Retirement Income Market Review, September 2018

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