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AXA IM says middle-agers should embrace risk for a better retirement

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Millions of savers in the UK risk running out of cash in retirement because they are becoming too cautious with their portfolios at a relatively young age, new research from AXA Investment Managers shows.

The research reveals a significant drop in the number of people willing to take risks with their investments once they hit 40.

Nearly seven in 10 (69 per cent) of respondents aged 16-21 say they would be willing to take risks with how they invest and manage their money. That figure falls sharply to 50 per cent for those aged 40-54, raising concerns that investors in this age bracket are slamming the brakes on potential growth years before they plan to retire.

Those aged 40-54 are also willing to take significantly less risk than those aged 22-30 (65 per cent) and 31-39 (58 per cent), a trend AXA IM believes is particularly concerning when life expectancies are rising – one in three people are now expected to life to 100 – and retirement periods are growing longer.

By de-risking too soon, AXA IM warns that many investors jeopardise curtailing the investment growth they need to grow their pension pots to a size able to fund a comfortable retirement. This is especially the case for those planning to work into their 60s, as they have more capacity for risk in terms of asset allocation.

Dani Saurymper, Portfolio Manager of the AXA Framlington Health fund at AXA IM, says: “Our society is evolving at a rapid pace as a result of advances in technology and medicine, and therefore people are living longer lives.”

“Forecast shows that the over 65s cohort will grow four times more quickly than the broader population between 2020 and 20301. The average Brit has never had so long to live, and while that’s something to celebrate, we want to remind individuals that they will increasingly have to take control of their own savings, to ensure they can enjoy longer retirements. So, to reap the rewards later down the line, a little more risk can pay off.”

Rob Bailey, Head of UK Wholesale Distribution, at AXA IM, comments: “It is worrying to see consumers attitude to financial risk changing so dramatically the older they get, only 50 per cent of those aged 40-54 are willing to take risks.  We believe there needs to be a re-calibration in attitude towards risk as people get older.

“It is clear that people are living longer post retirement and therefore need to be aware that risk is something they should factor in their portfolio in order to have enough to fund a longer retirement period.  Our research shows that we need to make people aware that by de-risking too early you may do more harm than good when it comes to funding your own retirement.” 

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