One in two consumers are using deposit accounts and cash Isas to save for their retirement rather than equities, despite the current high rates of inflation.
This research from Barnett Waddingham shows cash remains the preferred option for many savers, despite the fact that this is likely to lose value in real terms over the longer term, particularly in times of high inflation.
Their data shows that 45 per cent of consumers are using a savings account to save for retirement, outside of their main workplace pension savings. This is far higher than those relying on stocks and shares equities or property to boost the overall value of their longer-term savings.
Barnett Waddingham says 25 per cent are using a cash Isa, including more than a fifth (21 per cent) of 18-34 year olds.
The data also shows that a higher proportion of these younger savers are also looking at crypto currency as an investment option, with 12 per cent saying their are investing in the asset for their retirement, compared to just 5 per cent of the general population.
The research shows that men are also more likely to invest in assets such as equities which have historically provided a better hedge against inflation. The research showed men are twice as likely as women to be using a stocks and shares Isa to save for retirement (22 per cent vs 12 per cent).
Barnett Waddingham points out that UK equities have consistently outperformed cash over the last 20 years, as has a standard DC pension portfolio.
Barnett Waddingham partner and head of DC Mark Futcher says: “It’s vital people pay attention not just to what they’re saving for retirement, but how and where too.
“Squirreling away money for retirement into a cash savings account might feel safe, but the reality of the inflationary environment is that it could be falling in ‘real terms’ by as much as 8 per cent or 9 per cent. That’s not a performance people would accept from any other asset class; risk changes over time, and equities are less ‘risky’ in the long term than the short term.
“For those unsure where to save, there are many excellent sources of advice. Good employers will have a vested interest in your financial wellbeing; it’s worth speaking to them about accessing financial guidance. Alternatively, financial advisers, money advice charities, and Government initiatives like Money Helper can help point people in the right direction.”
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