Why most savers don\u2019t take enough risk<\/p>\n
Saund\u2019s decision to take control of his pension and concentrate his investments on the stock market is not the usual strategy for people who are approaching retirement. <\/p>\n
Most of the 22 million employees who are signed up to workplace pensions are part of their companies\u2019 default schemes. Many of these schemes automatically move clients into less risky assets in the years leading up to retirement.<\/p>\n
Helen Morrissey from the investment platform Hargreaves Lansdown said: \u201cA popular approach taken by many default funds is to adapt to what is known as lifestyling, where you are switched out of equities to lower-risk assets such as bonds, the closer you get to retirement.\u201d<\/p>\n
Equities are considered to be more risky because they are subject to market volatility and potential losses. Bonds are effectively IOUs from the government or companies. The returns are guaranteed and in the case of UK government bonds \u2014 known as gilts \u2014 there is very little chance of default. They also provide regular interest payments. By switching to bonds, savers can ensure their pots are protected from the ups and downs of the stock market.<\/p>\n
This lifestyling process can happen up to 15 years before someone\u2019s stated retirement date. But it can mean missing out on significant returns. <\/p>\n
Someone on a starting salary of \u00a325,000 at 22, who retired at 65 and saved 8 per cent into their pension throughout their career would have a pot worth \u00a3283,000 if it was moved into less risky assets (with 33 per cent stocks and 42 per cent bonds) 15 years before retirement, according to the consultancy Isio<\/a>. If that pot stayed in the typical growth fund (with 83 per cent shares and 6 per cent bonds), it would be worth \u00a3308,000. This assumes a salary increase of 2 per cent a year and investment growth of 7 per cent a year after fees.<\/p>\n Saving enough for retirement has become increasingly important as life expectancy and the cost of living have risen.<\/p>\n In June the trade association Pensions UK reported that the minimum amount required for a single retired person to live a comfortable retirement was \u00a343,900 a year after tax, assuming you don\u2019t have to pay rent or a mortgage, up from \u00a333,600 in 2021. You would need pension savings of at least \u00a3800,000<\/a> to afford that standard of living, according to the wealth manager Quilter.<\/p>\n Laith Khalaf from the investment platform AJ Bell said: \u201cFor many people, there is a fundamental mismatch in terms of what the lifestyle investment strategy is trying to achieve and what is going to happen in their retirement.\u201d<\/p>\n Jaspal Saund: \u201cMy target is to get to \u00a32 million to be comfortable\u201d<\/p>\n \u2018\u00a32m is achievable if I don\u2019t do anything stupid\u2019 <\/p>\n Saund puts \u00a3400 into his Sipp every month. He also has a workplace pension into which \u00a3780 is paid by his employer every month and a \u00a320,000 pension from a former employer that could not be moved into his Sipp. <\/p>\n![\"Man](\"https:\/\/www.europesays.com\/uk\/wp-content\/uploads\/2025\/08\/\/b1118200-39d6-4272-80c5-7c2239a84fa8.jpg\")
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