Our crazy contradictions over pensions

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One of the most interesting sections of the DCIF’s “Evolution not revolution” is the contradictory positions we take on post retirement risk.

Here’s two of the comments which the report cite as a lack of alignment between their retirement objectives and the investment strategy they’d choose.

“I wouldn’t want to take any chances with my money. Especially as I feel like I have plenty of time.” – Male, 56

The idea of time in retirement is confused by people’s expectation of how long they and their money might last. Which gives rise to this confused statement from a 57 year old female

“There are two ways to look at it. If you’re planning to live off it for a long time. you’d maybe want higher risk investments to give you more money for the longer term, but that comes with a risk. So, it’s whether you want to take that risk… With higher risk it could give you higher returns, but also plummet. I don’t think I would want to take that risk, to lose money.”

A 58 year old man clearly thinks he’s at a tender age

“At my age, I would expect them to be in low risk investments; solid investments where they are taking virtually zero risk. They won’t be putting it into the stock market. You don’t want to take the risk of a big reduction in your pot before you retire.” – Male, 58

and when asked to define what “low risk” a 57 year old female says

“Low investment risk is where I could lose maybe £1k or £2k on my pot of £200k, whereas a medium risk is where I might lose £5k.”

There was a time when such attitudes were branded “reckless conservatism” though that phrase has rather been usurped of late.

When it comes to the money we have – it is ours to have and to hold and our risk tolerance is tiny.

And yet we are reckless about our future liabilities.

As the authors of Evolution not revolution have it

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I don’t want to sound paternalistic and agree with this sentiment. But it is paradoxical that the same people who will take no risk with their assets can be so reckless about their liabilities.

Here’s the views of the Ignition House survey populationScreenshot 2019-11-16 at 09.35.53

But people have other plans..

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Indeed people seem as happy to gamble on their future as they’re reluctant to gamble their past.


So how do we explain this paradox?

There are stacks of behavioural finance books devoted to these paradoxes and I’m not going to pretend to know which bias’ are on display.

The important thing to note is that people are saying contradictory things about their past and their future and in Ralfean terms this is “utter bollocks”.

I’m not John Ralfe and can see some kind of emotional intelligence guiding people here, based on the utility of happiness. But all the same, we do need to get people to understand they can’t have security in the future without taking some risk with their savings.



About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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1 Response to Our crazy contradictions over pensions

  1. Brian G says:

    From my real life experience of 27 years advising people one on one, the most common and obvious trait I picked up from my customers was the lack of understanding of the consequences of different types of risk. People’s expressed views needed to be challenged and a genuine unbiased explanation of the risks associated with different asset classes needed to be given. Proper at retirement advice involved obtaining figures for annuities with different death benefits and different levels of indexation (including flat annuities) and then looking at past performance of different asset classes from cash to bonds to property to equities to mixed portfolios. When you challenge people who “don’t want any risk at all” by showing them other approaches honestly the vast majority of people are prepared to accept an element of risk or else see that an annuity is their best bet.

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