Pensioners urged to risk their savings for higher yields

22 March 2006
Pensioners should take more risks with their money, it was suggested yesterday.

Life expectancy post-retirement is much greater than it was in the past, with many retired people making financial plans spanning as long as 20 years.

And with annuity rates remaining low, pensioners should not automatically direct their savings towards low-risk, low-yield long term assets, according to Jupiter Asset Management.

"We know many people are leading active, adventurous lives in their sixties, before they do have to consider settling into a more peaceful old age. Their financial arrangements can reflect that too", Colin Maloney, director of pensions at Jupiter argued.

A growing number of older people are putting their savings into equities, which have a much higher potential yield than annuities, gilts and other conventional long-term investments, but which suffer from volatility.

John Lawson, head of pensions at Standard Life told IFAOnline: "You can get a much better yield out of other assets such as equities and property. Obviously these are quite volatile, not in income yields which are quite stable, but in asset prices. But the market has to find ways to hedge out risks and find a compelling case for people to take income drawdown."

While encouraging greater risk taking, Jupiter was nonetheless careful to stress that any such strategy must be carefully monitored to guard against capital erosion.

As such, the firm recommended a "layer cake" approach to investing, balancing the proportion of one's assets in higher risk assets against more stable holdings differently through the different stages of retirement.

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