Pension default funds and attitude to risk

It’s no wonder the public get confused about pensions. Given that no two people have identical situations, it is practically impossible to standardise advice. Generic pension education and pension guidance is one thing – generic advice is another.

Here’s an example from an article on the BBC website of what I consider a fair comment, although I personally disagree with the reference to ‘infrequent checks’:

“Try and keep things simple. It can be tempting, particularly with investments, to make decisions that look right now, but need to be kept constantly under review. Few of us have the time to do this. Better to make simple choices using simple products that will hopefully look after themselves with infrequent checks needed.”

And here’s another I came across recently after an employee had said, “I do not like to risk any of my investments” to which the following reply was given (and it was not by a regulated financial adviser):

“If you do end up going with a personal pension managed by an IFA I suggest that you tell the IFA that you will accept either 30% or 40% drops in capital value in bad years until ten years before retirement, then dropping in even steps to 10% over each year in the last ten years.”

Does that surprise you, because it certainly did me? What the two comments do show to is the importance of educating people on risk profiles. For more of the BBC article, see:

Tips for people in DC pension schemes (BBC.co.uk)