Monday 18 April 2016 12:15 pm

UK public more likely to invest its pension savings as period of low interest rates drags on

The UK public has become more willing to take risks with its retirement savings in a period of historically low interest rates, new research has shown.

Investment firm Franklin Templeton's annual Retirement Income Strategies and Expectations survey found that 30 per cent of people expect to invest part of their pension pots after they retire, compared to 25 per cent last year.

Respondents have also become more accepting of stock market volatility, with the percentage of people thinking the market is too risky to invest in during their twilight years falling from 44 per cent to 41 per cent.

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Unsurprisingly, half of the people surveyed were concerned about the low interest rate environment and its impact on their nest eggs, with this rising to 71 per cent of people in the 65-74 age bracket.

The Bank of England has maintained a base rate at 0.5 per cent since March 2009, making investment products such as Isas more attractive to savers who can no longer make significant returns by keeping their money in the bank.

The UK public is becoming more brave in its investment approach. The survey showed just 39 per cent of people would be concerned about a five per cent decline in their retirement portfolio, down from 44 per cent last year.

However, would-be investors are still nervous about larger losses. 81 per cent of the 2,003 people surveyed said they would be concerned if their retirement investments declined by 20 per cent, almost flat from 82 per cent last year.

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Colin Morton, Portfolio Manager, Franklin UK Rising Dividends Fund, commented: “Our second RISE survey has produced some interesting findings around people’s attitudes towards the role of investment in retirement saving.

“Encouragingly, there looks to be a greater understanding related to the part that market investments can play, particularly in providing an income stream in retirement.

“The UK public also seem more accustomed to potential short term volatility in their portfolios. This could point to a growing appreciation of the benefits provided by a long term investment outlook.

“The lower levels of concern around short-term fluctuations in portfolio values may also reflect a growing sense of realism amongst investors and the fact that they are starting to swallow the pill of lower returns in this low interest environment.

“In this environment, investors saving for their retirement should look at ways of gaining exposure to companies which are able to provide consistent above-average dividend growth as a way of generating an attractive and sustainable source of income.”