Perception of risk
But whether or not retirees will turn to higher-risk holdings depends on their perception of risk, according to Adrian Lowcock, senior investment manager at Hargreaves Lansdown.
Perception of risk changes and can be different from actual risk.
Lowcock said after gilt yields plummeted in 2012, they were now at around 3% with a current inflation rate of around 2%. This was an example of how low-risk expectations change, he said. Guaranteed losses from fixed income and cash is not necessarily a bigger risk but also not a much better investment alternative.
Going forward, investors need to fully appreciate the investments they are dealing with and the associated bigger risk.
"It requires education and understanding to know how equities behave in the short-term,” Lowcock added.