Four retirement super trends for the decade ahead, revealed by ANDREW OXLADE

The world of retirement saving has changed dramatically in my working career. The single biggest transformation has been the shift in responsibility.

If I’d started my career in the 1970s, I would have very likely had a final salary pension. I would have contributed little, if anything, and the payouts would be guaranteed. If investments flagged, my employer would make up the shortfall.

But I began working in the 1990s. As a result, it will be me, not my employer, who shoulders the risk of investments paying less than we’d hope. It will also be down to me to work out how to make that pot last for my retirement lifetime. In short, I’m responsible.

That is the most super of all retirement trends, leaving me – and you – to make many decisions, such as how much to save, how much to take out and even where to invest.

I doubt anyone realised back then quite how different the saving system would be 30 years in the future. And the same opacity applies today. We can, however, look at some of the trends gathering pace and speculate on where they may take us in the future.

Here, I’ve identified four areas for you to consider.

You’re on your own: the single biggest transformation to retirement saving in recent decades has been the shift in responsibility away from the employer to the individual

1. Finding adequate returns

The size of your retirement pot will be decided by three factors – how much you save, how long you save, and the investment returns you achieve. 

The first two you can control, the third you can’t. It seems that ever since I began saving for retirement, returns have beaten what was expected. 

Back in the noughties, the regulatory guidance was to expect returns of 7 per cent a year, later reduced to 5 per cent and then scrapped. 

Stock markets actually delivered blistering returns in my pension saving career to date, notching up average total returns of 9.1 per cent a year since 1997 for the MSCI World stock market index. The last decade has been even more remarkable with 13 per cent annual gains.

But there’s a but. Because markets have done so well, they look expensive versus historic norms. 

The US market, inflated by the excitement over tech stocks, is looking particularly lofty. 

Fortunately, better value can be found elsewhere. Fidelity’s January Outlook highlighted Asia, Europe and the UK. Emerging markets appear cheaper than the rest – an option for those who can stomach the extra risk.

It may be a simple case of leaving yourself less exposed to the US. As this chart from the Schroders Equity Lens shows, non-US shares are at a 44 per cent discount to US shares.

2. Overcoming pensions nihilism… and wild risk-taking

When I ask 20-somethings about retirement, I detect growing despair – a pensions nihilism. Retirement saving is not a priority. 

Understandably, the focus is on clearing student debt and buying a first home. I’ve heard this described as the young saver’s trilemma: house vs debt vs pension.

A byproduct of saving nihilism is that young people are more attracted to quick profits. A penchant for risky investments among younger investors has always been a thing. I did it. But it was particularly apparent in the Covid lockdowns. 

Young investors widely backed meme stocks being hyped on social media. More recently, the surge in the price of bitcoin has further gripped the imagination of an array of investors, particularly the young. 

In fact, 14 per cent of 20-somethings confess to having dabbled compared to 3 per cent of 50-somethings, according to UK data from the Fidelity Global Sentiment Survey.

Many will be sitting on big returns. However, investors are often blithely unaware of the risks they’ve taken when they’ve achieved such gains; it could so easily have gone the other way.

I hang on to the notion that patience is a virtue. Legendary investor Benjamin Graham said investment success came from ‘acting consistently as an investor and not a speculator’. His prodigy, the billionaire Warren Buffett, continued the theme: ‘The stock market is designed to transfer money from the active to the patient.’

The patient investor would take advantage of their employer’s pension matching, rather than opt out, backing long-term investments that offer the prospect of long, steady growth. 

Saving into an Isa or a Lifetime Isa is also tax-efficient and can be helpful for raising a property deposit.

And unlike crypto profits, traditional investments, such as in funds and shares, can easily be protected from taxes, such as capital gains tax, by being held in a pension or Isa.

The government should be considering the level of long-term savings nihilism in the young. 

The forthcoming review of pension saving, which also includes a review of Lifetime Isas, could skew saving incentives further toward younger…