In an environment where people’s notion of financial security has traditionally been created through their pensions, a survey that has recently been released from UK insurance behemoth Aviva, indicates that there is a quiet revolution occurring. The results display that 27% of people expressed they would consider investing in cryptocurrencies as part of their retirement investments, based on a sample of 2000 UK adults. Their growing acceptance also means that some part of the UK’s huge £3.8 trillion pension market will eventually crossover to the high-risk, high-return world of digital assets.
The Allure of Higher Returns
So, what’s driving this change? For many, the answer is simple: the promise of higher returns. The survey found that just over 40% of those interested in crypto were motivated by the possibility of greater financial growth compared to conventional investments. This feeling is especially true for younger groups. Almost one-fifth (20%) of adults aged between 25 and 34 had already taken a leap of faith to withdraw pension money to buy cryptocurrencies, showing that they clearly would go for risk for potential reward.
Dealing with the Regulations
While interest is clearly increasing, for the most part UK adults don’t have many formal options to invest in crypto for pensions. In fact, the reality is that most regulated pension schemes do not allow an investment in digital assets and so would require the user to withdraw the money and buy it personally, instead. This is a far cry from the United States, where a recent executive order has opened up the opportunity for Bitcoin and other cryptocurrencies to be included in pension 401(k) retirement plans. To note, the UK does have a proposed regulatory regime that will attempt to regulate crypto firms like traditional financial services firms, however, it seems the approach for public pensions will remain more conservative.
Acknowledging the Risks
That said, this enthusiasm is grounded in a healthy dose of reality. The same survey suggested that the public has some serious concerns. Among the listed concerns provided by respondents, the top mentioned were security risks associated with hacking and phishing attacks, followed by missing regulation and consumer protections, and the widely known volatility of cryptocurrencies. Security risks are certainly reasons why financial experts, including Michele Golunska, Managing Director of Wealth and Advice at Aviva, continue to promote the lasting benefit of traditional pensions, including employer contributions and tax relief.
The Knowledge Gap and Future Outlook
A surprising finding from the research is the knowledge gap that exists among potential crypto investors. While many expressed interest, a large number admitted they didn’t fully understand the benefits they might forfeit by cashing in their pensions. In fact, it is observed that 27% of survey respondents were completely unaware of any risk associated with crypto investing. As the UK regulatory landscape develops with proposals for (arguably) better transparency and consumer protection, the future crypto will have in retirement will depend upon a more informed public and regulated and accessible products. The evolution from speculative asset to part of a safe and secure retirement portfolio is in its infancy; however, the discussions around it are well and truly underway.
