In the Retirement Risk Zone, sudden market movements can not only be unsettling - they can also have a significant impact on your client’s plans for the future.

And, with rising prices also becoming the new normal, this can threaten how long their pension savings are likely to last - making it harder for advisers to deliver a stable and sustainable income stream. Here we explore these themes in more detail, and why they must be front of mind when your clients approach and move into retirement.
 

The persistent threat of market volatility

We’re living in an increasingly volatile world. Geopolitical instability, natural disasters and other factors can all cause sharp market fluctuations. These conditions are clearly far from helpful for those clients in the Retirement Risk Zone who will be looking for greater levels of financial stability.

So how do you protect clients from the negative effects of market volatility? Diversified multi-asset funds can help to cushion some of the ups and downs, but a portfolio’s ability to recover will all depend on the assets it holds and the passing of time. This is something that clients nearing or in retirement may not feel like they have.

Equities are likely to form a core part of most retirement strategies because they offer long-term returns to hedge against rising living expenses, as well as relatively higher levels of income in a low interest rate environment. However, they’re also the most troublesome asset class when it comes to volatility - especially during market corrections.
 

On average, there’s one big market correction every six years

Over the last 30 years, the stock market has consistently corrected itself whenever global growth has slowed. Indeed, looking back almost 90 years, there have been 14 large stock market corrections - which are defined as drawdowns of 20% or more. This is an average of one big correction every six years or so. On this evidence, it’s highly likely that the average client in the Retirement Risk Zone will experience a major market correction at least once.

 

How different asset classes have performed over the last 90 years

Rising to the challenge of inflation

While inflation won’t impact the value of your client’s pension savings like market volatility, it will impact how long their pot is likely to last. This is especially true for clients on fixed incomes.

When inflation is high, difficult decisions may need to be made.This could mean reducing their current level of income, deferring their retirement plans or even adopting a phased retirement to help protect the sustainability of their pension savings. Of course, we can’t predict how inflation will change over a client’s lifetime in retirement - but, for those who misjudge the rate at which prices will rise, they could face significant financial hardship in their later years.

  • Inflation peaked at 11.1% in October 2022 - the highest rate in over 40 years

  • Food prices rose over 19% in the year March 2023 - the sharpest spike since the 1970s
     

  • UK inflation stayed above 10% for 7 straight months in 2022/23, longer than any G7 country

Many clients worry about running out of money in retirement

According to our Retirement Voice research study, two in every five clients currently worry that their pension savings won’t last their full retirement lifetime. Looking at those clients who are next in line to retire, Gen Xers are twice as likely as Baby Boomers+ to have concerns about their money running out.

 

"I worry my retirement finances won’t last
my full retirement lifetime"

 

 

43%
Gen Z (aged 18-27)

 

46%
Millennials (aged 28-43)

 

50%
Gen X (aged 44-59)

 

27%
Baby Boomer+ (aged 60-80)

 

Figures show the percentage of clients who agreed with the statement shown. 
Source: Standard Life, Retirement Voice, 2024.

 

Support for your client conversations

To speak to your clients about market volatility or how inflation can shrink the buying power of their pension savings, download our short leaflets.

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Money invested is at risk. Tax may change in the future. 

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