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Low-Risk Investments: How To Choose The Right Retirement Income Options

By Alex Pritchard


If you’re approaching retirement, you’ll likely have been planning towards it for years. You’re probably thinking that once you hit your chosen retirement age, you’ll have a stable income, typically through a pension plan or an annuity.

However, the world has changed in the last few years. The old assumptions and plans for retirement may no longer be as reliable or as straightforward as they once were. As a result, there’s now a need to reevaluate what retirement looks like today, particularly from a risk perspective.

So, the big question is: are there truly any low-risk income options for retirees? 

In this blog, we’ll take a look at some of the options available to retirees, evaluating the risk involved, and how you can put your best foot forward to make the best decisions for your retirement. 

Flexible access pensions

In the past, many people relied on pensions that gave them a fixed, guaranteed income when they retired, often through annuities. However, since 2015, these guaranteed annuity rates have become less common.

Now, with the modern “private schemes,” you’re typically using flexible access as a route to access your money. This means you can choose how much money to take out from your retirement savings each year. 

For example, if you have £100,000 in your pension, you might decide to take out £3,000 or £4,000 a year. If your investments perform well and make between £5,000 to £10,000 a year, your overall pension pot stays the same size or even grows while you still get some income.

But what does this look like from a risk perspective?

It involves a fair bit of risk as your money remains invested in the market, and could go up or down. You’re also not getting a fixed, guaranteed income. But on the upside, you have more flexibility, and you can potentially benefit from market gains.

In terms of death benefits, if you pass away before age 75, the majority of your pension money can be paid out to your beneficiaries tax-free. After the age of 75, it becomes taxable.

Should you reduce your risk as you approach retirement?

There’s always been an assumption that, as you approach retirement, you start reducing investment risk to protect your savings. But that’s not the case anymore. 

What we’ve found with most of our clients is that they’re unlikely to reduce their risk – based on personal choices and preferences.  Even as they retire, most people will continue to take the same level of risk because the funds will be invested for the rest of their lives. 

So, if you’re planning to live until 85 or longer and you want your money to keep growing, this often involves taking on some level of risk, similar to what you might have done before retiring. 

Are annuities worth it?

Annuities haven’t really been a topic of conversation since pension freedoms were introduced in 2015. 

One reason they became less popular is that they offer lower returns – just a couple of per cent per year. Additionally, when you die, most of the money in the annuity typically disappears; it doesn’t go to your spouse or children.

For example, you can get a “very focused” annuity – with no escalation or spouse’s benefits – and this gives you a six per cent return. This sounds pretty attractive as a guaranteed or “secured” income. However, the catch is that this type of annuity offers no benefits for your spouse or guarantees for income growth over time. So, if you die, none of that money goes to your family.

If you want an annuity that will provide some income to your spouse after your death with guaranteed income for five to ten years, the return drops to around three per cent.

Essentially, while annuities are worth considering as they offer secured income, losing the death benefits you’d typically get from flexible access is a huge sacrifice. 

Investment risks: looking at the wider picture

2022 was a tough year for nearly all types of investments, except for UK equities (the FTSE 100). Even the relatively “safe” investments were not spared.

For example, high-risk sectors like American technology and biotech experienced significant losses of 20-50 per cent. On the other hand, very low-risk investments like government gilts also performed poorly. With interest rates going up and the government needing to borrow a lot more money, the long-term gilt market lost 30-50 per cent over the year.

So, if you invested in high-risk areas, you lost a lot of money, but even if you played it safe with low-risk investments, you still lost.

The value of a good independent financial adviser

The old rules about what’s “safe” and what’s “risky” are changing. So, if you do want to be a low-risk investor, it’s crucial to understand what “low-risk” actually means in today’s environment. 

Is it something that has been stable for a long time, or is it an asset that’s cheap, represents good value, and is therefore less likely to lose money? The devil is always in the details when it comes to investments! 

As always, an independent financial adviser remains the gold standard as they can help you navigate the investment landscape and adjust your portfolio to reflect the new realities. 

Good advisers have the research, knowledge, and experience to make “big calls” about your investment strategy, which can result in better performance for your portfolio and help you move towards a fulfilling retirement.

If you’d like to find out more about the risk perspectives to consider as you approach retirement, check out our podcast, A Dab Of Investment.

And if you’d welcome more of our expertise and experience to help you plan towards retirement, please email me at

The views expressed in this article are those of the author and do not constitute financial advice. Applewood Independent Ltd is authorised and regulated by the Financial Conduct Authority. For financial advice designed for you and your specific circumstances, please contact the author using the contact details provided in this article or, alternatively, contact the Applewood Independent Ltd office on 01270 626555.

The value of your investment can go down as well as up, and you may not get back the full amount invested.

Past performance is not a guide to future performance.