September 4, 2025

Beyond the Status Quo – rethinking the future of retirement investing

Challenging the Conventional Wisdom on Retirement Investing
When most people think about preparing for retirement, they’ve been told a familiar story: invest more in shares (equities) when you are younger, then gradually switch into bonds and “safer” assets as you approach retirement. This logic underpins the design of most pension “lifecycle” or “target-date” funds.

A new academic study, however, casts serious doubt on this traditional approach. By looking at data from 39 developed countries, stretching back more than a century, the researchers asked a simple but important question: what mix of investments actually works best over a lifetime?

What They Found…

Equities throughout life
The study concludes that the optimal strategy for retirement saving is to remain invested almost entirely in equities at every age. On average, the best results came from holding roughly one-third in domestic equities (e.g. UK companies) and two-thirds in international equities. Bonds and cash offered very little benefit, except briefly at the point of retirement to provide a cash buffer.

Stronger retirement outcomes
Investors following this all-equity approach ended up with higher retirement incomes, more reliable capital preservation, and larger potential legacies for their families, compared with the standard stock-bond mix.

Target-date funds may undershoot
The researchers calculated that investors using conventional target-date funds needed to save around 60% more to achieve the same retirement outcomes as those who simply stayed in a diversified equity portfolio.

Why Bonds Disappointed
Bonds have traditionally been seen as the safe option for retirees. But over longer horizons, the study found bonds:
– Produced much lower real (inflation-adjusted) returns,
– Became more volatile than expected, and
– Struggled particularly during periods of high inflation.

International equities, by contrast, delivered better protection for purchasing power and more reliable growth.

What This Means for You
It would be wrong to conclude that “everyone should be 100% in equities”. Real life is more complex:

– Behaviour matters – even experienced investors find sharp falls uncomfortable. Sticking with a strategy through difficult markets is often the hardest part.

– Personal circumstances – income needs, spending patterns, tax considerations and capacity for loss all play a role in determining the right mix of assets.

– Regulation – in the UK, advisers and wealth managers are required to recommend portfolios that are suitable for each individual client, not just what might appear best on paper.

The Takeaway
This research highlights that international equity diversification may be a far more powerful retirement tool than bonds. While most investors will want a degree of balance and stability in their portfolios, the evidence suggests that leaning towards equities, and not being afraid to hold them later in life, could materially improve retirement outcomes.

As ever, the right approach depends on your goals, your tolerance for risk, and your personal circumstances. Our role is to help you navigate these choices, ensuring your investments are aligned with your needs today while keeping you on course for the retirement you want tomorrow.

Reference: Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice