More than one in four savers say they would consider buying cryptocurrencies as part of their retirement planning, new research shows.
Some 27 per cent of people say they would do so, according to pensions provider Aviva – despite widespread concerns about cryptocurrency’s volatility, security and lack of regulation.
Cryptocurrencies are essentially digital money, an alternative to traditional currencies such as the pound or dollar.
As with real-world currencies, their value is determined by what people in the market are willing to buy and sell them for.
Transactions are logged on a secure decentralised digital ledger called blockchain, so they are not controlled by states, banks or other financial institutions, unlike traditional currencies.
However, unlike traditional currencies, they are very rarely used to purchase goods and services – at the moment.
They have captured the mind of huge swathes of savers who are drawn in by the sky-high prices Bitcoin – the most popular coin – has reached in recent months.
It reached an all-time high in mid-August of $124,496, surpassing its previous record of $123,193.63 which it hit in July.
The craze around these coins has caused some 21 per cent of people – equivalent to 11.6 million savers – to ‘invest’ in cryptocurrencies, according to Aviva.
But now adults are going one step further and are thinking about taking money out of their tried and tested pensions to funnel into the risky coins.
Some 4.3million people have already withdrawn money from their pension to invest in crypto.
One in four adults have or would consider withdrawing at least part of their pension to funnel into cryptocurrencies, Aviva says.
Potential higher returns is the motivation for 43 per cent of those who may use their pension funds to buy crypto.
For 36 per cent of savers it’s the excitement of new technology which lures them in while 32 per cent want to diversify their portfolio.
But beware – before anyone takes the plunge into the world of cryptocurrencies, remember they are not an investment.
They are largely unregulated, very volatile and high risk – and if you lose money, you have no protection under the Financial Services Compensation Scheme safety net.
Scammers also take advantage of the lack of understanding and regulation of cryptocurrencies to steal savers’ cash.
Almost three in ten people worryingly don’t know there are risks involved with cryptocurrencies.
Plus, if you opt out of saving into a pension in favour of cryptocurrencies you lose pension benefits such as tax relief which can compound your retirement savings.
Michele Golunska, a managing director at Aviva, says: ‘There are lots of different investment opportunities out there, and it’s easy to see why cryptocurrency has become so popular in recent years. But we mustn’t forget the value of the good old pension.
‘It comes with some powerful benefits, like employer contributions and tax relief, that can make a real difference to your long-term financial wellbeing.
‘It’s important to weigh up the risks and rewards carefully and make sure your retirement savings are working as hard as they can for you.’
Aviva says it encourages savers to take a balanced approach to retirement planning. It says you should prioritise long-term financial security over short-term speculation.