Retirement Advantage’s latest retirement sentiment index suggested the share of people unwilling to take any financial risk with their pension savings has gone up 13 percentage points in the last year - from 26 per cent in 2017 to 39 per cent now.
The proportion who said they would take a reasonable amount of risk for a good chance of a favourable return has also fallen to its lowest level since the annual research was launched three years ago – to 17 per cent, from 28 per cent last year and 29 per cent in 2015.
Markets experienced a slight correction in the early parts of this year following long periods of sustained growth.
Retirement Advantage believes the stock market volatility coupled with continued economic uncertainty has led to the spike in risk aversion.
Andrew Tully, pensions technical director at Retirement Advantage, said: “The stock market volatility we have experienced over the past few months has clearly spooked investors who are looking to take risk off the table.
“Drawdown is now the default option for the mass market while many consumers are treating their pension funds like bank accounts.
“These actions are creating their own risks around sustainability of income and also the level of tax paid on cash withdrawals.”
The firm polled 1,003 UK adults aged 50 plus who are not retired in March to gauge how they think about their finances.
Another factor indicating increased nervousness among investors was the fact more than ever (18 per cent) said having instant access to all of their pension savings was their main priority for their retirement income.
Certainty of income remained the most popular priority for retirement income, cited as the most important factor by 45 per cent of over 50s, the firm said.
Meanwhile, fewer people appeared to prioritise the flexibility of having some guaranteed income while managing the rest of their retirement - an index-low of 28 per cent, down from 36 per cent last year.
Dave Penny, managing director at Invest Southwest, agreed investors appeared more wary post market correction but thought the perceived risk aversion was dangerous.
He said: “I think the ‘nervy news’ of market jitters has certainly entered the consciousness of potential investors, irrespective of age.
“I don’t think this risk aversion is a good thing. With an appropriate spread of asset classes history has shown the time to be invested over the long term is when you have it to invest. Not drip feeding and not waiting.