Cash buffers limiting advised clients’ exposure to markets

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  • Recent market volatility has highlighted the importance of a cash buffer as protection against the depletion of pension savings during the stock market downturn
  • Aegon research with NextWealth shows that 84% of financial advisers use a cash buffer, with 58% of advisers allocating one to two years’ income to cash
  • One sixth (16%) of advisers said they don’t use cash buffers at all
  • For those using cash buffers, half make withdrawals from cash and top-up as part of a broader portfolio review. A fifth (20%) draw on cash only in emergencies

Aegon research* with Next Wealth on the retirement advice industry in the UK* reveals 84% of financial advisers use a cash buffer when investing to support their clients’ retirement income. Cash buffers are an explicit allocation to cash outside of any cash holdings within funds or portfolios and often help clients feel protected in the event of a market downturn.

Six out of ten (58%) advisers using cash buffers typically allocate one to two years of income to cash and one out of ten (9%) allocate three to four years of income to cash. One sixth (16%) of advisers surveyed said they don’t use cash buffers at all.

The research also shows how advisers use cash buffers when managing client withdrawals. Half (50%) make withdrawals from cash and replenish it as part of a broader portfolio review. A fifth (20%) make withdrawals from other assets and only use cash in emergencies, when markets experience a downturn for example.

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Steven Cameron, Pensions Director at Aegon comments:

“A distinguishing feature of retirement investing is the use of cash buffers for clients taking an income. The research shows an overwhelming proportion of advisers use cash buffers as many clients need this to protect their assets in the event of a market downturn. The majority of advisers allocate one to two years of income to cash, but some will typically allocate more.

“Recent market volatility from the coronavirus pandemic has put the need for cash buffers into the spotlight. In the first three months of lockdown the FTSE100 was around 1,000 points below where it stood during the same period the previous year, so the value of some pensions may have fallen 15% depending on their investment mix.

“The money withdrawn during a downturn represents a larger proportion of the pension pot, so advisers will have turned to cash buffers to avoid selling assets at depressed prices. Those without this protection may have found themselves caught out and having to rely on other options while markets recover.”



*The research was conducted with 227 financial advisers and supplemented with in-depth interviews with a panel of advisers. The full report is found here and also available on the Aegon ‘Advice Makes Sense’ hub which is designed to provide insight on topical issues and support advisers’ conversations with clients.


Notes to Editors

  • In the UK, Aegon offers retirement, workplace savings and protection solutions to over three million customers. Aegon employs around 2000 people in the UK and together with a further 800 people employed by Atos, we serve the needs of our customers. More information:
  • As an international life insurance, pensions and asset management group based in The Hague, Aegon has businesses in over twenty markets in the Americas, Europe and Asia. Aegon companies employ approximately 26,000 people and have millions of customers across the globe. Further information:

Figures correct as of November 2019