With the summer holidays in full swing, the Sweeney family opted for a rite of passage this year - the classic French camping holiday. Normally we descend on Cornwall, but now that the kids can stomach a longer drive, we braved the Channel crossing.

And it’s not just me. Many clients will be enjoying their summer holidays this week. Sitting under a palm tree and gazing out to sea without a care in the world, it’s inevitable that for some their thoughts will turn to what should be our longest holiday, retirement.

The UK government recently launched a new review of the state pension age. And this has brought back into sharp focus the whole question of how people prepare to pay for their retirement.

Our chart this week shows that more than 25% of people in the UK don’t know which asset class has the potential to provide the strongest long-term returns to finance life after work.

Another 10% thought an easy access cash savings account was likely to be their best option. That’s understandable when a lot of savings accounts are still paying interest north of 4%. But with many economists forecasting that the Bank of England will cut interest rates this week and again in November, the long-term appeal of bank deposits is likely to fade quickly.

It’s clear though that many UK savers are still convinced cash is king, with no less than £294 billion sitting in Cash ISAs, according to AJ Bell.

We’ve seen significant market volatility this year and during a period of heightened macroeconomic uncertainty, people could be forgiven for being tempted to seek refuge in cash.

However, figures from J.P. Morgan show this is likely to be a costly mistake. Their research earlier this year showed how multi-asset portfolios have outperformed cash after a series of economic and geopolitical shocks dating back to 1990, including the 9-11 attacks, two Gulf wars and the Covid-19 pandemic.

Their analysis shows that after these events a 60/40 portfolio of equities and government bonds outperformed cash 75% of the time over one year and always over three years. The average additional returns above cash were significant: 9% over one year and more than 20% over three years.

This all serves to underline the importance of professional advice as people make key decisions about their long-term financial future.

Key takeaway

Advisers have a crucial role to play in helping people plan effectively for retirement – to help them properly enjoy their time in the sun and make the most of what should be their longest holiday.

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This article is provided for general information purposes only and should not be construed as personal financial advice to invest in any fund or product. These are the investment manager’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.