People close to retirement will either need to scale back the expectations of what returns they will get on their savings or be prepared to take on more risk to get the kind of income and lifestyle they want, according an investor education expert.

A survey released today by the Commission for Financial Capability and the Financial Markets Authority on the expectations and experiences of people over the age of 50 found a strong aversion to taking on risk when it comes to their savings but that some had high expectations of investment returns.

Of those questioned 83 per cent believed high investment risk was something to avoid despite knowing that higher risk equated to higher returns and and 71 per cent believed most people should choose lower risk investments.

But when it came to the kind of returns they expected the general view was that 5 per cent was a low return, 9 per cent was medium and 15 per cent was high risk.

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David Boyle, general manager of investor capability at the Commission for Financial Capability, said many people were living in "lala land" when it came to how much they could earn off their savings.

He believed that was because many people were basing their expectations off what they could earn on a bank deposit before the global financial crisis hit.

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Prior to 2006 savers could get around 8 to 9 per cent on money in the bank and more than 10 per cent if they invested with a finance company.

But a one year term deposit is currently averaging under 4 per cent before tax is taken into account.

Boyle said a lot of people had lost money during the finance company collapses because they had focused on the returns and not understood the risks they were taking on as well as failing to diversify their investments.

He said people needed to understand the world was now in a low interest rate environment and that could continue for some time.

"If you look at that research there is quite a shift to more conservative products."

But he said people in their 50s needed to consider that they could be in retirement for 20 to 30 years and taking on slightly more risk now could give them a better chance of their savings keeping up with the cost of living when they retired.

"There is nothing worse than having to change your lifestyle to meet your income at retirement."

The survey revealed many people may be unaware of what their risk tolerance is as just 24 per cent had undertaken a risk profile questionnaire.

While most of those nearing retirement had some savings or investments to supplement NZ Super, but only 11 per cent of those aged over 50 said they currently had sufficient accumulated to deliver the sort of lifestyle they want.

Read the full report here: