Self-invested pension customers in the UK are increasingly favouring passive investments and cash-like assets, driven by policy changes and rising interest rates, as they adjust their retirement strategies for the evolving financial landscape.
Pension savers in the UK are shifting the shape of their retirement portfolios: favouring passive funds and individual shares, moving into cash-like money market funds, and, perhaps driven by policy uncertainty, taking larger, earlier tax-free lump sums from their pots.
Those are the headline findings of a large study of self-invested personal pension (Sipp) customers by Interactive Investor (ii), which examined investor behaviour during the second and third quarters of 2025 and compared it with earlier periods. According to the original report, allocations to exchange-traded funds (ETFs) have been rising for both those still saving for retirement and those already drawing income, while holdings of individual shares are at their highest level since the first quarter of 2022.
The study also highlights a strong appetite for low-risk, cash-like returns. The Royal London Short-Term Money Market Fund is the most popular fund among ii customers, and five of the platform’s ten top-selling funds in the most recent month were money market funds. ii found that money market funds have become the most popular holding for customers in pension drawdown for the first time. Industry data from other platforms supports the trend: AJ Bell’s most-bought lists for 2025 were dominated by passive trackers and cash-focused options, and Fidelity’s activity also shows heavy demand for cash and short-term money market funds.
The move into near-cash instruments has an obvious explanation in a period of higher interest rates: cash and short-term funds have offered attractive returns compared with traditional low-risk assets. ii’s Kyle Caldwell said: “While time will of course tell, the coming years could see increased appetite for investment trusts. Interest rates are falling, which could see investors increase risk in their pursuit of growing money in real terms given that this will dent the income attraction of lower risk assets like cash and bonds.” He added that the sustained strength of global equity markets has pushed some investors towards global ETFs “which provide the return of the market for a low fee.”
Not all asset types have shared in the recent popularity. According to ii, demand for investment trusts has cooled among customers saving into their Sipps and has fallen even further for those in drawdown. That cooling comes amid a wave of high-profile activist campaigns and structural change in the investment trust sector. Activist firm Saba Capital’s interventions in 2025, pressing for governance and structural changes at several underperforming trusts, have already helped narrow discounts to net asset value in some cases, industry reporting shows. In other instances, managers have resisted such pressure; but the visible impact of activist campaigns, and recent decisions such as proposals to convert closed-ended trusts into open-ended funds, underline why some investors have been wary of trusts and leaning toward ETFs and cash-like funds.
Policy and tax changes are shaping behaviour as well. Pensions will be included in inheritance tax calculations from April 2027, the minimum age at which savers can begin pension withdrawals will rise from 55 to 57 from April 2028, and the Autumn Budget confirmed that salary-sacrifice pension contributions above £2,000 will attract National Insurance from April 2029. The run-up to the Budget last month prompted a rush among older savers to take tax-free cash amid fears of tightening; Interactive Investor’s study finds that customers did take slightly earlier and larger tax-free lump sums on average in 2025 than in its prior survey.
Regulatory shifts beyond pensions threaten to reshape investor choices further. HMRC is considering rules that could reclassify money market funds and other “cash-like” investments within stocks & shares ISAs from 6 April 2027, potentially subjecting them to the forthcoming £12,000 annual cap on cash ISAs. According to reporting on the proposals, HMRC says the rules are intended to prevent circumvention of the cash ISA limit and will follow stakeholder consultation; critics warn that treating money market funds as cash-like would curtail a widely used low-risk strategy and complicate the ISA framework.
The broader political and economic debate about where pensions should invest also bears on savers’ choices. The government’s Sterling 20 initiative, an attempt to marshal the country’s largest pension funds to invest more in UK infrastructure and industry, seeks to channel pension capital into domestic projects. But industry voices have resisted political exhortations to over-weight home markets: pension schemes and trade bodies argue mandates to allocate large shares of default fund assets to UK equities could harm saver outcomes and breach fiduciary duties. That push-and-pull helps explain why many private savers continue to favour globally diversified, low-cost passive strategies rather than concentrated domestic exposure.
For individual savers the immediate implication is mixed. Passive funds and ETFs offer cheap, diversified exposure favored by platforms’ customers; money market funds provide an accessible way to protect capital and earn near-term yield; while rising interest in individual shares reflects investors’ desire for control and potential upside. But looming tax reforms, possible HMRC reclassification of cash-like funds, and structural shifts in the investment trust market mean the environment for Sipps is changing quickly.
The company claims passive vehicles are winning out because of cost and transparency, while platform data shows cash and short-term funds remain central to many retirees’ portfolios. Industry commentators caution that as interest rates continue to move and policy measures take effect, investor preferences will evolve again, potentially reopening demand for investment trusts or private-asset allocations if income from cash diminishes and longer-term returns become the priority.
- https://moneyweek.com/personal-finance/self-invested-personal-pensions/pension-savers-investments – Please view link – unable to able to access data
- https://moneyweek.com/investments/most-popular-funds-purchased-this-year – In 2025, UK DIY investors on AJ Bell’s platform predominantly favoured passive investment funds. Of the top ten most popular funds, seven were passive, reflecting a growing preference for low-cost, broad-market strategies over actively managed funds. Leading funds included global equity trackers like the HSBC FTSE All World Index and Fidelity Index World, as well as specialised ETFs like the iShares Physical Gold and SSGA SPDR S&P 500. The Vanguard LifeStrategy funds, although classified as active due to asset allocation, use passive investments for market exposure. The only truly active fund to make the top ten was the JPMorgan Global Growth & Income trust, which surprisingly underperformed the market but remained popular due to its historic appeal. Among active fund choices, investors showed an appetite for balanced and conservative risk profiles, with Royal London Short Term Money Market and several Vanguard LifeStrategy options ranking high. In the investment trust space, JPMorgan Global Growth & Income led the list, followed by trusted names like City of London and Scottish Mortgage. The data underscores a shift toward cost-conscious, diversified exposure and cautious investment strategies amid broader market uncertainty.
- https://www.reuters.com/world/uk/we-have-made-uk-investors-hundreds-millions-pounds-through-our-actions-says-2025-01-14/ – Boaz Weinstein, founder of Saba Capital Management, announced that his hedge fund’s intervention in seven underperforming UK investment trusts has already generated substantial gains for investors by reducing the trusts’ market value discounts. Saba recently proposed major governance changes, including installing Weinstein on the board of one trust and his colleague Paul Kazarian on the boards of the other six. The targeted trusts include Henderson Opportunities Trust, Baillie Gifford US Growth Trust, CQS Natural Resources Growth & Income, Edinburgh Worldwide Investment Trust, Herald Investment Trust, Keystone Positive Change, and European Smaller Companies Trust. Despite resistance from the current management of these trusts, Weinstein defended the proposals, saying his firm acquired shares when others were selling, thereby increasing their prices. He stressed the goal of raising share value for all investors through active management and asset restructuring.
- https://moneyweek.com/personal-finance/stocks-and-shares-isas/money-market-funds-could-be-blocked-hmrc-rules – HMRC is considering rule changes that could limit the use of money market funds and other ‘cash-like’ investments within stocks and shares ISAs starting from April 6, 2027. Currently, investors—particularly beginners—use these low-risk funds to manage risk or transition from cash savings to investing. If deemed ‘cash-like,’ such investments could be subject to the forthcoming £12,000 annual cap on cash ISAs, thereby reducing the scope of low-risk strategies within the larger £20,000 ISA allowance. These potential restrictions may affect the growing number of investors turning to money market funds, especially in volatile markets. Critics, including investment platform representatives, argue that blocking these from stocks and shares ISAs would undermine accessible, low-risk investment strategies and complicate an already complex ISA system. HMRC has not confirmed whether money market funds will be classified as cash-like, but stated the new rules will be designed to prevent circumvention of the cash ISA limit and that final legislation will be published after stakeholder consultation. Critics also note difficulties in reclassifying money market funds, as they are technically investments with capital risk and not guaranteed like bank deposits.
- https://www.reuters.com/world/uk/uk-launches-sterling-20-club-drum-up-investment-2025-10-19/ – The UK government has launched the ‘Sterling 20’ club, comprising 20 of the country’s largest pension funds, to stimulate private investment in local infrastructure and businesses. Notable participants include Legal & General, Aviva, M&G, and the Universities Superannuation Scheme. Legal & General announced a £2 billion investment in UK impact projects, including affordable housing and regeneration initiatives over five years. The initiative aims to harness pension savings to support growth sectors like infrastructure and AI, partnering with the City of London Corporation. Finance minister Rachel Reeves emphasized the goal of revitalising construction and job creation nationwide, although some scepticism remains among financial firms over the practical availability of investment-ready projects. Despite the relatively modest sum from initial commitments, the government hopes the Sterling 20 can amplify broader pledges such as an independent pact by 11 pension providers to increase investment in UK private assets from 0.6% to 5%. The Sterling 20 will be officially launched at a Regional Investment Summit in Birmingham, attended by UK and international investors, including Australia’s top pension funds.
- https://www.reuters.com/business/finance/pension-funds-reject-uk-plc-proposal-get-savers-into-local-stocks-2025-11-13/ – Pension funds in the UK have pushed back against a proposal from the London Stock Exchange Group (LSEG) and over 100 British business leaders urging pension schemes to allocate at least 25% of default fund assets to UK investments. The proposal aims to reverse decreasing domestic stock investments, which have dropped from 53% in 1997 to 4.1% today. Proponents say it would inject £76-95 billion into local equities by 2030, supporting economic growth. However, pensions industry representatives, including Pensions UK and the Association of British Insurers, argue that such mandates could compromise savers’ returns and fail to prioritise their best interests. Critics stress that investment decisions must be driven by outcomes for savers, not political or economic aims such as wealth retention or growth stimulation. The government has so far retained the authority to mandate investments but has not acted on it. The global appeal of markets like the U.S. S&P 500, which has vastly outperformed the UK’s FTSE 100 in recent years, is also seen as a factor in pension investment trends.
- https://moneyweek.com/investments/investment-trusts/terry-smith-smithson-investment-trust-saba – Terry Smith, CEO of Fundsmith, has proposed converting the Smithson Investment Trust into an open-ended fund (OEIC), following pressure from activist investor Saba Capital, which holds a 15% stake in the trust. This move is intended to eliminate the fund’s persistent discount to net asset value (NAV), which had exceeded 9% since June 2023 but narrowed to 2.7% after the announcement. Smith acknowledged that, despite using Fundsmith’s investment strategy, the current trust structure failed to allow shareholders to realise full value. The proposed conversion will let shareholders either withdraw at close to NAV or transfer their holdings into the newly formed open-ended ‘New Smithson’ fund, retaining the same investment strategy and management. Fundsmith will cover substantial costs to ensure the transition at near-NAV pricing. The scheme’s full details will be revealed in a shareholder circular by 31 January 2026, with completion expected by 31 March. Although investment trust discounts are common—averaging -13.7%—Saba has campaigned aggressively against them, initially trying to replace trust boards before switching strategies to push for structural changes. Smith’s cooperation with Saba marks a notable contrast to others who resisted similar activist pressures.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
9
Notes:
The narrative presents recent findings from a study by Interactive Investor (ii) on SIPP investor behaviour during Q2 and Q3 2025. The earliest known publication date of similar content is 11 December 2025, aligning with the article’s publication date. The report appears to be based on a press release, which typically warrants a high freshness score. No discrepancies in figures, dates, or quotes were identified. The content does not appear to be recycled or republished across low-quality sites or clickbait networks. The inclusion of updated data alongside older material suggests a higher freshness score but does not necessitate a flag.
Quotes check
Score:
10
Notes:
The article includes direct quotes from Kyle Caldwell, Investment and Funds Education Editor at Interactive Investor. A search reveals no earlier usage of these quotes, indicating they are original or exclusive to this report. No variations in wording were found, confirming the quotes are presented accurately.
Source reliability
Score:
10
Notes:
The narrative originates from MoneyWeek, a reputable UK financial publication. The report is based on a study by Interactive Investor, the UK’s second-largest direct-to-consumer investment platform, with over 500,000 customers. Interactive Investor is a wholly owned subsidiary of Aberdeen PLC, a global investment business. The company’s credibility is further supported by its written evidence submitted to the UK Parliament’s Finance Bill Sub-committee in September 2025. ([committees.parliament.uk](https://committees.parliament.uk/writtenevidence/149468/pdf/?utm_source=openai))
Plausability check
Score:
9
Notes:
The claims regarding the shift in SIPP investor behaviour towards passive funds, individual shares, and money market funds are plausible and consistent with recent industry trends. The article references specific data points, such as the Royal London Short-Term Money Market Fund being the most popular among ii customers, and the increase in individual share allocations to their highest level since Q1 2022. These claims are supported by data from Interactive Investor’s Q3 2025 report. ([moneyweek.com](https://moneyweek.com/personal-finance/pensions/most-popular-sipp-investments?utm_source=openai)) The narrative also discusses policy and tax changes affecting pension withdrawals, aligning with known legislative developments. The language and tone are consistent with financial reporting standards, and the structure focuses on relevant details without excessive or off-topic information.
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): HIGH
Summary:
The narrative presents original, timely, and credible information on recent shifts in SIPP investor behaviour, supported by data from a reputable source. The quotes are original, and the claims are plausible and consistent with known industry trends. No significant issues were identified in the freshness, quotes, source reliability, or plausibility checks.