Is it appropriate to use cryptocurrency to increase your pension?

Although cryptocurrencies have outperformed other asset classes in the past ten years, is it wise to use them when making retirement plans?

Over the past ten or more years, cryptocurrencyin particular, Bitcoinhas produced disproportionate returns for various investor classes. According to an analysis of Morningstar data from VanEck, Bitcoin was the best-performing asset class for nine of the twelve years between the beginning of 2014 and June 30, 2025, with an average annualized return of 630 percent. During the same time period, US equities, the second-best-performing asset class, returned an average of 15 percent.

In addition to the more traditional top stocks and funds, it is therefore not surprising that investors are increasingly choosing cryptocurrencies.

According to data from Aviva, over one in five British citizens have purchased cryptocurrency, and over 25% of them think about using it as part of their retirement planning.

According to Michele Golunska, managing director of wealth and advice at Aviva, "there are a lot of different investment opportunities out there, and it's easy to see why cryptocurrency has become so popular in recent years." However, we must not undervalue the traditional pension.

18% of people aged 25 to 34 say they have lowered their pension contributions to purchase cryptocurrency. People who do this run the risk of losing out on what Golunska refers to as "some powerful benefits" related to pensions, such as tax relief and employer contributions, which frequently scale based on employee contributions.

For what reason do people invest in cryptocurrency for their retirement?

The main reason people invested in cryptocurrency as part of their retirement planning was the possibility of enormous returns. According to 43% of those surveyed by Aviva who were thinking about moving money from their pension into cryptocurrency, the higher potential returns were what drove them to do so. Thirty-two percent stated they wanted to invest in cryptocurrency to diversify their portfolio, while 36 percent cited innovation and technology as a major motivator.

James Yardley, head of investments at Chelsea Financial Services, speculates that people may be more inclined to invest in cryptocurrency than in their pension due to the government's ongoing changes to the pension goal posts.

According to Yardley, "the government keeps changing the rules on pensions,". That, in my opinion, is undoubtedly a factor in the fact that people are eschewing their pensions in favor of alternative investment options.

Changes announced in last year's Autumn Budget will make pensions subject to inheritance tax starting in April 2027. The pension lifetime allowance, which was eliminated by the previous Conservative government, may also be reinstated under Labour.

Those who are suspicious of governments, on the other hand, clearly find cryptocurrency appealing. The general argument for investing in cryptocurrencies is that, because of their intrinsic limited supply, they can act as a hedge against the inflation that eventually characterizes fiat currencies. A lot of applications for cryptocurrencies like Ethereum also center on safe transactions that are impossible for governments and banks to track down.

The advantages and disadvantages of using cryptocurrency to increase your pension.

It makes sense that many people are tempted to use cryptocurrency to increase their pension given the enormous gains that investors have made in recent years, but it's crucial that anyone thinking about doing so is aware of the advantages and disadvantages.

Yardley claims that "it's hard to hold crypto inside the Sipp or ISA structure." Capital gains tax may apply to cryptocurrency held outside of these two categories. Additionally, you will lose out on the tax benefits that would result from contributing the same amount to a pension.

In October, when retail investors will be able to purchase cryptocurrency ETNs that serve as direct substitutes for cryptocurrencies like Bitcoin or Ethereum, that might change.

But for now, the only ways to get exposure to cryptocurrency under one of these tax-efficient guises are to purchase a cryptocurrency proxy stock like Strategy Inc. (formerly MicroStrategy) (NASDAQ:MSTR) or a blockchain exchange-traded fund (ETF), which provide some imprecise exposure to trading prices.

Yardley also points out the relationship between tech stocks and cryptocurrency prices. Theoretically, cryptocurrencies should diversify a share portfolio, but in recent years, their prices have followed the movements of large tech stocks, which typically lead the larger equity markets.

Retirement planning and cryptocurrencies.

The decision to include cryptocurrency in retirement plans ultimately rests with the individual, just like with any other investment.

"Make sure your retirement savings are doing everything they can for you by carefully weighing the risks and rewards," Golunska advises.

According to Yardley, it wouldn't be wise for anyone to invest all of their long-term savings in cryptocurrency due to its volatility. However, "there is a case for putting 5-10 percent in" due to its potential for quick returns and inflation resistance.

It can be challenging to pass on cryptocurrency if it is a part of your retirement plans. Because crypto assets are hard-wired with discretion and privacy, they are not always accessible or traceable, making inheritance difficult.

Customers are urged by Aviva to prioritize long-term financial security over short-term speculation and to approach retirement planning with a balanced mindset.