Pension risk/ funds

[NRS]

Any advice on what to do with the risk on pension these days? Being young-ish (28) then I have had my risk for pension to the high/ very high side due to the long time frame before I will take my pension. I have a small fixed pension from work which is around £100 per month, but recently it changed to the contribution pension where I have the risk now. Is it worth reducing the exposure to shares for the next few years, since it's likely to result in recession due to Brexit? So theorically the money will not go down with the market during the recession, and then I can change it back to more shares exposure once we reach the bottom (or just go lower). Or does this kind of strategy not tend to work? I don't have any charges for changing the risk (or they are paid by my company) so can do it as much as I want.

I guess it's the same question for funds, although it may be too late due to a combination of the drop already and charges for selling. Is it worth selling them now and buying in later in the cycle? It could improve value, albeit at higher risk.

It's also not quite as simple since I'm in Norway, so not actually the UK market I am investing in (although it's likely the Brexit will affect a lot of Europe anyway, hence my thinking).

[jeff m2]

High risk is sometimes a misleading term as financial houses use it to describe almost anything that aren't bonds as a a way of protecting their arses.

Over the term you indicate you almost certainly have to use equity as it's the only way to counter inflation and maintain the value of your pot.
Diversify your funds US, Europe and Emerging. Maybe rebal every couple of years.
Now would not be a good time to sell, sometimes the best action is no action.
Don't frig with it

[Pheo]

Don't bother trying to guess the market its glorified gambling a lot of the time.

Instead think of a market dip as you getting good value for money on your current contributionsz

[rotarymazda]

NRS said:

Any advice on what to do with the risk on pension these days? Being young-ish (28)

1. Save regularly over the long term then you never need to worry about best/worst time to buy.

2. Be absolutely sure what all the charges are. The company may pay advisor fees but you are still probably paying fund charges which are very likely to be cheaper elsewhere. As you will be saving for a very long time, charges really add up. Personally, I use a company pension to get the company contributions but then transfer it for free into a low-charge SIPP (UK). I avoid many thousands in charges this way.

3. Understand the tax implications. Best efficiency is when your marginal rates are high.

[Ozzie Osmond]

NRS said:

Being young-ish (28) then I have had my risk for pension to the high/ very high side due to the long time frame before I will take my pension.

Is it worth reducing the exposure to shares for the next few years?

No, it's not. Being out of the market can be disastrous, despite short term fluctuations.

Various approaches are possible, one of which might be to stay fully in "higher risk" until age 50 and then reduce the risk on 10% of your holdings every year or so after that.

[NRS]

jeff m2 said:

High risk is sometimes a misleading term as financial houses use it to describe almost anything that aren't bonds as a a way of protecting their arses.

Yes, it is the exposure to shares rather than that it will go down.

Pheo said:

Don't bother trying to guess the market its glorified gambling a lot of the time.

Instead think of a market dip as you getting good value for money on your current contributionsz

I understand that, just historically recessions cause the stock market to go down, so by getting money out of the market before a recession starts would mean you avoid the drop in value (apart from inflation affects) and then once the worst is over you can then get back in and pick up the increase over the next number of years. It is a gamble, but due to uncertainty of the Brexit companies are likely to defer spending until they know what it means, and so a recession is likely. So it is a gamble, but a calculated one IMO.

rotarymazda said:

1. Save regularly over the long term then you never need to worry about best/worst time to buy.

2. Be absolutely sure what all the charges are. The company may pay advisor fees but you are still probably paying fund charges which are very likely to be cheaper elsewhere. As you will be saving for a very long time, charges really add up. Personally, I use a company pension to get the company contributions but then transfer it for free into a low-charge SIPP (UK). I avoid many thousands in charges this way.

3. Understand the tax implications. Best efficiency is when your marginal rates are high.

1) Yes, I am saving regularly to do this, both in the pension and in general funds with different risk exposures to the market.

2) I will check up on this. I don't actually contribute anything for the pension, it's a defined contribution pension where my company pays 7% towards it to top of the 18.1% from national insurance (25.1% total). My next pay rise or the one after that moves any extra into no National Insurance, but 22% from my company instead. Then I will be paid around £100 a month from the defined pension from the old pension scheme before it changed at the start of this year.

3) I'm a 44% tax payer, although it's probably a bit lower after rebates (for example you get £2250 tax free each year if under 34 and it goes into an account to save for a house). So may be worth checking with an accountant since I'm getting enough savings to make it worth it?

Thanks for all the advice.