Gilts and Bonds

[Spydaman]

As I approach my retirement date my pension is now invested in Gilts and Bonds. What affect the growth of these investments?

[anonymous-user]

Interest rates

The covenant of the issuer

[Mazinbrum]

Why wouldn’t some of it be invested In equities assuming you are planning on drawing it for more than 5 years?

[ellroy]

In simple terms it’s likely that this was done with an expectation of purchasing an annuity with your fund. They are based on gilts.

If you’re not going to go down that route there’s no reason, beyond your own risk appetites, for such a move.

They’re yielding very little in income terms and given where we are in the yield curve the likelihood of any capital appreciation is slim to say the least. Simplistically when interest rates go up gilt/fixed interest securities go down. I’m sure you know where interest rates are now.

I’d seek a conversation with your advisers as soon as possible, or find one local to speak to to assess your options.

[Spydaman]

Oh dear that doesn't sound good. I've just turned 60 and was hoping to retire in about 6 months time. I'm going to set-up a draw down pension rather than an annuity. I saw a couple of financial advisors about a year ago but neither of them filled me with confidence as one was too cocky and the other seemed a bit dim. Can anyone recommend an IFA in the Ringwood/New Forest west area?

[anonymous-user]

Spydaman said:

Oh dear that doesn't sound good. I've just turned 60 and was hoping to retire in about 6 months time. I'm going to set-up a draw down pension rather than an annuity. I saw a couple of financial advisors about a year ago but neither of them filled me with confidence as one was too cocky and the other seemed a bit dim. Can anyone recommend an IFA in the Ringwood/New Forest west area?

I can't help you regarding an adviser although there are some sensible ones who post regularly on here. By all means pay for advice but I'd be cautious about getting into an "ongoing annual %" arrangement. 1% a year for 25 years would see a quarter of your money in the IFA's pocket. Better IMO to pay a flat fee for advice as and when you need it. But it's horses for courses.

My rudimentary layman's comment on your situation,

• At age 60 your average life expectancy is in the region of 25 years
• The sensible timeframe for stock market investments is "longer term", so let's say 10+years
• You probably wouldn't want to suffer a big stock market set-back at age 62 holding nothing but equities
• You could split your "pot" into two notional parts, (Part 1) age 60 to 70, and (Part 2) age 70 onwards.
• Most people spend more p.a. in the earlier years of retirement because they are more active than later on.
• Don't forget your State Pension will probably start around age 67 so tailor your overall pattern of drawdown to interact with that.
• Which leads me to think you might consider investing 50% gilts/bonds with a view to protecting the first 10 years and 50% equities for the remainder.
• Then pick a suitable annual pension income. This income is likely to derive from a mix of natural income supplemented by investment sales.
• See how things go over the first 5 years and adjust to taste.
• If you take a 25% tax free lump sum you'll need to factor that into your overall picture of investment and cash flow.

Curiosities of the UK tax regime lead to a situation where for some people the natural spending order in retirement may be,

• General investments first. (i.e. no tax wrapper)
• Then ISAs, and
• Last, pension.

Whilst it sounds counter-intuitive it's worth a careful look. This situation arises from the substantial benefit of tax free cumulation.

[Spydaman]

rockin said:

Spydaman said:

Oh dear that doesn't sound good. I've just turned 60 and was hoping to retire in about 6 months time. I'm going to set-up a draw down pension rather than an annuity. I saw a couple of financial advisors about a year ago but neither of them filled me with confidence as one was too cocky and the other seemed a bit dim. Can anyone recommend an IFA in the Ringwood/New Forest west area?

I can't help you regarding an adviser although there are some sensible ones who post regularly on here. By all means pay for advice but I'd be cautious about getting into an "ongoing annual %" arrangement. 1% a year for 25 years would see a quarter of your money in the IFA's pocket. Better IMO to pay a flat fee for advice as and when you need it. But it's horses for courses.

My rudimentary layman's comment on your situation,

• At age 60 your average life expectancy is in the region of 25 years
• The sensible timeframe for stock market investments is "longer term", so let's say 10+years
• You probably wouldn't want to suffer a big stock market set-back at age 62 holding nothing but equities
• You could split your "pot" into two notional parts, (Part 1) age 60 to 70, and (Part 2) age 70 onwards.
• Most people spend more p.a. in the earlier years of retirement because they are more active than later on.
• Don't forget your State Pension will probably start around age 67 so tailor your overall pattern of drawdown to interact with that.
• Which leads me to think you might consider investing 50% gilts/bonds with a view to protecting the first 10 years and 50% equities for the remainder.
• Then pick a suitable annual pension income. This income is likely to derive from a mix of natural income supplemented by investment sales.
• See how things go over the first 5 years and adjust to taste.
• If you take a 25% tax free lump sum you'll need to factor that into your overall picture of investment and cash flow.

Curiosities of the UK tax regime lead to a situation where for some people the natural spending order in retirement may be,

• General investments first. (i.e. no tax wrapper)
• Then ISAs, and
• Last, pension.

Whilst it sounds counter-intuitive it's worth a careful look. This situation arises from the substantial benefit of tax free cumulation.

Thanks for the reply. Plenty of food for thought there. I really do need to see an IFA.