Government bonds/gilts

[heisthegaffer]

Hi all

I have a couple of pensions, one of which is about £20k and growing a bit, 3% or so over last 12 months. I'm not contributing to it at all.

The other pension is my employee one and growing well enough both in terms of my firm and my contributions etc and actual investment growth. Happy with it for time being.

This one in question, is it worth me doing something different with the other smaller one such as investing in government or Corp bonds for between 10 and 15 years which is anticipated retirement aims?

I think I understand them... E.G £20k investment gets me a few % dividends back each year before I get the lump sum back. If then use the dividends to put elsewhere.

Thanks

[Jawls]

I don’t see any good argument for having a different investment strategy just because you have different pensions pots. You need to decide what your broader asset allocation strategy is. Other decisions are downstream of that.

I personally don’t see why you’d be heavy in government bonds if you’re 15 years out from retirement, but I’m not you.

(If you are serious about this, you need to understand the difference between individual bonds and bond funds, and the different risks that might apply)

But yeah … work out your requirements, and then decide what an appropriate strategy to meet those requirements is.

Edited by Jawls on Sunday 14th January 17:52

[Jon39]

heisthegaffer said:

... such as investing in government or Corp bonds for between 10 and 15 years which is anticipated retirement aims?

I think I understand them... E.G £20k investment gets me a few % dividends back each year before I get the lump sum back. If then use the dividends to put elsewhere.

I am not a fan of lending money to the government (gilts), although I did use gilts once and made 40% in 18 months for my children.
The difference then though, was inflation was running at 15% and it was fairly certain that inflation and interest rates were likely to fall considerably. Bonds work inversely, so a reducing interest rate increases the value of bonds, but also vice versa, as many on here were surprised to discover during 2021 and 2022.

Inflation is the killer of bonds. Imagine that you had asked your question 15 years ago (the time period to maturity that you referred to). £20,000 fifteen years ago would now have a purchasing value of about £15,000 and for most of that period, inflation was considered to be quite low. Put another way, what £20,000 bought in 2008, would now require £31,000 to purchase the same.

Bonds do come with a reassurance of fixed numbers, but £20,000 today will of course not buy as much, when it is returned to you in 2038.
I can give you an extreme example of government bonds. 3.5% War Loan Undated was issued at the time of the First World War. £100 of 3.5% War Loan, would have almost been enough to buy a new car in 1920 (Austin 7 £130).
That government stock was redeemed in 2015, so the £100 was then returned to all the holders. Forget a new car though, perhaps just one weeks grocery was the result of a 100 year investment !

[simon800]

heisthegaffer said:

Hi all

I have a couple of pensions, one of which is about £20k and growing a bit, 3% or so over last 12 months. I'm not contributing to it at all.

The other pension is my employee one and growing well enough both in terms of my firm and my contributions etc and actual investment growth. Happy with it for time being.

This one in question, is it worth me doing something different with the other smaller one such as investing in government or Corp bonds for between 10 and 15 years which is anticipated retirement aims?

I think I understand them... E.G £20k investment gets me a few % dividends back each year before I get the lump sum back. If then use the dividends to put elsewhere.

Thanks

What's it invested in now that has generated a 3% return over 12 months? As some rough benchmarks, 2023/past 12 months performance;

VLS 60; 10.14% / 5.58%
VLS 80; 11.83% / 7.09%
100% global equities; 15.41% / 11.60%

If you're 15 years from needing the money, then probably worth considering risk level and it being higher than something which has offered 3% returns over the same period...

[BobToc]

I think it's hard to justify much of a fixed income allocation over a 15 year horizon.

[heisthegaffer]

simon800 said:

heisthegaffer said:

Hi all

I have a couple of pensions, one of which is about £20k and growing a bit, 3% or so over last 12 months. I'm not contributing to it at all.

The other pension is my employee one and growing well enough both in terms of my firm and my contributions etc and actual investment growth. Happy with it for time being.

This one in question, is it worth me doing something different with the other smaller one such as investing in government or Corp bonds for between 10 and 15 years which is anticipated retirement aims?

I think I understand them... E.G £20k investment gets me a few % dividends back each year before I get the lump sum back. If then use the dividends to put elsewhere.

Thanks

What's it invested in now that has generated a 3% return over 12 months? As some rough benchmarks, 2023/past 12 months performance;

VLS 60; 10.14% / 5.58%
VLS 80; 11.83% / 7.09%
100% global equities; 15.41% / 11.60%

If you're 15 years from needing the money, then probably worth considering risk level and it being higher than something which has offered 3% returns over the same period...

Thanks. Its Aviva managed, risk level 6 out of 7, global equities, 40% UK I recall.

I'll look into alternative funds as its not cutting the mustard.