Pension provider letter - reducing risk now I m old
Discussion
Hi Folks
I had a letter come through the post that said my pension would be moving to a more conservative and lower risk strategy in June. I m 50 in November for context.
Should I just let them do this(I can change if I want) ?
For context my pension is no where near big enough(who s is I know but until I got to my current job it was patchy - not a nice steady 30 years of payments) so I really need to be paying in as much as possible for a good 10 years or more. So my view is I should take the risk and stay in the current fund.
All views welcome.
I should say, omg 10 years more work, that will require some effort, I’m ready to retire now.
I had a letter come through the post that said my pension would be moving to a more conservative and lower risk strategy in June. I m 50 in November for context.
Should I just let them do this(I can change if I want) ?
For context my pension is no where near big enough(who s is I know but until I got to my current job it was patchy - not a nice steady 30 years of payments) so I really need to be paying in as much as possible for a good 10 years or more. So my view is I should take the risk and stay in the current fund.
All views welcome.
I should say, omg 10 years more work, that will require some effort, I’m ready to retire now.
My own view, for what it’s worth………..
De-risking even at the point you retire is the wrong call for most people, doing it ten years before you retire is just stupid.
The idea isn’t ever to have chancy investments but the ones that are likely to pay the best are also likely to fluctuate more over the short-medium term.
If you need to be able to count on withdrawing the entire pot on a particular date then by all means reduce risk as you approach, typically this would be if you are buying an annuity.
If your intention is drawdown during retirement then you are still looking long term even when you actually retire (hopefully!) so de-risking just reduces the likely returns.
De-risking even at the point you retire is the wrong call for most people, doing it ten years before you retire is just stupid.
The idea isn’t ever to have chancy investments but the ones that are likely to pay the best are also likely to fluctuate more over the short-medium term.
If you need to be able to count on withdrawing the entire pot on a particular date then by all means reduce risk as you approach, typically this would be if you are buying an annuity.
If your intention is drawdown during retirement then you are still looking long term even when you actually retire (hopefully!) so de-risking just reduces the likely returns.
Steve H said:
My own view, for what it s worth ..
De-risking even at the point you retire is the wrong call for most people, doing it ten years before you retire is just stupid.
The idea isn t ever to have chancy investments but the ones that are likely to pay the best are also likely to fluctuate more over the short-medium term.
If you need to be able to count on withdrawing the entire pot on a particular date then by all means reduce risk as you approach, typically this would be if you are buying an annuity.
If your intention is drawdown during retirement then you are still looking long term even when you actually retire (hopefully!) so de-risking just reduces the likely returns.
Exactly this.De-risking even at the point you retire is the wrong call for most people, doing it ten years before you retire is just stupid.
The idea isn t ever to have chancy investments but the ones that are likely to pay the best are also likely to fluctuate more over the short-medium term.
If you need to be able to count on withdrawing the entire pot on a particular date then by all means reduce risk as you approach, typically this would be if you are buying an annuity.
If your intention is drawdown during retirement then you are still looking long term even when you actually retire (hopefully!) so de-risking just reduces the likely returns.
This philosophy was set up back in the days when one was forced to buy an annuity on retirement date so it made sense back then. Whereas nowadays, when you retire you still want those funds to carry on growing for another 20 or 30 years.
So you only want to crystallise a part of it and that's the part you start de-risking, not the whole of it. But that amount will be unique to each person's circumstances.
I'd agree with all the above. I am 57 and semi-retired and had a similar letter a few years back. I told them I didn't want to de-risk and carry on managing it myself as usual.
If you are going to carry on working for some time, then personally I would still be going for growth - and I will do even when I retire fully, if that ever actually happens.
If you are going to carry on working for some time, then personally I would still be going for growth - and I will do even when I retire fully, if that ever actually happens.
Steve H said:
My own view, for what it s worth ..
De-risking even at the point you retire is the wrong call for most people, doing it ten years before you retire is just stupid.
The idea isn t ever to have chancy investments but the ones that are likely to pay the best are also likely to fluctuate more over the short-medium term.
If you need to be able to count on withdrawing the entire pot on a particular date then by all means reduce risk as you approach, typically this would be if you are buying an annuity.
If your intention is drawdown during retirement then you are still looking long term even when you actually retire (hopefully!) so de-risking just reduces the likely returns.
IMO 100% this.De-risking even at the point you retire is the wrong call for most people, doing it ten years before you retire is just stupid.
The idea isn t ever to have chancy investments but the ones that are likely to pay the best are also likely to fluctuate more over the short-medium term.
If you need to be able to count on withdrawing the entire pot on a particular date then by all means reduce risk as you approach, typically this would be if you are buying an annuity.
If your intention is drawdown during retirement then you are still looking long term even when you actually retire (hopefully!) so de-risking just reduces the likely returns.
I was fortunate to be able to retire at 55 and I’ve kept the same funds as when I was working.
I’m doing drawdown to fund my retirement so looking for growth to maintain withdrawals and cover inflation, hopefully.
Usual caveats, I’m not a financial advisor, do your own research, etc……
Personally I’d move it back out of the cautious approach they advocate but depends on your plans.
The rationale for this was that most people used to take an annuity, to make predictable plans you’d derisk t cash and bonds at the end to give you certainty.
The upside you avoided any downswings ( the once in 20 year shock that most pension schemes work on) the downside is that you miss out on market upside.
Now depending on your plans and attitude to risk, you may want to look at drawdown instead in which case you need to stay in equities to give you continued upside.
Everyone’s circumstance is different but I agree with the others that it’s generally too cautious an approach aged 50, caveat that if you have complex scenarios you should speak to an IFA
The rationale for this was that most people used to take an annuity, to make predictable plans you’d derisk t cash and bonds at the end to give you certainty.
The upside you avoided any downswings ( the once in 20 year shock that most pension schemes work on) the downside is that you miss out on market upside.
Now depending on your plans and attitude to risk, you may want to look at drawdown instead in which case you need to stay in equities to give you continued upside.
Everyone’s circumstance is different but I agree with the others that it’s generally too cautious an approach aged 50, caveat that if you have complex scenarios you should speak to an IFA
Steve H said:
One has to wonder how so many in an industry that charges quite so well for its services still manages to give out such outdated and inappropriately overcautious guidance 
.
They're probably obliged to, by law. Many people close to retirement during crashes in 2008, for example, didn't have time to recover funds before cashing in or buying an annuity. .
So they give you options that some probably aren't aware they have.sixor8 said:
Steve H said:
One has to wonder how so many in an industry that charges quite so well for its services still manages to give out such outdated and inappropriately overcautious guidance .
They're probably obliged to, by law. Many people close to retirement during crashes in 2008, for example, didn't have time to recover funds before cashing in or buying an annuity. . So they give you options that some probably aren't aware they have.Over caution to avoid liability at the cost of the client, not so much.
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