Funds dropping!
Discussion
JulianPH said:
As Mike has highlighted, most pension glide paths phases you into low volatility holdings as you get closer to retirement.
This was historically done on the basis you were going to buy an annuity.
If you are intending to use your fund to draw down an income this can be exactly the wrong place to be, as your money needs to keep working for you.
Interestingly enough my pension has just updated, so they will start the change to lower risk from 56yo, instead of 43yo now, going down to an equity share of 20% by 70yo. This was historically done on the basis you were going to buy an annuity.
If you are intending to use your fund to draw down an income this can be exactly the wrong place to be, as your money needs to keep working for you.
NRS said:
JulianPH said:
As Mike has highlighted, most pension glide paths phases you into low volatility holdings as you get closer to retirement.
This was historically done on the basis you were going to buy an annuity.
If you are intending to use your fund to draw down an income this can be exactly the wrong place to be, as your money needs to keep working for you.
Interestingly enough my pension has just updated, so they will start the change to lower risk from 56yo, instead of 43yo now, going down to an equity share of 20% by 70yo. This was historically done on the basis you were going to buy an annuity.
If you are intending to use your fund to draw down an income this can be exactly the wrong place to be, as your money needs to keep working for you.
mikeiow said:
Sheepshanks said:
The financial news, signals, forecasts, political situation (both her and US) etc etc are so confusing at the moment. I haven't got too long to go to retirement and find myself a bit paralysed as to what to do.
Well, I am in the same position as you.....actually in the process of 'crystallising' one lump from my Aviva fund (from an LTA perspective, the dip is a good thing 
, should that be a concern!)I assume you mean you have more in DC pensions than DB?
My view is that although, like you, I may not have long to go to retire, that retirement will itself (hopefully!) be a lengthy 20-30+ year period....so my logic ought to be similar to that I had 20 years ago.
(eta - this is pretty well what Derek said whilst I was typing!)
"What was that logic?", I hear you ask!
Partly - live for fun - get out there & do stuff, enjoy the growing family, have FUN!!
Partly - I don't really understand markets, but I do understand they go down, then they go up (I work in IT, not finance, so not an advisor!!)
The difference in retirement is that one is not in a great position to "buy on the dips" and keep adding to investments to average in.
To alleviate that, maybe one should take the TFLS and trickle it back into markets over time (okay, perhaps via ISAs, not pensions), trying to replicate that regular paying pattern.
Maybe one should keep a chunk of it in cash (perhaps even the oft-criticised premium bonds) to be able to live off at times of poor markets in order to allow them to recover.
None of us have a crystal ball
I've spent too long on my own 'planning spreadsheet' (I imagine many here have!) - tries to give you the ability to model income desires against fund/pension growth over many years, allowing for different pensions (eg state) kicking in at different points, allowing you to play with imaginary fund growth, or indeed throw in some dips to see "what if".
It is very much a "work in progress", but has given me a decent handle on how things could pan out!
If you/anyone want a sanitised version of my spreadsheet to look at, message me your email - I'd welcome any feedback (had some already from folk on a couple of forums!)
JulianPH said:
Good to hear. Just make sure you have selected the right track though (the annuity purchase path is very different than that for income drawdown).
(Thanks for the big reply that disappeared too)! Currently 32 so have some time to decide. Also in Norway so the system is a bit different here I think. What differences do you mean regarding the track to follow? I presume for the annuity purchase you might want to de-risk earlier to protect the lump sum to purchase an annuity, versus keeping best possible growth for a lot of the money when you first retire (assuming say 20-30 more years of life)?
I have 3 pensions - a small DB paid-up policy which should be £1400 a year - but I see a new note saying this is below minimum amount according to regulations so will be recalculated payment period when I retire - need to check what that actually means. Plus a company one (open for nearly 5 years - £26k, and a private one (saved 2 years and got about £8.5k in it). Finally a public pension, which being Norway might be a bit safer than many other countries.
Derek Chevalier said:
I recall discussing this earlier in the year - did you ever get to the bottom of why they were risk level 5?
Indeed.....& no, not really.....& they have done pretty well in this last relatively volatile year, which ties in with my understandings of bond & gilts (when compared with 'regular' shares!).The gilts are 100% UK (100% AA rated), the bonds 50% UK, 50& International (more spread from AAA to BBB). Only 2 (out of possible 10) risks in both.
Odd, eh!
mikeiow said:
The gilts are 100% UK (100% AA rated)
Something like this? Index linked? Over 5 years?https://www.fundslibrary.co.uk/FundsLibrary.DataRe...
Derek Chevalier said:
mikeiow said:
& the bond elements are still rated as "risk 5' by them.
I recall discussing this earlier in the year - did you ever get to the bottom of why they were risk level 5?Does “lower for longer” truly mean “lower forever”? D’ya feel lucky punk..?
WindyCommon said:
Does “lower for longer” truly mean “lower forever”?
Ten years ago I formed the view that governments and central banks were "destroying the value of money" and IMO that view is vindicated today.Money remains a useful tool for barter or exchange but it no longer has any intrinsic value. I am unable to think of any way in which its "value" can be restored.
To my mind the logical conclusion is that the value of "assets" will inevitably bounce around when times get harder. For instance, thanks to manipulation by huge international landlords, with a vested interest and deep pockets, the paper value of High St retail properties far exceeds their real worth. That's exactly what underlies the ongoing turmoil around Jessops, the collapse of Maplin and many other retailers.
NRS said:
JulianPH said:
Good to hear. Just make sure you have selected the right track though (the annuity purchase path is very different than that for income drawdown).
(Thanks for the big reply that disappeared too)! Currently 32 so have some time to decide. Also in Norway so the system is a bit different here I think. What differences do you mean regarding the track to follow? I presume for the annuity purchase you might want to de-risk earlier to protect the lump sum to purchase an annuity, versus keeping best possible growth for a lot of the money when you first retire (assuming say 20-30 more years of life)?
I have 3 pensions - a small DB paid-up policy which should be £1400 a year - but I see a new note saying this is below minimum amount according to regulations so will be recalculated payment period when I retire - need to check what that actually means. Plus a company one (open for nearly 5 years - £26k, and a private one (saved 2 years and got about £8.5k in it). Finally a public pension, which being Norway might be a bit safer than many other countries.
The main difference (as you have already worked out) is that if you are looking for a lump sum to withdraw (in this example to purchase an annuity) then you need to glide down to a very defensive portfolio in order to be taking far less risk as you get closer to the withdrawal date.
If you are looking to draw down a life time worth of income from the funds then you need to glide down into a far more balanced portfolio that should enable you to take this income whilst still giving the potential for long term capital growth to preserve your funds and keep them growing in line with inflation.
Of course there are no guarantees when it comes to investing, but gliding down into the right structure for your own requirements is quite vital in achieving your aims.
Most pensions still only offer a glide path to annuity purchase though (but this is starting to change).
The Norwegian pension system is absolutely excellent BTW!
Derek Chevalier said:
mikeiow said:
The gilts are 100% UK (100% AA rated)
Something like this? Index linked? Over 5 years?https://www.fundslibrary.co.uk/FundsLibrary.DataRe...
The 5 year is another option I could have chosen....they look VERY similar over 1/3/5/10 years!
mikeiow said:
95JO said:
Looks like I got out just in time
I was always running the risk, seeing as though my investments were always meant to be held for a maximum of 3 years... Cashed out early (regardless of market conditions) after ~18 months to use as a deposit for my first house.
I'll be opening a standard S&S ISA to try and do the same again once I have adjusted to the adult life of paying a mortgage/bills and work out how much I can invest per month. Let's hope the aforementioned fund prices stay low until I'm back
Well, any dip is a buying opportunity!I was always running the risk, seeing as though my investments were always meant to be held for a maximum of 3 years... Cashed out early (regardless of market conditions) after ~18 months to use as a deposit for my first house.
I'll be opening a standard S&S ISA to try and do the same again once I have adjusted to the adult life of paying a mortgage/bills and work out how much I can invest per month. Let's hope the aforementioned fund prices stay low until I'm back
.....although knowing where were are on the "dip curve" is always the interesting challenge.....let's just hope it isn't a "dip cliff" !!
mikeiow said:
Derek Chevalier said:
mikeiow said:
The gilts are 100% UK (100% AA rated)
Something like this? Index linked? Over 5 years?https://www.fundslibrary.co.uk/FundsLibrary.DataRe...
The 5 year is another option I could have chosen....they look VERY similar over 1/3/5/10 years!
https://www.youtube.com/watch?v=HMSELcxEjnc
the author uses Vanguard funds allowing you can see the relative volatility of their 2 gilt funds and compare to something like LS100
WindyCommon said:
Derek Chevalier said:
mikeiow said:
& the bond elements are still rated as "risk 5' by them.
I recall discussing this earlier in the year - did you ever get to the bottom of why they were risk level 5?Does “lower for longer” truly mean “lower forever”? D’ya feel lucky punk..?
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