De-risking SIPP
Discussion
Franco5 said:
I ve received some really good advice on investment fund selection for my SIPP on here before so I hoped that somebody might be able to advise on ideas for moving some of my SIPP to low risk investments, bonds etc as I near pension age please?
Not a Financial Advisor here, so take with seasoning…retired 4½ yrs now.One thing to consider: how long will you be retired?
I figured I would be hoping to last 30+ years, so chose to remain fairly well invested. Figure out a plan to suit you for whatif scenarios…
Not sure what funds you are currently in.
I’d suggest a low-cost global fund (many available) - take half an hour to watch Lars videos here to see the reasoning behind that.
I don’t follow his logic slavishly - my career was in tech, so I have a tilt to that, although frankly any “global” investor will have a chunk in the US, with the “Mag7” in particular!
Is your SIPP to be your only form of income?
We built up cash savings of around 3 years ‘income’, should we need it….& have a plan when to stop the drawdown & use the cash.
Others will give more ideas, I’m sure.
You could look at things with Defensive or Cautious in the title (but they can still go down), or money market funds (which I regard as the invested version of a good savings account). Look at the key data sheets and performances to see what they do. Other options exist. I am not an advisor.
I’m with Mike on this, the idea of protecting yourself from big short/medium term drops as you approach retirement age only made sense when you were using the whole amount to buy an annuity on retirement.
I understand some annuity rates are quite good at the moment so that may be the plan but if you intend to drawdown your pension from what you have built then (hopefully) this is a medium-long term process and still benefits from the same type of investments that built up the pension in the first place.
As a side point, a lot of supposedly safer options don’t actually turn out any better than anything else when it comes to downturns so be careful if going that route.
I understand some annuity rates are quite good at the moment so that may be the plan but if you intend to drawdown your pension from what you have built then (hopefully) this is a medium-long term process and still benefits from the same type of investments that built up the pension in the first place.
As a side point, a lot of supposedly safer options don’t actually turn out any better than anything else when it comes to downturns so be careful if going that route.
Is it 100 or 120 minus age ?
I'm continually asking myself the same question although we have the luxury of decent DB pensions so can take a riskier path. We're both retired aged 58/60 and are 75% 60/ 40 and 25% 80/20 with our SIPPs and Investments. I'm going to start reducing the 80/20 allocation any day now.
For us it's literally a case of shifting things over on the Vanguard platform as we've kept it pretty simple.
I'm continually asking myself the same question although we have the luxury of decent DB pensions so can take a riskier path. We're both retired aged 58/60 and are 75% 60/ 40 and 25% 80/20 with our SIPPs and Investments. I'm going to start reducing the 80/20 allocation any day now.
For us it's literally a case of shifting things over on the Vanguard platform as we've kept it pretty simple.
DT1975 said:
Is it 100 or 120 minus age ?
I'm continually asking myself the same question although we have the luxury of decent DB pensions so can take a riskier path. We're both retired aged 58/60 and are 75% 60/ 40 and 25% 80/20 with our SIPPs and Investments. I'm going to start reducing the 80/20 allocation any day now.
For us it's literally a case of shifting things over on the Vanguard platform as we've kept it pretty simple.
That 'de-risking' thing was more from the time when you were going to launch into an annuity on retirement, as Steve said.I'm continually asking myself the same question although we have the luxury of decent DB pensions so can take a riskier path. We're both retired aged 58/60 and are 75% 60/ 40 and 25% 80/20 with our SIPPs and Investments. I'm going to start reducing the 80/20 allocation any day now.
For us it's literally a case of shifting things over on the Vanguard platform as we've kept it pretty simple.
I do believe you need your own plan for how to manage market drops, but lowering into bonds/gilts, well, I would say less relevant.
Others do build 'cash ladders' that allow access for those first few years, and if we believe in the risk of sequencing (SORR - & I do), then you need to have your plan for what to do if things fall badly in the first few years.
Just been chatting to my mum who's 68 so already drawing down her pension.
She made a comment that the pot had done really well recently and when we've looked into it she's still invested around 40% in stocks.
This seems high to me although through luck more than anything else she's done well recently.
My thinking is that moving more into bonds might be a good shout. Bank some of those gains and maybe keep 20% or thereabouts in stocks. 22% alone is in "US Stocks" which I imagine means she's quite exposed if Nvidia loses a chunk of value as an example.
She made a comment that the pot had done really well recently and when we've looked into it she's still invested around 40% in stocks.
This seems high to me although through luck more than anything else she's done well recently.
My thinking is that moving more into bonds might be a good shout. Bank some of those gains and maybe keep 20% or thereabouts in stocks. 22% alone is in "US Stocks" which I imagine means she's quite exposed if Nvidia loses a chunk of value as an example.
mikeiow said:
That 'de-risking' thing was more from the time when you were going to launch into an annuity on retirement, as Steve said.
I do believe you need your own plan for how to manage market drops, but lowering into bonds/gilts, well, I would say less relevant.
Others do build 'cash ladders' that allow access for those first few years, and if we believe in the risk of sequencing (SORR - & I do), then you need to have your plan for what to do if things fall badly in the first few years.
Gotcha, as I said we're more than covered with DB pensions (not attempting to divert away from the subject hopefully). We will however at some point start drawing down our Investments, if we have a crash we can pause not so for others I appreciate.I do believe you need your own plan for how to manage market drops, but lowering into bonds/gilts, well, I would say less relevant.
Others do build 'cash ladders' that allow access for those first few years, and if we believe in the risk of sequencing (SORR - & I do), then you need to have your plan for what to do if things fall badly in the first few years.
If it's any consolation I have a DC pension that was crystallised before Covid / Putin / Trump and despite five years of withdrawals hasn't actually lost any value, it's worth roughly the same.
Overall we're basically 48% Equities, 27% Bonds, 25% Cash.
Nearly 4 years in to taking my drawdown from my transferred DB pension.
I’m currently 64.
DC pension remains untouched but 100% EQ.
Current split of EQ to Bonds 75/25%.
Pensions total are approx 50% of my total investments / savings.
When I stopped work I put in a 30% market “ crash “ into the transferred DB pension equation.
I’m currently 64.
DC pension remains untouched but 100% EQ.
Current split of EQ to Bonds 75/25%.
Pensions total are approx 50% of my total investments / savings.
When I stopped work I put in a 30% market “ crash “ into the transferred DB pension equation.
ChocolateFrog said:
Just been chatting to my mum who's 68 so already drawing down her pension.
She made a comment that the pot had done really well recently and when we've looked into it she's still invested around 40% in stocks.
This seems high to me although through luck more than anything else she's done well recently.
My thinking is that moving more into bonds might be a good shout. Bank some of those gains and maybe keep 20% or thereabouts in stocks. 22% alone is in "US Stocks" which I imagine means she's quite exposed if Nvidia loses a chunk of value as an example.
If she's holding US funds / ETFs then she may be a bit exposed to Nvidia but it'll likely be pretty tiny. Of course if Nvidia catches a cold then so might a lot of other US stocks.She made a comment that the pot had done really well recently and when we've looked into it she's still invested around 40% in stocks.
This seems high to me although through luck more than anything else she's done well recently.
My thinking is that moving more into bonds might be a good shout. Bank some of those gains and maybe keep 20% or thereabouts in stocks. 22% alone is in "US Stocks" which I imagine means she's quite exposed if Nvidia loses a chunk of value as an example.
I'm 68 too and my portfolio is looked after by someone else. It was 80% equities, just under half of those in the US, but they have just suggested changing things as I've ramped up the amount I'm taking. They want to do 6mths cash, then a ladder using bonds etc, for a few years, then equities at risk level 6 (on a scale 1-10, where 1 is least risky).
However wife and I both get state pension, we both have smallish DB pensions, and we have fairly chunky amounts in ISAs (also 80% invested in equities at Risk level 6) so my SIPP is only part of our overall financial position.
ChocolateFrog said:
Just been chatting to my mum who's 68 so already drawing down her pension.
She made a comment that the pot had done really well recently and when we've looked into it she's still invested around 40% in stocks.
This seems high to me although through luck more than anything else she's done well recently.
My thinking is that moving more into bonds might be a good shout. Bank some of those gains and maybe keep 20% or thereabouts in stocks. 22% alone is in "US Stocks" which I imagine means she's quite exposed if Nvidia loses a chunk of value as an example.
Nothing wrong with 40% (do you mean individual stocks or equity funds) and why “through luck”? She made a comment that the pot had done really well recently and when we've looked into it she's still invested around 40% in stocks.
This seems high to me although through luck more than anything else she's done well recently.
My thinking is that moving more into bonds might be a good shout. Bank some of those gains and maybe keep 20% or thereabouts in stocks. 22% alone is in "US Stocks" which I imagine means she's quite exposed if Nvidia loses a chunk of value as an example.
Does she hold Nvidia stocks or does the funds she holds invest have Nvidia in their holdings?
Why do you think Bonds would be a “good shout”? What’s she going to say to you if you move into Bonds and Equities shoot up.
Mid sixties here, just going into seventh year of drawdown and have around 65% equities in my med to long term pot.
craig1912 said:
ChocolateFrog said:
Just been chatting to my mum who's 68 so already drawing down her pension.
She made a comment that the pot had done really well recently and when we've looked into it she's still invested around 40% in stocks.
This seems high to me although through luck more than anything else she's done well recently.
My thinking is that moving more into bonds might be a good shout. Bank some of those gains and maybe keep 20% or thereabouts in stocks. 22% alone is in "US Stocks" which I imagine means she's quite exposed if Nvidia loses a chunk of value as an example.
Nothing wrong with 40% (do you mean individual stocks or equity funds) and why through luck ? She made a comment that the pot had done really well recently and when we've looked into it she's still invested around 40% in stocks.
This seems high to me although through luck more than anything else she's done well recently.
My thinking is that moving more into bonds might be a good shout. Bank some of those gains and maybe keep 20% or thereabouts in stocks. 22% alone is in "US Stocks" which I imagine means she's quite exposed if Nvidia loses a chunk of value as an example.
Does she hold Nvidia stocks or does the funds she holds invest have Nvidia in their holdings?
Why do you think Bonds would be a good shout ? What s she going to say to you if you move into Bonds and Equities shoot up.
Mid sixties here, just going into seventh year of drawdown and have around 65% equities in my med to long term pot.
Luck because she doesn't really know what she's doing and I think it's probably just one of the providers default pensions.
The ratio seemed high to me, I was under the impression that you'd want to take a lot less risk by this point.
A proper recession could knock 20% off her pot as it stands.
Maybe I'm wrong.
Derisking equities / increasing bond allocation is (imho) old world thinking.
Heaps written about it. More so over the last decade. Fundamentally, we're living longer and many of us are choosing to retire earlier. We need our money to work for us.
A recent paper on this very topic
https://papers.ssrn.com/sol3/papers.cfm?abstract_i...
Has generated a whole heap of chatter - you'll even see it discussed on YT.
Sheepshanks said:
ChocolateFrog said:
A proper recession could knock 20% off her pot as it stands.
Would that be a massive problem for her?
OTOH - if she s got sufficient then no need to take more risk than necessary.
ukwill said:
Derisking equities / increasing bond allocation is (imho) old world thinking.
Heaps written about it. More so over the last decade. Fundamentally, we're living longer and many of us are choosing to retire earlier. We need our money to work for us.
A recent paper on this very topic
https://papers.ssrn.com/sol3/papers.cfm?abstract_i...
Has generated a whole heap of chatter - you'll even see it discussed on YT.
This - The de-risking made sense when retiring at 65, and dying at 75 was the plan, where pots werer smaller, and needed to cover a (relatively) short timeframe, had a deadline day (the day you purchase your annuity) so couldn't really cope with market downturns just before this etc. Heaps written about it. More so over the last decade. Fundamentally, we're living longer and many of us are choosing to retire earlier. We need our money to work for us.
A recent paper on this very topic
https://papers.ssrn.com/sol3/papers.cfm?abstract_i...
Has generated a whole heap of chatter - you'll even see it discussed on YT.
But nowadays - people want to retire at 60 and die at 90 and drawdown along the way (i.e. not buy an annuity) - i.e. They have a 30 year investing horizon.
It's the same time horizon that a 30 year old has until retiring - You wouldn't recommend that the 30 year old goes all bonds, so why recommend that the 60 y.o should?
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