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.
The last eight years of 'er indoors working life (age 58 to 66) 'er employment came with a NEST pension. I did not know as much about pensions then as I do now and all of 'er contributions ended up in a 'low risk' fund.
That fund was so low risk that if it had not been for the tax relief added on she would have got back less on retirement than she paid in!
And then the cheeky t
ts took 6 months to transfer the miserable sum into a SIPP that I set up for 'er!
A well known PH'er who is very good with money once told me that 'risk' to an pension provider and risk to an individual are two very different things, so that a 'high risk' pension fund could almost be regarded as a low/medium risk by the individual.
That fund was so low risk that if it had not been for the tax relief added on she would have got back less on retirement than she paid in!
And then the cheeky t
ts took 6 months to transfer the miserable sum into a SIPP that I set up for 'er!A well known PH'er who is very good with money once told me that 'risk' to an pension provider and risk to an individual are two very different things, so that a 'high risk' pension fund could almost be regarded as a low/medium risk by the individual.
8-P said:
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.
There isn’t enough information to be definite but if you are not planning to retire for at least 10 years, then you certainly have scope to retain a high allocation to higher risk assets.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.
Agreed. Can't usefully comment on OPs situation without knowing exactly what the proposed "lower risk" approach amounts to.
OP - tell us more. What are the details?
And, for good measure,
(a) do you have a mortgage and when/how will it be paid off?
(b) do you have other savings, whether ISA, cash or whatever?
The point is that risk in any particular area can only be assessed within an overall financial context.
Having said that, life expectancy for retirees now typically averages around age 85 so many people will be retired for a very long time. Hence the trend towards running more risk for longer.
OP - tell us more. What are the details?
And, for good measure,
(a) do you have a mortgage and when/how will it be paid off?
(b) do you have other savings, whether ISA, cash or whatever?
The point is that risk in any particular area can only be assessed within an overall financial context.
Having said that, life expectancy for retirees now typically averages around age 85 so many people will be retired for a very long time. Hence the trend towards running more risk for longer.
8-P said:
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.
If I still had 10 years to go, I'd have kept mine at 85% equities. Risk rating 5/6.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.
But have maybe 1 year so am now on 45% equities, risk rating 3/6.
I dont fancy a big hit now but if I still had a decade I'd be happilg chasing growth
Just to be clear, this is very unlikely to be suggesting an immediate “derisk” of the OP’s pension. It will most likely be some sort of “lifestyling” approach so it starts to allocate funds to lower risk investments gradually. Typically, this might be switching gradually over a period of 10-15 years before intended retirement.
It’s worth looking into what the lower risk outcome looks like. It might still be sufficiently “risky” for the OP to be happy with it in retirement.
It’s worth looking into what the lower risk outcome looks like. It might still be sufficiently “risky” for the OP to be happy with it in retirement.
ferret50 said:
The last eight years of 'er indoors working life (age 58 to 66) 'er employment came with a NEST pension. I did not know as much about pensions then as I do now and all of 'er contributions ended up in a 'low risk' fund.
That fund was so low risk that if it had not been for the tax relief added on she would have got back less on retirement than she paid in!
And then the cheeky tts took 6 months to transfer the miserable sum into a SIPP that I set up for 'er!
A well known PH'er who is very good with money once told me that 'risk' to an pension provider and risk to an individual are two very different things, so that a 'high risk' pension fund could almost be regarded as a low/medium risk by the individual.
Yep - i worked overseas for a while and forgot about a small pot i'd built up, a workplace pension and stopped contributing in 2005. I eventually got around to looking, and it had grown about 10% by 2020. My fault, was all cash equivalent and low risk. I moved it all to high risk right away and its about 75% ish up already. Had i moved it to high risk funds back then, and there is only a selection of about 10 funds in this platform so really only 2-3 options for global equities which it considers " high risk", it would have been much higher today.That fund was so low risk that if it had not been for the tax relief added on she would have got back less on retirement than she paid in!
And then the cheeky t
ts took 6 months to transfer the miserable sum into a SIPP that I set up for 'er!A well known PH'er who is very good with money once told me that 'risk' to an pension provider and risk to an individual are two very different things, so that a 'high risk' pension fund could almost be regarded as a low/medium risk by the individual.
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