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Protecting Pension Fund - EU Referendum
gil13
Posts: 297 Forumite
I am just wondering what peoples thoughts are with regards to de-risking their pension funds as we approach the vote. I appreciate no one knows how the market will react, some say it is already priced in others say not. I suspect a vote to leave will result in the markets going down - but for how long? If the economy really is effected over the next 2-3 years then what? On the other hand if it is Remain then the markets will probably rally and if you are totally out of the markets you miss out - but of course you lessen the risk of loss in the event of exit. In reality if you have many years to retirement it might not be such a big issue.
So what are folks thinking and doing? Are you shifting to safer funds, if so from what funds to what funds? Is it even possible to find a cash fund outside of a SIPP? I know when I looked in our selection of funds, even the so called cash funds are exposed to sterling and that is going to be all over the place anyway. Go to bonds, gilts? Transfer into more global funds with lower UK exposure? I suspect even these fund unit prices will all get a hit if we Brexit anyway, but maybe not as bad as FTSE funds?
It is not the easier one to call, what do you think , what are your strategies?
So what are folks thinking and doing? Are you shifting to safer funds, if so from what funds to what funds? Is it even possible to find a cash fund outside of a SIPP? I know when I looked in our selection of funds, even the so called cash funds are exposed to sterling and that is going to be all over the place anyway. Go to bonds, gilts? Transfer into more global funds with lower UK exposure? I suspect even these fund unit prices will all get a hit if we Brexit anyway, but maybe not as bad as FTSE funds?
It is not the easier one to call, what do you think , what are your strategies?
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Comments
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I'm doing nothing.
If you're globally well balanced across the range of asset classes then this issue is no more of a worry than many that happen all the time. Greek crisis, China problems to name a couple of recent ones.
Yes if you're out of the market and thing fall, you can buy in at a lower price but if you're out and they rise you'll be buying in higher.
Why not just sit tight and invest rather than gamble.0 -
I am just wondering what peoples thoughts are with regards to de-risking their pension funds as we approach the vote.
I'm doing nothing. Any downturn wont be as much as a stockmarket crash and reducing equity content after a stockmarket crash (last Autumn) that has yet to recover is rarely a good idea.
Plus, increased volatility and events if Brexit is the outcome does not mean all returns will be negative. There will be areas that see gains because of currency fluctuations.
The Japanese Tsunami and Nuclear issue was a much more significant event on Japan. Yet their market is much higher than it was before the incident.I appreciate no one knows how the market will react, some say it is already priced in others say not.
The lead up coinciding with a crash makes it hard to say how much is priced in. it is fair to say that there is some pricing in.I suspect a vote to leave will result in the markets going down - but for how long?
A couple of days. Maybe a week or two before sanity returns. Not all markets/areas will go down. Assets priced on a global market may not drop at all and may increase.I know when I looked in our selection of funds, even the so called cash funds are exposed to sterling
That is how cash would be.Go to bonds, gilts?
Which could suffer worse than equities.
Short term wobbles but little or no difference over the long term.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Unless you are about to retire, intend buying an annuity and have a large portion of your portfolio in uk/European equities then for most people do nothing is the right answer.
In my case I have just deferred investing some cash within my s&s ISA into equities, this is so I can take advantage of any temporary drop in the case of an out vote, either way this cash will be put into equities soon after the vote. But in my view I am just as likely to lose out using this strategy as gain :-)0 -
As you say, if we leave then short term your UK equities will provably drop because nobody likes uncertainty. But the pound sterling would also probably drop for the exact same reason, meaning your overseas equities (e.g. US shares, Japanese shares etc) would be worth more pounds for the same amount of dollars or yen. So you could lose on some of your portfolio and gain on the rest.
And if we agree to remain, then some of the cloud of uncertainty will be lifted, so the shares and currency could move in the opposite direction.
So basically you are sitting there with a portfolio which will move one way or the other, in the short term, but you don't know which bits will move in which directions because you don't know the verdict.
If you move one way to avoid the risk, you open yourself up to different risks. And if you move all to cash to avoid losing the 10% you think you'll lose in a Brexit, then if we don't exit, you'll have missed out on the 10% gain instead.
Ultimately the purpose of pension planning is to make sure you have enough in retirement compared to what all your neighbours have, because your money is competing with theirs to buy goods and services and services to keep you comfortable.
If you move everything to cash and avoid investing for a year while you think there is more global uncertainty than usual, and that gamble doesn't work out, then everyone else who didn't avoid investing because they don't actively try to outguess the market, will have more than you. That doesn't help you pay as much for bread and milk and wine and beer and home help as they are able to do, so your efforts to guess on the "safest" option result in a worse retirement.0 -
It is not the easier one to call, what do you think , what are your strategies?
Brexit is merely one in a long long line of reasons for markets to go up or down. There's nothing special about it and many more things that will cause far worse that could and likely over a long time, will, cause big dips.0 -
Thanks for those replies, I certainly would not be taking out all to cash but I have trimmed a bit with a bias to more global funds. I would be slightly more cautious though if I was near retirement as a big crash and period of economic turbulence could do a lot of damage to retirement plans for some people.0
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I'd be more concerned with the wider slow down of global growth than "Brexit". On many measures there's not great value to be found. With many companies dividends looking at risk going forward.0
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I am keeping an eye on things I want to buy, and making purchases when I am happy with the value.
Yes they may drop further, but the dividends are still there, and as I'm looking at >10 year horizon I'm not too bothered what happens on a timescale of months0
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