Defined Contribution Pension - Target Date Fund Investments

Jimbo911
Jimbo911 Posts: 23 Forumite
I am aged 51 and contribute to a Defined Contribution pension. My monthly contributions are invested into a Target Date Fund. The aim is to get the most from my money and create a smoother journey for my investments as I head towards my planned retirement aged of 55.

The Target Date fund invests in a range of different investment types that all have different levels of risk that are appropriate to my age. My fund is at a stage where as I approach my planned retirement age of 55, the mix of investments become more balanced and move towards a more cautious approach.

I have attached a breakdown of my Target Date fund at the end of this post which shows my mix of investments.

Considering the current economic climate and also the direction we think our economy is heading, I would be interested to hear your views on how you think each of these investments will perform over the next 4 years.

The intention of this post is for me to make an informed decision to see if I wish to change my investment types or keep them as they are.


MY INVESTMENTS


UK Equities, 4.4%
Global Developed Market Equities, 17.5%
Global Multi-Factor Equities, 3.9%
Global Small-Cap Equities, 2.3%
Emerging Market Equities, 3.7%
Global Property, 3.4%
Commodities, 1.4%
Global Corporate Bonds, 7.1%
UK Corporate Bonds, 8.4%
Gilts, 12.2%
Index-Linked Gilts, 35.6%
Cash, 0.0%
«134

Comments

  • bostonerimus
    bostonerimus Posts: 5,617
    First Anniversary Name Dropper First Post
    Forumite
    It's difficult to answer your question without knowing about all your other investments, pensions, debts, housing situation etc.

    Generally I'd say 60% bonds is pretty conservative at age 51 and that in drawdown fees and expenses will directly affect your level of income so make sure you minimize those!
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • coyrls
    coyrls Posts: 2,423
    First Anniversary Name Dropper First Post
    Forumite
    The fact that you have 35% in index linked gilts suggests that your Target Date fund has been designed with the assumption that you will be purchasing an annuity. Is that your intention? If so, have you considered the alternatives? If you are not purchasing an annuity you should review your investment strategy to align with how you plan to fund your retirement.
  • Linton
    Linton Posts: 17,066
    Name Dropper First Post First Anniversary Hung up my suit!
    Forumite
    Target date funds work on the assumption that you need less risk as you approach retirement. If you are planning to take drawdown at 55 this is arguable since you may not be touching half the the money for 20 years, planty of time to justify a 100% equity portfolio.

    No-one knows which way our economy is going in the next 4 years and none knows how your funds are going to perform. That is why one holds a broad range of investments and hopefully most of the equity is invested overseas. A major fall in sterling may actually be to your benefit.

    I agree with bostonorius that your equity seems very low which will significantly reduce your potential return but as we dont know your circumstances we can only assume that your retirement plans have taken this into account .
  • dunstonh
    dunstonh Posts: 116,044
    Name Dropper First Anniversary Combo Breaker First Post
    Forumite
    My monthly contributions are invested into a Target Date Fund.

    These funds are aimed at people who intend to buy an annuity or fully encash the pension as a lump sum at retirement. So, does that description fit you?
    They are not suitable for those that intend to use drawdown.

    Considering the current economic climate and also the direction we think our economy is heading, I would be interested to hear your views on how you think each of these investments will perform over the next 4 years.

    Nobody knows. Impossible to answer. You should invest appropriate for your risk level, your capacity for loss and your behaviour and knowledge. Not anyone elses.
    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.
  • Jimbo911
    Jimbo911 Posts: 23 Forumite
    coyrls wrote: »
    The fact that you have 35% in index linked gilts suggests that your Target Date fund has been designed with the assumption that you will be purchasing an annuity. Is that your intention? If so, have you considered the alternatives? If you are not purchasing an annuity you should review your investment strategy to align with how you plan to fund your retirement.


    You are correct in the fact that my DC fund is designed to purchase an Annuity. The scheme does not offer a Drawdown option. I intend moving my pot to a drawdown scheme in 4 years time. Are you able to advise on what my mix of Investments should be for me to take drawdown?


    Thank you.
  • Jimbo911
    Jimbo911 Posts: 23 Forumite
    Generally I'd say 60% bonds is pretty conservative at age 51 and that in drawdown fees and expenses will directly affect your level of income so make sure you minimize those!


    I intend moving my pot to a drawdown scheme in 4 years time. Are you able to advise on what my mix of Investments should be for me to take drawdown?


    Thank you.
  • Jimbo911
    Jimbo911 Posts: 23 Forumite
    Linton wrote: »
    I agree with bostonorius that your equity seems very low which will significantly reduce your potential return but as we dont know your circumstances we can only assume that your retirement plans have taken this into account .


    I intend moving my pot to a drawdown scheme in 4 years time. Are you able to advise on what my mix of Investments should be for me to take drawdown?


    Thank you.
  • Jimbo911
    Jimbo911 Posts: 23 Forumite
    dunstonh wrote: »
    These funds are aimed at people who intend to buy an annuity or fully encash the pension as a lump sum at retirement. So, does that description fit you?
    They are not suitable for those that intend to use drawdown.


    I intend moving my pot to a drawdown scheme in 4 years time. Are you able to advise on what my mix of Investments should be for me to take drawdown?


    Thank you.
  • Jimbo911
    Jimbo911 Posts: 23 Forumite
    edited 14 June 2017 at 8:57AM
    I intend moving my DC pot to a drawdown scheme in 4 years time. Is anyone able to advise on what my mix of Investments should be for me to take drawdown?


    Thank you.


    MY CURRENT TARGET DATE FUND INVESTMENTS

    UK Equities, 4.4%
    Global Developed Market Equities, 17.5%
    Global Multi-Factor Equities, 3.9%
    Global Small-Cap Equities, 2.3%
    Emerging Market Equities, 3.7%
    Global Property, 3.4%
    Commodities, 1.4%
    Global Corporate Bonds, 7.1%
    UK Corporate Bonds, 8.4%
    Gilts, 12.2%
    Index-Linked Gilts, 35.6%
    Cash, 0.0%
  • dunstonh
    dunstonh Posts: 116,044
    Name Dropper First Anniversary Combo Breaker First Post
    Forumite
    Jimbo911 wrote: »
    I intend moving my pot to a drawdown scheme in 4 years time. Are you able to advise on what my mix of Investments should be for me to take drawdown?


    Thank you.

    Yes. In real life I can. However, the board is not regulated to allow such things and you havent given us enough information to do that even if it was possible.

    What happens if someone recommends funds that are quite a few notches above your risk profile or recommends funds that are outside of your knowledge and understanding and need rebalancing and adjusting periodically.
    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.
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 342.5K Banking & Borrowing
  • 249.9K Reduce Debt & Boost Income
  • 449.4K Spending & Discounts
  • 234.6K Work, Benefits & Business
  • 607.1K Mortgages, Homes & Bills
  • 172.8K Life & Family
  • 247.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards