pensions & brexit

AnotherJoe

lgar wrote: »

Due to claim my private pension, how will the uncertainty over brexit & the falling £ effect this?

It's only a matter of before someone asks how Brexit will affect the rise in their bread making machine.

bigadaj

AnotherJoe wrote: »

It's only a matter of before someone asks how Brexit will affect the rise in their bread making machine.

No more dough, no impact on inflation?

Triumph13

lgar wrote: »

Due to claim my private pension, how will the uncertainty over brexit & the falling £ effect this?

Glass half full = shares going up
Glass half empty = LTA shrinking as it's denominated in £

jamesd

woolly_wombat wrote: »

Not so good for those close to retirement who have Lifestyle pensions. Gilt yields are up, so prices are down and look as if they may have topped.

Gilt yields are only roughly back to where they were pre-Brexit vote so far but I agree that more increases in yield and decreases in capital value seems likely.

But lifestyling is in large part obsolete, just like annuities for those close to state pension age in normal good health with typical pot sizes, so it's perhaps worth considering getting out of that if you're in it. Enough in low volatility options to pay for any fixed in time spending that you plan to do can be useful though.

RickyB2000

Does life styling still make sense for an AVC attached to a DB pension where you can take the AVC as the 25% tax free or to buy more DB pension?

jamesd

Yes, some lifestsyling makes sense for that. Traditional lifestyling has two parts:

1. reducing ups and downs due to market movements close to retirement.
2. matching annuity rate changes by using annuity-related investments such as gilts.

The gilt bit doesn't make sense for the 25% tax free or more DB pension case but the market movement part does. For someone who's paying attention it's probably better to turn off lifestyling and manage the fund choices themselves. Lifestyling plans have in some cases started way sooner than seems sensible to me, as much as fifteen years before retirement, reducing investment returns for that whole period.

Buying more DB income usually doesn't make sense because the reverse commutation rate is usually poor. But if the rate is OK and competitive with state pension deferral or a better paying annuity then it can be a good move.

coyrls

jamesd wrote: »

Yes, some lifestsyling makes sense for that. Traditional lifestyling has two parts:

1. reducing ups and downs due to market movements close to retirement.
2. matching annuity rate changes by using annuity-related investments such as gilts.

The gilt bit doesn't make sense for the 25% tax free or more DB pension case but the market movement part does. For someone who's paying attention it's probably better to turn off lifestyling and manage the fund choices themselves. Lifestyling plans have in some cases started way sooner than seems sensible to me, as much as fifteen years before retirement, reducing investment returns for that whole period.

Buying more DB income usually doesn't make sense because the reverse commutation rate is usually poor. But if the rate is OK and competitive with state pension deferral or a better paying annuity then it can be a good move.

I think there are two reasons to manage your fund choices as you come up to retirement. The first, as jamesd says is the 25% tax free lump sum, which you can gradually move to a cash equivalent to make the sum a bit more predictable. Another reason for moving to a cash equivalent is if you are going to have to transfer your pension in cash (e.g. from an occupational DC scheme to a SIPP because the occupational scheme doesn’t offer drawdown). As you are not in control of the point at which your funds are converted to cash, you cannot control what the transfer sum will be unless you adjust your investments. You most likely will also be out of the market for several weeks while the transfer takes place before you can reinvest the cash.

[FONT=&quot] I gradually moved my pension to a cash fund over the twelve months prior to transfer to give myself a bit more certainty over the final sum to be transferred. I guess some of this is psychological but I didn’t like the idea of my funds being converted to cash at a date over which I had no control.[/FONT]

woolly_wombat

jamesd wrote: »

Gilt yields are only roughly back to where they were pre-Brexit vote so far but I agree that more increases in yield and decreases in capital value seems likely.

But lifestyling is in large part obsolete, just like annuities for those close to state pension age in normal good health with typical pot sizes, so it's perhaps worth considering getting out of that if you're in it. Enough in low volatility options to pay for any fixed in time spending that you plan to do can be useful though.

I have been concerned for some time about one of my OH's pensions, which had lifestyling.

Action has already been taken.

I thought this article was interesting:
http://monevator.com/weekend-reading-when-is-an-inflation-target-not-an-inflation-target/