Move funds to something less volatile?

vulcanrtb

Hi all,
I'm in a DC scheme and I've seen some of the volatility lots of us have experienced in the last few months. Has anyone moved their pots to a less risky option (assuming the pension provider allows it)? I had considered moving it all to cash if possible, yes I know that means negative growth in effect, but I think I prefer that to the possibility of large losses in the current political climate (I'm 24 months away from retirement).

I can provide more detail on how my pot is invested if it helps.
Thanks.

AlanP_2

What happens in 24 months?

Will you withdraw it all from the pension at that point (to buy an annuity for example) or will it stay inside the pension wrapper for the next 20-40 years whilst you live off it?

If you will be living off it for 40 years then you need a good proportion of it invested in something that will beat inflation alongside a cash pot that can be used to live off whilst equity prices are low.

How are you currently invested and what is your overall plan for retirement?

TAMB

We would need more information. Portfolio, income intentions, ability to absorb a market fall etc

I would point out if you intend to use flexi-access income drawdown in retirement, it is likely you will be taking income for potentially the next 30 years plus (presuming you are 60-65). Trying to time the market now will likely negatively impact your portfolio over the long-term. When do you buy back in? Much better to get a portfolio with a risk profile you are comfortable with and should provide you with the required growth over the long-term.

Secondly, this market volatility can be seen as a buying opportunity. You have two years to retirement and could use that to buy the lows. Or save an additional cash buffer you can use when you retire to allow the markets to recover

dunstonh

I'm in a DC scheme and I've seen some of the volatility lots of us have experienced in the last few months.

Not unusual levels of volatility. And losses certainly less than in 2015/16 and 2008/9.

Has anyone moved their pots to a less risky option (assuming the pension provider allows it)?

No. I am actually thinking about moving up a risk level if the drop continues to crash level.

I had considered moving it all to cash if possible, yes I know that means negative growth in effect, but I think I prefer that to the possibility of large losses in the current political climate (I'm 24 months away from retirement).

Are you using drawdown or annuity purchase? If annuity, you should be low risk already. If drawdown, then you are going to be invested for another 20-30-40 years. So, short term loss periods are going to be frequent occurrences for you.

There are always reasons not to invest. If you want "excuses" you will always find them. It is better to be logical about these things and not sell up after a 16% drop.

Albermarle

Has anyone moved their pots to a less risky option (assuming the pension provider allows it)

I moved one of my pots into lower risk/lower equity proportion funds 12 months ago , as I thought that markets were getting a bit overheated . So with hindsight that was a good/lucky move but now the market has moved down I will move them back again, which may or may not be a good decision !

vulcanrtb

I'm 53 now, want to retire at 55. Roughly £445,000 in pot now, ITRO £3350 going in per month total.
At age 60 forces pension + wife's LGPS = circa £13,000 per year
No mortgage, debts or kids, looking to bring in about £30,000 a year to live on.

I know that the numbers stack up to support an age 55 retirement, but right now I am more worried about a nose dive in my pension pot than I am worried about not making big gains. I have a stressful job and want out, the idea of having to work longer to recover concerns me.

Hope that helps a bit.

Prism

vulcanrtb wrote: »

I'm 53 now, want to retire at 55. Roughly £445,000 in pot now, ITRO £3350 going in per month total..

Do you know the breakdown of that £445,000 pot? As in equites/bonds split.

OldMusicGuy

I hold a big chunk of my SIPP in cash and over the last two years have moved to less volatile funds because I retired in March last year. This is because I have enough in my SIPP to last through retirement and am more worried about sequence of returns risk than not getting great growth in my invested funds.

You should be ready for whatever the market throws at you in your financial planning, especially coming up to retirement. So you should have a clear plan for how much you need in retirement and when you need it. The worst thing you can do is get scared and react (late) to a market downturn without thinking about the consequences.

I have at least 5 years (more like 10 if I need it) cash in my SIPP and outside it, the rest remains invested in three multi-asset funds with approximately a 50/50 equity/bond split. I should not need to touch these for 5 to 10 years. That suits my financial objectives.

You need to decide if you want to maybe park some as cash now to help protect against sequence of returns risk (which will mean crystallizing some losses) or if you need to get growth to enable you to retire early. If the latter, you may have to risk volatility over the next couple of years and perhaps be flexible about when you retire.

It all depends on your financial objectives and appetite for risk. Going to all cash seems self-defeating. Surely you don't aim to spend all the money in your DC pot within a few years? Even I (a highly risk averse person) would not go all cash.

AlanP_2

vulcanrtb wrote: »

I'm 53 now, want to retire at 55. Roughly £445,000 in pot now, ITRO £3350 going in per month total.
At age 60 forces pension + wife's LGPS = circa £13,000 per year
No mortgage, debts or kids, looking to bring in about £30,000 a year to live on.

I know that the numbers stack up to support an age 55 retirement, but right now I am more worried about a nose dive in my pension pot than I am worried about not making big gains. I have a stressful job and want out, the idea of having to work longer to recover concerns me.

Hope that helps a bit.

I think you need to set up an excel cash flow s/sheet and see how it plays out.

Assuming you have two full SPs to come at 66/67 you should exceed your 30k target without needing the DC funds so their main use will be the 55-60 @ 30k a year and 60-67 period @ 17k a year.

What / where does your wife's salary / retirement plan fit in to this?

vulcanrtb

Wife unable to work, but we both have full SP at 67 of £8915 per year each.

bostonerimus

OP what is your current asset allocation? You don't want to be making panic changes to your investments, but you should strategically adjust things so they match your circumstances ie being close to retirement and wanting to do drawdown.

So work out your retirement drawdown income needs and sources; do you intend to use an annuity, how much comes from state and work pensions and how much do you need/want from drawdown etc. and then you can slowly adjust your asset allocation to match.

FYI I'm retired, have a 2 year cash cushion and a 70/30 overall allocation that I'm happy with because I get my income from pension and rent so I don't worry about market volatility.