Picking Funds

AnotherJoe

Doglegger wrote: »

Ah, sorry, one omission from that is there is a DB element to the pension and the TFLS is taken from this pot. A crash wouldn't be ideal at that point I would think.

Is the DB element related to the size of the pot?

Can you remain invested after you take the DB?

Doglegger

AnotherJoe wrote: »

Is the DB element related to the size of the pot?

Can you remain invested after you take the DB?

No, they are separate, DB depending on service, DC depending on rate of contributions but they allow the TFLS to be taken entirely from DC leaving the DB at it's max value.
They allow 12 months to keep the remaining DC invested before it has to be transferred.

cfw1994

When it comes to DC schemes, the question of "lowering risk at RA" is, I feel, a slightly impossible conundrum!

Assuming there is the hope of 25-30 years of happy retirement ahead....then any investment needs to build and grow - being in 'low risk' (bonds/cash/???) at the start of that really runs the risk of not growing the pot sufficiently. Unless the pot is so huge as to not need to grow much!

The idea of having 'glide paths' to retirement that lower risk feels counterintuitive to me when looking at that longer horizon...a reason I opted out of our Aviva work scheme one....

Keeping a cash pool available to ride out any downturns is often seen as one safeguard against that - allowing investments to remain in medium to higher risk (as one might when looking at a 10+ year timeline)....
.....but that cash itself loses money to inflation, especially if sitting there for perhaps 2-10 years 'waiting' for the economy crash!

That said, I would expect to have relatively easy access to 2 years cash at point of retirement "in case".

Any DB schemes (or indeed, planned annuity pots from DC schemes, despite poor returns) can help smooth out the risk.

MK62

Doglegger wrote: »

This gets quoted a lot but it's not as simple as that with some work schemes. I am currently in the process of phase shifting for 7 years and derisking until chosen RA. I am in the "drawdown lifestyling" option but even this will derisk down to 10% equity come retirement day. This makes sense to me since I will have to transfer the pot to a drawdown provider as cash so couldn't afford a crash at that point.

What if the crash came the week after you'd transferred to your chosen drawdown provider and picked your new investments.....same result, but the initial transfer sum might well be much lower due to the profiling applied in the 7 year run up........

What if it comes at the start, or in the middle years of the profiling?, do you continue to then sell equities low and shift into alternatives (mainly bonds) while those are relatively high?.......or do you reverse the profiling, buying equities low by selling bonds while relatively high (relative as in bonds may also have fallen, but not by as much).......

What if you've continued to profile down to 10% equity by year 7, when the big recovery and 30-40% equity rally happens......

Of course, the opposites are also possible...;)