Pensions - Baptism of Fire

mr97

crv1963 -  Thank you.  I've been thinking about pensions almost obsessively.  Totally living in a fictitious future, playing out like some Black Mirror episode. Staying grounded is wise words indeed, words I'm going to heed.  That quote my J. Lennon, springs to mind: "Life is what happens to you while you're busy making other plans."  
I've been on the planet long enough to know that life is short and all the best plans in the world can be subject to change - sometimes quite abruptly and permanently.  
I wish you all the very best with your plans and future. Thank you for taking the time to help me out. 
What a great forum.  It's actually been a breath of fresh air as on some forums people seemed to be attacked for whatever there mention. 
 Have a good one!  

mark55man

you're in good hands - your own!

Agree very much with crv1963 in having a general direction rathern than a detailed 200 point plan - as long as you are thinking in and checking in once in a while, and don;t miss opportuntities (eg when you start getting shifts) you'll be fine

mr97

Ended up with a sipp Vanguard target retirement 2035 Fund.  Low fees and flexible-  perfect for my requirements at the moment. Thank you for all your advice guys.  I wish you all the very best.

Thank you, so much  mark88man. I'm really quite enjoy learning about investing. Just bought a ebook DIY Simple Investing by J. Edwards. Bit of bedtime reading. ...What on earth has happened to me lol

mark55man

you're welcome - can't go far wrong with a vanguard fund.  investing is about getting comfortable slowly and not get rich quick that's the trick.  With a big dose of understanding your scheme so that you can take advantage of your circumstances to suit your requirements and your personal needs and do not worry about the whole world. 

mr97

Thank you, mark88man. Really appreciate your time and encouragement.  Have a great day 

peter8888

mark88man   I started working for a fella who owns about 17 trucks via a franchise scheme for a aggregates company,i was a bus driver with a company pension and all the usual big company perks.I am very frustrated with this company as it has no structure in place,just another bloke who runs things day to day from home,i got so down being a bus driver i had to leave,the wages are better but that is the only plus.I have not been auto enrolled into any type of pension scheme yet ,i started in feb 2020 and was furloughed for the month of april too.any thoughts ??

mark55man

hey there - just to be clear I am a random bloke on the internet and not a financial professional, but I have done a bit of homework.  also I am part of a large company so I don't share some of the problems you have but will try and cover the basics.

first thing - your bus company pension is separate from anything that happens in your new employment but you should make you understand its nature - ie DC (Defined contribution aks money purchase) where you have saved for a pot of money and then have to invest and ultimately manage the pension you dra - or its a DB (Defined Benefit aka Final Salary) where the pension fund takes the investment risk and you are entitled to a set amount (based on your service, your salary, and the scheme rules).  This (and you state pension - get a forecast to make sure you have your full entitlement) will be the starting point for your retirement.

With the auto-enrollment the basic advice is never say no to free money so if your new company has a scheme then its probably better off taking it than not, as most schemes of this type have fairly standard T&C.  This forum is full of advice (and some horror stories) about smaller companies and how they have or haven't set the up properly - I would be tempted  to start a new thread specifically on that.  Also there are some monster threads on this board which cover most aspects of retirement - ie how to invest, and what amount you need in retirement.  Some of these are for very well off people, but the principles are the same - and a common observation is the lower your required income the bigger help  the the State pension is in achieving that and is often the bedrock of planning.  Then you make whatever savings (ISA or pension or cash) you need to  supplement that.

You are going to have to grasp the investment thistle as you can't keep everything in cash for 20 years without eroding value, but there are plenty of balanced cautious funds covering most different types of assets (eg equity, bonds, property, ...) and also with a global perspective.  They key here is getting comfortable slowly not getting rich quick so you want to avoid an investment where your risk is concentrated on specific shares.  Most pension funds have a couple of general purpose funds which won't shoot the lights out, but will be reasonably safe until you get more comfortable

mr97

Hi - hope everyone is keeping well.  
I debated with myself as to where to post this, but as it will be directly linked to my pension - so to speak - I thought I would include this in my thread. 
I have now set-up a sipp pension with £3600 (target retirement fund 2035) and I'm also waiting for a small pension pot to transfer over too (10k)- I may choose a different fund for this as I may need to transfer this into my NHS pension (when I complete my degree, of course) 
Currently, I'm just about to add funds £20000 to a Vanguard LS60 S&Sisa.  Being 52yrs old and very new to investing, I have read that there's an old adage "keep your age in years in bonds"!   Unfortunately, I'm finding many an old adage and, each with a conflicting viewpoint.  Having researched when is the best time to invest during the current climate, this only served to keep me stuck in mouth open mode - this mouth open look has been a common theme throughout my investing journey, so far. lol   Currently I'm now thinking, prior to transfer, do I put £10k in VLS40 & 10k in VLS60 to get a 50/50 mix of bonds & shares or do I stick my original plan of £20k in the 60/40 VLS60?  
I a guess at this point, I really like to know if you guys thinking I'm overthinking all this?  I have previous when it comes to money differing, in part due to my lack of uncertainty and partly fear.  
My plan is to get an investment going (S&Sisa ), concentrate on my studies, drip-feed funds into the plan and try not to look at it too often.   I plan to invest this money for 12 - 15yrs. 
 I have an emergency fund and a little buffer in an easy-access account so I think this is quite doable.   

gm0

You have spotted the over thinking and web resources trap.  For every opinion there is dissent.  From the current trend (or fashion if -ve about them) of passive trackers.  To gold etc. etc. etc. And people chose a timeframe, a geography or a simulation to show why their idea is better than the other one and that a disliked strategy or  "emperor has no clothes". 

If you truly have a 12+ year timeframe in mind and can gently buy a little at a time then correction, volatility and subsequent recovery are your friend. Just keep going at it saving don't stop when it troughs - best time to buy. 

Now nobody is going to 2nd guess 60% equity that much.  It is a very mainstream choice.   Some people would accumulate in 100% equities and let the volatility go hang. But easier to be relaxed about this and sleep at night if you are 25 than 50

The whole bonds in age thing is in my opinion a red herring - folk wisdom passed down.  It has two arguments - 1) lifestyling (switching progressively to cash+bonds from equities as a fixed date to draw "all the money" and buy an annuity approached.  No risk of a poorly timed 60% correction taking out 60% of your pension - either forever by buying or delaying retirement by however many years by waiting for recovery before buying.  Obviously this derisking of the fixed date was quite sensible when annuity purchase was the only choice (from the early retirment age up to 75 forced purchase back in the day). 
Ideas tend to hang around after the original reason for them disappears and post fact rationalisations appear to prop them up.

There is a 2nd argument for increasing bonds + cash towards planned retirement age which is that the "ideal" portfolio in long term accumulation and in drawdown (deaccumulation) are likely not the same.  Accumulation can tolerate more - even all equities.  In your reading you will have encountered sequence of return risk and how the order as well as the long term average of returns matters.  A portfolio that has no cash or bonds must sell equities - whatever happens.  And a few years of that if income must be taken can damage the long term prospects of a 30-40 year retirement.  This is why bonds and cash feature in most drawdown portfolio planning to provide contingent income.  So moving to the target position in a planned way - even a bit at a time - can help with short term volatility.  It is not best practice to be way out of line the day before you take the money. Reasonable people can disagree about how long to phase this in over.  10 years (too much), 1 year (too little).

My reading around on backtesting suggests that below 40% equities insufficient return for income becomes a problem and above 70-80% the increase in volatilty and sequence of return causing a problem outweigh additional return from a higher percentage. 
You don't need that problem in your mid-70s.   Most modeling and analysis is based on "fixed income" and inflation rises.  Clearly if you can vary the income taken with what happens then this risk comes under better control.  There are swathes of analysis about this online to see if there is a sustainable "gain" to be banked in how much to take via a specific method.

mark55man

gm0 has covered the main arguments about bonds.  especially that a big part of it was about not lowering risk before you bought an annuity which is old thinking (but not totally dead).  Now, you would look to live to mid 80s if you get to 60 so you do still have time to recover from crashes

the only disadvantage about having all you money say LS60 is that when you sell you are selling both the 60 (equity) and 40 (bonds).  if equity is in a downturn this might not be as efficient as having 60% in LS100 and 40% in bonds/cash - then when you need cash in a downturn then you can cash in the bonds and leave the equity to recover.  Many people suggest having a couple of years expenses in cash just for this reason allowing them to top up the cash during equity peaks.

In a prolonged turndown the above strategy would leave you more and more exposed to equity which might be bad, but if you are in a global broadly diversified fund you shouldn't be too terrible - and at worst you would have to sell some equities at poor values and maybe give yourself a pension pay cut - but you would have avoided having to do that without time to plan.   Having a solid basis of fixed income (State & NHS pensions) will also seriously mitigate against you depleting your pot when values are low