Managing pension investments during retirement

cfw1994

Linton said:

Deleted_User said:

Is it just me or is “wealth preservation” an incredibly irritating marketing gimmick? 

Also, any asset with allocation < 5% of the total is kinda meaningless in terms of an overall portfolio.   If an asset with 4% outperforms the rest of your portfolio, the grand total will hardly notice the difference. Even anything under 10% makes me wonder “why bother”? 

On the contrary, ISTM that Wealth Preservation is a very good name as it make the primary objective of the fund clear to both the manager and to the customer. One very useful outcome of this is that, unlike funds in the Absolute Return sector, there is no pressure to achieve a top rank in the performance tables. WP funds that compromise their primary remit are easily identified and can be avoided. 

I agree that any allocation below 5% in a fund based portfolio is not worth the time and effort required to manage it.  

Have to say I’m with Mordko on this.  “Wealth Preservation Fund” just smacks of “Wealth Managers” to me 

Yes, once one approaches and enters a drawdown phase, one needs to know the pot won’t shrink overnight by 50%....but even looking at the extraordinary events of the past 8 months, I think we find most people back where they were.  Mine are up over 11% on start of year, 5% from peak in Feb and 25% since trough of March.
Will it plummet again over coming months/years?  Maybe, who knows.....

Managing drawdown ahead: the OP said “ My strategy is to maximise withdrawal from my pension whilst minimising tax payments. ”

I don’t think wealth preservation funds impact tax payments: the best way to do that is to have ISA income to add to the pension pot, no?

I am in the lucky position of knocking on the LTA door, so have crystallised much of my DC pot and moved chunks to ISAs.   Still S&S based, perhaps even slightly “riskier” funds - I want those to grow in a manner that can improve funds without excess tax.
My strategy on funds is to continue to split them between “riskier” American (broadly tech-based, has performed very well and I think still will), Global funds (also done pretty well): then some lower risk in gilts and Aviva “pre-retirement interest” funds that have done okay.  

I may tweak things a little (danger, danger!), but don’t desperately see reasons to behave any differently - those have broadly done well for 15+ years, I hope to be retired for 20-30+, why change things?

The mechanics of drawing down will be the new bit for us....if the markets do plummet again, well, maybe we will rein in spending.  Mind you, that has been reined in well enough this year anyway!
I should perhaps add that we have a decent chunk in premium bonds & a couple of cash ISAs (should never have used them....note to younger self - “the markets broadly climb up, don’t invest big chunks in useless cash accounts!”).  Those could stop us having to draw down if we entered a prolonged downturn.

Went cycling with 2 recently retired pals over the weekend.  They have decent DB schemes, but have about 50% of their pre-retirement income now....yet they reckoned they were saving about a grand a month now.   The opportunity cost of not retiring is firmly outweighed by the very appealing alternative!

[Deleted User]

Audaxer said:

Deleted_User said:

I am in exactly the same position as the OP, retiring November, I keep refining the strategy and hopefully I have found the right balance
I don't use percentages but years of spending, so mine are
1 year cash
5 years bonds (VAGP and Royal London Short Duration Index Linked) and wealth preservation (MyMap3, PNL, CGT)
1 year mixed asset (wife's pension)
the rest growth 

With that strategy is it your intention to regularly top up the cash and bonds funds from the growth funds, once you have spent them?

Probably in good years, drawing from growth. In bad years, drawing from cash and then the bonds

Audaxer

cfw1994 said:

Linton said:

Deleted_User said:

Is it just me or is “wealth preservation” an incredibly irritating marketing gimmick? 

Also, any asset with allocation < 5% of the total is kinda meaningless in terms of an overall portfolio.   If an asset with 4% outperforms the rest of your portfolio, the grand total will hardly notice the difference. Even anything under 10% makes me wonder “why bother”? 

On the contrary, ISTM that Wealth Preservation is a very good name as it make the primary objective of the fund clear to both the manager and to the customer. One very useful outcome of this is that, unlike funds in the Absolute Return sector, there is no pressure to achieve a top rank in the performance tables. WP funds that compromise their primary remit are easily identified and can be avoided. 

I agree that any allocation below 5% in a fund based portfolio is not worth the time and effort required to manage it.  

Have to say I’m with Mordko on this.  “Wealth Preservation Fund” just smacks of “Wealth Managers” to me 

I have been considering Capital Gearing Trust and Personal Assets Trust as they seem like good Wealth preservation ITs. Out of interest I have just compared them on Trustnet to the VLS40 fund which I hold, and I see that 3 year and 5 year returns are fairly similar. I was surprised to see that from the start of the year to March, VLS40 had fallen a bit less than CGT.  I therefore think that for a low volatility investment, a fund like VLS40 with a fixed allocation, can provide the same function in a portfolio as one of the Wealth Preservation ITs.  Interested in your views.

green_man

laser707 said:

Hello.  I am planning to retire at the end of the year.  My strategy is to maximise withdrawal from my pension whilst minimising tax payments.  I am looking as how to best structure investments with my SIPP whilst retired. My plan is to have 1 year in cash, 1 year in wealth preservation (PNL) and 1 year in mixed 40%equity/60% bond.  With the remainder in growth funds.  I am primarily invested in low cost passive lifestyle type funds (Vanguard 100%equity, Blackrock & HSBC  equivalents) and plan to keep as the basis of my growth element.  Each year reducing the growth section to fund the pension withdrawal, but having 2-3 years reserve in less volatile investments in case of stock market slump.  I am interested to understand how others have structured their pension holdings to manage withdrawals against market volatility and what comments you may have on my intentions.  

My answer to the original question: (I’m 54, retired and my SIPP will be my main income, supplemented by an income portfolio ISA) 
My plan is. 

3 years cash**
17 years Muiti asset (60% equities)
3 years high growth (small companies to offset Cash drag)
The rest is for access in 20+ years and is in Global Growth Multi asset (85% equities)

I asked a couple of months ago if using Wealth Preservation trusts would reduce the amount of cash I needed to carry. The consensus was no, I should still carry 3 years (ish). So instead I’ve offset the cash with equivalent high growth stocks.


**At the moment I actually have much more cash as I’ve just moved in cash from my works pension fund and I’m a bit reticent about going all in to the market at current levels. 

Albermarle

Audaxer said:

cfw1994 said:

Linton said:

Deleted_User said:

Is it just me or is “wealth preservation” an incredibly irritating marketing gimmick? 

Also, any asset with allocation < 5% of the total is kinda meaningless in terms of an overall portfolio.   If an asset with 4% outperforms the rest of your portfolio, the grand total will hardly notice the difference. Even anything under 10% makes me wonder “why bother”? 

On the contrary, ISTM that Wealth Preservation is a very good name as it make the primary objective of the fund clear to both the manager and to the customer. One very useful outcome of this is that, unlike funds in the Absolute Return sector, there is no pressure to achieve a top rank in the performance tables. WP funds that compromise their primary remit are easily identified and can be avoided. 

I agree that any allocation below 5% in a fund based portfolio is not worth the time and effort required to manage it.  

Have to say I’m with Mordko on this.  “Wealth Preservation Fund” just smacks of “Wealth Managers” to me 

I have been considering Capital Gearing Trust and Personal Assets Trust as they seem like good Wealth preservation ITs. Out of interest I have just compared them on Trustnet to the VLS40 fund which I hold, and I see that 3 year and 5 year returns are fairly similar. I was surprised to see that from the start of the year to March, VLS40 had fallen a bit less than CGT.  I therefore think that for a low volatility investment, a fund like VLS40 with a fixed allocation, can provide the same function in a portfolio as one of the Wealth Preservation ITs.  Interested in your views.

Yes the recent performance has been similar . The difference is that the trusts hold a wider variety of assets ( gold or cash for example ) and can vary the % equities etc . So in a different set of market conditions they could behave differently to VLS 40 . Even similar multi asset trusts do not perform exactly the same in all scenarios. 
Probably the belt and braces approach is to have these two IT's and two multi asset funds ( one fixed allocation and one not /one UK bias and one not) which is approx. where my core holdings are heading by coincidence. 

cfw1994

green_man said:

laser707 said:

Hello.  I am planning to retire at the end of the year.  My strategy is to maximise withdrawal from my pension whilst minimising tax payments.  I am looking as how to best structure investments with my SIPP whilst retired. My plan is to have 1 year in cash, 1 year in wealth preservation (PNL) and 1 year in mixed 40%equity/60% bond.  With the remainder in growth funds.  I am primarily invested in low cost passive lifestyle type funds (Vanguard 100%equity, Blackrock & HSBC  equivalents) and plan to keep as the basis of my growth element.  Each year reducing the growth section to fund the pension withdrawal, but having 2-3 years reserve in less volatile investments in case of stock market slump.  I am interested to understand how others have structured their pension holdings to manage withdrawals against market volatility and what comments you may have on my intentions.  

My answer to the original question: (I’m 54, retired and my SIPP will be my main income, supplemented by an income portfolio ISA) 
My plan is. 

3 years cash**
17 years Muiti asset (60% equities)
3 years high growth (small companies to offset Cash drag)
The rest is for access in 20+ years and is in Global Growth Multi asset (85% equities)

I asked a couple of months ago if using Wealth Preservation trusts would reduce the amount of cash I needed to carry. The consensus was no, I should still carry 3 years (ish). So instead I’ve offset the cash with equivalent high growth stocks.


**At the moment I actually have much more cash as I’ve just moved in cash from my works pension fund and I’m a bit reticent about going all in to the market at current levels. 

Sounds entirely reasonable!  
One thing I am curious about - what specific action (or set of actions), or market event, will lower your reticence and get you to move back into "the market"?
Asking because I am aware my funds are broadly up 5% *above* where they were at the peak back in Feb (& some 25% up in the trough) - a part of me feels that I am unable to time these things, and am better off staying invested.   Fully realise there could be a further dip ahead....
Also aware that multiple years in cash will mean losing money to inflation.   2 or 3 makes no major difference, but 5-10 or more would (to me) sound quite big.

Albermarle said:

Audaxer said:

cfw1994 said:

Linton said:

Deleted_User said:

Is it just me or is “wealth preservation” an incredibly irritating marketing gimmick? 

Also, any asset with allocation < 5% of the total is kinda meaningless in terms of an overall portfolio.   If an asset with 4% outperforms the rest of your portfolio, the grand total will hardly notice the difference. Even anything under 10% makes me wonder “why bother”? 

On the contrary, ISTM that Wealth Preservation is a very good name as it make the primary objective of the fund clear to both the manager and to the customer. One very useful outcome of this is that, unlike funds in the Absolute Return sector, there is no pressure to achieve a top rank in the performance tables. WP funds that compromise their primary remit are easily identified and can be avoided. 

I agree that any allocation below 5% in a fund based portfolio is not worth the time and effort required to manage it.  

Have to say I’m with Mordko on this.  “Wealth Preservation Fund” just smacks of “Wealth Managers” to me 

I have been considering Capital Gearing Trust and Personal Assets Trust as they seem like good Wealth preservation ITs. Out of interest I have just compared them on Trustnet to the VLS40 fund which I hold, and I see that 3 year and 5 year returns are fairly similar. I was surprised to see that from the start of the year to March, VLS40 had fallen a bit less than CGT.  I therefore think that for a low volatility investment, a fund like VLS40 with a fixed allocation, can provide the same function in a portfolio as one of the Wealth Preservation ITs.  Interested in your views.

Yes the recent performance has been similar . The difference is that the trusts hold a wider variety of assets ( gold or cash for example ) and can vary the % equities etc . So in a different set of market conditions they could behave differently to VLS 40 . Even similar multi asset trusts do not perform exactly the same in all scenarios. 
Probably the belt and braces approach is to have these two IT's and two multi asset funds ( one fixed allocation and one not /one UK bias and one not) which is approx. where my core holdings are heading by coincidence. 

Interesting that a broadly "low risk low cost passive" index fund performs as well as the wealth preservation one mentioned.   Kind of backs up a strategy that might suggest to "invest globally to low cost trackers and all will be well"

Audaxer

Albermarle said:

Audaxer said:

cfw1994 said:

Linton said:

Deleted_User said:

Is it just me or is “wealth preservation” an incredibly irritating marketing gimmick? 

Also, any asset with allocation < 5% of the total is kinda meaningless in terms of an overall portfolio.   If an asset with 4% outperforms the rest of your portfolio, the grand total will hardly notice the difference. Even anything under 10% makes me wonder “why bother”? 

On the contrary, ISTM that Wealth Preservation is a very good name as it make the primary objective of the fund clear to both the manager and to the customer. One very useful outcome of this is that, unlike funds in the Absolute Return sector, there is no pressure to achieve a top rank in the performance tables. WP funds that compromise their primary remit are easily identified and can be avoided. 

I agree that any allocation below 5% in a fund based portfolio is not worth the time and effort required to manage it.  

Have to say I’m with Mordko on this.  “Wealth Preservation Fund” just smacks of “Wealth Managers” to me 

I have been considering Capital Gearing Trust and Personal Assets Trust as they seem like good Wealth preservation ITs. Out of interest I have just compared them on Trustnet to the VLS40 fund which I hold, and I see that 3 year and 5 year returns are fairly similar. I was surprised to see that from the start of the year to March, VLS40 had fallen a bit less than CGT.  I therefore think that for a low volatility investment, a fund like VLS40 with a fixed allocation, can provide the same function in a portfolio as one of the Wealth Preservation ITs.  Interested in your views.

Yes the recent performance has been similar . The difference is that the trusts hold a wider variety of assets ( gold or cash for example ) and can vary the % equities etc . So in a different set of market conditions they could behave differently to VLS 40 . Even similar multi asset trusts do not perform exactly the same in all scenarios. 
Probably the belt and braces approach is to have these two IT's and two multi asset funds ( one fixed allocation and one not /one UK bias and one not) which is approx. where my core holdings are heading by coincidence. 

Yes, I agree that these trusts hold a greater variety of assets. I also have some HSBC Global Strategy Balanced as well as more in VLS funds, as well as an income portfolio of active funds. Maybe adding a few wealth preservations funds would help with more diversification, or maybe I should keep things simple by adding to the multi asset funds. Their performance seems to be similar to the WP ITs, or even a bit better in the case of HSBC Global Strategy Balanced, with not that much more risk in my opinion.

Albermarle

Audaxer said:

Albermarle said:

Audaxer said:

cfw1994 said:

Linton said:

Deleted_User said:

Is it just me or is “wealth preservation” an incredibly irritating marketing gimmick? 

Also, any asset with allocation < 5% of the total is kinda meaningless in terms of an overall portfolio.   If an asset with 4% outperforms the rest of your portfolio, the grand total will hardly notice the difference. Even anything under 10% makes me wonder “why bother”? 

On the contrary, ISTM that Wealth Preservation is a very good name as it make the primary objective of the fund clear to both the manager and to the customer. One very useful outcome of this is that, unlike funds in the Absolute Return sector, there is no pressure to achieve a top rank in the performance tables. WP funds that compromise their primary remit are easily identified and can be avoided. 

I agree that any allocation below 5% in a fund based portfolio is not worth the time and effort required to manage it.  

Have to say I’m with Mordko on this.  “Wealth Preservation Fund” just smacks of “Wealth Managers” to me 

I have been considering Capital Gearing Trust and Personal Assets Trust as they seem like good Wealth preservation ITs. Out of interest I have just compared them on Trustnet to the VLS40 fund which I hold, and I see that 3 year and 5 year returns are fairly similar. I was surprised to see that from the start of the year to March, VLS40 had fallen a bit less than CGT.  I therefore think that for a low volatility investment, a fund like VLS40 with a fixed allocation, can provide the same function in a portfolio as one of the Wealth Preservation ITs.  Interested in your views.

Yes the recent performance has been similar . The difference is that the trusts hold a wider variety of assets ( gold or cash for example ) and can vary the % equities etc . So in a different set of market conditions they could behave differently to VLS 40 . Even similar multi asset trusts do not perform exactly the same in all scenarios. 
Probably the belt and braces approach is to have these two IT's and two multi asset funds ( one fixed allocation and one not /one UK bias and one not) which is approx. where my core holdings are heading by coincidence. 

Yes, I agree that these trusts hold a greater variety of assets. I also have some HSBC Global Strategy Balanced as well as more in VLS funds, as well as an income portfolio of active funds. Maybe adding a few wealth preservations funds would help with more diversification, or maybe I should keep things simple by adding to the multi asset funds. Their performance seems to be similar to the WP ITs, or even a bit better in the case of HSBC Global Strategy Balanced, with not that much more risk in my opinion.

The multi asset funds are cheaper but these IT's are not that expensive considering they are actively managed.