Life's swerve ball ..how to correct it?

Rodders2409

Hello All,
I posted on here a couple of years ago as I was looking to get info on routes to increase pension provisions following my better half's Parkinson's diagnosis.
Good news.... I received fantastic help from forum contributors, to the point that I was able to make the jump and 'retire' at 54, to become a full time carer at home. We're just about able to manage financially for the next 13yrs, and PIP support may just make it more comfortable. 
Bad news....my better half doesn't have Parkinson's but Multiple System atrophy (MSA) which ain't good at all :-(

So, my question is this.
Given all the uncertainty right now and the lack of too much visibility, my main pension is tucked away in ....Aegon Growth Tracker (Flexible Target) (ARC) ....and after a crashing time has recovered back to almost what it was 9 months ago. I have the option to change the investment portfolio to a more secure environment as it's (by their reckoning) slightly over the 'middle risk' threshold. We're living off savings and income from a rental property and can last about 3 yrs before it gets twitchy, and that's not luxury living!!

My immediate thoughts have been to leave it as is, because nobody knows what's happening, and 3 years is a reasonable time to wait it out...but is that reasonable?

Albermarle

My immediate thoughts have been to leave it as is, because nobody knows what's happening, and 3 years is a reasonable time to wait it out...but is that reasonable?

The usual advice on here is that if you were happy with it before Covid/partners unfortunate diagnosis, then no reason to change due to 'current uncertainty' as there is always current uncertainty about some issue or another .

If in doubt do nowt .

Linton

As Albemarle says what is happening in the news now is not a reason to change your investment approach.  Any need to change investments would come from your particular circumstances and requirements.

Are you happy that the Aegon Growth TrackFlexible Target Fund is appropriate for your circumstances?  Looking up the details on Trustnet it is normally 70% equity (shares), half of which is UK equity, with the rest in corporate, inflation linked and UK Government bonds, which overall could be called slightly above middling risk.  However from the fund fact sheet it steadily moves into less risky investments including 25% cash as you approach retirement date - presumably the one that you have registered with them, which may or may not be relevent now.  The 25% cash is for the tax free lump sum.  Unfortunately I cannot find any description of what the "less risky"  investments are and their overall effect.

However if you are drawing down for the long term you do need significant equity to protect the real value of your income in the long term.  On the other hand if you can manage OK without the pension after you reach State Pension age this may not be a problem and very low risk may well be fine.  You may even wish to move into less risky investments now.

badger09

I'm not going to try to influence your decision. Just wanted to say that I hope you are getting all the help you need to manage your wife's condition. I'm sure you're aware of it, but support is available here https://www.msatrust.org.uk/support-for-you/
MSA is such a cruel disease.

Rodders2409

Thanks Linton and Albemarle,
I'm in a full carer / retirement mode so there will probably be no further contributions, or at least I'm not planning on that. I'm probably at £450K in pension pot with 3 yrs savings and then I'm needing to take 25% and then draw down at 4% annualy to add to the property rental, all until SP kicks in in 13 yrs. 

Rodders2409

Thanks Badger,
Yep, it's a damned awful condition and we're already seeking support through the MSA trust etc. What has really surprised me is how few people (including us) had heard of MSA, even most clinicians I've spoken to don't really know what it is...confusing it with MS or MND etc...

Albermarle

Rodders2409 said:

Thanks Linton and Albemarle,
I'm in a full carer / retirement mode so there will probably be no further contributions, or at least I'm not planning on that. I'm probably at £450K in pension pot with 3 yrs savings and then I'm needing to take 25% and then draw down at 4% annualy to add to the property rental, all until SP kicks in in 13 yrs. 

Normally if you draw down at 4% ( + inflationary increase each year ) your pot should last a lot longer than 13 years , assuming it is invested and not just held in cash . So by the time the 13 years is up, the majority of the pot should still hopefully be left and you can continue to take income from it on top of your state pension. This is because based on historical trends an investment fund holding 70% equities should grow between say 3% and 6% pa on average.
However as Linton pointed out , your fund is designed to reduce % equity/risk as you approach the retirement age that they have on their books for you. However if you are drawing down over a longer period then this is not really what you want and you would want to keep a minimum 50% equity . So it is not urgent but you may want to see what other funds Aegon offer that may be more suitable for your situation long terms .
A short term fix is to change the retirement date they hold for you to later .

[Deleted User]

I do think that now is a great time to review your investment strategy. In March or April would have been the wrong time but now that investments recovered we need to ask ourselves:
1. “Is the asset allocation appropriate to deal with the key risks I am facing?”
2. “Did I sleep well at night in March?” 

If the answer to either question is “no” then change.
You really need to evaluate your own risks given your timeline and needs as nobody understands them better than you. 70% equity sounds too high given the timeline you quoted.

Albermarle

Also the fact the fund equity is 50% UK , is on the high side, and is probably why only now is the value back where it started , as UK stock market has struggled to recover more than any other major market .
There is an argument about what should be the % in UK with different opinions, but I think nearly everybody would agree that 50% is too high. So something else to look out for when you review alternative funds. 

Rodders2409

Thanks Albermarle and Mordko,
To be honest, given the scale of global impact around Covid I was kind of surprised that the funds were back to roughly wgere they were 7 months ago, as I thought it'd take much longer. I've had other things on my plate and didn't really look at these things very closely!
So, I should probably look at reducing UK equities to below 50% then, any suggestions of where might be best to place the investments?

Albermarle

Rodders2409 said:

Thanks Albermarle and Mordko,
To be honest, given the scale of global impact around Covid I was kind of surprised that the funds were back to roughly wgere they were 7 months ago, as I thought it'd take much longer. I've had other things on my plate and didn't really look at these things very closely!
So, I should probably look at reducing UK equities to below 50% then, any suggestions of where might be best to place the investments?

First I would have a look at what pension funds are available in your pension. Most likely there will be funds that are more globally invested . Mainly means less in UK and more in US.
As also suggested maybe 70% equities overall is a bit high /volatile , 
You may find that having two or three different funds might be the answer .