Low risk investments

AlanP_2

itwasntme001 said:

How safe is your DB pension?  Over a long enough period, the chances of a company going bust increases.  You may not be skilled enough to assess the risks but there may be a real possibility of your company providing the pension going bust (especially if highly indebted and borrowing costs go up for example).  You are protected by the pension protection fund but this may not cover the full DB pension (the fund is not funded/backed by the taxpayer at all) so you may only get a fraction of the income paid by the fund every year after the company goes bust.

I would look into wealth preservation funds (like cgt or pnl).  Investing a large amount of your cash into a diversified global stock market index is highly risky particularly at current valuations.  You may want to (and probably should) invest some in stocks, but you should aim for diversification especially now at high valuations.  You probably do not need bonds.  Instead, maintaining a relatively high cash amount can make sense.  But if you go for a wealth preservation fund, there is no harm in investing the lot in there as they tend to be very diversified themselves and protect you from inflation much more than stocks will....

You probably should not take on too much risk such as with equity investments if your DB pension provider is considered as a higher risk of defaulting.

I think that must be the most pessimistic view of DB pensions I have ever read on here.

The individual's risk with a DB pension is much lower than for a DC pension. As for the Pension Protection Fund, my limited undertsanding is that it pays 90% of the scheme pension amount (with an upper limit I think) if pension hasn't been started and 100% if it has been started.

itwasntme001

AlanP_2 said:

itwasntme001 said:

How safe is your DB pension?  Over a long enough period, the chances of a company going bust increases.  You may not be skilled enough to assess the risks but there may be a real possibility of your company providing the pension going bust (especially if highly indebted and borrowing costs go up for example).  You are protected by the pension protection fund but this may not cover the full DB pension (the fund is not funded/backed by the taxpayer at all) so you may only get a fraction of the income paid by the fund every year after the company goes bust.

I would look into wealth preservation funds (like cgt or pnl).  Investing a large amount of your cash into a diversified global stock market index is highly risky particularly at current valuations.  You may want to (and probably should) invest some in stocks, but you should aim for diversification especially now at high valuations.  You probably do not need bonds.  Instead, maintaining a relatively high cash amount can make sense.  But if you go for a wealth preservation fund, there is no harm in investing the lot in there as they tend to be very diversified themselves and protect you from inflation much more than stocks will....

You probably should not take on too much risk such as with equity investments if your DB pension provider is considered as a higher risk of defaulting.

I think that must be the most pessimistic view of DB pensions I have ever read on here.

The individual's risk with a DB pension is much lower than for a DC pension. As for the Pension Protection Fund, my limited undertsanding is that it pays 90% of the scheme pension amount (with an upper limit I think) if pension hasn't been started and 100% if it has been started.

It depends on what the DC pot is invested in (and with whom the DC pot is with).  Likewise, the riskiness of a DB pension depends on both the risk of insolvency of the paying company and the chances the PPF goes bust as well.  The PPF may say they will pay up to 90% of the annuity, but they are not backed by the UK government / UK taxpayer.  If they do not have any money, they simply will go bust and therefore won't pay.

The risk is probably not worth considering IF it is a stand-alone default of just the company paying you the pension.  But if there is a systemic wide insolvency crisis with corporations, then this is where the risks rises materially.  Over a 20-30 year retirement such as the OPs presumably, the chances of "stuff" happening can be large enough to worry about these things.

So it makes some sense to assess the long term solvency situation of the company.  If high enough, it may warrant taking more of the pension into DC form (if possible).

dunstonh

How safe is your DB pension?  Over a long enough period, the chances of a company going bust increases.  You may not be skilled enough to assess the risks but there may be a real possibility of your company providing the pension going bust (especially if highly indebted and borrowing costs go up for example).  You are protected by the pension protection fund but this may not cover the full DB pension (the fund is not funded/backed by the taxpayer at all) so you may only get a fraction of the income paid by the fund every year after the company goes bust.

That is incorrect information and should be disregarded by the OP.

stephenadarglas

EdGasketTheSecond said:

Gold will do nicely in the current zero interest rate and QE/stimulus environment. It will also protect the value of your investment unlike your NS&I bonds which have a negative return compared to inflation.

This statement is bordering on the ridiculous and is extremely dangerous to the OPs situation.

itwasntme001

dunstonh said:

How safe is your DB pension?  Over a long enough period, the chances of a company going bust increases.  You may not be skilled enough to assess the risks but there may be a real possibility of your company providing the pension going bust (especially if highly indebted and borrowing costs go up for example).  You are protected by the pension protection fund but this may not cover the full DB pension (the fund is not funded/backed by the taxpayer at all) so you may only get a fraction of the income paid by the fund every year after the company goes bust.

That is incorrect information and should be disregarded by the OP.

What is incorrect exactly?

The PPF also can reduce the inflation rises of DB pensions which will also effectively reduce the DB amount that was initially promised over the lifetime.

If you do not think anything at all can go wrong with DB pensions and the effectiveness of PPF protections over the next 30 years, I think you are seriously deluded.