DIY Pension Management

AlanP_2

Maureen43 said:

Thank you all for your generous help. I have bought the book and will read the associated threads.

I'm 52, would ideally like to retire at 60 and am risk averse! I am also horrified by how unlikely it is that I will actually be able to retire at 60, based on my fund value. I started paying into my pension at 22 as well!

Can you let us know what you are invested in and how much you / employer contribute as that helps to provide some context.

If you started at 22 paying in £25 a month and have never increased it then inflation will have made that similar to paying in £5 a month now.

If you have increased your contributions over time then that is better.

Have you checked your State Pension forecast (looking beyond the headline, page 1 figure) to see what that will likely provide?

MaxiRobriguez

Maureen43 said:

Thank you all for your generous help. I have bought the book and will read the associated threads.

I'm 52, would ideally like to retire at 60 and am risk averse! I am also horrified by how unlikely it is that I will actually be able to retire at 60, based on my fund value. I started paying into my pension at 22 as well!

The dawning realisation that defined contribution pension schemes don't provide anywhere near the level of income as defined benefit schemes unless you really sacrifice a lot happens to us all. At least you've worked it out now, rather than in 10 years when you're not in a position to do anything about it.

Whilst you may need to work a few extra years past 60, remember too then that it won't be that long before your state pension will give you £9k annually which takes some pressure off.

Albermarle

Maureen43 said:

Thank you all for your generous help. I have bought the book and will read the associated threads.

I'm 52, would ideally like to retire at 60 and am risk averse! I am also horrified by how unlikely it is that I will actually be able to retire at 60, based on my fund value. I started paying into my pension at 22 as well!

Probably being too risk averse has negatively affected the fund value . By being too cautious with investments you can actually  increase the risk of not generating a big enough fund. So the risk works both ways.

OldMusicGuy

Albermarle said:

Probably being too risk averse has negatively affected the fund value . By being too cautious with investments you can actually  increase the risk of not generating a big enough fund. So the risk works both ways.

This is wise advice and exactly what happened to me. I am very, very risk averse so before I understood anything about investing, I would always choose very low risk funds. This was a huge mistake. If I'd understood how to invest for the long term and ride out ups and downs I would have invested at a higher risk level than I did in my 30s and 40s. I would have been able to retire a lot earlier. 

I now manage my own DC pot (my only pension except SP) and I have what I regard as a fairly conservative portfolio. But it's still invested at a higher risk level than I was comfortable with in my 30s/40s when I was ignorant. And paying a financial adviser didn't help either, because they invested in very low risk funds like I told them I wanted. 

bostonerimus

Albermarle said:

Maureen43 said:

Thank you all for your generous help. I have bought the book and will read the associated threads.

I'm 52, would ideally like to retire at 60 and am risk averse! I am also horrified by how unlikely it is that I will actually be able to retire at 60, based on my fund value. I started paying into my pension at 22 as well!

Probably being too risk averse has negatively affected the fund value . By being too cautious with investments you can actually  increase the risk of not generating a big enough fund. So the risk works both ways.

Theoretically, a DB pension invested in exactly the same way as a DC pension should provide greater retirement income because it is pooled and there will be a mortality credit. The DIY nature of DC pensions can also be hazardous as they allow for people to choose their contribution level, and it's often too low, and also to choose their investments and people can make poor long term decisions...that's often not taking enough risk so that their pension pot grows. The replacement of the DB pension with DC pensions was sold to employees as giving them choice and flexibility, when it really was employers transferring risk, cost and responsibility to their workers.  And now the gig economy is even eroding the workplace DC pension...

I think the OP should first make sure they have 6 months to a year of spending in cash in the bank and then put the SIPP in a Target Date Retirement fund. Something like Vanguard's Target Retirement 2030 would give a 65/35 equity to bond split and would give the chance of some growth. But the OP is "risk averse" so maybe a 2025 fund or even 2020 would suit better. Also controlling spending is vital so a budget should be done any saving possible ploughed back into the retirement investment pot.

Thrugelmir

bostonerimus said:

Albermarle said:

Maureen43 said:

Thank you all for your generous help. I have bought the book and will read the associated threads.

I'm 52, would ideally like to retire at 60 and am risk averse! I am also horrified by how unlikely it is that I will actually be able to retire at 60, based on my fund value. I started paying into my pension at 22 as well!

Probably being too risk averse has negatively affected the fund value . By being too cautious with investments you can actually  increase the risk of not generating a big enough fund. So the risk works both ways.

The replacement of the DB pension with DC pensions was sold to employees as giving them choice and flexibility, when it really was employers transferring risk, cost and responsibility to their workers. 

A former Chancellor has a lot to answer for.  A one tax raid fundamentally changed the landscape permanently.  Many employers had little choice.

bostonerimus

Thrugelmir said:

bostonerimus said:

Albermarle said:

Maureen43 said:

Thank you all for your generous help. I have bought the book and will read the associated threads.

I'm 52, would ideally like to retire at 60 and am risk averse! I am also horrified by how unlikely it is that I will actually be able to retire at 60, based on my fund value. I started paying into my pension at 22 as well!

Probably being too risk averse has negatively affected the fund value . By being too cautious with investments you can actually  increase the risk of not generating a big enough fund. So the risk works both ways.

The replacement of the DB pension with DC pensions was sold to employees as giving them choice and flexibility, when it really was employers transferring risk, cost and responsibility to their workers. 

A former Chancellor has a lot to answer for.  A one tax raid fundamentally changed the landscape permanently.  Many employers had little choice.

Yes Brown is culpable, but I put him and Blair squarely along side the employers and financial industry all looking to implement neo-liberal policy at the expense of workers and their long term financial benefit. New Labour must answer for a lot, they really put the icing on a cake that Maggie started baking.

zagfles

bostonerimus said:

Thrugelmir said:

bostonerimus said:

Albermarle said:

Maureen43 said:

Thank you all for your generous help. I have bought the book and will read the associated threads.

I'm 52, would ideally like to retire at 60 and am risk averse! I am also horrified by how unlikely it is that I will actually be able to retire at 60, based on my fund value. I started paying into my pension at 22 as well!

Probably being too risk averse has negatively affected the fund value . By being too cautious with investments you can actually  increase the risk of not generating a big enough fund. So the risk works both ways.

The replacement of the DB pension with DC pensions was sold to employees as giving them choice and flexibility, when it really was employers transferring risk, cost and responsibility to their workers. 

A former Chancellor has a lot to answer for.  A one tax raid fundamentally changed the landscape permanently.  Many employers had little choice.

Yes Brown is culpable, but I put him and Blair squarely along side the employers and financial industry all looking to implement neo-liberal policy at the expense of workers and their long term financial benefit. New Labour must answer for a lot, they really put the icing on a cake that Maggie started baking.

What, you mean "neo-liberal" policy like preventing pension funds being "dipped into", mandating inflation increases, the pension protection fund etc? Policies which added massive cost to DB pensions, and when combined with stuff like tax changes, life expectancy, and decreasing gilt returns made DB pensions massively more expensive than in the 70's and 80's?

Are those the "neo-liberal" policies you're talking about? Starting with Maggie adding inflation linking to DB pensions in the mid 80's. How neo-liberal!

zagfles

OldMusicGuy said:

Albermarle said:

Probably being too risk averse has negatively affected the fund value . By being too cautious with investments you can actually  increase the risk of not generating a big enough fund. So the risk works both ways.

This is wise advice and exactly what happened to me. I am very, very risk averse so before I understood anything about investing, I would always choose very low risk funds. This was a huge mistake. If I'd understood how to invest for the long term and ride out ups and downs I would have invested at a higher risk level than I did in my 30s and 40s. I would have been able to retire a lot earlier. 

I now manage my own DC pot (my only pension except SP) and I have what I regard as a fairly conservative portfolio. But it's still invested at a higher risk level than I was comfortable with in my 30s/40s when I was ignorant. And paying a financial adviser didn't help either, because they invested in very low risk funds like I told them I wanted. 

This is the problem with the whole financial services industry. What's the point of asking for advice or recommendations if they're basing that advice on your emotional attitude to risk? Life is a risk. Advice should include what risk you should be taking, that's real advice.

It would be like advice on the COVID jab being dependant on your attitude to the risk of blood clots

Nothing is risk free. Like with vaccinations it's a balance of risks and that balance should form a major part of any advice.

Risk of blood clot vs risk of dying of COVID. Risk of a sustained and prolonged market downturn vs risk of not getting enough growth to provide a decent retirement income. There's no such thing as a risk free option.

Notepad_Phil

zagfles said:
This is the problem with the whole financial services industry. What's the point of asking for advice or recommendations if they're basing that advice on your emotional attitude to risk? Life is a risk. Advice should include what risk you should be taking, that's real advice.

I well remember filling in some investment risk form which came out as me being a risk averse person and should be in low risk funds. Luckily this was only for a bit of fun as I had been self investing for 20+ years by that time in high equity funds as I knew that was the least riskiest way to get to a decent amount of retirement income. If I had done as the form filling suggested then I'd probably still be working as opposed to being early retired since my mid 50s.