Drawdown concerns

ALAMANDA

Hello I have a drawdown with scottish widows plan b. and over the last year the policy valuation has dropped dramatically .do I need to take any action or is this the state of the market 

JOHNBOY42

everybodys funds have dropped.............. its a bumpy ride........ sit tight

JoeCrystal

ALAMANDA said:

Hello I have a drawdown with scottish widows plan b. and over the last year the policy valuation has dropped dramatically .do I need to take any action or is this the state of the market 

Surely if you were doing a drawdown then you should already know about the investment risks as well. Of course, the pension fund value will change on a daily basis. No difference from having a normal pension fund pre-drawdown after all. 

NannaH

If you are in drawdown surely you have at least two years in cash to use? 

Of course the problems then start once you have to sell funds to replenish the cash if the markets are still down or haven’t grown.
If you are taking only the yield from income funds then the amount you get will be reduced. 

dunstonh

and over the last year the policy valuation has dropped dramatically 

It shouldn't have dropped dramatically.  Most people are down around 10%.    Your withdrawals may magnify that a bit as drawing money out during a falling market can make it look worse than it is.  Especially with a high draw rate.

.do I need to take any action or is this the state of the market 

What is your drawdown/investment strategy?  How much cash are you holding in the pension (or externally that you can switch to)?
Ideally, you are holding several years worth of cash in the pension.  So, you wouldn't be selling units at this point in time to fund your withdrawals.    Or alternatively, you are holding cash external to the pension and can stop or lower the withdrawals during this negative period.

Your drawdown strategy should be in place to cover good periods, negative periods and periods of no growth/loss.    As negative periods are always coming along, you shouldn't be worried about them when they do come along.     So, far, this is actually just a mild drop.  There was three times bigger in 2020.  Twice as much in 2018 and 2015/16 and four times bigger in 2008/9 and  2000-2003 (which was three negative years in a row).

If you are struggling with 7 months of high volatility and a relatively small loss then you need to reconsider your retirement strategy.

JOHNBOY42

dunstonh said:

and over the last year the policy valuation has dropped dramatically 

It shouldn't have dropped dramatically.  Most people are down around 10%.    Your withdrawals may magnify that a bit as drawing money out during a falling market can make it look worse than it is.  Especially with a high draw rate.

.do I need to take any action or is this the state of the market 

What is your drawdown/investment strategy?  How much cash are you holding in the pension (or externally that you can switch to)?
Ideally, you are holding several years worth of cash in the pension.  So, you wouldn't be selling units at this point in time to fund your withdrawals.    Or alternatively, you are holding cash external to the pension and can stop or lower the withdrawals during this negative period.

Your drawdown strategy should be in place to cover good periods, negative periods and periods of no growth/loss.    As negative periods are always coming along, you shouldn't be worried about them when they do come along.     So, far, this is actually just a mild drop.  There was three times bigger in 2020.  Twice as much in 2018 and 2015/16 and four times bigger in 2008/9 and  2000-2003 (which was three negative years in a row).

If you are struggling with 7 months of high volatility and a relatively small loss then you need to reconsider your retirement strategy.

excellent advice from dunstonh as usual.....

jim8888

Sometimes I think the responses on this board can be harsh. "Surely" you have done this, "surely" you have done that. The OP wouldn't be asking the question on the board if they had the knowledge that many others - on this forum - obviously do. Investing, money and particularly pensions are complex subjects that many people don't get to grips with because of the intimidating aura that they have. Being made to feel that you are dim when all you're seeking is simple information is not helpful. 

Albermarle

ALAMANDA said:

Hello I have a drawdown with scottish widows plan b. and over the last year the policy valuation has dropped dramatically .do I need to take any action or is this the state of the market 

If by action, you mean switching funds or pension provider, then probably not as all pension funds are down to a greater or lesser extent so far in 2022.
However you may want to consider reducing the income you are taking from the pension for a period. 
To get some better guidance you need to supply a lot more details though.