Interest rates up - Lifestyle fund pension pot down.....

fiddlerman

My pot was 78k in Nov 21 and is now 66k......in a 'lifestyle' fund supposedly less volatile in run up to my retirement in Dec 22.

@coyris said

Lifestyle arrangements were designed when people typically took an annuity when they retired.  The aim was to align with annuity rates, to provide some stability in the projected pension in the years running up to retirement.  In that respect your lifestyle arrangement has performed as expected, as your pot value has declined, annuity rates have risen therefore reducing the variability of annuity projections.  If you do not plan to purchase an annuity at retirement, it may not have been appropriate for you to be in a lifestyle arrangement.

This reply by @coyris pretty much mirrors an article I read in The Times a few weeks back, which I why I started looking at my pot performance.....trying to avoid panic! I'd had no warning from my provider.

My pot has gone down 12k/13% in 5 months since last Dec.........difficulty is in knowing what is due the interest rate/bonds issue and what down to overall turbulence re covid/ukraine - I suspect mostly the latter, and I realise it depends on the make up of funds.

The April 22 statement from my pot provider lists all the choices i have re taking my pension incl lump sum, drawdown etc....any warnings are cloaked in jargon and generic statements re getting outside advice....so I'm thankful to the Times for the article.

It would probably suit me to sit on the pot for 5 years or more as I don't need income - anything from an annuity id probably have to re-invest anyway, so Im getting outside advice, maybe I'll shift it to a better fund....

Thanks for any previous replies - its useful to help understand the rather murky landscape I'm trying to navigate.....
 

Albermarle

My pot has gone down 12k/13% in 5 months since last Dec.........difficulty is in knowing what is due the interest rate/bonds issue and what down to overall turbulence re covid/ukraine - I suspect mostly the latter, and I realise it depends on the make up of funds.

As a generalisation, bonds and shares have gone down a similar amount.

Bonds do not like increasing interest rates/high inflation, so it is mainly economy related .Equities are affected by more issues, but Ukraine is one. Also they had been on a bull run for most of the last ten years, so had to correct at some point .

I suspect if you look back your pot will have grown significantly before this recent period.

Thrugelmir

Which fund(s) hold your investments? 

coyrls

Albermarle said:

My pot has gone down 12k/13% in 5 months since last Dec.........difficulty is in knowing what is due the interest rate/bonds issue and what down to overall turbulence re covid/ukraine - I suspect mostly the latter, and I realise it depends on the make up of funds.

As a generalisation, bonds and shares have gone down a similar amount.

Bonds do not like increasing interest rates/high inflation, so it is mainly economy related .Equities are affected by more issues, but Ukraine is one. Also they had been on a bull run for most of the last ten years, so had to correct at some point .

I suspect if you look back your pot will have grown significantly before this recent period.

In a lifestyle arrangement, 9 months from retirement, I would expect the investments to be around 75% bonds, with a large proportion of those bonds being long term index linked gilts, to align with annuities.

A 13% fall in 5 months is probably due to the drop in bond prices, as the fall is greater than you would expect from a medium risk equity portfolio over the same period.

dunstonh

This reply by @coyris pretty much mirrors an article I read in The Times a few weeks back, which I why I started looking at my pot performance.....trying to avoid panic! I'd had no warning from my provider.

You provider is not there to advise you.  It is either you (if you DIY) or your adviser that would cover that.

My pot has gone down 12k/13% in 5 months since last Dec.........difficulty is in knowing what is due the interest rate/bonds issue and what down to overall turbulence re covid/ukraine - I suspect mostly the latter, and I realise it depends on the make up of funds.

About 8% of that could be gilts/fixed interest securities.  The rest equities.

Very little, if any of it is directly to do with Russia's invasion of Ukraine.  Indirectly it doesn't help and puts further pressure on the real issues behind it. Interest rates and inflation along with the global cost of living crisis.  Equities have been shifting away from consumer discretionary spending companies. Some of which have crashed big time (such as many tech companies).   Although they are still higher than their massive boom during 2020.

The April 22 statement from my pot provider lists all the choices i have re taking my pension incl lump sum, drawdown etc....any warnings are cloaked in jargon and generic statements re getting outside advice....so I'm thankful to the Times for the article.

You generally find providers do not cover all options.  Just a summary of the main ones.