Mind Boggling…..Fund names minefield….Help please

Moneymac06

Albermarle said:

As suspected it appears to be set to derisk too much, if drawdown is the likely way of withdrawing.
This is because with drawdown, your money needs to be in funds that have a good chance of at least keeping up with inflation, and hopefully grow a bit. So pointless derisking the whole portfolio to very low risk funds as you approach drawdown/retirement. Something like 50% equity- 50% bonds would be more in the right area ( opinions vary as to the exact amount) It is useful to have some cash savings during drawdown as well, so if you took those into account , then say 50% equity ; 30% bonds + 20% cash could be another route.
Just very general info, not personal advice of course.

Thank you, so as I also asked Dunstonh above, should we be changing the Lifestyle Plan on the Pension Account instead of the actual funds first? 

NannaH

I think first you need to decide on when he will start drawdown,  whether he will take a tax free lump sum and how many years income you intend to keep in cash within the pension,  plus if you intend to use income funds to replenish some/all the cash that will be drawn down.  

I find it easier to visualise ‘buckets’ for short, medium and long term.
So bucket 1: cash for say 3 years of income and payment of fees. 
Bucket 2:  Income funds to replenish cash and maybe a little growth.
Bucket 3: Equity funds for 10 years+ out. 

Then decide on suitable funds . 

QrizB

Moneymac06 said:

Thank you, so as I also asked Dunstonh above, should we be changing the Lifestyle Plan on the Pension Account instead of the actual funds first? 

As I recall, my employer's DC scheme presents this in four tiers, from least to most hands-on.

1. Leave your pension in the default lifestyle plan. This uses a tiny (but complementary) set of the pension company's funds and de-risks as you approach retirement. Like yours, my default assumes annuity purchase.
   
2. Choose a different lifestyle plan that more closely reflects your retirement goals. The alternative lifestyles use the same funds as option 1 but change the de-risking profile to better suit eg. drawdown or splurging it all on a Maserati.
3. Give up on lifestyling and choose funds yourself, from within the pension company's rage of dozens / hundreds of funds.
4. Go further, leave the walled garden of the provider's funds and choose funds or individual comnpany shares from the wider market.
   

From what you've said, you're currently in the default lifestyle plan. If you think the default isn't a great match to your intentions, it's likely to be relatively simple and straightforward to choose a different lifestyle plan from those available. This isn't a spur-of-the-moment decision but the provider's documents should explain what the options are, what outcomes they're most suitable for and so on; you might be able to pick a lifestyle plan with an evening's reading, say.

The lifestyle plan descrioptions should also include details of the funds used. Reading about these will give you a bit of an idea of what leverl of research you'll need to do if you decide to go on to choose funds yourself.

Moneymac06

Many thanks to everyone who has responded, lots of information to mull over, it’s definitely give us some knowledge to now research and decide what to do next.
Thank you again

Albermarle

QrizB said:

Moneymac06 said:

Thank you, so as I also asked Dunstonh above, should we be changing the Lifestyle Plan on the Pension Account instead of the actual funds first? 

As I recall, my employer's DC scheme presents this in four tiers, from least to most hands-on.

1. Leave your pension in the default lifestyle plan. This uses a tiny (but complementary) set of the pension company's funds and de-risks as you approach retirement. Like yours, my default assumes annuity purchase.
   
2. Choose a different lifestyle plan that more closely reflects your retirement goals. The alternative lifestyles use the same funds as option 1 but change the de-risking profile to better suit eg. drawdown or splurging it all on a Maserati.
3. Give up on lifestyling and choose funds yourself, from within the pension company's rage of dozens / hundreds of funds.
4. Go further, leave the walled garden of the provider's funds and choose funds or individual comnpany shares from the wider market.
   

From what you've said, you're currently in the default lifestyle plan. If you think the default isn't a great match to your intentions, it's likely to be relatively simple and straightforward to choose a different lifestyle plan from those available. This isn't a spur-of-the-moment decision but the provider's documents should explain what the options are, what outcomes they're most suitable for and so on; you might be able to pick a lifestyle plan with an evening's reading, say.

The lifestyle plan descrioptions should also include details of the funds used. Reading about these will give you a bit of an idea of what leverl of research you'll need to do if you decide to go on to choose funds yourself.

Just to add to this good explanation.
My last employer pension had a choice of four lifestyle options as well. I took option 3 having done some reading about basic investing, later enhanced by reading this forum. Also the charges on this particular pension were very low, so did not move this one into Option 4, although I did with an older more expensive ex employer pension.

OP - One possible short term 'fiddle factor' is to change the retirement age on the providers website to a later one. This will then push the lifestyling back a few years. The age you enter is only an indication for them. It has no effect on when you can actually take the pension,( which as he is 58, he could take it anytime) Not really a proper solution though.

bostonerimus

There is no hurry. What you have right now is very mainstream so just take your time and do a little research and planning.

Whether a particular set of funds or other financial products is right for you depends on what you want to achieve. So for retirement I would first do a detailed budget so you can estimate the amount of retirement income you need to produce. Then you can look at the sources of that income, ie state pension, part time work, benefits and workplace pensions you have. You might want to buy an annuity with your DC pot or manage it for income by investing in a few funds. If you are looking to generate long term income from funds you probably need a high equity allocation (above 50%) so you have the potential for some growth and I would do that with a single multi-asset fund. Take a look at the guides that your pension provider puts out and stick to the multi-asset/lifestyle funds and understand how they are constructed and then you can make a sensible choice.

Pat38493

Moneymac06 said:

Many thanks to everyone who has responded, lots of information to mull over, it’s definitely give us some knowledge to now research and decide what to do next.
Thank you again

I am in a similar situation - I have two DC funds which are in the company default lifestyle fund at the moment.

I have made notes in my diary of what year the life styling is due to kick in and I need to do something about it before then - I am pretty sure I won't want the default lifestyling because I have a DB fund as well which will cover some of the risk for me and I will most likely also be using Drawdown.

I did a bit of digging around and it appears that between Aviva and Aegon who I am with, the life styling seems to be technically done in a different way so I will need to figure out how to change it - at least one of them has a fund which is identical to the one I am currently in but without life styling.

The other thing which worries me a bit is that if the life style dates are completely automated or based on rigid things that happen exactly x years before retirement, this could result in your fund being moved into another fund at a bad time (e.g. if there was a big market crash the day before this was done) - therefore I intend to keep more control over exactly when this is done.  I might have to take some one-off advice from an IFA at that time, but we will see.

Albermarle

Pat38493 said:

Moneymac06 said:

Many thanks to everyone who has responded, lots of information to mull over, it’s definitely give us some knowledge to now research and decide what to do next.
Thank you again

I am in a similar situation - I have two DC funds which are in the company default lifestyle fund at the moment.

I have made notes in my diary of what year the life styling is due to kick in and I need to do something about it before then - I am pretty sure I won't want the default lifestyling because I have a DB fund as well which will cover some of the risk for me and I will most likely also be using Drawdown.

I did a bit of digging around and it appears that between Aviva and Aegon who I am with, the life styling seems to be technically done in a different way so I will need to figure out how to change it - at least one of them has a fund which is identical to the one I am currently in but without life styling.

The other thing which worries me a bit is that if the life style dates are completely automated or based on rigid things that happen exactly x years before retirement, this could result in your fund being moved into another fund at a bad time (e.g. if there was a big market crash the day before this was done) - therefore I intend to keep more control over exactly when this is done.  I might have to take some one-off advice from an IFA at that time, but we will see.

Traditionally lifestyling was geared to you buying an annuity, but AFAIK, most pension providers will now have lifestyle options geared toward drawdown, so not derisking anywhere near as much. The problem seems to be that many default lifestyling options are still geared towards annuities, and are totally unsuitable for someone planning to do drawdown.
Although as you have found out , there is no real consistency between providers about how they do it.