Private Pension Lifestyling investments - the next scandal?

Mick70

does this include the Vanguard  Target Retirement fund pensions ?
i.e where pick an age you would like to retire ,  2030 say

Pat38493

michaels said:

Another problem with SWR (in addition to the 'holding your nerve' ) is that it is all framed against the initial conditions at the moment of retirement.  So the person that retired during one of the drops will have a much lower SW amount than their virtual twin who retire a year or so previous at a market peak.  This implies that the same pot at year zero with the same investment strategy will provide one level of retirement if taken in year zero with the market high and a second much lower level if taken in year 2 after a market crash - even though the person who retired in year zero will have suffered the same investment fall as the person who retires in year 2. 

(An alternative way of looking at this is that if the person who retired in year zero returns to work for 1 day in year 2 and then re-retires, suddenly the pot that would previously have given them the year zero SWR will now only give the much lower year 2 SVR)

Well yes, although if it's a year apart and one of them started to draw money out whilst the other carried on putting in, they are not in exactly the same scenario but generally I agree, whereas in reality, the initial years retirement scenario is historically more likely to be more benign for the person retiring at the bottom of the market.

As someone said recently, judgement calls may need to be made.  I would look at this on a perspective of general market drawdown conditions (how much lower is the market than its last historical peak).  If I was retiring at or near historic peak of market, I would probably be looking at least for 100% success rate and with some portfolio leftover at the end.  If I was retiring in a 40% drawdown depression, I might feel more comfortable retiring with a success rate of 90% or 95% (which feels counterintuitive but that's what the historical data seems to show).  You can also look at CAPE ratios and so on to give a rough indication but in the end it's judgement.  Fundamentally if you wait to pull the trigger as soon as you reach 100% success probability, it's likely you are at market peaks at that time, which is exactly when you are more likely to run into a worst case scenario.

We also have to keep in mind that a lot of this is highly theoretical because I would guess that in the UK, the vast majority of people have at least some level of state pension, and many might have other benefits or DB sources of income or annuities that they put in place - as such rules like 4% become irrelevant and you need some better cash flow modelling to try to assess it.

If like me you are in a couple with some DB assets, 2 state pensions etc and thinking of retiring early, your initial drawdowns might be significantly higher than 4% because the money doesn't need to last 30 years (at least not at anything like 4% drawdown rates).

It would be interesting to see comments from IFA like DunstonH about how they handle this with clients - do they take into account current market cycle situation when advising clients about these type of risks and models.

Mick70

Mick70 said:

does this include the Vanguard  Target Retirement fund pensions ?
i.e where pick an age you would like to retire ,  2030 say

 and if so should i be making any future payments into their lifestragey 60% equity fund instead ?

Pat38493

Mick70 said:

does this include the Vanguard  Target Retirement fund pensions ?
i.e where pick an age you would like to retire ,  2030 say

In my opinion yes - Vanguard Target Retirement funds are their equivalent of life styling.   Nothing fundamentally terrible about them but I suspect that a lot of the regular posters on this board prefer to keep control of their own investment mix.

Mick70

Pat38493 said:

Mick70 said:

does this include the Vanguard  Target Retirement fund pensions ?
i.e where pick an age you would like to retire ,  2030 say

In my opinion yes - Vanguard Target Retirement funds are their equivalent of life styling.   Nothing fundamentally terrible about them but I suspect that a lot of the regular posters on this board prefer to keep control of their own investment mix.

thanks pat , some of this does go over my head a little at times
It is pension i set up for my wife 
as things stand she has about £240k  (target 300k) ,
60k vanguard s&s isa (60% equity)
60k vanguard pension - target retirement fund 2030
and about £110k in various savings 

I am unsure now , regarding the retirement fund if should amend my monthly standing order to pay into 60% equity fund instead 

Hoping we can retire together in 3-4 years time (ideally 3)

Pat38493

Mick70 said:

Pat38493 said:

Mick70 said:

does this include the Vanguard  Target Retirement fund pensions ?
i.e where pick an age you would like to retire ,  2030 say

In my opinion yes - Vanguard Target Retirement funds are their equivalent of life styling.   Nothing fundamentally terrible about them but I suspect that a lot of the regular posters on this board prefer to keep control of their own investment mix.

thanks pat , some of this does go over my head a little at times
It is pension i set up for my wife 
as things stand she has about £240k  (target 300k) ,
60k vanguard s&s isa (60% equity)
60k vanguard pension - target retirement fund 2030
and about £110k in various savings 

I am unsure now , regarding the retirement fund if should amend my monthly standing order to pay into 60% equity fund instead 

Hoping we can retire together in 3-4 years time (ideally 3)

I am not sure there is a specific answer to this as it depends partly on how you intend to access the money after retirement, and partly on your attitude to risk and tolerance on volatility so you would probably need to give some more info there e.g. ages, other funds that you have together etc (possibly on a separate new post as this one has steered away from the original topic quite a bit I guess).

3-4 years time is not 2030, so I guess the question would be, even if you want this approach, why the fund is in a 2030 target retirement fund if actually you want to retire in 2026/7?

The Vanguard 2030 retirement fund looks like it is currently already sitting at 62% equity 38% bonds, so if that is what you feel is right for you based on your other fund in an ISA, it’s roughly the same allocation right now.   Personally I wouldn’t want to be that low in equity at that stage but I might have a different risk attitude and different other pension assets than you.

Also as an aside, if you are saying that your wife is still working, it is usually better to shove as much money into pensions as possible rather than ISA or other savings (unless she wants to retire before reaching the age that she can access the pension assets).  In fact, in the last year before retirement some people even put their entire salary into their pension and lived of their savings in order to maximise tax relief.

Mick70

Pat38493 said:

Mick70 said:

Pat38493 said:

Mick70 said:

does this include the Vanguard  Target Retirement fund pensions ?
i.e where pick an age you would like to retire ,  2030 say

In my opinion yes - Vanguard Target Retirement funds are their equivalent of life styling.   Nothing fundamentally terrible about them but I suspect that a lot of the regular posters on this board prefer to keep control of their own investment mix.

thanks pat , some of this does go over my head a little at times
It is pension i set up for my wife 
as things stand she has about £240k  (target 300k) ,
60k vanguard s&s isa (60% equity)
60k vanguard pension - target retirement fund 2030
and about £110k in various savings 

I am unsure now , regarding the retirement fund if should amend my monthly standing order to pay into 60% equity fund instead 

Hoping we can retire together in 3-4 years time (ideally 3)

I am not sure there is a specific answer to this as it depends partly on how you intend to access the money after retirement, and partly on your attitude to risk and tolerance on volatility so you would probably need to give some more info there e.g. ages, other funds that you have together etc (possibly on a separate new post as this one has steered away from the original topic quite a bit I guess).

3-4 years time is not 2030, so I guess the question would be, even if you want this approach, why the fund is in a 2030 target retirement fund if actually you want to retire in 2026/7?

The Vanguard 2030 retirement fund looks like it is currently already sitting at 62% equity 38% bonds, so if that is what you feel is right for you based on your other fund in an ISA, it’s roughly the same allocation right now.   Personally I wouldn’t want to be that low in equity at that stage but I might have a different risk attitude and different other pension assets than you.

Also as an aside, if you are saying that your wife is still working, it is usually better to shove as much money into pensions as possible rather than ISA or other savings (unless she wants to retire before reaching the age that she can access the pension assets).  In fact, in the last year before retirement some people even put their entire salary into their pension and lived of their savings in order to maximise tax relief.

thanks pat , appreciate any advice 
i dont want to derail the thread but may do a separate thread on my own circumstances 
think the original plan was retire 2027 and had option of a fund at 2025 or 2030 , but now hoping she maybe able to retire 2026 age 59.  we only really started hammering her pension about 5 year ago and she is a very low earner ( est14k pa)   hence not much in her actual pension as limited what can pay in, much of the bank is from a lump sum i received.
out of interest , as it got closer to retiring could we simply transfer the full fund to a lifestyle option 60% equity within the vanguard umbrella ? - ie sell it and move it to a different vanguard fund ?

Pat38493

Mick70 said:

Pat38493 said:

Mick70 said:

Pat38493 said:

Mick70 said:

does this include the Vanguard  Target Retirement fund pensions ?
i.e where pick an age you would like to retire ,  2030 say

In my opinion yes - Vanguard Target Retirement funds are their equivalent of life styling.   Nothing fundamentally terrible about them but I suspect that a lot of the regular posters on this board prefer to keep control of their own investment mix.

thanks pat , some of this does go over my head a little at times
It is pension i set up for my wife 
as things stand she has about £240k  (target 300k) ,
60k vanguard s&s isa (60% equity)
60k vanguard pension - target retirement fund 2030
and about £110k in various savings 

I am unsure now , regarding the retirement fund if should amend my monthly standing order to pay into 60% equity fund instead 

Hoping we can retire together in 3-4 years time (ideally 3)

I am not sure there is a specific answer to this as it depends partly on how you intend to access the money after retirement, and partly on your attitude to risk and tolerance on volatility so you would probably need to give some more info there e.g. ages, other funds that you have together etc (possibly on a separate new post as this one has steered away from the original topic quite a bit I guess).

3-4 years time is not 2030, so I guess the question would be, even if you want this approach, why the fund is in a 2030 target retirement fund if actually you want to retire in 2026/7?

The Vanguard 2030 retirement fund looks like it is currently already sitting at 62% equity 38% bonds, so if that is what you feel is right for you based on your other fund in an ISA, it’s roughly the same allocation right now.   Personally I wouldn’t want to be that low in equity at that stage but I might have a different risk attitude and different other pension assets than you.

Also as an aside, if you are saying that your wife is still working, it is usually better to shove as much money into pensions as possible rather than ISA or other savings (unless she wants to retire before reaching the age that she can access the pension assets).  In fact, in the last year before retirement some people even put their entire salary into their pension and lived of their savings in order to maximise tax relief.

thanks pat , appreciate any advice 
i dont want to derail the thread but may do a separate thread on my own circumstances 
think the original plan was retire 2027 and had option of a fund at 2025 or 2030 , but now hoping she maybe able to retire 2026 age 59.  we only really started hammering her pension about 5 year ago and she is a very low earner ( est14k pa)   hence not much in her actual pension as limited what can pay in, much of the bank is from a lump sum i received.
out of interest , as it got closer to retiring could we simply transfer the full fund to a lifestyle option 60% equity within the vanguard umbrella ? - ie sell it and move it to a different vanguard fund ?

Yes you certainly could do that if you wanted to and if it fits with your investment strategy that you want to stick with 60% equity fund.  As said above it also depends how you want to access the money - e.g. if you want to use it to buy an annuity at retirement, the answer might be different to if you want to draw it out slowly over the following 30 or more years.

zagfles

michaels said:

One thing with annuities - befroe they made vary little sense compared to 'swr', now they are relatively much more competitive.  So perhaps the markets are trying to tell us something and that 'lifestyling' was actually effective in what it was hoping to achieve.

And those who were going to drawdown may have hit the jackpot as they didn't move to fixed interest, yet now see RPI annuities at 3.3% for a 55 year old and 4.5% for a 65 year old, so why bother drawing down with a 3-4% "SWR" when you can get an annuity for similar or better?

Mick70

Pat38493 said:

Mick70 said:

Pat38493 said:

Mick70 said:

Pat38493 said:

Mick70 said:

does this include the Vanguard  Target Retirement fund pensions ?
i.e where pick an age you would like to retire ,  2030 say

In my opinion yes - Vanguard Target Retirement funds are their equivalent of life styling.   Nothing fundamentally terrible about them but I suspect that a lot of the regular posters on this board prefer to keep control of their own investment mix.

thanks pat , some of this does go over my head a little at times
It is pension i set up for my wife 
as things stand she has about £240k  (target 300k) ,
60k vanguard s&s isa (60% equity)
60k vanguard pension - target retirement fund 2030
and about £110k in various savings 

I am unsure now , regarding the retirement fund if should amend my monthly standing order to pay into 60% equity fund instead 

Hoping we can retire together in 3-4 years time (ideally 3)

I am not sure there is a specific answer to this as it depends partly on how you intend to access the money after retirement, and partly on your attitude to risk and tolerance on volatility so you would probably need to give some more info there e.g. ages, other funds that you have together etc (possibly on a separate new post as this one has steered away from the original topic quite a bit I guess).

3-4 years time is not 2030, so I guess the question would be, even if you want this approach, why the fund is in a 2030 target retirement fund if actually you want to retire in 2026/7?

The Vanguard 2030 retirement fund looks like it is currently already sitting at 62% equity 38% bonds, so if that is what you feel is right for you based on your other fund in an ISA, it’s roughly the same allocation right now.   Personally I wouldn’t want to be that low in equity at that stage but I might have a different risk attitude and different other pension assets than you.

Also as an aside, if you are saying that your wife is still working, it is usually better to shove as much money into pensions as possible rather than ISA or other savings (unless she wants to retire before reaching the age that she can access the pension assets).  In fact, in the last year before retirement some people even put their entire salary into their pension and lived of their savings in order to maximise tax relief.

thanks pat , appreciate any advice 
i dont want to derail the thread but may do a separate thread on my own circumstances 
think the original plan was retire 2027 and had option of a fund at 2025 or 2030 , but now hoping she maybe able to retire 2026 age 59.  we only really started hammering her pension about 5 year ago and she is a very low earner ( est14k pa)   hence not much in her actual pension as limited what can pay in, much of the bank is from a lump sum i received.
out of interest , as it got closer to retiring could we simply transfer the full fund to a lifestyle option 60% equity within the vanguard umbrella ? - ie sell it and move it to a different vanguard fund ?

Yes you certainly could do that if you wanted to and if it fits with your investment strategy that you want to stick with 60% equity fund.  As said above it also depends how you want to access the money - e.g. if you want to use it to buy an annuity at retirement, the answer might be different to if you want to draw it out slowly over the following 30 or more years.

i started my own thread pay so as not to derail this one , thanks advice BTW