Private Pension Lifestyling investments - the next scandal?

Pat38493

Mick70 said:

Pat38493 said:

Mick70 said:

just had a look at my DC pension 
it is Royal London - "Retirement Solutions Group Personal Pension Plan"  , we didnt really get any say was just told by the MD we were in it .  I have noticed it quotes a retirement date (65th birthday) - is it best I let them know I plan on retiring well before that age ?  it states that that the portfolio changes as i approach retirement age - is that normal , or a red flag ?

That's kind of what this whole thread is supposed to be about.   What that means is that you are in a life styling approach.

You need to know how many years before retirement they will move you more into bonds.  If you set your retirement age to an earlier year, it will trigger that change earlier.  I have deliberately left mine at 65 even though I plan to retire earlier as I don't want it to change and I am actually now in the process of transferring the fund to a non life style option.

Beyond that it depends on your intentions at retirement (drawdown vs annuity etc) and whether you think it's a good idea to go heavy into bonds at retirement - different opinions exist on that but most IFAs in the UK I think would veer towards move you into bonds at least to some extent at retirement, albeit maybe at a lesser rate than some life style funds.

FWIW I was listening to the meaningful money podcast recently and one of the advice points they gave was "switch off life styling on your investments" and take control of what it's doing yourself.

Mine has retirement age of 65 (2035) and I plan to retire about 2027, so no need to panic yet ? I had been going to contact them about the retirement date to say it was too old but will leave it now. Unsure if I should contact royal London about it though .  

Are they able to switch it somehow ?

You would need to ask them
a) How many years before the set retirement age will the investments start being de-risked
b) What are the other options that you can change your fund to?
c) How do you switch off the life style option if you want to do that.

It may be that you can get access to an online platform where you can manage this stuff yourself - it depends on what your provider allows and supports.

zagfles

OldScientist said:

zagfles said:

OldScientist said:

Hopefully some food for thought on considering annuities...

Life expectancy (LE), the age for which there is a probability of 25% or 10% of reaching, and the probability of reaching 100yo is (data from https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07 )

Age    LE   25%  10%   100

M55   84    92      97     3.8%

M65   85    92      96     2.9%

F55    87    94      99     6.6%

F65    87    94      98     5.3%

MF55                          10.1%

MF65                            8.0%

Off on a bit of a tangent here but I was puzzled by 65 year olds having an apparently lower chance of reaching 100 than 55 year olds, doesn't really make sense, LE at 65 should be higher than 55 since some people will die between those ages. But a bit of playing with the figures suggests they are assuming big increases in life expectancy for younger people, it seems a 15 year old boy has a 10.5% chance of reaching 100 and a 15 year old girl 15.3%!

So not only are they assuming a big increase in LE in the future but also that the gender LE gap will remain significant.

Seems odd doesn't it - but the ONS are assuming increases in longevity for younger generations (in the same way that current 65 year olds are projected to live longer than those who were 65 years old 30 years ago). However, the projected improvement in longevity has been revised downwards over the last decade or so (and there are some areas in the UK where life expectancy is now declining).

Which is what surprised me - life expectancy has been declining wordwide in the past decade and the UK is no exception, the % decline in the UK is bang in line with this trend, so not sure why they're assuming such big increases in LE in the future.

https://en.wikipedia.org/wiki/List_of_European_countries_by_life_expectancy

warrenb

Something has crossed my mind. Buying bonds now may well pay off in the middle distance future. Yields are currently high but prices are low, this means in the future when rate do decline (hopefully) not only did you purchase when yield was high, but these bonds will become very attractive and the prices will also rise.

Linton

warrenb said:

Something has crossed my mind. Buying bonds now may well pay off in the middle distance future. Yields are currently high but prices are low, this means in the future when rate do decline (hopefully) not only did you purchase when yield was high, but these bonds will become very attractive and the prices will also rise.

Yes, but you buy bonds for security.  Therefore it makes sense to hold to maturity so volatility in price doesnt matter,

If you are a long term bond investor you get no advantage from bonds increasing in price when interest rates fall.  If you sold your old bonds and bought new bonds (you are a long term bond investor) you should find that the gain from increased capital value matched the loss from lower interest rates, again assuming you hold to maturity.

If you are hoping to trade bonds to make a quick killing I suggest you would be better off doing it with equity.