Royal London Governed Portfolios Short Term and Long Term?

Spivo46

I am currently in the RL GP 4 pension fund which is a balanced/moderate long term investment. I plan to retire within months. Should i be in a short term investments such as GP6 balanced/moderate before moving to drawdown. GP4 returns are currently outperforming GP6 both short and long term. It appears that GP4 will have a lower proportion of funds invested in Equities and a greater proportion invested in Bonds. Is this simply a risk assessment / predicting bull vs bear markets in the near future? Any guidance please is appreciated. 

Linton

Are you planning to drawdown or buy an annuity?

If you are planning to buy an annuity then you will avoid any disruptions from equity crashes if you substantially derisk well before you plan to retire.

But if you are going into drawdown a substantial part of your pot wont be touched fo a decade or two.  In that case there is no advantage in derisking the whole pension as it could decrease the returns you need for matching inflation in the long term.  Just focus on say the first 5 years. Whch funds you choose in retirement depends on your drawdown strategy.

Dont try to predict the future, just take reasonable precautions against relatively inlikely but serious events that could happen at any time.

Spivo46

Linton said:

Are you planning to drawdown or buy an annuity?

If you are planning to buy an annuity then you will avoid any disruptions from equity crashes if you substantially derisk well before you plan to retire.

But if you are going into drawdown a substantial part of your pot wont be touched fo a decade or two.  In that case there is no advantage in derisking the whole pension as it could decrease the returns you need for matching inflation in the long term.  Just focus on say the first 5 years. Whch funds you choose in retirement depends on your drawdown strategy.

Dont try to predict the future, just take reasonable precautions against relatively unlikely but serious events that could happen at any time.

thanks Linton, that makes sense. I am 95% sure it will be all in to drawdown over 25 years (hopefully longer)!

dunstonh

Should i be in a short term investments such as GP6 balanced/moderate before moving to drawdown. 

The mixing of the RL GPs is for those that are using a bucketing investment strategy.  There is also the deposit facility within the RL pension as well for very short term money.

GP4 returns are currently outperforming GP6 both short and long term. 

That is looking backwards.  What will it be looking forwards?
Generically, in most periods, you would expect the one with the highest equity content to give the best long term performance but it will also have the worst short term performance in negative periods.    This is why it is generally not ideal for money being drawn out in the short to medium term.

If you are not going to use the bucketing strategy, then or the yield strategy (as RL only has ACC units), what is your chosen method going to be? - total return worked well from 2009 to 2021 but it didnt in the decade before and it may not in the decade ahead.     So, you need to have a think of how you are going to structure your investments.

 appears that GP4 will have a lower proportion of funds invested in Equities and a greater proportion invested in Bonds. Is this simply a risk assessment / predicting bull vs bear markets in the near future? Any guidance please is appreciated. 

Time can dilute risk.   If you not touching say 33% of your portfolio for at least 21+ years then you can afford to take more investment risk with it than the money you are taking out over 10-15 years or 5-10 years etc.   

you must not forget that the investment period from 2009 to 2021 was one of above normal growth.  You need to consider that is not the norm and be prepared for decades of little or no growth or even losses.   So, your assets should be structured for what could happen as you don't know what will happen.

Its not about predicting but more about preparing.

SVaz

Have you got enough in cash within the pension for say 2-3 years income?  

Does your pension fund pay income?  If it does, is it enough for a year’s spends?
Sorting out your short term plans is the most important thing.   

Spivo46

dunstonh said:

Should i be in a short term investments such as GP6 balanced/moderate before moving to drawdown. 

The mixing of the RL GPs is for those that are using a bucketing investment strategy.  There is also the deposit facility within the RL pension as well for very short term money.

GP4 returns are currently outperforming GP6 both short and long term. 

That is looking backwards.  What will it be looking forwards?
Generically, in most periods, you would expect the one with the highest equity content to give the best long term performance but it will also have the worst short term performance in negative periods.    This is why it is generally not ideal for money being drawn out in the short to medium term.

If you are not going to use the bucketing strategy, then or the yield strategy (as RL only has ACC units), what is your chosen method going to be? - total return worked well from 2009 to 2021 but it didnt in the decade before and it may not in the decade ahead.     So, you need to have a think of how you are going to structure your investments.

 appears that GP4 will have a lower proportion of funds invested in Equities and a greater proportion invested in Bonds. Is this simply a risk assessment / predicting bull vs bear markets in the near future? Any guidance please is appreciated. 

Time can dilute risk.   If you not touching say 33% of your portfolio for at least 21+ years then you can afford to take more investment risk with it than the money you are taking out over 10-15 years or 5-10 years etc.   

you must not forget that the investment period from 2009 to 2021 was one of above normal growth.  You need to consider that is not the norm and be prepared for decades of little or no growth or even losses.   So, your assets should be structured for what could happen as you don't know what will happen.

Its not about predicting but more about preparing.

Thanks Dunstonh - I have no fixed plans yet, i am trying to figure things out. Like most, i want to achieve growth inline or above inflation.  A bucketing strategy or dividing the investments sounds sensible. Preparing for any possible outcome sounds complicated. Today i have looked at fixed term annuities again. Seems like the cowards way out of gambling in the hope that things are clearer in 5 years. If i put 270k in for 5 years it will pay £1500 per month with a end to term payment of £250k