Current state of the pension market.

Callum_J

JohnWinder said:

hopefully the Bonds markets will recover over the next few months.

No, if you're still contributing to your retirement savings you want the bond market to stay as un-recovered as possible, preferably drop a long way, so that your contributions will buy you more bonds at the lower prices. Then, when you're drawing from your retirement accounts will be a good time for the bond market to recover. It's in the book.

Thats interesting, I do have a lot to learn.

Pat38493

Callum_J said:

Thanks JohnWinder, I’ll have a look at that book.

Thanks too Penners, hopefully the Bonds markets will recover over the next few months.

My works pension is with Royal London; and I seem to be in a lifestyling scheme. I take it this is the default option when you are over 60, and theoretically near retirement? 

I am 61, but won’t be retiring for a good few years yet. I believe this is a low growth option? Would my funds be better shifted into something with slightly more risk, and hopefully better growth?

Unless you are planning to take an annuity when you retire, then yes I would think that you should take a look at how your fund is currently invested - being invested mostly in bonds is usually not really a good plan unless you are planning to buy an annuity, as you will want at least some of your money to continue growing for many years even after you are retired.

Unfortunately the bond markets are not likely to recover quickly - as far as I understand, bonds have suffered a kind of big correction in the last 2 years due to the economies coming out of the post 2008 crash and covid shocks and interest rates starting to go up, then going up much quicker than expected.  Experts now think that bonds will start to behave as they are normally supposed to which is modest annual growth without a lot of volatility.  Unfortunately you got unlucky if your pension was lifestyled at the exact time this was all going on (unless you want to buy an annuity as the cost of annuities tend to go down when bond prices goes down).

Callum_J

Pat38493 said:

Callum_J said:

Thanks JohnWinder, I’ll have a look at that book.

Thanks too Penners, hopefully the Bonds markets will recover over the next few months.

My works pension is with Royal London; and I seem to be in a lifestyling scheme. I take it this is the default option when you are over 60, and theoretically near retirement? 

I am 61, but won’t be retiring for a good few years yet. I believe this is a low growth option? Would my funds be better shifted into something with slightly more risk, and hopefully better growth?

Unless you are planning to take an annuity when you retire, then yes I would think that you should take a look at how your fund is currently invested - being invested mostly in bonds is usually not really a good plan unless you are planning to buy an annuity, as you will want at least some of your money to continue growing for many years even after you are retired.

Unfortunately the bond markets are not likely to recover quickly - as far as I understand, bonds have suffered a kind of big correction in the last 2 years due to the economies coming out of the post 2008 crash and covid shocks and interest rates starting to go up, then going up much quicker than expected.  Experts now think that bonds will start to behave as they are normally supposed to which is modest annual growth without a lot of volatility.  Unfortunately you got unlucky if your pension was lifestyled at the exact time this was all going on (unless you want to buy an annuity as the cost of annuities tend to go down when bond prices goes down).

That’s really interesting to know. I think I’ll have to phone Royal London and see what other options I have.

Incedentally, are Vanguard Life Strategy 20% and 40% lifestyling type funds. Are they just too cautious for for me at present, and are they geared towards people buying an annuity?

Pat38493

Callum_J said:

Pat38493 said:

Callum_J said:

Thanks JohnWinder, I’ll have a look at that book.

Thanks too Penners, hopefully the Bonds markets will recover over the next few months.

My works pension is with Royal London; and I seem to be in a lifestyling scheme. I take it this is the default option when you are over 60, and theoretically near retirement? 

I am 61, but won’t be retiring for a good few years yet. I believe this is a low growth option? Would my funds be better shifted into something with slightly more risk, and hopefully better growth?

Unless you are planning to take an annuity when you retire, then yes I would think that you should take a look at how your fund is currently invested - being invested mostly in bonds is usually not really a good plan unless you are planning to buy an annuity, as you will want at least some of your money to continue growing for many years even after you are retired.

Unfortunately the bond markets are not likely to recover quickly - as far as I understand, bonds have suffered a kind of big correction in the last 2 years due to the economies coming out of the post 2008 crash and covid shocks and interest rates starting to go up, then going up much quicker than expected.  Experts now think that bonds will start to behave as they are normally supposed to which is modest annual growth without a lot of volatility.  Unfortunately you got unlucky if your pension was lifestyled at the exact time this was all going on (unless you want to buy an annuity as the cost of annuities tend to go down when bond prices goes down).

That’s really interesting to know. I think I’ll have to phone Royal London and see what other options I have.

Incedentally, are Vanguard Life Strategy 20% and 40% lifestyling type funds. Are they just too cautious for for me at present, and are they geared towards people buying an annuity?

Keep in mind that Royal London are your pension provider, not your adviser.  As such, they will tell you factually what are your options, but they won't tell you which one is best.  They won't even tell you if you do something completely crazy, other than making you sign a lot of forms stating that you know what you are doing.

Also they won't advise you on what investments to pick inside your pension pot other than with some very generic information.

If you want to find out more about this, it's often recommended on these boards to read the book about it by Tim Hale - Smarter Investing as it's a good kind of beginners primer to all these investment topics.

Vanguard life strategy funds are not lifestyling.

Lifestyling normally means that your pensions will be moved into lower risk investments x years before your planned retirement date.  You would have to look at your Royal London investments and pension arrangements or ask them what the lifestyling approach is.

On the other hand, Vanguard life strategy funds (confusingly named perhaps) don't change the mix over time - they are a mixed fund with x% bonds and y% equities which is rebalanced regularly to the same % of each.  You can get other versions of these multi asset type funds on lots of other fund providers and platforms. 

Also, I've seen it mentioned on here that Vanguard's life strategy funds are biased towards UK investments - i.e. they have a larger portion of UK investments than the overall global market.  This may or may not be in line with your wishes, but for what it's worth, UK markets has performed less well than many other global markets in the last 10 years (which does not mean the same situation will continue).

Also - probably this is obvious but don't make hasty choices to change your investments before you know what you are doing and why - it's a long term game.  Ask for further comments on here or get an adviser if necessary.

handful

Pat38493 said:

Also, I've seen it mentioned on here that Vanguard's life strategy funds are biased towards UK investments - i.e. they have a larger portion of UK investments than the overall global market.  This may or may not be in line with your wishes, but for what it's worth, UK markets has performed less well than many other global markets in the last 10 years (which does not mean the same situation will continue).

I was actually quite surprised to discover there is more US/Global exposure than I expected after hearing this being quoted numerous times by different people.

Here are details of the current allocation for Lifestrategy 80% Equity

Vanguard U.S. Equity Index Fund GBP Acc	19.5%
Vanguard FTSE Developed World ex-U.K. Equity Index Fund GBP Acc	19.2%
Vanguard FTSE U.K. All Share Index Unit Trust GBP Acc	19.0%
Vanguard Global Bond Index Fund GBP Hedged Acc	14.2%
Vanguard Emerging Markets Stock Index Fund GBP Acc	6.2%
Vanguard S&P 500 UCITS ETF (USD) Accumulating	6.1%
Vanguard FTSE Developed Europe ex-U.K. Equity Index Fund GBP Acc	5.0%
Vanguard U.K. Government Bond Index Fund GBP Acc	2.8%
Vanguard Japan Stock Index Fund GBP Acc	2.6%

Pat38493

handful said:

Pat38493 said:

Also, I've seen it mentioned on here that Vanguard's life strategy funds are biased towards UK investments - i.e. they have a larger portion of UK investments than the overall global market.  This may or may not be in line with your wishes, but for what it's worth, UK markets has performed less well than many other global markets in the last 10 years (which does not mean the same situation will continue).

I was actually quite surprised to discover there is more US/Global exposure than I expected after hearing this being quoted numerous times by different people.

Here are details of the current allocation for Lifestrategy 80% Equity

Vanguard U.S. Equity Index Fund GBP Acc	19.5%
Vanguard FTSE Developed World ex-U.K. Equity Index Fund GBP Acc	19.2%
Vanguard FTSE U.K. All Share Index Unit Trust GBP Acc	19.0%
Vanguard Global Bond Index Fund GBP Hedged Acc	14.2%
Vanguard Emerging Markets Stock Index Fund GBP Acc	6.2%
Vanguard S&P 500 UCITS ETF (USD) Accumulating	6.1%
Vanguard FTSE Developed Europe ex-U.K. Equity Index Fund GBP Acc	5.0%
Vanguard U.K. Government Bond Index Fund GBP Acc	2.8%
Vanguard Japan Stock Index Fund GBP Acc	2.6%

Yes, but I think the point is that the UK is not 19% of the global markets so there is a bias towards UK.

LHW99

A quick way of reducing the effect of lifestyling while you think about things is to increase the age that the pension co has as your retirement date. Putting it up to 70, or even 75 would likely delay lifestyling, until you have made a decision on what to do fundwise. You should be able to do that online.

Albermarle

handful said:

Pat38493 said:

Also, I've seen it mentioned on here that Vanguard's life strategy funds are biased towards UK investments - i.e. they have a larger portion of UK investments than the overall global market.  This may or may not be in line with your wishes, but for what it's worth, UK markets has performed less well than many other global markets in the last 10 years (which does not mean the same situation will continue).

I was actually quite surprised to discover there is more US/Global exposure than I expected after hearing this being quoted numerous times by different people.

Here are details of the current allocation for Lifestrategy 80% Equity

Vanguard U.S. Equity Index Fund GBP Acc	19.5%
Vanguard FTSE Developed World ex-U.K. Equity Index Fund GBP Acc	19.2%
Vanguard FTSE U.K. All Share Index Unit Trust GBP Acc	19.0%
Vanguard Global Bond Index Fund GBP Hedged Acc	14.2%
Vanguard Emerging Markets Stock Index Fund GBP Acc	6.2%
Vanguard S&P 500 UCITS ETF (USD) Accumulating	6.1%
Vanguard FTSE Developed Europe ex-U.K. Equity Index Fund GBP Acc	5.0%
Vanguard U.K. Government Bond Index Fund GBP Acc	2.8%
Vanguard Japan Stock Index Fund GBP Acc	2.6%

The US financial markets account for 60 to 65% of the global total.

handful

Pat38493 said:

handful said:

Pat38493 said:

Also, I've seen it mentioned on here that Vanguard's life strategy funds are biased towards UK investments - i.e. they have a larger portion of UK investments than the overall global market.  This may or may not be in line with your wishes, but for what it's worth, UK markets has performed less well than many other global markets in the last 10 years (which does not mean the same situation will continue).

I was actually quite surprised to discover there is more US/Global exposure than I expected after hearing this being quoted numerous times by different people.

Here are details of the current allocation for Lifestrategy 80% Equity

Vanguard U.S. Equity Index Fund GBP Acc	19.5%
Vanguard FTSE Developed World ex-U.K. Equity Index Fund GBP Acc	19.2%
Vanguard FTSE U.K. All Share Index Unit Trust GBP Acc	19.0%
Vanguard Global Bond Index Fund GBP Hedged Acc	14.2%
Vanguard Emerging Markets Stock Index Fund GBP Acc	6.2%
Vanguard S&P 500 UCITS ETF (USD) Accumulating	6.1%
Vanguard FTSE Developed Europe ex-U.K. Equity Index Fund GBP Acc	5.0%
Vanguard U.K. Government Bond Index Fund GBP Acc	2.8%
Vanguard Japan Stock Index Fund GBP Acc	2.6%

Yes, but I think the point is that the UK is not 19% of the global markets so there is a bias towards UK.

Agreed, just making the point that the fund is affected more by global events than it would appear based on the UK bias spoken about. So if someone was expecting a US market correction anytime soon they would have to consider whether this may be too heavily weighted toward the US. (I hold some of this myself so am not in that camp!)

Callum_J

LHW99 said:

A quick way of reducing the effect of lifestyling while you think about things is to increase the age that the pension co has as your retirement date. Putting it up to 70, or even 75 would likely delay lifestyling, until you have made a decision on what to do fundwise. You should be able to do that online.

That sounds like a good idea.