Current state of the pension market.

Pat38493

Callum_J said:

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.

This works if the lifestyling has not been actioned yet - however if you were already de-risked into safer funds automatically by the lifestyling approach, I don't think that changing the scheduled retirement date would reverse the situation and re-invest you back into more equities - i.e. it might be too late.

Hoenir

handful said:

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!)

The USA itself only accounts for 20% of global trade. Less than China. 

As far as the entire UK stock market is concerned in 2020 the rough split of revenue generation was 23% from the US in 2020, 17% from emerging Asia, and 12% from the eurozone. Less than 50% was domestic. 

By comparison only 40% of the revenue the S&P 500 companies is generated outside of the US. 

Albermarle

handful said:

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!)

On your first point all stock markets are affected by global events. The second point is valid and many investors have reduced their US exposure, but not necessarily in favour of more UK.
Returns from the US for UK investors are also affected by the exchange rate.

Callum_J

QrizB said:

Callum_J said:

Hi, yes, should be VLS 20. I was recommended them by my financial advisor.

Do you remember why they recommended those two funds? They're very cautious, the sort of thing you might choose if you're planning to buy an annuity?

VLS 60 or 80 would be more likely recommendations if you were still expecting to see growth.

I think he probably recommended them because of my age and relatively close to retiring age; though I won’t be retiring anytime soon.
Maybe in that case, I may be better in VLS 60 p or 80?

Hoenir

Callum_J said:

QrizB said:

Callum_J said:

Hi, yes, should be VLS 20. I was recommended them by my financial advisor.

Do you remember why they recommended those two funds? They're very cautious, the sort of thing you might choose if you're planning to buy an annuity?

VLS 60 or 80 would be more likely recommendations if you were still expecting to see growth.

I think he probably recommended them because of my age and relatively close to retiring age; though I won’t be retiring anytime soon.
Maybe in that case, I may be better in VLS 60 p or 80?

Generally speaking investing in equities should be viewed with a 10 year time frame in mind.  As was mentioned earlier in the thread. Government Bonds perform a purpose as retirement approaches. Rising interest rates immediately impact the value of bonds( i.e. they fall). On the positive side annuity rates rise so your smaller pot buys more income. Not exciting but at least defensive. 

What is being overlooked at the moment. Is that the real economy takes time to feel the impact of higher interest rates. From the announcement of a rise to a visible effect. Bank of England itself suggests an 18 month lag. Never wise to act in a knee jerk way. Allow the fog to start to clear first. As when equity markets do move it's akin to a landslip. Gone without warning. 

Callum_J

Hoenir said:

Callum_J said:

QrizB said:

Callum_J said:

Hi, yes, should be VLS 20. I was recommended them by my financial advisor.

Do you remember why they recommended those two funds? They're very cautious, the sort of thing you might choose if you're planning to buy an annuity?

VLS 60 or 80 would be more likely recommendations if you were still expecting to see growth.

I think he probably recommended them because of my age and relatively close to retiring age; though I won’t be retiring anytime soon.
Maybe in that case, I may be better in VLS 60 p or 80?

Generally speaking investing in equities should be viewed with a 10 year time frame in mind.  As was mentioned earlier in the thread. Government Bonds perform a purpose as retirement approaches. Rising interest rates immediately impact the value of bonds( i.e. they fall). On the positive side annuity rates rise so your smaller pot buys more income. Not exciting but at least defensive. 

What is being overlooked at the moment. Is that the real economy takes time to feel the impact of higher interest rates. From the announcement of a rise to a visible effect. Bank of England itself suggests an 18 month lag. Never wise to act in a knee jerk way. Allow the fog to start to clear first. As when equity markets do move it's akin to a landslip. Gone without warning. 

Thanks, that’s informative, I’ll bear that in mind.

Cus

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.

If the bond market was at a value of 10, then dropped to 5, people say this is good if you are in accumulation as you can buy more units. But mathematically isn't it the same chance of the value going from 5 to 10, as it is going from 10 to 20? Why would past performance make any difference to future performance?