Safest Pension Fund?

jamesd

mexican_dave said:

"Money market funds", Reckon there is some volitity there! Not my cup of tea! Reckon you have to watch that day & night, and be quick to respond - that the world of professional investors, worried for you, unless your name is Warren Buffet!

Money market funds have volatility that closely approximates nil, far lower than even the tamest ordinary bond funds. The sort of thing you can put £100 in and come back to £110 a hundred years later, having never gone as low as £99.99.

Going below £100 is so rare that there's even a term for it, "breaking the buck". It's happened exactly twice in the US since they were introduced there in 1971:

1. In 1994 a fund fell to $96 due to derivatives
2. In 2008 a fund using Lehman Brothers had trouble determining a value when they became bankrupt

Except cash it doesn't get more stable than that.

jamesd

vienly said:

mexican_dave said:

"Money market funds", Reckon there is some volitity there! Not my cup of tea! Reckon you have to watch that day & night, and be quick to respond - that the world of professional investors, worried for you, unless your name is Warren Buffet!

I'll do my research before diving in, thanks!

Just ignore the post. Everything it contains except the poster metadata is wrong.

jamesd

vienly said:

3) Plan to use drawdown, hoping to balance it so the pot will last me 25 years. (also will have savings on the side)

Drawdown: safe withdrawal rates has an introduction to the research into how much you can take while still surviving a repeat of the worst that the last 125 or so years delivered investors.

MallyGirl

mexican_dave said:

"Money market funds", Reckon there is some volitity there! Not my cup of tea! Reckon you have to watch that day & night, and be quick to respond - that the world of professional investors, worried for you, unless your name is Warren Buffet!

I think you might be thinking this is about foreign currency trading? It is something else entirely 

vienly

NlghtOwl said:

An important point to remember is that unless you’re buying an annuity you don’t need all your money at the point of retirement. You need some 2 yr money, some 5 yr money etc and some you won’t need for 10,20 or 30 years. You can therefore take different approach to risk for each of these ‘buckets’. If you invest in low risk assets in the last 2 - 4 years, you may not need to derisk you current investments at all. I would still consider a little more diversification of assets though as well as a us fund. Good luck 

Thanks, that is a good way of managing the pot, splitting it into seperate years.
Completely forgot Standard Life lets me have 12 different funds.
Think I will take that approach

jamesd

SL also have a pretty decent fund range, good enough that I've only been moving money out for drawdown. Though I do have a substantial charges discount via work 

JohnWinder

You sound engaged enough in financial retirement planning for it to be worth a little effort to put you in the box seat.
Your investment choices don’t seem terrible, and some good observations have already been made. But you could improve your understanding a lot by reading Tim Hale’s book Smarter Investing. Get it from your library, even an older edition is good value.

Secondly, to pick up some issues you raised…

I recently moved it to from 'Sustainable Multi Asset (PP) Pension Fund' to 'SL Vanguard US Equity Pension Fund’’

That’s not a hanging crime, but if you did it for the wrong reasons it would be bad enough. The wrong reasons would include ‘recency bias’ and ‘performance chasing’. The former is about being unduly influenced by something recent, like US stock returns, at the expense of other valuable information, like non-US stocks outperformed US stocks from 1999-2013 to the extent of giving an investor a 10% difference in their investment result in that period. You can back-test it at portfoliovisualizer.

In the same vein, it's only the last few years thanks to Apple etc than the SP500 index has out-returned the total US stock market.

And the latter, performance chasing, is changing investments into an asset that did better recently. Here’s a handful of reasons why you shouldn’t, but you could think of some counter arguments I suppose:

https://behaviouralinvestment.com/2023/10/10/the-paradox-of-past-performance/

‘I do plan to move it to a world tracker if it eventually outpaces the S&P500’

Yes, it’s good to have a written plan for your investing (as long as you can find it, lost on the internet when you need it), but as written there it’s not actionable since you don’t indicate the quantity or quality of ‘outpace’ or when you’ll ‘move it’. It might include your clear 'rule' of how you'll act, clear enough that others could apply it, lest you fall victim to some behavioural error. And do be careful of performance chasing.
You may not yet be at the stage of evaluating SL’s fees yet, but after reading something like Hale you ought to consider fees.