Creating the short term bucket

JDK1971

I am around 3 or so years away from retirement.  I have paid into company pension schemes for years and have a modest DB scheme plus a DC pot which is nearly enough to fund my retirement.

I have actively managed my DC pot and I am happy with my funds and their performance, but everything is in equities.  Given that I’ve got around 3 years left to contribute (at circa £40k per annum) I now think I should turn my attention to building up my short term bucket to give me a buffer against sequence of returns risk.

The problem is that the funds available through the Standard Life scheme (which is where my contributions are paid into) are limited if you look at their very low risk options. What advice would others offer for the creation of the short term bucket?  Would you go for cash, bonds or more defensive stocks?  It’s ironic that I seem more comfortable buying index equity funds than other instruments.

Thanks for any advice.

Linton

For the short term (up to 5 years) we keep a large amount of cash in our current accounts and we also each have near to maxed out PBs to add a bit of excitement in our old age.  I have no interest (pun) in making gains from the cash.

Our short term buffer is not something just used during a crash.  All income from income funds, SP and annuities goes into the buffer and all expenditure comes from the buffer so there are no difficult timing decisions to be made. The short term buffer is large enough  to buy whatever we want (eg major holidays) with immediately available cash   So no need to save up or worry about what investments to sell.

For the medium term (5-10 years)  there is about the same amount of money again in Wealth Preservation Funds with an aim of matching inflation.  These were useful when interest rates were very low but I would probably now choose short dated gilts.

The long term growth bucket is 100% equity as it is managed to meet a 10 year+ outlook with no continuous drawdown. Crashes can come and go without causing sleepless nights..  Our monies are near to being 60/40 equity/non-equity overall but the two sides are managed very differently.

Moonwolf

I’m with Standard Life.  I’ve been with all equities so far because in general I am not terrified of running out as long as the DC lasts the bridging period until I am 67 and I am getting all my DBs and the state pension.

However, I have adjusted my fund choice so I now have 15% in their Sustainable Multi Asset Pre Retirement fund. 

My feeling is, if the US brings in trade tariffs it will be inflationary and we will get more volatility, this is just to take the edge off.  I have about £50k in ISAs and short term savings as well.

Sarahspangles

JDK1971 said:

I am around 3 or so years away from retirement.  I have paid into company pension schemes for years and have a modest DB scheme plus a DC pot which is nearly enough to fund my retirement.

I have actively managed my DC pot and I am happy with my funds and their performance, but everything is in equities.  Given that I’ve got around 3 years left to contribute (at circa £40k per annum) I now think I should turn my attention to building up my short term bucket to give me a buffer against sequence of returns risk.

The problem is that the funds available through the Standard Life scheme (which is where my contributions are paid into) are limited if you look at their very low risk options. What advice would others offer for the creation of the short term bucket?  Would you go for cash, bonds or more defensive stocks?  It’s ironic that I seem more comfortable buying index equity funds than other instruments.

Thanks for any advice.

I am retiring in Spring. I have my planned pension income for 2025/26 in a short-term money market fund in my SIPP.  My actual cash flow plan is to use maturing regular savers as income, and then replenish the account that feeds them with SIPP flexi-access drawdown later in the year. That way I will make full use of my personal allowance and savings allowance. I can decide how to fund 2026/27 in Spring 25, possibly by moving another tranche into a STMM fund for up to 18 months. I also have ISAs and Premium Bonds as a buffer.

If I had a longer lead time before my Defined Benefit pensions start in three years’ time, I think I would need a more sophisticated plan.