So What Should I do

Robert_Sterling_3

growth of 7% pa

Could you run it through again please but with 0% growth.

dunstonh

Could you run it through again please but with 0% growth.

And why do that for someone in their 30s?

Although nothing is impossible, it is highly improbable that they would get an average 0% return for 30 years.

Robert_Sterling_3

And why do that for someone in their 30s?  
Although nothing is impossible, it is highly improbable that they would get an average 0% return for 30 years.

Enter Bob Dylan singing "When will they ever learn...."

The past is not necessarily a guide to the future?

deemy2004

The problem I see is,

More and more people are retiring, drawing down on their pension fund assets. And the rate of drawdown is likely to double during the next 20 years.

Then how can the value of the asset grow ?

I just cannot see, how with decreasing inflows and increasing outflows the value of assets such as shares will grow in real-terms in the long-run. As the pensioner population is likely to double over the next 20 years.

There needs to be the money going into the funds in ever increasing amounts, year on year, coupled with a strong economy for the value of the assets to grow.

Pal

Agreed. The increasing outflows from pension funds is likely to depress equity prices, but whether they will actually fall depends on the inflow of investments as well. If you are worried about that, then perhaps you should consider investing your pension in property, bonds, cash etc instead, although obviously the same issues apply to all investments. Lots of people with big houses will be attempting to sell them to release equity in 20/30 years time...

In the end we are all gambling on future economic conditions which are a total unknown. While equities may fall or stay the same over the long term, cash is likely to fall in value due to inflation. Who is to say that inflation will not average 10% over the next 30 years? How will that impact a cash ISA earning interest lower than inflation? At least equities should keep pace with inflation over the long term, if you believe that inflation means companies can charge higher prices equals higher profits, higher dividends and so higher stock prices.

But who knows? All we can do is attempt to manage our finances according to how the world currently appears to work.

deemy2004

Theres always the 4 1/4% 2036 index linked gov stock, put that in an ISA or if you prefer 'pension wrapper' and you have have it as safe as you possibly can have it be.

Growth plus inflation indexing.

Pal

I don't know anything about that particular bond, but how would it grow in value? Assuming you are talking about its resale value, couldn't it's value still fall. Assuming you buy it at issue and hold it to maturity you get 4.25% a year. What if inflation exceeds 4.25% in the future? How is it index linked?

Wouldn't an index linked Gilt be a better bet?

deemy2004

Jesus Christ !

4 1/4% 2036 index linked gov stock IS an index linked gilt !

Pal

4.25% sounds like a fixed interest Gilt to me.

dunstonh

There is a 4 1/8 index linked treasury stock 2030 that was issued 12th June 1992. I cant see a 4 1/4 index linked but there are a few 4 1/4 convential gilts though, one of which expies 2036.

It may come as no surprise to those that know, that you would face a capital loss on that index linked gilt if held to the 2030 maturity date as it is currently priced at 208.1

On the convential gilt, you would have a small capital gain as its priced 96.0