pension

dannybbb

i realise there is no crystal ball  but  i wonder with pensions (specifically as a self employed person with a sipp  invested in 2 hsbc global funds) would there ever be an event where you decide to move your investments to something more stable. Im reading too much about how the stock market is overvalued as well as all the instability in the world.

I get that  the idea is just invest and forget about it bit as someone with next to no experience I just wanted to hear if there are any circumstances that would make you switch out your investements for something with less risk? Guess my concern comes from putting  quite a lot of cash in over the last 9 months (55k) and at 50 not a huge amount of time for things to recover if things tank

im invested in my pension more for the tax benefitsmore than an expectation of a big growth in value providing it is in line with inflation. would i be better with bonds / gilts? 

MallyGirl

Unless you intend to use every penny the day you retire- buying an annuity - then much of it should remain invested with time to recover

Marcon

dannybbb said:

i realise there is no crystal ball  but  i wonder with pensions (specifically as a self employed person with a sipp  invested in 2 hsbc global funds) would there ever be an event where you decide to move your investments to something more stable. Im reading too much about how the stock market is overvalued as well as all the instability in the world.

I get that  the idea is just invest and forget about it bit as someone with next to no experience I just wanted to hear if there are any circumstances that would make you switch out your investements for something with less risk? Guess my concern comes from putting  quite a lot of cash in over the last 9 months (55k) and at 50 not a huge amount of time for things to recover if things tank

im invested in my pension more for the tax benefitsmore than an expectation of a big growth in value providing it is in line with inflation. would i be better with bonds / gilts? 

The earliest you can access your funds (unless seriously ill) will be 57, so at least 7 years to go - and decades longer than that unless you intend to use the whole lot to buy an annuity when you hit 57?

Perhaps a free appointment with https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise would help you to get a better understanding of the basics/your options?

dannybbb

actually im not 50 until march but that looks like a good idea when i get there

Albermarle

dannybbb said:

i realise there is no crystal ball  but  i wonder with pensions (specifically as a self employed person with a sipp  invested in 2 hsbc global funds) would there ever be an event where you decide to move your investments to something more stable. Im reading too much about how the stock market is overvalued as well as all the instability in the world.

I get that  the idea is just invest and forget about it bit as someone with next to no experience I just wanted to hear if there are any circumstances that would make you switch out your investements for something with less risk? Guess my concern comes from putting  quite a lot of cash in over the last 9 months (55k) and at 50 not a huge amount of time for things to recover if things tank

im invested in my pension more for the tax benefitsmore than an expectation of a big growth in value providing it is in line with inflation. would i be better with bonds / gilts? 

If you mean you are invested in the HSBC global strategy funds then they are already a mixture of equities and bonds. The % of each will depend on which ones you have chosen.

If you were 100% in equities and getting a bit nervous, then it would not be so unusual to reduce the 100% down as you get older, but not too far.

Roger175

I think this is very much a case of personal circumstances. If you have some DB provision and aren't going to be so heavily dependant on the performance of your DC pension, then it probably isn't such a concern. It also depends where you are in terms of your retirement journey, ie how close to retirement you are and what the effect of a market crash/heavy correction would be to you at that point in time.

I'm recently retired at age 60 and feel I have accumulated a large enough pot to be comfortable, however, I am quite concerned that a crash in the next few years could easily change this - this is what's known as a sequence of returns risk. My wife (age 61) has DB pensions paying around 9k per year and we will both be eligible for full state pensions in 6/7 years time, so it is this next 6/7 years where we are most exposed to any sudden drops.

For this reason I have sold a few relatively minor holdings which were 100% S&P500 and about 60% of my global equity funds which are approx 65% USA invested (much in S&P500) and have instead put this money into short term money market funds. These are paying around 5% which I fully accept is probably far less that the potential return on the other funds, but equally unlikely to leave me fretting if there is a sizable correction any time soon. Like I say I have sufficient, I just can't risk loosing a large lump early into retirement. I am still invested in Global equities, but I have just reduced my exposure. I also have a reasonably large selection (well over £200k) of high yield shares (mostly FTSE100 companies) and although those would also be exposed to a correction, I hold these as part of a separate high yield portfolio, designed to generate income, so capital value is not as critical, as I would probably never sell these in any case. 

I probably wouldn't be so worried at age 50, but then you don't say when you would like to retire.

dannybbb

thanks for the replies. i have 50k in hsbc global  balanced and 25k in dynamic which have both been fine but not significantly over what i would get with cash but with what is beginning to feel like a risk

ersonal circumstances. ...I have a rental property that pays around £850 pm and 250K in a cash isa and around 500k in various cash savings paying around 4.8%. plus the 75k in the sipp and around 140k in the business which i guess i can continue to draw and / add to the sipp  even if work becomes thin on the ground. Im self employed in a business that has been going well but has limited scope , i think ill be able to work for the next 5 years or so but in more of a way that covers my expenses than aking savings as i hev been doing  so perhaps retiring at 55 if things go the way they seem to be going.

It just seems that a crash is likely from what i read and even if not ,cash is paying best part of 5% -my instinct as a new investor is why not put it in less risky investment  as it seems unneccesary at this point. Is it possible to sell within the sipp and keep it as cash  there for the time being. Bottom line i suppose if that if it grew at  3-5% as per cash i wouldnt be dissapointed but if i lost 50% i would     Or do you think the funds i have are low enough risk anyway?

dannybbb

@Albermarle so you would only consider age and proximity to retirement and no other external forces. in my naivity i think have less risk while interest rates are good to mitigate the much discussed crash. worst that can happen in that case is im a few % down, and retain the tax benefits -   worst case if i stay in the hsbc funds is i could lose a huge amount that could take years to recover. so its more that the rewards seem fairly similar but dont seem to match the risks with the background of a suspected crash.
Within a sipp, what would be a good less risky alternative, just a notch down on the hsbc funds or cash or something else? and are there costs involved if i sold?

thanks in advance

AlanP_2

So in round numbers your asset allocation is:

£50k Equities
£25k Bonds
£890k Cash

Or in percentage terms 5.2% Equities, 2.6% Bonds and 92.2% Cash

Plus a BTL property.


Too my mind the biggest risks you face are a housing market crash and inflation chewing up the real value of your cash.


If your equities fell by 90% would you actually even really notice any impact?

dannybbb

@AlanP_2 thanks for taking the time to reply and do the maths

if theres a housing crash i wont notice particularly as i see it as a source of income (at the moment im not spending it but  I dont intend to sell it)

I have definitely suffered form the effects of inflation  in the past but as of not savings are higher than inflation , i think thats my concern in a way that i have left investing late and then put a lot in at a time when there are increased risks of a crash. If 50k went to 5k it would have an impact of course, especally if it took the rest of the time i have to return to 50. I know  its probably muddled thinking but  as i said before what are the rewards of staying in stocks - slightly higher return vs  the risk of losing most of it

Bostonerimus1

AlanP_2 said:

So in round numbers your asset allocation is:

£50k Equities
£25k Bonds
£890k Cash

Or in percentage terms 5.2% Equities, 2.6% Bonds and 92.2% Cash

Plus a BTL property.


Too my mind the biggest risks you face are a housing market crash and inflation chewing up the real value of your cash.


If your equities fell by 90% would you actually even really notice any impact?

This isn't an asset allocation I'd recommend for someone starting out as its far too defensive. But for someone in sight of retirement there's an argument for it when you are getting 4% or 5% on your cash as it's acting a lot like an annuity. Of course knowing that such an asset allocation along with the BTL can generate sufficient income is critical. The biggest dangers are house price collapse and inflation.