Five Years On From COVID - Pension Review

SteveBLFC64

Hi All,

It's just coming up to five years since our first UK lockdown, together with the plummeting share prices at that time - just wondering what everyone's take on it is with respect to their retirement planning/portfolio allocation:-

• Were any sufficiently aware to see the signs of it coming, and take any precautions in advance?
• Did any take any action they subsequently regretted, eg. attempt to move to less volatile investments, but perhaps did it too late?
• Were some sufficiently confident in what they already were doling, and just left their investments as they were with perhaps just small adjustments - presumably these were the 'winners' in that they then saw their investments start to grow again, regaining and then increasing beyond pre-COVID levels
• Has living through that experience helped to go through the other minor market shocks we've subsequently had, and made us tend to panic and stress over our pension funds a little less?
• Has it impacted your portfolio allocation and strategy?

Personally, at the time I was 56 and only really starting to put my portfolio together properly (still looking at the nominal retirement age of 65 - I'm 'old school' , and still reasonably happy in my work ), as in consolidating them and deciding on allocation - I didn't make any drastic changes in what I was doling, and was glad to see my pension recover in the main, apart from a couple of Chinese-related funds which tanked, but that was really post-COVID, so perhaps not relevant to this.

And I do realise that everyone's circumstances are different: age, employment, whether pension self-invested or through an advisor, planned retirement age, etc.

Thanks in advance,

Steve

crv1963

Hi Steve

I actually took my DB Pension at the same time as Covid hit, it was entirely coincidental. Then I return back to the workforce as I was/ am healthcare staff. I then opened a SIPP as well as my employer NEST pension as I was paying a lot of tax. I simply chose Vanguard 60% equities fund for my SIPP- the same as my wife's SIPP. NEST was Default fund. Wife's SIPP and NEST the same. There may be better choices but we're happy with where we are now.

We take the attitude that when there are falls we're buying more stock that will rise when the market recovers, although we keep an eye on the value of our pensions this is probably 2 or 3 times a year. We're not obsessed by them and even if there were a big crash we have the DB Pension and savings that would allow us to wait for a recovery.

One thing the lockdowns did teach me was my plans to retire mid 50s were wrong. Not financially but socially, if I hadn't had work with the travel involved I would have become quite frustrated, I didn't realise the importance of human interaction, having taken it for granted. Mind my mothers garden looked fantastic as she didn't go anywhere! My wife and I simply worked through it all.

tacpot12

I'm in the "sufficiently confident in what they already were doling" camp. I just let my investments as they were, mainly to see if the stated advantage of Investment Trusts being able to maintain a dividend 'cover' was correct. It turned out to be substantially correct. I didn't see much change - portfolio income dropped from 4.2% to 4%, a fall of less than 5%.

Now the portfolio is worth 11% more that it was when I bought it 7 years ago (so an annual return of 1.5% on the capital), but I have also had £105k of income from it in that time (£15k a year), so my total return is about 5.7% which is enough for me to be sure that I will be leaving more in my pension that I started with. 

As the market has recovered, I've used the opportunity to sell some SMT and buy investments that are better for dividends to give me extra income to cope with inflation.

The experience did help me when the Ukraine war started. I was much more confident in my portfolio's ability to withstand economic turmoil, and even started to reduce the cash balance in my SIPP by buying more dividend producing assets. I started my retirement with the intention of keeping about £12,000 - about 8 months income - in cash, but have wound this down to £8,000 over the last year or so. This seems plenty.

The experience didn't cause me to change my asset allocation policy at all. I originally set up a 70/30 Equity/Bond split, and also had a 70/30 split of UK vs. overseas investments. Ultimately, I think this UK-centricity has hurt returns, but has benefited me in terms of lower volatility. The UK stockmarket might not be the liveliest, but that suits me.  
 

cfw1994

Well,I was a similar age then & lucky enough to be planning my exit from working.  

Having attended 4 funerals a few years earlier (two good friends my age 😔), I had focussed a lot (perhaps too much!) on not exiting work in a box 😳

COVID arrived and made me delay my plans for a year.  Might as well sit at home on zoom calls with customers than sit at home twiddling thumbs going nowhere 🤷‍♂️  Living in Lockdown Leicester didn’t help 👀 

Did the finances go smoothly?
Not exactly…markets dipped just a few months after I had started drawing on my DC pot, & we followed our plan to stop the draw & live off “cash savings”….actually for over a year, before going back in.   

I was very (overly?!) aware of the SoR risk & we had discussed this, putting 2-3 years funds into PBs & other “cash” investments.  Incidentally, I am also aware cash isn’t a total panacea for that, but we could always tighten belts too.   Being flexible is one of the beauties of being retired 👍

Now 4 years in, with a much better handle on spending and our lifestyle, I feel very fortunate 🤞

Still agonise from time to time over where our money is invested: still have 2-3yrs in cash pots, so likely will remain well invested in equity, despite a niggling feeling we are due a bit of a dip/crash 🤷‍♂️

Hoenir

In July 2008 RBS had a rights issue at around £12 per share. Was the biggest global  banking operation. By the October it was bust. Requiring huge amounts of public money support. Did anyone see it coming? 

dunstonh

• Were any sufficiently aware to see the signs of it coming, and take any precautions in advance?

No. Indeed, we were out partying in the local pub with everyone there wondering why the heck the country was locking down.

• Did any take any action they subsequently regretted, eg. attempt to move to less volatile investments, but perhaps did it too late?

Nope.  Learnt many times before that you just close your eyes and wait to come out the other side.  You never know when a high point is or when a low point is.  You will inevitably get it wrong.  So, short term issues shouldn't matter.

• Were some sufficiently confident in what they already were doling, and just left their investments as they were with perhaps just small adjustments - presumably these were the 'winners' in that they then saw their investments start to grow again, regaining and then increasing beyond pre-COVID levels

Close your eyes and do nothing is the correct strategy.  Maybe if you have some cash available, invest during that period.

• Has living through that experience helped to go through the other minor market shocks we've subsequently had, and made us tend to panic and stress over our pension funds a little less?

Its worth noting that it was only the third largest fall in the last 25 years.   The almost three year negative period of dot.com and other events was my first.    It does get easier with each.  So, when credit crunch came followed by 2015/16, 2018, 2020, 2022-23 (albeit bonds with that one), you just shrug your shoulders and say here we go again.

• Has it impacted your portfolio allocation and strategy?

No, and it shouldn't do unless you are doing something wrong.  

westv

I did nothing different. It was just another market crash.
In fact, working from home boosted (and continues to) my pension pot.

Albermarle

I did not do anything then, but post Covid I reduced my bond holdings. Mainly due to info picked up in these forums about the predicted effect of interest rates going up from near zero back to more normal rates.

Secret2ndAccount

I bought more stocks in mid 2020. My SIPP and ISA were already 100% equities, but I had some cash in savings accounts. So I opened a General Investment Account and bought more stocks. This worked out well as I caught most of the recovery (didn't buy exactly at the bottom). Over the next two years I was able to move the investments into my SIPP/ISA using my yearly allowances. Sometimes I bought and sold the same investment; sometimes, something different. One of the shares I had in the GIA had lost money, but I still believed in the company. I sold it at a loss in the GIA, and was able to offset that loss against my gains to avoid Capital Gains Tax. Then I bought the company back in my SIPP, and it subsequently went back up with no CGT concerns.
I'm holding a lot of cash at the moment. I sold a property and have not been in a rush to get the cash into equities. Interest rates were zero 5 years ago, but 5% now.

Qyburn

Although it was a sharp drop it recovered pretty quickly.

westv

Qyburn said:

Although it was a sharp drop it recovered pretty quickly.

The drop in 2022 took longer to reach the bottom and to recover.