Will recent "events" cause a rethink of DC pensions?

Hoenir

Bostonerimus1 said:

It might be a good time to research Japan's lost decade. We might not be just looking at market volatility, we might be looking at years of low growth and poor returns. 

S&P 500 on a total return basis suffered a period of 12.7 years once. 

As for Japan it's approaching three decades, not one. 

Hoenir

DRS1 said:

From the heading I wondered if you were suggesting a revival in nice secure DB pension schemes to replace these scary roller coaster DC newcomers.  Don't think so.  You are on your own at the mercy of the markets.

Not everyone in the past benefited from DB pension schemes. Annuities actually date back to Roman times. Seems good ideas do last the passage of time. 

Bostonerimus1

DRS1 said:

From the heading I wondered if you were suggesting a revival in nice secure DB pension schemes to replace these scary roller coaster DC newcomers.  Don't think so.  You are on your own at the mercy of the markets.

Employers won't want to take risk back from employees. The change over from DB to DC pensions reduced cost and risk to employers so I can't see anyway to reverse that. But I think many people put too much faith in the models and withdrawal strategy mantras that are necessary with DC pensions. IMO many people should be scaling back their retirement income expectations and maybe looking to annuities. That's the sort of change I was thinking about.

leosayer

I retired 3 months ago and plan to start drawing from my 75/25 SIPP in a few months.

The recent drops are well within my expectation of normal market volatility. In fact, I made the decision to retire just over a year ago when equity markets were roughly at the same level they are now.

Of course I don't like the recent losses but that's the whole reason for holding bonds which have done what they're supposed to do. 

I have no trouble sleeping which tells me that my 75/25 allocation is probably about right for me.

barnstar2077

Bostonerimus1 said:

Stock markets have suddenly become very volatile. What does this mean for DC pension strategies in both the accumulation and spending phases? Those of us either retired, or close to it, have lived through the decline of the DB pension and rise of the DC pension based on individual exposure to equities and fixed income. The investment and withdrawal strategies have always included some nod to volatility, but after the UK bond crisis of a few years ago and the current fall in markets are you reassessing things...or is this all covered by your plan? 

Shouldn't everyone's plan take into account falls in the market already though?  They are expected, so people should either already be diversified, or like me, prepared to weather the storm.  If people are changing their plans now, then their plan wasn't doing it's job to begin with.

Having said that, there is an old Chinese (possibly apocryphal) curse "May you live in interesting times."  Well, we certainly live in interesting times now!

badmemory

The last "hiccup" came just as I was about to retire & take it.  I left it for another 5 years.  It is now happening to my sons but he will have to wait anyway for 12/15 years.  That should hopefully be enough time for it to recover.  I am hoping the beginning of May will be a good time to add his £2880.

cfw1994

SouthCoastBoy said:

For me, I think I will stick to my current plan. I've  never held bonds, just cash, and I have at least a 10 year cash buffer. 60% in equities, lost around 150k in the last 2 to 3 weeks, but hoping over the next 5 or so years that will be regained. My total portfolio in nominal terms is back to around where it was 12 to 18 mths ago.

Think the last few weeks means I will carry on working for a while yet.

Mine isn’t far off losing that much too….but the difference is that I stopped working 4 years ago 🫣

It’s only money….my strategy remains as it was 🤷‍♂️

If things are still bad later in the year I’ll pause the drawdowns and we will move to “cash” assets (mostly PBs).  

If you have a 10 (TEN 😜) year cash buffer, why are you still working?

The way Tariff tRump behaves is erratic….his tariff wars can just as easily flip in the next 2-3 weeks.

We are fresh back from a month in Les Arcs, which beats working hands down ⛷️🤣

Life is for living, & once you have a plan for how to spend time away from the shackles of work, my recommendation is to crack on 👍
Off to Wales next week with 15 pals to celebrate my significant b’day (last autumn) by having 8 of us racing headfirst across a quarry at up to 100mph.  Should be a blast!  If weather holds, we might get a day up Yr Wyddfa (Snowdon).

katejo

Cobbler_tone said:

It’s just reminded me the true value of a good DB pension and can’t believe I considered transferring it at one point.
The markets are definitely up in the air but think the UK might do well out of it.

I have a decent DB one too 😄 

Hoenir

Bostonerimus1 said:

DRS1 said:

From the heading I wondered if you were suggesting a revival in nice secure DB pension schemes to replace these scary roller coaster DC newcomers.  Don't think so.  You are on your own at the mercy of the markets.

Employers won't want to take risk back from employees. The change over from DB to DC pensions reduced cost and risk to employers so I can't see anyway to reverse that. But I think many people put too much faith in the models and withdrawal strategy mantras that are necessary with DC pensions. IMO many people should be scaling back their retirement income expectations and maybe looking to annuities. That's the sort of change I was thinking about.

With regards to private sector DB schemes. Firstly they were born in an era when life expectancy was far shorter. Secondly a certain chancellor changed the rules in 1997. Making smaller schemes financially unviable for employers. 

Juno_Moneta

 8 of us racing headfirst across a quarry at up to 100mph.  Should be a blast!  If weather holds, we might get a day up Yr Wyddfa (Snowdon).

That sounds interesting! What’s the event - cars, motorbikes?