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

Sarahspangles

Universidad said:

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. 

My big fear is that when, inevitably, the separation between those who managed to hold on to a good DB pension and those with tiny DC pensions becomes too great, the government will take some popular action to harmonise things.

This is not borne so much out of concern for future investments as the fact that so few people have decent amounts going in to their DC pensions... But a decade of terrible performance wouldn't help. 

It’s a worry, but I think what mitigates this is the fact that whether someone has a DB or a DC pension they do have an element of choice about when they retire. So it would be less obvious that those with DC pensions are on lower incomes in old age, as they simply pull the trigger later.

What the Govt could do is make some kind of tweak to improve the returns on annuities. Wouldn’t that fit with the overall desire to get money into circulation? Or is that only money in savings accounts?All subject to affordability…..

badmemory

Not that it would affect me but I was hoping that they would increase the employers contribution to autoenrollment from 3% to at least 5%.  It is a pity that having been set up it is leaving people thinking that their retirement will be sorted when it is obvious to many us that it will not be enough.

Durban

cfw1994 said:

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).

With respect, I’m sure from previous posts that you have a decent DB pension as well as DC.  I don’t mean this in an envious way as I have a very good LGPS one myself

 This puts you in a much more relaxed position than the majority of people who have to rely solely on their DC pensions 

I dont mean to say this to be unpleasant, just stating a fact. Apologies if you haven’t got a DB pension and I have the wrong person

Nebulous2

Bostonerimus1 said:

Linton said:

hilsea said:

Yes a lot of unease across the pond in the bond market. The 30 year treasury hit 5 % this morning.. with this in the USA it’s now spreading to Europe . I’m wondering if china is withdrawing cash from the USA treasury market. So people saying bonds are doing what they are meant to do might be a bit premature. The bonds didn’t really help when we had the pandemic. I’m more concerned about the money market funds, we tend to look at these as holding cash however in these strange times I do worry that these could suddenly become more riskier than than key investor documents indicate .

I understand from YouTube that both China and Japan are significantly reducing their holdings of US treasuries and buying gold. Chinese and Japan's own bonds have much lower yields than US treasuries. I dont know whether there is some non-obvious reason why that shiould be so.

But, barring the collapse of the $, short term $ bonds and MM funds should not be seriously affected.

It looks like the bond markets are starting to get involved in all this with rates on an upward trajectory. So expect bond prices to fall. I imagine some of the selloff in US bonds will simply be because of a reduction in confidence in the US. The scary thing is that all this might have broken the bubble of the US T-bill as being the default safe harbour and once that is lost it's hard to get it back.

There may also be an element of foreign investors pulling out of the US stockmarket. American companies are fearful of selling actively in case they draw Trump's anger. EU shareholders apparently hold 17% of the US market, more than the value of all the EU markets combined. Them withdrawing could account for why the US has been hit harder than most other markets. 

American exceptionalism has been hit over the head repeatedly with a blunt instrument in the last few days. 

SouthCoastBoy

I am wholly reliant on DC pension and savings, so I thought I would look at my main private pension, I haven't subscribed into it since June 2023, as left my employer at that point.

The valuation for December 2023 was approx 463k, today it is currently valued around 481k, so currently back to early 2024,if it stays like that for the next couple of years and then starts edging up again, that would be good enough for me.

About a month ago it was valued at 576k

badmemory

I am sitting with fingers crossed as my sons DC pension took a 10% hit between 4th & 8th April.

westv

SouthCoastBoy said:

I am wholly reliant on DC pension and savings, so I thought I would look at my main private pension, I haven't subscribed into it since June 2023, as left my employer at that point.

The valuation for December 2023 was approx 463k, today it is currently valued around 481k, so currently back to early 2024,if it stays like that for the next couple of years and then starts edging up again, that would be good enough for me.

Mines down about 10% - early 2024 price now as per yours.

Strummer22

I'm 39 so nowhere near retirement. I'm watching with interest but not taking any action at the moment. 

I'm hopeful that when I come to retirement age I will have a sufficient pot plus non-pension savings that such volatility won't upset me. So long as it's still a tax-efficient and otherwise sensible option, I will be doing flexible drawdown. By which I mean, taking lower withdrawals (fewer luxuries) when markets are low to avoid crystalising losses any more than necessary. 

crv1963

Nebulous2 said:

Some of the clickbait press constantly reference gold-plated DB pensions. They pick their moments for it. We don't hear that so much when the stockmarket has gained 20% in a year. 

While there are considerable differences between the two types, including transferring risk from the employer to the employee, what I believe is the biggest difference, for funded schemes, is the amount of money committed. 

Lots of people are on the minimum 8% into DC pensions, 5% personal / 3% employer. Many public sector workers are paying more than that themselves, with the employer paying considerably more. 

Absolutely. I pay 9.1% and my employer 24.7% for my DB. My wife has the 5%+3% in her workplace pension- hence us paying into her sipp slightly less than her take home earnings. My son pays 10%+10% employer match - not a bad as he's had this contribution rate for 10 years after my first venture on this forum sparked his interest. His view at present seems level headed- "so what, I've got 40 years for it to recover".

On the other hand I have colleagues who would prefer to sacrifice some of their employed contributions (NHS) to increase take home pay now. They accept reduced pension would result but housing and child care costs are a significant chunk of take home pay as they start out on their career.

I also know of people my wife works with who think their 8% into NEST pension is going to give them a secure retirement starting at the age of 40+. No amount of explaining would get then to voluntarily pay in more.

GenX0212

westv said:

SouthCoastBoy said:

I am wholly reliant on DC pension and savings, so I thought I would look at my main private pension, I haven't subscribed into it since June 2023, as left my employer at that point.

The valuation for December 2023 was approx 463k, today it is currently valued around 481k, so currently back to early 2024,if it stays like that for the next couple of years and then starts edging up again, that would be good enough for me.

Mines down about 10% - early 2024 price now as per yours.

Mine was trending down about 5% overall but has taken a bigger hit in the last 24hrs and is now down about 10% and back to early 2024.
I'm trying to be philosophical about it.