Moving to safer investments

djdaddy72

Hi,

Newbie here, so go easy please.

I have a pot of money in a DC pension that is essentially frozen as I've got other stuff going on elsewhere.  I'm just over a year from 55 and I want to almost lock-in the gains I've made in order to plan a 25% withdrawal.  Right now, I'm totally invested in higher risk funds (Standard Life 6 rating) and want to move most of it into one or two funds that will all but keep what I have intact.  

I self invest but I don't have much experience on low risk strategies.  What should I be looking at in order to maintain the numbers I have now?  I'm not looking for specifics in terms of funds, just 'instruments' that I can look at and then make my own mind up.

I did look at UK debt but that seems to be losing money hand over fist.  Seems like deposit accounts might be a good thing.

Thanks in anticipation....

DJDaddy72

El_Torro

If you're not planning buy an annuity then remember that your money could remain invested for decades. If you want to derisk some of the pot for the money you will be using in the next few years then fine, though derisking the whole pot might be extreme, depending on what your strategy is. 

Money market funds are currently quite popular. Not without risk but they should provide a better return than having the money sitting in cash. 

If you are currently in 100% equities then moving to a multi asset fund with a percentage (say 40%, or 60%) in bonds will give you some level of derisking. Maybe not as low risk as you are looking for though. 

Also, is there a reason why you are taking the 25% tax free lump sum? If you don't have a specific purpose for this money it's probably better to leave it invested in the pension.

djdaddy72

No plans for an annuity as I've got other provisions.  The 25% thing is maxing what I have in order to use and pass on.  Let's just say I have plans.  I'm more than happy with the gains made and wary of events taking that away once more (thinking of what happened at the turn of the year).  So that's why I'm looking for something suitable and I will take a look at money market funds.  Many thanks!

dunstonh

I did look at UK debt but that seems to be losing money hand over fist.

Are you sure?

We certainly had the unwinding of the credit crunch boom over 2021 to 2023 creating the biggest drops in over 100 years.   However, but since then it us up and acting within its 95% norm.

I will take a look at money market funds.  Many thanks!

Be on guard.  Money Market funds can suffer liquidity issues if market sentiment improves as they can hold assets with maturity dates and can suspend outflows.    It is short term money market funds that you need to focus on to virtually remove liquidity concerns.  Short term gilts and bonds (currency hedged) are other typical risk reducers.

kempiejon

Just over a year from wanting to use money I can see switching the money off market will preserve the absolute value and inflation doesn't have long to bite. Even a lower equity mix like a multi-fund has some money at risk of market vagaries so if 25% of the pot is an actual set total then one way to guarantee that value is going all cash or some short date gilts with know maturities next year and fixed amounts.
But a pensions is for the rest of one's life so for most 55 year olds that's not a great plan and of course going early with the full 25% is missing decades of pension growth that could have been extracted 25% tax free.

hara____

As well as money market funds, it would be worth learning enough about bond duration to be able to confidently choose a government bond fund that could meet your needs.

For a real example, compare the total return of VGOV (gilts of all maturities) and IGLS (gilts of up to 5 years) in 2022. The only difference is that VGOV, by definition, has a much higher duration and so its price was much more sensitive to the increase in yields in 2022.

A combination of a money market fund and a short-duration bond fund might be suitable for you.

Albermarle

djdaddy72 said:

No plans for an annuity as I've got other provisions.  The 25% thing is maxing what I have in order to use and pass on.  Let's just say I have plans.  I'm more than happy with the gains made and wary of events taking that away once more (thinking of what happened at the turn of the year).  So that's why I'm looking for something suitable and I will take a look at money market funds.  Many thanks!

Not sure what you mean by that, presuming the market drop due to Trumps' initial tariff announcements ( which was late March)?
In any case markets soon recovered from that . Since January 1st -
S&P 500 - Up 7.5% ( in Dollars, lower in Pounds)
FTSE 100 - Up 12 %
Dax ( Germany) + 20%
France + 4% 
Nikkei ( Japan ) +2%
Hong Kong +24 %

Global index fund in £STG + 5%