Trying to understand pension changes and feeling out of my depth

Albermarle

Addlepate said:

Spoke to L&G today (again - I'd spoken to them before, but not got much sense). Fund movement is part of a general review, not specific to me. They say, and as far as I can see, the PMC Multi-Asset 3 does not de-risk toward nominal retirement date.

This has thrown me a bit, as according to their info, if I accept the change I will go straight into the lifestyling / de-risking phase of the target date fund, as it starts well in advance of the nominal 2033 retirement date.

I don't know if this is what I want, as I want to take a little more risk given my position, and even if it makes little difference in the short term, I don't know if moving from a fund in a lifestyling / de-risking phase to a more, say, equities based fund might incur costs due to the different mix (market variation, not charges)?

I have until the 11th to decide ...

The lifestyling is based on your estimated retirement age. If you have not told them otherwise then they will probably have 65 in their system. Normally it is straightforward to change this.
So if you changed it to 70, then the lifestyling profile would be put back 5 years, and the equity % would most likely increase.
It is not the most professional approach, but it does work and could be a temporary fix whilst you get more to grips with it all.
Note that the age you have as your estimated retirement, does not affect when you can actually retire, or when you can start taking the pension.

Cobbler_tone

I get the impression that that OP suffers from FOMO but at the same time doesn’t want to ‘lose’ anything. I can afford a dip (i.e. I have my backbone elsewhere) and close to retirement. I have 60% in the target date fund and 40% in World equities. I could probably increase my risk but at the same time could take a hit, e.g. if Nvidia tanks. It ticks along and doing well at the moment. Your alternative are the lowest risk funds but they will tread water.

Addlepate

Albermarle said:

The lifestyling is based on your estimated retirement age. If you have not told them otherwise then they will probably have 65 in their system. Normally it is straightforward to change this. So if you changed it to 70, then the lifestyling profile would be put back 5 years, and the equity % would most likely increase.
It is not the most professional approach, but it does work and could be a temporary fix whilst you get more to grips with it all.

Yes, it is. The retirement age I gave (70) is right in the middle of the 2030 - 2035 target date range and the fact sheet says the de-risking for that fund starts (I think) eight years before, so pretty much now.

I asked about changing retirement age and they said it would not change which target date range or fund I was in, which seems odd, and I am going to check again tomorrow.

My interest at the moment is as you say to give time to get to grips with things.

Addlepate

Cobbler_tone said:

I get the impression that that OP suffers from FOMO but at the same time doesn’t want to ‘lose’ anything

I think it's about two things. The longer term fund decision is more about suitability and getting the right balance of risk, security and reward for me. I don't understand what that is yet, or really have enough knowledge, but I think it's probably a little more risk. Shorter term and more urgently, it's whether the fund change will cause any significant problem (loss, limiting options, etc.). I feel out of my depth with both!

As things stand though it feels there's little to choose between the two funds. At first I thought I might as well let the change go through, but as I don't want to de-risk at this point, I wonder if sticking with the original fund is better. I'm not sure whether it'll really make that much difference though, though I also wonder whether bonds are a current factor.

Yorkie1

The factsheets for each fund (see my previous post for links) show whether / what proportion of the fund is comprised from bonds.

NickPoole

Just tell them you want to stay in Multi Asset fund - you are in it already and you only started to worry because L&G said they were going to change it

Cobbler_tone

I was going to suggest staying in the default fund. That way it kinda relinquishes personal responsibility. i.e. it will do what it will do and your return will be the same as the vast majority of people. A target date fund will be profiled to match your planned retirement date. It will already have a proportion of equity investments in it. It also removes most of the worry and stress of thinking you did the 'wrong' thing.

NickPoole

Thing is, the Multi Asset fund is already medium risk at best, probably lower than that, so de-risking it more (and charging you extra for doing so, even if it is a pittance) seems like overkill to me

Albermarle

NickPoole said:

Thing is, the Multi Asset fund is already medium risk at best, probably lower than that, so de-risking it more (and charging you extra for doing so, even if it is a pittance) seems like overkill to me

Interestingly though, even though its equity % ( at 40%) is the same as Vanguard Lifestrategy 40, its 5 year performance is better . 25% as compared to 15%.
Presumably because the 60% part is not all bonds.

From what I could understand from the link to the target retirement fund, the OP would coincidentally be at about 40% equity 8 years out from retirement.
However dropping to 20% eventually, which is too low even for a cautious investor, and could effect how well the pot would survive a long drawdown.

Addlepate

Thanks all again for your thoughts, responses - and patience!

I spoke to L&G again and I have basically three choices:

- Do nothing and go into the 2030 - 2035 target date fund, which looks as though I'll be straight into de-risking based on nominal retirement date

- Change my nominal retirement age as @Albermarle suggested, in which case I'll still be put into a target date fund, but it'll be the 2035 - 2040 fund as @Yorkie1 and it'll be at 40%-ish equities

- Opt not to change and stay in the current multi-asset fund as @Cobbler_tone suggests.

They don't have any detailed information about why they think the target date fund is 'better'.

They are a bit inconsistent about transaction costs (resulting from market conditions); they said on the phone that potential delay in moving funds is just because they'll be moving everyone who's in the default fund, and it'll take time; the information suggests it's in case market conditions aren't suitable they might delay the change.

My objective at the moment is essentially to not dig any holes while I think more in depth about what fund is right for me, rather than to stay in either multi-asset or target date until retirement; but of course that might mean I don't change from whatever I'm in.

I think I'll look again tonight at the fact sheets, but it seems to me at the moment there will be little difference between the current and 2035 - 2040 target date funds, but the 2030 - 2035 fund proposed will be a little worse if de-risking does start fairly soon.

I suspect to be honest I am over-thinking it and there will be little practical difference in the short term, provided I don't go to target date then just leave it, but better to think about it than ignore it, I think.