Investment choices for Aviva pension

itman

First the facts…

We (my wife and I) are 51 yrs old and are fortunate to have enough savings and pension to retire, although it will be another 4 yrs until I am able to claim a pension (and I will likely delay this for a further 5-10 yrs) .

My Aviva pension has over £500k, currently invested 50% in Multi-asset Plus Fund (risk2) and 50% in Mixed Investment (40-85% Shares) (risk4).

Now the theory…

I have a strong feeling (likely along with many people here) that the market is due a significant correction.

I also have a fear over the next 10 yrs as to how AI will affect the markets and economy in general as some industries are decimated.

With the market at a high and with these massive uncertainties I want my pension to be safely invested such that it beats inflation, but has minimal risk.

Browsing and using AI to find safe investments generally results in suggestions of UK gilts. Are these a wise choice in a downturn? And in a scenario that AI results in mass unemployment within 10 yrs (a distinct possibility in my view)?

What other safe investment options should I be considering?

TIA

MeteredOut

Do not use generative AI to make investment decisions - it just takes in lots and lots words, and outputs an average of what everyone is saying based on your prompt, with some randomness built in so it looks more intelligent (ok, it does a bit more than that, but not that much). It also liable to confirmation bias - it wants to help you, so will pick up on your unintentional biases and play them back to you as the best choice.

If you're investing for the long term 5+ years (some say 10+ years), investing in the stock market has proven to be the best place to leave your money.

InvesterJones

Work out a plan for how much you actually need the investments to grow by. Then only once you have this, you can look for the asset mix that has the best chance of achieving this at the lowest risk in your timeframe.

If you've figured out that you only need to beat inflation (by any amount) then inflation-linked gilts are available that mature in 10 years and are guaranteed to grow at inflation + 1.3% (measured by CPIH). Job done as long as the UK govt. doesn't default. However, you need to be sure that's all you need, and that your costs don't differ wildly from the basket of goods used in the official measure of inflation. And have a plan for what you do with that money when it matures - plan for how you will take an income, for however long you hope to be around in retirement etc.

jimjames

You already have 50% of your portfolio in less risky assets. Unless you want to buy an annuity at the point of retirement in 10 years then you're likely to need that money to sustain you for the next 30 years or more. By the way you refer to "the market" as being at a high, the world's stock markets are not one homogeneous thing, different markets are at different levels and even the USA S&P is below previous peaks.

Your search results using AI shows the current limitations and where it might not be quite the threat it's being seen as.

itman

https://forums.moneysavingexpert.com/discussion/comment/81902531#Comment_81902531

Was just using AI for ideas and explanation. Also looking at other sources, including this forum. So, yes, I completely agree with that sentiment.

I agree that stocks have historically been safe and proven (with hindsight) to be the best investment. I fear that the future may be a different kettle of fish.

I don't need a significant increase in my pot (although obviously any increase is nice!). I just need to maintain in real terms what I have. Safe investment in the forthcoming unpredictable world is my main driver.

itman

https://forums.moneysavingexpert.com/discussion/comment/81902568#Comment_81902568

Yep, just maintaining above inflation is key. We have the number we need.

Does gilt investment need to be to a fixed time-frame then? I must admit that I would worry about life-changing circumstances over a 10 year period (e.g. severe illness) that might change timescales for pension.

itman

https://forums.moneysavingexpert.com/discussion/comment/81902604#Comment_81902604

I fear that the current 'ineptitude' of AI is simply lulling many people into a false sense of security. The timescales to the next significant iterations on AI are very short. Every 6 months we will be taking a major step up and 2 or 3 years from now I don't think anyone will be underestimating the threat.

I don't believe the worst case scenarios that every person working behind a PC will be out of a job within a few years, but I do believe it will be transformational. The results of this on markets and governments is extremely unpredictable. This is not comparable IMHO to the dotcom boom and does not have a precedent in history.

dunstonh

I have a strong feeling (likely along with many people here) that the market is due a significant correction.

A correction would typically be classed as in excess of 10% but less than 20%.

Corrections occur on average every 18 months. So, we are always due one.

I also have a fear over the next 10 yrs as to how AI will affect the markets and economy in general as some industries are decimated.

And many will be enhanced and thrive with AI.

With the market at a high and with these massive uncertainties I want my pension to be safely invested such that it beats inflation, but has minimal risk.

The markets spend most of their time at or near their highs.

Browsing and using AI to find safe investments generally results in suggestions of UK gilts.

You mean the gilts that fell around 20-40% in value over Nov 2021 and October 2023?

Newbie_John

@dunstonh not all gilts are equal, TR35 for example at the price of 99.14 guarantees positive return if kept to maturity till 2035.

It really depends at what price you buy - close to par and keep to maturity - they are extremely safe.

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/81902639#Comment_81902639

No, you can sell gilts within seconds without penalty. However you'll then have to take what the market values them at, which might be better or worse pro-rata than keeping them to maturity, when you know exactly what you'll get for them and won't be affected by any falls. But it's nice to have that as an option.

Newbie_John

Gilts are easier to understand what happens to rhem if you keep to maturity, otherwise their price fluctuates and yes you can sell anytime.

Quick example - you buy £10k gilts with 3% for 10 years.

If between now and 2035 the BoE rates go to 10% there won't be much interest in gilt paying 3% if you can get 10% elsewhere - so the market will price it lower, you may even get £5k from your £10k if you decide to sell. But if you keep to maturity - you will get what you were promised.

It can also be the other way round - if all rates drop to 0% your £10k may be worth more.

TR35 I've mentioned earlier costs less now as the inflation is coming down/low so for £10k you'll actually get more £10200 worth off it + inflation + coupon etc. So extremely safe if kept to maturity