De-risking Pensions

Storcko14

I de-risked gradually from about 10 years ago when I realised that I would probably have enough by age 55/56. Thanks largely to favourable markets I was comfortably ahead of target so I semi-retired in 2023 (took a 3 day /week contract). In the early part of 2025 ahead of full retirement in June 2025, I took a sizeable chunk out of holdings that had outperformed and put that in STMM and an ILG ladder. This 'safe' bucket - which will include 2* SP in due course - equates to just over a quarter of the whole portfolio and covers about 150% of essentials. That felt like a significant shift psychologically but definitely helps when doom scrolling any given day's geopolitical madness. Of the safe bucket components I see the STMM part as the riskier given sticky inflation so keep a close eye on that.

RogerPensionGuy

https://forums.moneysavingexpert.com/discussion/comment/82036370#Comment_82036370

Just a poing to mention about de~risking 10/15 years before possibly buying an annuity.

I agree this is a good general rule, however my DC SIPP was deep in the markets the last 10 years in maximum or just 1 or 2 risk indexs below maximum risk volitilty whatever.

The returns were very very nice, then the IHT DC SIPP rules were to change and made keeping DC SIPP loaded feeling poor value, then the annuity rates rolled up.

So I jumped out of risk and used money market funds to bring stability and add gently to pot.

Then keep an eye on the Moneyhelper annuity tool until I saw good initial PA picking the increase index and value protection or guarantees I liked and contacted an old Broker I was asking a year or two ago, this Broker was able to get a slightly better deal (no health issues) and broker just completed the deal now.

So I my case, I was lucky the wheels just aligned and I moved from a DC SIPP to a hard nice deal annuity.

I think I was lucky.

Cheers Roger.

Secret2ndAccount

Lucky? Nah. The day that any of us puts 1 penny into the stock market we are relying on luck; so call it lucky if you like. You educated yourself on the role of equities, the alternatives and their pros and cons. You made an informed decision, you profited from it, and you made a second, educated, informed choice as to when to get out. That’s not luck.

In motor racing there is an oft repeated piece of wisdom: “Luck is when preparation meets opportunity.”

snowlaser

I think it very much depends upon what you intend to do with the funds at and after retirement.

If you intend to take a 25% cash lump sum at retirement then gradually moving 25% into cash ready for that does reduce risk.

If you intend to take a 25% cash lump sum and buy an annuity with the rest then gradually moving 25% into cash and 75% into bonds ready for that is also reduces risk.

But if you intend to take income drawdown why would you move such a big chunk into cash and bonds? You are 5 years from retirement and will want to be invested for hopefully decades beyond that. It doesn't really matter if markets plunge in the next 5 years? You just want a bit of cash to see you through the downturn?

Albermarle

https://forums.moneysavingexpert.com/discussion/6672730/de-risking-pensions

but having restless nights thinking about what might happen to my pension pot in the current geopolitical and economic context.

Wars, corruption, AI bubble, chaotic governments etc. so much instability and just have a gut feeling there is something horrible brewing.

There is name for this, it is called Recency Bias. The human tendency to focus on what is happening now, and not see it in a wider long term context.

Interested in peoples opinions if its worth de-risking my work pension (managed) and how to do it.

You have not said how it is invested now. Although there is a lot of mentions on this forum about 100% equity funds, in reality most pensions are invested in a mix of equities and bonds. Also many workplace pensions derisk automatically as you get nearer to retirement age.

split my fund with 50% cash and bonds with the other 50% on usual shares ?

That would not be an unusual split approaching retirement and into drawdown.

MarkCarnage

I'd only 'de risk' by moving to bonds if

1. I was seriously considering buying an annuity
2. I wanted to use some of my fund to do a DIY annuity with a gilt 'ladder' covering several years, preferably index linkers.
3. I would hold to maturity otherwise at risk of serious volatility particularly in long dated linkers.

The conventional/regulatory definitions of risk should be taken with a pinch of salt.