Right age to reduce risk

greco_2

Be gentle with me as this is my first post.

I'm planning to retire next year when I'll be 60. I'll have no need to touch my pension for at least 4 years as I have ISAs and other investments to draw on.

My pension pot is large enough for drawdown to be viable as an option. Conventional wisdom says to start moving away from stocks and shares and into fixed income when retirement starts to loom on the horizon but if I don't have to buy an annuity for another 15 years, doesn't it make more sense to remain invested in stocks and shares for another few years?

What are the arguments for and against?

[Deleted User]

Welcome to mse greco

I am 60 and my dh is 61 and retired now for 5 months. We also have no need to drawdown on his pension yet and I, on his authorisation, transferred all his pensions to a sipp, which I manage successfully.

Risk at this time has to be combined with increase in value. I am competent at buying and selling shares as appropriate so I don`t deal with funds. At this time risk has to be as close to zero as possible with a weather eye on inflation, to avoid capital erosion

At the moment the sipp is in cash and gilts (bought when they were cheaper and the yield is higher than now) and I have several lower limit buys on solid blue chips in place.( I cashed in all the shares as soon as I sensed poor sentiment in the market several weeks ago.) They will all provide a decent yield and hopefully increase in capital value over time.

My aim is to provide drawdown without erosion of capital due to inflation

Taxes come into the equation too and I have decided that drawdown will start at the best time re tax liability

Op you need a timeline to start with and fill in the dates when you expect income eg my pension is just starting and various savings mature over time and don`t forget your tax liabilities

re risk again: I have also placed sums for both of us in ns&i index linked certificates, ISAs and cash savings

dunstonh

Stockmarket is not one risk level so you may want to alter the spread within the equity content but apart from that there is no reason for you to reduce your risk specifically with another 15 years to go.

EdInvestor

greco wrote: »

My pension pot is large enough for drawdown to be viable as an option. Conventional wisdom says to start moving away from stocks and shares and into fixed income when retirement starts to loom on the horizon but if I don't have to buy an annuity for another 15 years, doesn't it make more sense to remain invested in stocks and shares for another few years?

Yes:indeed you should look to remain fairly heavily in equities (at least 50%) after starting drawdown if you want to experience its full benefits.

purch

Right age to reduce risk

....when you were 6 months younger than you are now !!!! :eek:

[Deleted User]

The stockmarket is a very dangerous place to be at the OPs age and this close to retirement. We are at the beginning of a bear market and I don`t believe that he/she should gamble with the pension. Value could potentially halve over the next few years.

Risk must be reduced at his age ie the money should be spread around into safer investments. Add a few blue chips by all means but choose wisely

dunstonh

The stockmarket is a very dangerous place to be at the OPs age and this close to retirement

Only if you feel that age 60 is old. Many people would not feel that way.

However, one would hope that the portfolio isnt 100% stockmarket unless a high risk investor at any age.

greco_2

Thanks everyone.

At the moment, I've got a Section 32 policy with Sun Life which will pay me at least £4200 a year at 65. I also have around £20,000 in an Axa pension geared to retirement at 65.

The rest is with Standard Life. About 25% in their with profits fund which has a horrendous MVA but guarantees a 4% minimum return and another 25% in their Pension Managed fund. 15% is in the New Star Tristar fund which I put in last year on the advice of my IFA but against my own instincts ( I wish I'd listened to myself), 20% in their European fund and the other 15% scattered around.

I'm putting around £1000 a month in at present and the only question exercising my mind is the best home for it. My inclination is to keep feeding it into the stock market to take advantage of averaging in the expectation that the market will be a lot higher in, say, 10 years time than it is now.

EdInvestor

I´d suggest you treat the SL WP money as effectively a low risk bond/gilt component and then seek some better external funds for the other money.SL has quite a good list.

jamesd

Your inclination to keep investing looks like a good one. There's currently a sale on when it comes to good companies. Prices may go down more but looking ahead a few years the next year or possibly two look like being a good time to be buying. For the same reason, it's not a good time to be selling or switching to lower risk unless you're forced to by something like the need to urgently buy an annuity.

greco_2

I´d suggest you treat the SL WP money as effectively a low risk bond/gilt component

Good thinking.

then seek some better external funds for the other money

In the case of the Tristar fund that would mean crystallising a loss. It has some good components but I think I bought it at a bad time and should let it run.