Degree of Risk

cogito

I'm 59 and not intending to draw on my pensions until I'm 65 and then go into drawdown.

My current investments are:

Sun Life Section 32 policy - guaranteed income of £4200 at 65
Axa Lifestyle pension £19000
Standard Life With Profits - £46000
New Star Tristar - £24000
Invesco High Income - £20000
M&G Global Basics - £18000
Schroder Emerging Markets - £13000
Standard Life Pension Pacific Basin - £12000
Standard Life Pension European - £37000

Total annual contributions are about £12000 split 50/50 Invesco/M&G.

A friend of mine who 'knows about these things' suggests that my funds are a bit high risk but I personally feel fairly comfortable with them. He has got me a bit concerned. Should I be?

dunstonh

Risk is a personal thing. Everyone has different risk profiles. If you are happy with the level of potential volatility that can occur between now and retirement then there is no reason to change it. However, you would typically be best advised to scale down the risk gradually as you get closer. Especially if you are doing annuity purchase rather than income drawdown.

What you may want to do is investigate combining some of those pension plans (where no guarantees exist) if you are looking at annuity purchase as the fewer the number of sources, the better the annuity rate typically.

cogito

Thanks very much. I know not to touch the Section 32 Policy and I've realised that I've forgotten about another policy with Sun Life which has £23000 in a with profits fund. I suppose I could move that policy and the Axa one across to Standard Life in line with your suggestion as long as there is no downside.

My present investments are light on the USA and Japan which was a conscious decision I took a few years ago but I'm happy with that as I think it was the right thing to do.

dunstonh

I suppose I could move that policy and the Axa one across to Standard Life in line with your suggestion as long as there is no downside.

You would need to check for guaranteed annuity rates. Especially on the old sun life one. I wouldnt be too quick to move them to Std Life either. There are much better options out there than SL.

You need to consider if you are doing income drawdown or annuity really before you do anything (exc section 32 of course).

As for risk, changes shouldnt be like an on/off switch. It should be gradual. It may be a case where you reduce the risk of the portfolio by moving 20% a year out of the stockmarket for each of the last 5 years. Or after a period of good growth, dont get greedy and hold on but move a greater chunk to safety. If you are going income drawdown then you may want to move part of the portfolio progressively into higher yielding funds with income reinvested so you start the process going early.

There is really no right or wrong as long as you know what you are doing and why.

EdInvestor

Since you are planning to do drawdown, which is typically done via a SIPP, you may like to consider moving suitable pensions into a SIPP now, as this makes the whole "taking benefits" process extremely hassle free later.

If you are a fund investor, this may be the best SIPP to look at:

https://www.h-l.co.uk


Also gives access to the best quality unit trusts at discount rates.