De-Risking Pension Portfolio

L

LiferT

Registered User
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Hi All

I intend to retire in approx. 5 years and have a defined contribution pension, invested in a growth fund with a medium risk level (4 out of 7).

To protect against any upcoming stock market correction or bear market, I would like to move into less risky investments, particularly as there would be little time over the next 5 years for my portfolio to recover in the event of a severe correction in the stock market.

Although I intend to invest in an ARF/AMRF at retirement age and see the need to keep some risk to provide a return over time, I would also like to protect the value of my lump sum at retirement.

I am thinking of moving to a more cautious fund with a lower risk level (3 out of 7), comprised of just over 40% shares and 30% bonds, with the remainder in alternatives, property and cash.

As always, I would appreciate your views about switching funds at this stage to protect my portfolio?

Thanks

LT
 
What other pensions do you have (state pension, defined benefit) etc? Useful to know the % to which your retirement income is dependent on this.

E.g. my wife and I each expect Irish state pension, UK state pension, small defined benefit pension, so I would expect to retain my defined contribution pension fund at a high risk level, because we are assured a reasonable baseline fixed income.
 
Two things to remember:

Many people hit pension age with a mortgage paid off and a full contributory state pension. This means that shelter and the basics are fully covered. So think about your overall risk profile, not just that of the fund.

You and/or a spouse could easily be drawing down from the pension fund for another thirty years. So you will need good returns to sustain you. OTOH a sequence of poor returns after you stop contributing could wipe you out if you are heavily in equities.
 
Thanks for your replies.

I will be availing of an almost full state pension when I reach state retirement age (whatever that will be), but will likely be relying on my DC occupational pension exclusively for the first couple of years of retirement.

This is why I would like to safeguard my lump sum as it will be used to subsidise my income before the state pension kicks in.

Thanks

LT
 
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