# Pension taking a hit



## Trivia (18 Jun 2022)

I’m 8 years out from retirement.  My pension has dropped from 860k to 710k in the last couple of years. It’s split between medium and high risk.  Rang the pension advisor who manages the pension fund at the beginning of the year when it started to lose value to ask should I move to low risk. The advice I got was to hold tough and to  ride it out, it’s impossible to know when it will rise and I’d miss out on an upward swing. He told me there was little difference between the medium and high risk and the fund was being managed. It will gain value over the long run. I’m feeling nervous. Any advice?


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## jpd (18 Jun 2022)

Sit tight and wait it out - 8 years is enough time for the markets to recover


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## Dunelm (18 Jun 2022)

With most people now opting for an ARF rather than annuity does this change the standard advice of de risking approaching retirement? Feels like even if there was only two or years to retirement that staying in mostly equities might be okay as retirement no longer crystallises a position like it once did,


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## Conan (19 Jun 2022)

I understand the idea of taking an 8 year investment view. However if you are intending to invest the residual 75% into an ARF on retirement,  then perhaps you need to take an investment time horizon that looks beyond the 8 years to retirement. So how do anticipate investing the ARF?


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## moneymakeover (19 Jun 2022)

The point about the 25% cash withdrawal at retirement is a good one.

We all want to maximise that


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## Trivia (19 Jun 2022)

Thanks for your replies. I definitely want to withdraw 25% cash on retirement and then reinvest the remaining amount to an ARF fund.


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## Sarenco (19 Jun 2022)

The recent inflationary spike has been tough on all our pension fund balances.

Year to date, global equities (MSCI World) are down around 15% in euro terms.  But, somewhat unusually, government bonds (EGBI) are down almost as much.  There’s really nowhere to hide.

So what to do?

Grit your teeth and hope for better days.  There’s not really anything else you can do.


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## Gordon Gekko (19 Jun 2022)

Any advice?

Ramp up your pension contributions…


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## odyssey06 (19 Jun 2022)

Gordon Gekko said:


> Any advice?
> 
> Ramp up your pension contributions…


To cover your the hit or to take advantage of the gains when they happen ?


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## Gordon Gekko (19 Jun 2022)

Items that you want and need have become substantially cheaper. In any other walk of life, you’d buy more.


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## DazedInPontoon (19 Jun 2022)

As well as taking on board the advice you're being given (I agree with Gordon) it can be helpful to understand *why* you're feeling the way you do.

I would sum it up as: people know they should buy low and sell high when investing, but your instincts will often lead you to do the opposite, you will feel euphoria when things are going good and want to pile in more (which can lead to buying into bubbles) and feel like quitting when things have gone down even though this is the time to 'buy low'.


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## Paul O Mahoney (20 Jun 2022)

DazedInPontoon said:


> As well as taking on board the advice you're being given (I agree with Gordon) it can be helpful to understand *why* you're feeling the way you do.
> 
> I would sum it up as: people know they should buy low and sell high when investing, but your instincts will often lead you to do the opposite, you will feel euphoria when things are going good and want to pile in more (which can lead to buying into bubbles) and feel like quitting when things have gone down even though this is the time to 'buy low'.


If its okay I'll give my tuppence.

When we pass 50 our lives seem to change, in most cases our children are heading or are in adulthood and the focus shifts away from them to us the parents.

Many of us have a pension and we start the road of understanding what that few bob we have been squirreling away for 20,25,30 years, now we want to know what this " pot of gold" will provide in our latter years.

Some of us realise we may not have enough,  we increase our contributions via AVCs and despite the tax advantages of doing this the net pay is still reduced and despite years of getting by with mortgages, children etc we are nervous and despite knowing that this is a savvy financial move.

We have based our future lives on having a pension,  we might be paying off the mortgage with the lump sum, we want to travel we want to create a " bucket list" and tick off each item, but we need our pension.

If those funds are less than we thought then our future is not going to be what we want or it "might'nt " be.

While people know the risks of investment in anything, when those people see their investments, especially their pension reduce in value,  anxiety develops.

The majority don't have the level of understanding of financial stuff that is apparent on this forum and they probably thought that what goes in comes out,  rightly or wrongly.

I typed using " we" but it's my wifes pension that will be our main pension and I try and forecast the future years to retirement, obviously it's our point of  view and appreciate others will have different views and circumstances.


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## Jim2007 (20 Jun 2022)

Trivia said:


> I’m 8 years out from retirement.  My pension has dropped from 860k to 710k in the last couple of years. It’s split between medium and high risk.  Rang the pension advisor who manages the pension fund at the beginning of the year when it started to lose value to ask should I move to low risk. The advice I got was to hold tough and to  ride it out, it’s impossible to know when it will rise and I’d miss out on an upward swing. He told me there was little difference between the medium and high risk and the fund was being managed. It will gain value over the long run. I’m feeling nervous. Any advice?


To start with one would need to know what exactly what the allocation are and how well it is tracking the benchmark mark.  And in addition, the asset allocation for your total wealth.  Only then can you figure out your total exposure and make decisions on rebalancing.

If your pension advisor also manages the fund their advice is not worth much because there is a conflict - in times like these they need to manage the fund float carefully….


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## Dexysgirl (22 Jun 2022)

Hope its ok to hop in here as my husband(58) and myself(55) are asking the same questions re. our Exec Pensions.  We are hoping to retire in the next year to 18 months and are worried about the hit on the funds this year. My husbands main policy was close to 580k and is down to nearer 500k. This fund can be cashed in from aged 55 .
We opened 2 new funds (one each) in the last few years and the normal retirement  age on these is 60.There is 117k in my fund (down from 135 since Jan) and 30k in my husbands.  Should we  (1)keep paying into this pension but move into a cash fund to safeguard the figure and perhaps get some interest on it for the next year or so, as interest rates are now rising or (2) cash in the main fund and focus on the other 2 funds for the coming few years until we fully wind up the company (approx 2 years). 
Many thanks


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## joe sod (24 Jun 2022)

My pension fund is down about 12% so far  ,its all in equities and higher risk profile mixed asset funds. How are other people getting on?


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## ClubMan (24 Jun 2022)

joe sod said:


> My pension fund is down about 12% so far


So far from what date or compared with what?


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## TRS30 (24 Jun 2022)

joe sod said:


> My pension fund is down about 12% so far  ,its all in equities and higher risk profile mixed asset funds. How are other people getting on?



From the start of the year, mine is down about 2% to the end of March. I'll be checking again at the end of this month. Will most likely be down more however doesn't bother me as is a long term investment and I'm getting cheap units.


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## MelF (24 Jun 2022)

Gordon Gekko said:


> Items that you want and need have become substantially cheaper. In any other walk of life, you’d buy more.


I don't understand this. 'Items that you want and need.' Does this relate purely to the pension?


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## Steven Barrett (24 Jun 2022)

MelF said:


> I don't understand this. 'Items that you want and need.' Does this relate purely to the pension?


Items on sale and you buy more than you need right now because they are going cheap. 

Same with stocks. The share price of *quality* companies are cheaper than usual, so buy more.  The price will go up in the future.


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## joe sod (24 Jun 2022)

ClubMan said:


> So far from what date or compared with what?


From the start of the year


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## ClubMan (24 Jun 2022)

Steven Barrett said:


> Same with stocks. The share price of *quality* companies are cheaper than usual, so buy more.  The price will go up in the future.


Encouraging people to try to time the market?
Hmmmm....


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## ClubMan (24 Jun 2022)

joe sod said:


> From the start of the year


Why not the start of last year.
Or 10 years ago?
And it's an apples and oranges comparison given that everybody's pension investments, timeframe, charges etc. will vary so much.
Pointless exercise.


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## Gordon Gekko (24 Jun 2022)

ClubMan said:


> Encouraging people to try to time the market?
> Hmmmm....


Nobody’s encouraging anyone to try and time the market.

It all depends on the time horizon? If, as it is for most people, it’s multidecade, then investing in a diversified portfolio of quality companies makes sense.

Markets are off by 20%+. So the “things” that one wants and needs to own over the next number of decades have gotten cheaper.


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## joe sod (24 Jun 2022)

ClubMan said:


> Why not the start of last year.
> Or 10 years ago?
> And it's an apples and oranges comparison given that everybody's pension investments, timeframe, charges etc. will vary so much.
> Pointless exercise.


It's simply to gauge whether I'm doing OK relative to other people.  For example if I was down much more than others well then I would have to question whether I am invested in the correct pension funds.


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## jim (24 Jun 2022)

Gordon Gekko said:


> So the “things” that one wants and needs to own over the next number of decades have gotten cheaper.


But who knows future price and whether todays price is good value. It might not be. Price could be 50% less in 6 months.


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## Steven Barrett (24 Jun 2022)

ClubMan said:


> Encouraging people to try to time the market?
> Hmmmm....


What?!!! 

Did you read what I said? First of all, it was an explanation of what someone else said and secondly, it was encouraging anyone to time the market. It was shares are cheaper than usual. That is a fact and isn't reliant on timing anything. Buy them today, tomorrow or the day after and they will still be cheaper than December 2022.


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## noproblem (24 Jun 2022)

jim said:


> But who knows future price and whether todays price is good value. It might not be. Price could be 50% less in 6 months.


They could indeed, they could also be 100% more in 12 months.


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## T McGibney (24 Jun 2022)

"When prices fall, people tend to buy more" is in all fairness the most basic of all the rules of economics.


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## interested21 (24 Jun 2022)

ClubMan said:


> Encouraging people to try to time the market?
> Hmmmm....


It's the opposite of timing the market. It's encouraging people to continue buying while the price is down, in anticipation of the price going up again over the lifetime of the pension. If you're not anticipating the price going up in the future then why invest at all?

It's easy to say "buy low and sell high" but a lot of people now are realising why this is harder than it sounds - things are low because of negative sentiment and you need to have conviction and courage to swim against the tide and continue to invest in the expectation of future highs. Or maybe you do believe prices will go up again in the future, but you think we have further to drop and try to time the bottom, but you miss it because you keep waiting and end up buying in again at a higher price than if you had just gone for it in the first instance.


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## interested21 (24 Jun 2022)

T McGibney said:


> "When prices fall, people tend to buy more" is in all fairness the most basic of all the rules of economics.


When it comes to investing though people tend to get irrational and buy when the price rises and sell when it falls!


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## Conan (24 Jun 2022)

If you remember back to the “financial crash”, Equity markets fell c30% in 2008 and the largest drawdown from Equities into Cash by Pension investors was in the first 3 months of 2009. Had those people stayed invested, they would have recovered their “losses” in the following 2 years. But many got out at the bottom (crystallised their losses) and then missed the recovery. History may or may not repeat itself, but it certainly rhymes.


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## Gordon Gekko (25 Jun 2022)

jim said:


> But who knows future price and whether todays price is good value. It might not be. Price could be 50% less in 6 months.


No, it couldn’t.

You think that after prices have fallen by 20%-ish year to date, they’re going to fall by 50%?


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## jim (25 Jun 2022)

Gordon Gekko said:


> No, it couldn’t.
> 
> You think that after prices have fallen by 20%-ish year to date, they’re going to fall by 50%?


Its possible


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## Gordon Gekko (25 Jun 2022)

jim said:


> Its possible


As possible as aliens landing on the steps of the GPO tomorrow and telling us who’s going to win next year’s Masters.

Most things are “possible”.

Markets are not going to fall by 50%.

That would represent a 60% fall, given what’s happened already this year.


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## jim (25 Jun 2022)

Gordon Gekko said:


> As possible as aliens landing on the steps of the GPO tomorrow and telling us who’s going to win next year’s Masters.
> 
> Most things are “possible”.
> 
> ...


The point is markets could continue to fall significantly. Who knows by how much or whether they will in fact rise. Tis hard to predict loike.


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## bitethebullet (25 Jun 2022)

My DC pension has done nothing but fall since i changed it from cash to high risk global equities fund.It's down 10% since i amended it last August.  As others have said though the units are cheaper I'm getting more. Also i'm 13.5 years away from retirement so not too worried.....yet


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## joe sod (25 Jun 2022)

I think though this time you really need to know where actually the pension funds have money invested because of the inflation not being a big factor since early 80s. If for example it is a "low risk" fund, that means a higher proportion of bonds but bonds are not the place to be with high inflation and bond values are falling. Also you don't want too much exposure to tech or growth stocks in this inflationary environment.
I think this "low risk" "high risk" categorization is completely out dated now we need more information than that


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## Lisboa (27 Jun 2022)

I'm also down 12% this year but I'm not worried about that.  

When my company set up the pension plan (2018 or 2019), I picked the two funds with the highest risk/reward ratings (6/7), at a split of 50/50 each;

*A passive global equity,
*An active and passive diversified mix of assets - (which is still at least two thirds equities).

Now I'm wondering if it's a good time to just move everything to the passive global equity fund and leave it for 20 years (I'm mid 30's).


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## Dave Vanian (27 Jun 2022)

bitethebullet said:


> My DC pension has done nothing but fall since i changed it from cash to high risk global equities fund.It's down 10% since i amended it last August.  As others have said though the units are cheaper I'm getting more. Also i'm 13.5 years away from retirement so not too worried.....yet



I'm curious as to why you were in cash before August 2021 and what prompted you to switch then?


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## Sarenco (27 Jun 2022)

Gordon Gekko said:


> No, it couldn’t.
> 
> You think that after prices have fallen by 20%-ish year to date, they’re going to fall by 50%?


The DOW ultimately fell by 89% from its 1929 peak.

I'm not saying it's going to happen, but a further fall of 50% in real terms from where we are today is certainly within the realms of possibility.


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## bitethebullet (27 Jun 2022)

Dave Vanian said:


> I'm curious as to why you were in cash before August 2021 and what prompted you to switch then?



I was always in the default lifestyle strategy. When i looked at the graphs over the last few years the equities option looked more attractive. Not soon after i joined it started to nose dive. Hopefully things will recover in the next few years.


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## Dave Vanian (27 Jun 2022)

bitethebullet said:


> I was always in the default lifestyle strategy. When i looked at the graphs over the last few years the equities option looked more attractive. Not soon after i joined it started to nose dive. Hopefully things will recover in the next few years.



Thanks.  It sounds like you weren't in cash but were probably in a mixed asset fund.  As a general rule, over the long term a pure equity fund would be expected to do better in a rising market than a mixed asset fund.  If you were looking at graphs of past performance last year when most funds were on the up, that would probably be what you saw.  However, I hope your broker explained to you that during a market fall, a pure equity fund will be likely to fall further and faster than a mixed asset fund too.  With over a decade to go before you retire, I think you'll be fine, especially if you have monthly contributions going in and buying at lower prices.  Hold the nerve (or stop looking at it altogether.)


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## Gordon Gekko (27 Jun 2022)

Sarenco said:


> The DOW ultimately fell by 89% from its 1929 peak.
> 
> I'm not saying it's going to happen, but a further fall of 50% in real terms from where we are today is certainly within the realms of possibility.


On that basis, anything is within the realms of possibility.

An amateur winning the Masters is within the realms of possibility.

My son playing for Manchester United is within the realms of possibility.


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## Sarenco (28 Jun 2022)

Gordon Gekko said:


> An amateur winning the Masters is within the realms of possibility.


Well, no amateur has ever won the Masters before. 

But the global stock market has fallen by 50%+ in the past so there is historic precedent.

Again, I’m not predicting anything.


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## jim (28 Jun 2022)

Gordon Gekko said:


> On that basis, anything is within the realms of possibility.
> 
> An amateur winning the Masters is within the realms of possibility.
> 
> My son playing for Manchester United is within the realms of possibility.


Of course its very possible that the stock market coukd fall further and fall significantly. To say otherwise is irresponsible.


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## Gordon Gekko (28 Jun 2022)

jim said:


> Of course its very possible that the stock market coukd fall further and fall significantly. To say otherwise is irresponsible.


Respectfully, I disagree.

I also argued against a 50% fall from current levels, not against further falls.

It’s analagous to contradicting someone who’s arguing that an amateur won’t win the Masters by pointing out that Francis Ouimet did in fact win a Major in 1913.

50% falls on top of 20-25% falls are like hen’s teeth.


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## Sarenco (28 Jun 2022)

Gordon Gekko said:


> It’s analagous to contradicting someone who’s arguing that an amateur won’t win the Masters by pointing out that Francis Ouimet did in fact win a Major in 1913.


Amateurs actually won golf majors as recently as the 1930s.  But no amateur has ever won the Masters.

Anyway, you said that stock prices "couldn't" fall by 50% on top of a 20% fall. 

They could actually.  They have in the past and may well do so again at some point in the future.


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## Gordon Gekko (28 Jun 2022)

Pedantry is alive and well.

“Markets fell by X% a hundred years ago so it’s mad to say that they can’t do so again.”


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## TRS30 (28 Jun 2022)

Are probability and possibility not two different things.


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## Brendan Burgess (28 Jun 2022)

That's all folks...

We had this discussion before 






						Key Post - A rough year
					

This analysis was originally in sterling but the conclusions are just a valid for a Euro investor.  September and October were torrid months for global markets.  Market falls are unsettling for investors, leading to questions like, “what if this time is different, what if markets never recover...



					www.askaboutmoney.com


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