Pre/Post retirement equity exposure etc

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Hesitant

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I've seen a number of posts that seem to recommend having the same exposure to equities pre and post-retirement. The premise appears to be that you will
need to take on the same level of investment risk immediately post-retirement if you expect your pot to last for another 20+ years (hopefully). However
is it not the case that prior to going into an ARF/annuity there will be a benefits crystallsiation event (BCE) that involves cashing up your pot and then re-investing
in an ARF/annuity. In that event is it not better to have moved gradually to cash (not bonds given recent events) prior to the BCE. This guards agaisnt the risk of a major downturn near retirement. Then post retirement in the case of an ARF to have an invesment mix that includes a cash pot representing 5(?) yrs expected/imputed withdrawals and then the rest in equities. The cash pot can be used to pay the withdrawals and guard again sequencing risk by being replenished from the equity pots during up cycles. Does this make sense or is it even possible? Apologies if already asked and answered.
 
Well, my personal opinion is that it is prudent to have 10 years’ of anticipated expenses in cash on retirement.

The reason being, as you suggest, to mitigate sequence of returns risk.

The cash doesn’t necessarily have to all be in a pension vehicle - it could partly or wholly be made up of deposits held outside a pension.
 
Sarenco said:
Well, my personal opinion is that it is prudent to have 10 years’ of anticipated expenses in cash on retirement.

The reason being, as you suggest, to mitigate sequence of returns risk.

The cash doesn’t necessarily have to all be in a pension vehicle - it could partly or wholly be made up of deposits held outside a pension.
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Sounds like a good option. But I have heard that some ARF providers will insist on distributing the minimum 4% and in that case if it was during a period of weakness for equities unless it was coming from a cash pot withint the ARF structure your fund value would be hit. Don't know if this is true but I'd be interested to know what flexibility ARF's provide in this regard. Can that detail be found online?
 
Imputed distributions from an ARF kick in the year you turn 61.

But it’s important to look at all your accounts as a whole - it really doesn’t matter what “pot” the money comes from to fund your spending.
 
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Sarenco said:
Imputed distributions from an ARF kick in the year you turn 61.

But it’s important to look at all your accounts as a whole - it really doesn’t matter what “pot” the money comes from to fund your spending.
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If an ARF was 50/50 between a cash and an equity fund and we were in the middle of a market crash would it not make sense to pay any withdrawals+tax out of the cash fund potentially giving the equity fund time to recover? Sorry if my understadning is flawed.
 
Hesitant said:
If an ARF was 50/50 between a cash and an equity fund and we were in the middle of a market crash would it not make sense to pay any withdrawals+tax out of the cash fund potentially giving the equity fund time to recover? Sorry if my understadning is flawed.
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I'm not too far from retirement and I'm currently about 76% in equities with the remaining in bonds, cash, alternatives and property. All of my new contributions are going into cash so that on retirement the lump sump will be taken from the cash element soley. After retirement I plan to keep 5 years spending in cash and the rest of the ARF as equities. So I think what you're stating and proposing makes perfect sense to me and from what I've read seems to be the way to go. My pension has variety of lifestyling options from conservative to adventurous but as even the adventurous lifestyling approach looked a fair bit too conservative I've chosen the option to self manage.
 
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Flybytheseat said:
I'm not too far from retirement and I'm currently about 76% in equities with the remaining in bonds, cash, alternatives and property. All of my new contributions are going into cash so that on retirment the lump sump will be taken from the cash element soley. After retirement I plan to keep 5 years spending in cash and the rest of the ARF as equities. So I think what you're stating and proposing makes perfect sense to me and from what I've read seems to be the way to go.
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Thanks @Flybytheseat . But my take on it was that at retirement you cannot opt to get the lump sum from the cash element soley. Rather the entirety of the pension (all funds - bonds,cash,equity etc) is encashed and the lump sum deducted before you move into ARF/annuity. So if that occurs in a period of stock market volatility you might take a hit.
 
Hesitant said:
Thanks @Flybytheseat . But my take on it was that at retirement you cannot opt to get the lump sum from the cash element soley. Rather the entirety of the pension (all funds - bonds,cash,equity etc) is encashed and the lump sum deducted before you move into ARF/annuity. So if that occurs in a period of stock market volatility you might take a hit.
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True but hopefully I'll only be out of the market for a mater of days/weeks on retirement. Dont see how you can avoid this very short window of risk.
 
Hi,
It was my understanding that not all ARF providers offer the option of drawing your annual income from a particular fund but instead apply the same percentage across all funds within your ARF with the QFM.
For example, only some providers (New Ireland, Royal London Ire…) would allow bucket strategy (draw 4% from cash fund).
Am I wrong in this understanding ?
 
Hesitant said:
we were in the middle of a market crash
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How would you know in real time if you were in the middle of a crash? These things are only clear (long) after the fact.

Otherwise to answer the question I think it depends on how much other income you expect in retirement: state pension, part-time work, rental, DC pension from previous employment, etc. The more fixed pension income you have the more equity exposure you can tolerate.
 
Deauville said:
Hi,
It was my understanding that not all ARF providers offer the option of drawing your annual income from a particular fund but instead apply the same percentage across all funds within your ARF with the QFM.
For example, only some providers (New Ireland, Royal London Ire…) would allow bucket strategy (draw 4% from cash fund).
Am I wrong in this understanding ?
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I believe that Zurich may provide an option to have some funds in the equivalent of a cash fund and that drawdowns can be made exclusively from that. It’s then topped up regularly to maintain the income stream. That is from an informal discussion with one of their client advisors.
 
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Hesitant said:
If an ARF was 50/50 between a cash and an equity fund and we were in the middle of a market crash would it not make sense to pay any withdrawals+tax out of the cash fund potentially giving the equity fund time to recover? Sorry if my understadning is flawed.
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Why would you need 50% of your ARF in cash if you are only taking out 4%? That is far too much money to have in cash in an ARF. As Sarenco said, you will have a pile of cash from your tax free lump sum also that will be used to supplement your income. If there is a crash not long after/ at maturity, if you take out the minimum 4% from the cash portion, you'll be fine.
 
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