A reader approaching retirement asks if they should bring forward their de-risking plans
Thursday 12 Sep 2019 Author: Daniel Coatsworth

I’m 57 and currently have my SIPP invested mainly in equities. I plan to start taking an income via drawdown when I turn 65 and so was planning to take a bit less risk from my 60th birthday. However, given everything that’s going on in the UK at the moment I’m wondering if I should bring forward my plans?


Tom Selby, AJ Bell Senior Analyst says:

Lots of investors are concerned about Brexit and what it might mean for their investments.

While it might be tempting to radically alter your retirement strategy based on whether or not the UK leaves the EU with a deal, remember this is just one political event whose impact is far from certain. One of the biggest mistakes investors can make is dramatically shifting their portfolios based on short-term events such as Brexit.

The pound has recently been falling in value which could hurt UK-focused companies while potentially giving a boost to exporters whose goods will become cheaper to foreign buyers. If the Prime Minister salvages a Brexit deal and sterling rebounds, the opposite will likely occur.

The extent to which either scenario will play out is entirely unclear at this stage. There are also many other factors at play, including UK economic performance and the Bank of England, which sets interest rates independently of Government.

Something like Brexit should be seen as an opportunity to review your portfolio and strategy to make sure you aren’t overly exposed to one outcome or another.

It is good sense not to put all your eggs in one basket by investing in a single or even handful of shares which may be overly exposed to the fortunes of a particular factor or country’s fortunes.

This does not necessarily mean having to choose lots of shares or funds – a single global equity or multi-asset fund might be satisfactory, as long as it is widely diversified.

When it comes to reviewing and potentially reducing your exposure to equities – and hence the risk – in your portfolio as you approach retirement, you should weigh the pros and cons first.

Broadly, reducing risks in a diversified portfolio, perhaps by holding more bonds and cash in place of equities, should dampen the volatility of your investments. It will also limit the extent to which they can grow, meaning your outcome becomes more certain. This is a common strategy for people approaching retirement, particularly when they plan to buy an annuity.

While there is nothing wrong with holding cash or cash-like investments as part of your portfolio, having the majority of your fund in cash leaves you exposed to the ravages of inflation. This might not be a problem for a year or two, but over longer time periods it risks seriously eroding your fund value.


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Please note, we only provide guidance and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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