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Gilts & Pre-Retirement Fund

Gilts, bonds, and interest-bearing shares
FanciThat
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Gilts & Pre-Retirement Fund

#234229

Postby FanciThat » July 5th, 2019, 3:06 pm

Hi folks, part of my Final Salary pension (which I will start drawing in 9 months time), is actually a Personal Money Fund pension, which over the last 5 years has gradually moved away from being invested in Black Rock 70/30 Global Growth fund to a mixture of Cash, Index linked Gilts and BlackRock Pre-Retirement Fund (20% switch each year).

However I have noticed in the last few months that the fund value has continued to rise (obviously I don't have a problem with that!) but on closer inspection, I notice that both the Index-linked gilts and the Gilts Pre-Retirement Fund are actually quite volatile, which is the opposite of what I would expect. Presumably this is all down to Bonds and Interest rate expectations, rather than stock markets?

Here's a link to the Pre-Retirement Fund performance recently

https://www.trustnet.com/factsheets/p/qz31/blackrock-dc-pre-retirement-pn

My slight worry is that what goes up may well come down again (particularly with Brexit still not being resolved). Any thoughts on future movements or just some clarity on what drives these movements?

Thanks, FT

Alaric
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Re: Gilts & Pre-Retirement Fund

#234237

Postby Alaric » July 5th, 2019, 3:37 pm

FanciThat wrote: Any thoughts on future movements or just some clarity on what drives these movements?


Are you going to be forced to turn the "Personal Money Fund" into an annuity? If so, you may find the the fund value is designed to mimic fluctuations in the annuity rates on offer.

If drawdown is an option, having so much in fixed interest and indexed may not have been necessary. It was a flaw in the older "accumulate" and "convert to annuity" model of pension provision that so much depended on the relative prices of equities and fixed interest on a single day.

FanciThat
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Re: Gilts & Pre-Retirement Fund

#234332

Postby FanciThat » July 5th, 2019, 10:11 pm

Hi Alaric, I think that is the idea (turn into an annuity) but I'm pretty sure that some ex-colleagues who have already taken their pension managed to use the PMF as part or all of their 25% lump sum. Alternatively I could transfer is out to my SIPP and use it as part of my drawdown fund, which I would then take out next year (most of my pension is final salary and I have no plans to keep my SIPP longer than I need to ....)

Thanks, FT

tjh290633
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Re: Gilts & Pre-Retirement Fund

#234334

Postby tjh290633 » July 5th, 2019, 10:17 pm

FanciThat wrote:Hi folks, part of my Final Salary pension (which I will start drawing in 9 months time), is actually a Personal Money Fund pension, which over the last 5 years has gradually moved away from being invested in Black Rock 70/30 Global Growth fund to a mixture of Cash, Index linked Gilts and BlackRock Pre-Retirement Fund (20% switch each year).

However I have noticed in the last few months that the fund value has continued to rise (obviously I don't have a problem with that!) but on closer inspection, I notice that both the Index-linked gilts and the Gilts Pre-Retirement Fund are actually quite volatile, which is the opposite of what I would expect. Presumably this is all down to Bonds and Interest rate expectations, rather than stock markets?

Here's a link to the Pre-Retirement Fund performance recently

https://www.trustnet.com/factsheets/p/qz31/blackrock-dc-pre-retirement-pn

My slight worry is that what goes up may well come down again (particularly with Brexit still not being resolved). Any thoughts on future movements or just some clarity on what drives these movements?

Thanks, FT

The problem with fixed interest securities is that they mature at a price which can be far below the current price. You have fallen victim to the outdated concept, that you should move into fixed interest as you near retirement. Nothing could be further from the truth.

What you need is a high and increasing flow of dividend income when you retire, probably most safely obtained from a well chosen selection of investment trusts.

If you search for the B7 and B8 it should lead you to some possible portfolios, which may suit your needs better than what you have now. You are right to be worried.

TJH

gbjbaanb
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Re: Gilts & Pre-Retirement Fund

#234412

Postby gbjbaanb » July 6th, 2019, 2:46 pm

FanciThat wrote:However I have noticed in the last few months that the fund value has continued to rise (obviously I don't have a problem with that!) but on closer inspection, I notice that both the Index-linked gilts and the Gilts Pre-Retirement Fund are actually quite volatile, which is the opposite of what I would expect. Presumably this is all down to Bonds and Interest rate expectations, rather than stock markets?


When I first started investing, I noticed that my bond fund did well during the recession, and the equity fund did afterwards. It made me think that binds and equities were 2 sides of investment, depending on the economic conditions.

But then we had QE, and the whole economic landscape has changed. there's so much money sloshing around that bonds are fully bought with cheap money and their price is now as volatile as equities. I think the most defensive place to put your money these days is in equities - utilities and consumer staple type shares.

FanciThat
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Re: Gilts & Pre-Retirement Fund

#234833

Postby FanciThat » July 8th, 2019, 11:07 am

Thanks all for the info - further food for thought!

Cheers FT


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