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How to de-risk your pension and Isas

As you approach retirement your savings and investments should be allocated on the basis of how you will withdraw your assets
How to de-risk your pension and Isas

 

  • As you approach retirement you need to prepare you pensions savings according to how you plan to fund your retirement
  • If you plan to buy an annuity you should you should shift your pension from growth-focused equities into assets likely to move in line with annuity rates
  • But if you plan to leave your money invested and draw an income directly from it you need to continue to hold growth assets 

Historically, unless you had the security of a final salary pension to look forward to, preparing to take a retirement income from your pension was a lengthy process. That was because the vast majority of people bought an annuity – a guaranteed income for life – with their pension fund, meaning that it was sensible to gradually reduce the risk that the value of their investment might be decimated by a market crash in the run-up to the withdrawal of their cash.

However, the options at retirement were broadened in 2015 to include income drawdown, whereby your pension is left invested and you draw income directly from it, and cashing in pensions entirely. So the de-risking path to pension income now varies according to how you plan to fund your retirement.

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