Should You Be Selling Equities in the Run Up to Retirement?

Should you be de-risking your portfolio as you approach retirement? Your financial situation does still change significantly at retirement, even if you no longer have to buy an annuity

Emma Wall 7 April, 2016 | 6:17PM
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This article is part of our Guide to Maximising Your Pension, helping investors build up the maximum possible pension pot – and turn it into the maximum possible retirement income.

Are lifestyle funds obsolete? Lifestyling may sound like the latest diet fad from across the pond, but in fact it’s the act of de-risking your pension portfolio as you approach retirement age. Before pension freedoms were introduced in April 2015, buying an annuity when you reached retirement was compulsory for most workers. In order to make this process as seamless as possible, the pension provider matched the underlying assets of your savings scheme with those found in an annuity basket – namely low risk government bonds and cash alternatives.

Annuity rates were indeed linked to the 15-year gilt yield, which in June 2008 was 5.11% - not an unattractive proposition at retirement. But in these days of low interest rates a 15 year gilt yields just 1.95%, and as annuitisation is no longer compulsory lifestyling is not just unattractive but you could argue has no place at all pension planning.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Emma Wall  is former Senior International Editor for Morningstar

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