Pension
Income
Investor

When do I need to consider changing the investments in my pension income portfolio?

If you invest your retirement pot in the portfolios we have suggested, or any similar basket of investments, you’ll need to keep a close eye on the funds involved.

There are two main things to watch out for.

First, a change in fund manager. We have chosen the funds in our portfolios partly because of the reputation and record of the individuals in charge. When these people retire or move on, investors at the very least need to consider whether to switch to an alternative fund.

When fund managers leave, fund management firms tend to put out statements along the lines of, “we have a strong team in place and our process will remain unchanged”. Treat these statements with a degree of scepticism. Form your own opinion – perhaps with help
from the personal finance sections of national newspapers or from specialist websites such as www.morningstar.co.uk or www.citywire.co.uk – of the merits of the new managers relative to the alternative funds available. We intend to keep up-to-date information on the best
alternatives on this website.

The other important task is to monitor performance. This is not a question of looking every day at the ups and downs of the price of our funds, but a matter of spotting any consistent failure to perform in line with similar funds over a period of two or three years. There are tools that allow you to compare a fund’s performance with its peers on platforms (Hargreaves Lansdown has one, which both customers and non-customers can use) and we will aim to keep track of the funds in our portfolios on our website.

There are other circumstances in which you may want to change the portfolio. This has nothing to do with individual funds, but concerns the types of asset that you hold.

There is an argument that investors should switch to less volatile assets, principally bonds, as they approach the point at which they want to buy an annuity, as we expect investors in the high-income portfolio to need to do at some stage, as explained in Step 5. We believe that such a switch to bonds is a sensible course of action in general, although the situation at the time of writing is complicated by the fact that the safest bonds are widely seen as overvalued and highly priced.

We cannot say at this stage what the best course of action will be in, say, ten years’ time.

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