Pension help

[user1480889603]

Hi
I have a workplace pension and it's now worth around £400k. I pay the maximum contribution and AVCs in order to get the tax break thing with the employer contribution so quite a lot is being invested each month. I'm 51 and the default Target Retirement Age is usually 65. But in 2020 I changed the TRA to 55 being rather optimistic about early retirement (wishful thinking!). In late 2023 (a year after the Truss debacle) I changed it to 57. This is because I realised I'd been a bit optimistic and also that the lifestyle fund switches funds into less risky (with less return) investments the closer to retirement you get - ie I realised i was losing out on growth. One year earlier I was cautioned to not make this switch immediately as it might crystallise losses. I tried to talk to the pensions manager about when might be a good time to switch the TRA to 57 but they won't tell you what to do - they just provide information. I just don't really understand pensions so I am panicking a bit wondering if I've done it all wrong now. Especially as now I think I'd like the TRA to be even higher - 59 or 60 ideally. Would I be "crystallising losses" ? Later this year when I turn 52 more of my money will be diverted into the cash fund rather than consolidation fund. This will increase a bit each year. My instinct is to change the TRA before then. Looking at my pension statements my pension does seem to have gone up in the past 2 years ... but considering that around £16,000 a year (of mine and employer's money) is being invested it doesn't seem to have grown that much.
Anyway my question is - is it safe to raise the TRA to 59 or 60. Sorry if all this sounds rambling. I have read and re-read the statements and all the info and just don't understand a lot of it.

I think you should take advice from a financial adviser specialising in pensions.

I believe the TRA is only relevant if you ask for lifestyling, ie the funds switch from equities into less risky bonds as you approach the TRA. Personally I have always switched off lifestyling because I don't like that automatic approach and prefer more control over my pension investments.

Nowadays, we have so many more options as to how and when we take our private pension. You also don't want to convert during a dip in the market though the market seems quite bouyant at the moment. Best to consult an expert.

I'm not a financial adviser, so suggest you speak to your pension fund manager to clarify exactly how adjusting the TRA impacts any "lifestyling" in your particular pension scheme.

I have switched off lifestyling completely, as I'm happy to keep my private pension 100% in equities forever i.e. although my TRA is stated as being 67 there's no automatic transfer from equities to bonds/cash. However, I'm not reliant on my private pension (I have full state pension and an index-linked final-salary company pension to come) so I can be a bit more gung-ho with the private pension. If your company pension is the only income you'll have, you might decide you want to reduce the risk of a massive crash in equities cutting the value of your pot just before you retire. Think about it this way - if your £400k suddenly dropped 25% to £300k, would that affect you a lot?

If you alter your TRA I wouldn't call it "crystallising losses", as you aren't taking any money out at this stage. You are just swapping your money from one type of investment to another as you approach retirement. No-one has a crystal ball, so no-one can tell you whether that will turn out to be the best decision or not.

Have you spoken to Pension Wise? Free, impartial advice to over 50s provided by the government. Maybe they can explain things in more detail.

are You planning on buying an annuity with your pension fund? This is really what lifestying was set up for so you lower the risk of your pot dropping significantly as you move towards retirement
The closer you are to your stated retirement age than the more will have been taken out of equities and put into bonds or cash which will impact performance.
I suspect that you would be best to move your retirement age to the latest you think it will be as soon as possible.

‘Lifestyling’, which is the term for moving everything towards cash or low volatility investments as you near retirement age, was designed for those who were going to buy an annuity at retirement. it should give you much more predictability as to what annuity you’ll get, whereas if you keep eg all your investments in equities and then the stock market crashes just before you plan to retire, it could make a big difference.

But if you are planning to take your pension as drawdown, you can keep it on higher growth assets throughout your retirement. But obviously this means your pot has more potential for growth, but also more potential for dips. And if you live a longer life than you expect may run short on money.

I plan to take mine via drawdown so avoiding life styling altogether. Be aware some funds don’t allow it, but if you would be able to switch it into one that does.

as a pp said, there is free pensions advice via moneyhelper for over 50s