What caught my eye this week.<\/em><\/p>\n I<\/span> noticed an article in This Is Mone<\/em>y<\/a> this week featuring a reader upset that their pension hadn\u2019t been life-styled into lower-risk assets as they\u2019d hoped.<\/p>\n Instead, they wrote:<\/p>\n \u2026my money remained in a fund rated moderate-high risk\/high reward until March 2020.<\/p>\n At this point, I realised what had happened and asked for the switch to be made manually. The same month, I asked for my pension date to be moved forward five years to March 2025.<\/p>\n Shortly after, the stock market plummeted due to the pandemic and I am now entering retirement with a shortfall in my fund.<\/p>\n<\/blockquote>\n Judging solely on the facts presented, you can see why the reader is aggrieved.<\/p>\n The pension provider seems to have sent out literature describing a de-risking process that was never going to happen to this person\u2019s fund, due to it being from some earlier vintage. Hence the confusion.<\/p>\n What\u2019s more, the reader tried to take evasive action themselves but that ultimately come to naught too.<\/p>\n Apparently the case was investigated by the Financial Ombudsman, and the pensioner provider was not found to be accountable. I won\u2019t second guess that ruling.<\/p>\n However there\u2019s a bigger picture lesson here. It\u2019s reminder that today\u2019s pension freedoms<\/a> so beloved by the likes of us Monevator<\/em> types have come with downsides.<\/p>\n Trying to manage a defined contribution pension \u2013 the biggest lump of money most of us will ever get near to \u2013 is daunting enough for most people when it comes to their saving and investing years.<\/p>\n But when it runs into the trickiest problem in finance \u2013 the switch to drawing down your pot \u2013 the risks multiply faster than you can say \u201cwho let the 47th into the war room?\u201d\u00a0<\/em><\/p>\n Only a couple of years ago, the papers were writing horror stories about the dangers of life-styling pensions after the big bond rout<\/a>. (The article above cites a nicely balanced one of its own<\/a> from 2022).<\/p>\n But now global equities have wobbled, it\u2019s understandable that some near-retirees might instead be wondering why they didn\u2019t have a bigger safety cushion.<\/p>\n People underestimate how hard this conundrum is to resolve, because we want to believe in certainties.<\/p>\n But in my view it\u2019s not even necessarily that the pension providers \u2013 or the investors \u2013 should be doing anything different, even though with hindsight there will always have been an optimum course to follow.<\/p>\n Rather, it\u2019s that individuals are running into the maelstrom of sequence of return risk<\/a> and the complexities of\u00a0drawing down a pension as, well, individuals, rather than spreading the risks with others as under the defined benefit pensions of old.<\/p>\n We might understand some people will see their pensions plunge before retirement because they took too much risk. Shrug and say that\u2019s on them.<\/p>\n Stock market crashes happen. These guys rolled snake eyes.<\/p>\n But, firstly, the typical person isn\u2019t (sadly) a hyper-aware Monevator<\/em> reader. And secondly, there but for the grace of God and all that.<\/p>\n Terribly unlucky things can happen in the stock market. Both to individuals and to entire countries and generations<\/a>.<\/p>\n While the analogy isn\u2019t perfect, you might as well say an overweight person should have seen their heart attack coming even while you splutter through your own deep pan pizza and play the percentages with your own arteries.<\/p>\n We\u2019re not going to go back to defined benefit company pensions.<\/p>\n But thinking about all this, it\u2019s easy to see a case for bigger private\/pension partnership pensions \u2013 where millions of members together smooth the sequence of return risks.<\/p>\n The case for no-hassle annuities looks stronger these days too, as a way of simplifying drawdown.<\/p>\n But again, that\u2019s because payouts are currently pretty good. If taking out annuities becomes all the rage and yet we slide back into a low-rate era again, you can guarantee that trend will overshoot the new reality.<\/p>\n I sometimes wonder if we write too much about pensions, drawdowns, and so on these days. I just about remember being young, and I\u2019m sure it\u2019s all a bit off-putting to anyone under 40 who stumbles across Monevator<\/em>, compared to if they saw an article about the fun stuff.<\/p>\n But this constellation of issues is why we keep returning to \u2013 or even belabouring \u2013 the subject. A little knowledge combined with a lot of responsibility for your own retirement is a dangerous thing.<\/p>\n We can try to do own own small part to address the knowledge deficit.<\/p>\n But the heavy personal responsibility part is here to stay.<\/p>\n Have a great weekend.<\/p>\n What\u2019s the safe withdrawal rate danger zone? \u2013 Monevator<\/a><\/p>\n How Warren Buffett got rich \u2013 Monevator<\/a><\/p>\n From the archive-ator: Types of entrepreneurs \u2013 Monevator<\/a><\/p>\n Note: Some links are Google search results \u2013 in PC\/desktop view click through to read the article. Try privacy\/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.<\/em><\/p>\n The UK government borrowed almost \u00a315bn more than expected last year\u2026 \u2013 Sky<\/a><\/p>\n \u2026and the economy is suffering a slump in exports to the EU \u2013 City AM<\/a><\/p>\n Average energy bills to fall 9% in July \u2013 Guardian<\/a><\/p>\n Small pension pots will be automatically merged under new plans \u2013 Pensions Expert<\/a><\/p>\n Bakery chain turns its 400 workers into owners \u2013 BBC<\/a><\/p>\n More than \u00a3800m of state pension underpayments identified \u2013 Standard<\/a><\/p>\n IMF urges baby boomers to keep working into their 70s \u2013 Independent<\/a><\/p>\n Zopa Bank doubles profit amid IPO speculation \u2013 City AM<\/a><\/p>\n Warren Buffett\u2019s Berkshire Hathaway now owns 4.89% of the entire US Treasury bill market \u2013 Barchart<\/a><\/p>\n Unrealistic trade demands put US recession probability at 90% \u2013 Apollo<\/a><\/p>\n How can investment platforms offer such high rates? [Search result]<\/em> \u2013 FT<\/a><\/p>\n Nationwide\u2019s new Best Buy mortgage rate is 3.89% \u2013 This Is Money<\/a><\/p>\n How to save money on overseas transfers \u2013 Which<\/a><\/p>\n Get up to \u00a31,500 cashback when you transfer your cash and\/or investments through this link<\/a>. Terms apply \u2013\u00a0Charles Stanley<\/a><\/p>\n More major lenders relax their mortgage borrowing rules \u2013 This Is Money<\/a><\/p>\n Are NS&I\u2019s British Savings Bonds worth opening after rates rise? \u2013 Which<\/a><\/p>\n The wedding racket: how tying the knot became so expensive [Search result]<\/em> \u2013 FT<\/a><\/p>\n Get up to \u00a34,000 when you transfer your ISA to InvestEngine our link<\/a>. (Minimum deposit of \u00a3100, other T&Cs apply. Capital at risk) \u2013 InvestEngine<\/a><\/p>\n Help to Save expands to offer \u00a31,200 in bonuses to more people \u2013 Which<\/a><\/p>\n Can you really buy a Birkin direct from a Chinese factory? [No\u2026]<\/em> \u2013 GQ<\/a><\/p>\n How to grow \u00a31.50 supermarket basil into a bush \u2013 House Beautiful<\/a><\/p>\n Quirky converted homes for sale, in pictures \u2013 Guardian<\/a><\/p>\n Give your kids money now, not later \u2013 Of Dollars and Data<\/a><\/p>\n The rise of UK property guardians: \u201cI like quirky and offbeat\u201d<\/em> \u2013 Guardian<\/a><\/p>\n How market turmoil made low-volatility stocks great again \u2013 Morningstar<\/a><\/p>\n The Holy Trinity of assets \u2013 A Teachable Moment<\/a><\/p>\n Signs of hope in Labour\u2019s top-secret plan for new towns \u2013 Guardian<\/a><\/p>\n A stupid decision to sell a rental property \u2013 FIRE v London<\/a><\/p>\n All-in US TIPS, with yields at 30-year highs? [Very US but interesting]<\/em> \u2013 Economic Matters<\/a><\/p>\n The secret fees behind $9.7 trillion in ETFs \u2013 Morningstar<\/a><\/p>\n Costs count: the trouble with accessible factor investing [Research]<\/em> \u2013 Alpha Architect<\/a><\/p>\n Thinking the unthinkable about US assets \u2013 Behavioural Investment<\/a><\/p>\n How do typical individual investors research stocks? \u2013 Larry Swedroe<\/a><\/p>\n The best and worst assets to own after a bear market \u2013 Trustnet<\/a><\/p>\n A Man for All Markets<\/em>\u00a0by Edward O. Thorp \u2013\u00a0\u00a30.99 on Kindle<\/a><\/p>\n Million Dollar Weekend<\/em>\u00a0by Noah Kagan \u2013\u00a0\u00a30.99 on Kindle<\/a><\/p>\n Great Britain?<\/em>\u00a0by Torsten Bell \u2013\u00a0\u00a31.99 on Kindle<\/a><\/p>\n The Moneyless Man<\/em>\u00a0by Mark Boyle \u2013\u00a0\u00a30.99 on Kindle<\/a><\/p>\n How much does it cost to insulate a draughty British house? \u2013 This Is Money<\/a><\/p>\n Ghost forests are growing as sea levels rise \u2013 Ars Technica<\/a><\/p>\n Elon Musk-backed XPrize just doled out $100m to carbon removal projects \u2013 Fortune<\/a><\/p>\n Wood-burning stoves to be allowed in new homes despite concerns \u2013 Guardian<\/a><\/p>\n The many fallacies of \u2018AI won\u2019t take your job, but someone using AI will\u2019 \u2013 Platforms<\/a><\/p>\n More-than-human science \u2013 Aeon<\/a><\/p>\n Image generation: 2023 and now\u2026 \u2013 Tom Tunguz<\/a><\/p>\n \u2026and why taste matters more than ever \u2013 Fast Company<\/a><\/p>\n The rise of the infinite fringe \u2013 The Verge<\/a><\/p>\n Slop world: how the hostile Internet is driving us crazy [Search result]<\/em> \u2013 FT<\/a><\/p>\n An autopsy of American exceptionalism \u2013 Cullen Roche<\/a><\/p>\n Martin Wolf on Trump\u2019s shakeup of the global order [Podcast]<\/em> \u2013 OddLots via Apple<\/a><\/p>\n How the Republic falls \u2013 Democracy Americana<\/a><\/p>\n The US labour force over the last 150 years \u2013 A Wealth of Common Sense<\/a><\/p>\n Trump\u2019s war on measurement\u2026 \u2013 ProPublica<\/a><\/p>\n \u2026and the scientists trying to save their data from deletion \u2013 BBC<\/a><\/p>\n Silicon Valley got Trump completely wrong \u2013 Vox<\/a><\/p>\n A trade war with China is a very bad idea \u2013 Atlantic<\/a> [h\/t Abnormal Returns<\/a>]<\/em><\/p>\n Conjuring imaginary creatures \u2013 Nautilus<\/a><\/p>\n DuoLingo:<\/em> its\u00a0next move is teaching chess \u2013 VentureBeat<\/a><\/p>\n Always invert \u2013 The Better Letter<\/a><\/p>\n Treadmills are out, barbells are in \u2013 Guardian<\/a><\/p>\n The last letter \u2013 Aeon<\/a><\/p>\n Enough is Enuf<\/em><\/a> by Gabe Henry \u2013 Guardian<\/a><\/p>\n \u201cWe don\u2019t get paid for activity, just for being right. As to how long we\u2019ll wait, we\u2019ll wait indefinitely.\u201d Like these links? Subscribe<\/a> to get them every Saturday. Note this article includes affiliate links, such as from Amazon<\/a> and Interactive Investor<\/a>.<\/em><\/p>\n\n
Not everyone wanted this job<\/h3>\n
Unlucky for some<\/h4>\n
Armed and dangerous<\/h3>\n
From Monevator<\/h3>\n
News<\/h3>\n
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<\/a><\/p>\nProducts and services<\/h3>\n
Comment and opinion<\/h3>\n
Naughty corner: Active antics<\/h3>\n
Kindle book bargains<\/h3>\n
Environmental factors<\/h3>\n
Robot overlord roundup<\/h3>\n
Our messed-up times mini-special<\/h3>\n
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And finally\u2026<\/h3>\n
\u2013 Warren Buffett, Berkshare Shareholder Meeting 1998<\/em><\/p>\n