Putting Some ooMPH Into Your Pension
Our client Mike went through a divorce which left him saddled with a lot of debt. Currently, aged 51, he aims to retire at 65, but wants to drawdown a tax free lump sum from his pension when he's 55 to pay off that debt, and in order to achieve this, he needs to grow his fund from £270,000 to £300,000 by then.
Most of Mike's funds are in Reeves portfolio, although, as a knowledgeable and informed investor he likes occasionally to invest in individual higher risk shares that Reeves cannot advise on, but he still buys them through the Transact platform. This is something Mike enjoys doing and it isn't unusual with Reeves clients. But, Mike's investments in individually chosen shares aren't significant enough to meet his target. Investing into individual shares is a high-risk investment.
Also, it's unlikely that Mike's pension pot held by Reeves will achieve the kind of growth levels he is looking for to meet his debt repayment target, particularly as, owing to the uncertain outlook in global markets, we've recently been holding higher levels of cash and uncorrelated assets such as gold funds.
However, as a experienced investor, Mike recognises that to earn the kind of higher returns he needs to achieve his objectives, it's necessary to take on a higher degree of risk. To clients such as Mike, Reeves are launching a new MPH Portfolio, designed for the more aggressive investor, looking for higher returns and willing to take on the attendant higher degree of risk.
The MPH portfolio will invest in specialist, high risk funds which have the potential to deliver outstanding returns. However, clients must realise that losses could be equally substantial. Mike recognises that, in this event, he might have to put his retirement off for several years or retire with less money.
We've been researching and planning the MPH portfolio for the last 18 months and we are currently in the final stages of due diligence. It isn't a portfolio we would advise any client to put all their money into but, for anyone driven by a desire for higher returns and who has a significant pension pot, putting a proportion of it in MPH could represent a suitable diversification of risk in their overall portfolio.
It is important that no actions should be taken without first taking advice. Personal circumstances and an individual's appetite for risk means that the advice for one person may not be the same for everyone. The information in this blog or any response to comments should not be regarded as financial advice. Reeves do not advise on Defined Benefit pension schemes. Reeves do introduce a third party specialists in areas of work we do not cover. Clients investing in the MPH portfolio must have a high risk tolerance and capacity of loss. Please note: This article has been published with the use of a fictional character to outline a case study.