Have you a view on Chancery Lane pensions?

25 March 2022

Question by Martin

Have you a view on Chancery Lane pensions? They seem to have a very convincing theory on how dividends are paid no matter how the stock market performs.


Kind regards
Martin


Answered by Boring Money

Hi Martin,

I don't know Chancery Lane Pensions but they are right to say dividends are paid regardless of stock market performance. However, if your retirement income is reliant upon dividend income you have to accept fluctuating income (because regardless of how stock markets perform dividend payments from companies can still vary). It is also often only paid quarterly, six monthly or yearly.

Furthermore, if you are investing for income you are by definition investing in a smaller pool of companies; the FTSE has historically been a relatively high dividend-paying index but you wouldn't want too much money in it. This can cause greater variability of returns and probably lower overall returns. Imagine missing out on high-growth, low dividend tech stocks over the past 20 yrs.

I don't know if this is Chancery Lane's approach or not, but it is something to be aware of when investing. If you want a regular, consistent income in retirement there is nothing wrong with taking a total return approach by investing in a balanced portfolio of global companies and government bonds. The risk to capital is if the withdrawals you require to meet your retirement lifestyle are greater than the returns you achieve. Over one or two years it might be sustainable but over time excessive withdrawals will erode the pension pot and risk your future financial security and independence.

I hope this helps.

Andrew

Answered by

Boring Money