David, 64

Retirement isn't far off for David, and he can't wait to shake the commute. When the time comes to down tools for good, he's looking forward to relaxing, walking the dogs on the beach, swimming in the sea, and climbing hills in Scotland.

Confidence level: 7 out of 10

"I'm fairly confident in managing my investments, because over the years I've come to the firm view that I want my money in low-cost, diversified index tracker funds. I simply don't believe that anyone can consistently beat the markets and so I want to focus on keeping costs down.

"Having said that, I do look for funds that at a very broad level reflect where some growth might be, given my appetite for risk, so I do select the indexes I want tracked.

"What I'm not confident about is the mechanics of going into drawdown and how to make drawing a pension from my SIPPs as efficient as possible."


My pension planning question...

"I'm thinking of moving some funds from L&G Global 100 into a global ESG tracker fund because (a) I'm not sure that US equities will perform well in the medium-term and (b) it would give me a warm glow and (c) I think ESG 'woke' businesses may well perform better, especially those in areas like renewable energy. I would appreciate your views on my thinking, and wonder if there are any ESG tracker funds that you like?"

Extra details

  • Wants to start drawdown in the next 1-3 years
  • £750,000 in passive tracker funds 
  • Portfolio a blend of risk levels - 20/30/50 split between Vanguard 80% equity, L&G Global 100% equity, Vanguard 60% equity

Answer by Anna Stoughton, Boring Money

Relationship Manager & former Financial Advisor

Anna StoughtonMeet the experts

 

The following information should be treated as a generic guide and not advice.

Thanks for your very appropriate question! The amount of investors who are using a blend of both passives and active funds has recently increased. With the rising uncertainty, an increased number of investors have moved to passives as they can diversify your risk and give peace of mind, whilst often being cheaper than actively managed funds.

Global equities are currently popular due to the diversification they offer, but do ensure that your risk profile is appropriate for where you are in life i.e. you say that you want to be accessing your pension in the short term (next 5 years). One blunder DIY investors can make is investing too much in our home (UK) markets. Whilst you’re unsure about the US performance in the medium term do not write them off as an area to invest.

Is the ESG investment market expanding? Yes. Appetites are growing fast for environmental issues to be addressed (did you see the David Attenborough documentary recently?!) and this is being reflected by the ever increasing ESG options offered. But beware, just because a fund has an ESG label it may not be “flawless”. ESG products can still contain fossil fuels investments such as oil stocks. Have a browse through ethical fund options if you want specific areas to be screened out of your investments – e.g. tobacco.

With ESG investing I think it can come down to the individual, your specific goals, and what sustainable means to you. Why don’t you take our quiz to help you decide where you sit in the ESG scene and which ESG funds may be most suitable? I also find the Morningstar website helpful for looking at the Sustainability Rating, Carbon Risk Score and Fossil Fuel Involvement.

Food for thought for you.

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