Portfolio re-balance

dunstonh

scouser_in_exile wrote:

1) Tax efficient wrappers = ISAs and PEPs. No CGT liability for one thing.
2) Watson Wyatt = Too complicated to explain everything that they do, but you can find out more about them via their website http://www.watsonwyatt.com/ - I have access to their asset allocations via a fund platform's secure IFA website (and after reading some of dunstonh's comments, I'm betting good money that it's the same place he gets them from).

Correct. I use the data from there and stick it into 1st software and then use those allocation spreads with the various providers (not just that one). Of the different versions available, the Watson Wyatt sourced one is the most comprehensive and WW have a very good reputation.

scouser_in_exile

Post Edited

EdInvestor

Watson Wyatt are a prominent firm of actuaries.Actuaries are responsible for the pensions system and you may have noticed that most pension schemes have recently developed serious deficits.

I would be inclined to treat the suggestions of firms like WW about investment strategies with a fairly large degree of caution, having regard to their recent very poor track record, particularly on risk.

cheerfulcat

Actuaries are responsible for the pensions system and you may have noticed that most pension schemes have recently developed serious deficits.

Nothing to do with Gordon " Smash and Grab " Brown, then?

jd79, I think that the WW asset allocation looks OK but somewhere within that I would be inclined to add some ( small ) exposure to commodities.

dunstonh

Gordon Brown has had more in tax from pension schemes than the pension deficit. You have the new accountancy methods which has increased deficits purely by moving numbers around and you have many that believe that the life expectancy figures are more conservative than they need to be, further increasing the deficit. Plus you had a stockmarket crash a few years back.

The sandler report into pension investing found too many were too heavily focused in UK equities and should be using asset allocation and rebalancing. Those schemes that have deficits havent used asset allocation and rebalancing so trying to blame WW for that is irresponsible. If trustees dont take the advice given, you cannot blame those advising them.

jamesd

scouser_in_exile, how do those asset allocations change for ISA and pension wrappers?

A greater change might be wondering what happens if it's for retirement more than 10 years away and there's a 50%chance of retiring in the US, which might shift the definition of domestic and international.

EdInvestor

dunstonh wrote:

....you have many that believe that the life expectancy figures are more conservative than they need to be

These are set by actuaries

Plus you had a stockmarket crash a few years back.The sandler report into pension investing found too many were too heavily focused in UK equities..

Asset allocations are set by pension fund "consultants" aka actuaries....

Nothing to do with Gordon " Smash and Grab " Brown, then?

HI CC, actually you remind me that I've been meaning to try to quantify this a bit more - maybe you can help.

Say an investor has an HYP worth 100k.

It enjoys a capital growth rate of 20%. It also has a dividend yield of 4.5%

So its total earnings in a year are 20k increase in capital value plus 4.5k in dividend income, for a total return of 24,500.

How much extra would the investor get if Gordon's raid hadn't taken place?

*BTW, query to the OP, perhaps you could outline the thinking underlining your fund choices? Why did you pick each particular fund?*

dunstonh

How much extra would the investor get if Gordon's raid hadn't taken place?

The FTSE100 is estimated to be around 1000 points lower than it would have been had Gordon's raid not occured. So, it has had performance issues on the share values.

A sector allocated portfolio of medium risk (to compare to the medium/high HYP) which only achieved sector average performance across the board would have beaten HYP over the last 5 years. A period many point to as being a good time for HYP.

EdInvestor

The FTSE100 is estimated to be around 1000 points lower than it would have been had Gordon's raid not occured. So, it has had performance issues on the share values.

Gordon's measures related to taxes on company profits and dividends AFAIK.The former were cut and the latter were increased ? So what we should be seeing is a rise in the index as profits went up but a cut in the yield of funds/share portfolios as divis were taxed?

[I only mention the HYP in this context as I know CC has got one and with an HYP the capital performance and divi is clearly separate.So I'm assuming it should be easier to show the effect of the "tax raid" without other things (like charges) getting in the way.]

IMHO this article makes a reasonable stab at apportioning blame: as is clear the issues are very complicated.

cheerfulcat

Hi, Ed,

The immediate effect on an HYP was to cut the income by 10% so in your illustration instead of £4,500 p/a the dividend income would be £5,000. Of course in a pension fund, where the dividends are re-invested, the compounded effect would be far greater.

I can't take the Guardian article seriously, I'm afraid, as it is far too biased. I prefer the Motley Fool's version .