Balancing a portfolio - how to account for a With Profits fund

DominicH

I'm looking at rebalancing/reallocating my retirement savings. A significant chunk of it is in a dormant Prudential With Profits DC pension. For the time being, I do not want to transfer it out to a SIPP or whatever.

So, I have an overall portfolio balance in mind, different percentages allocated to various asset classes etc. But I don't know if I should consider the asset allocation within the With Profits fund when calculating the balance (I have a fairly detailed breakdown of the asset class allocation they use), or just put the whole Prudential part of my savings under the "cautious" heading, like I would with bonds, say.

I know With Profits funds use a smoothing mechanism to reduce volatility, but that is only temporal smoothing and can't work miracles if the underlying assets lose a lot of value. So I'm thinking that I should count the individual asset classes within the Pru fund, just as if I held them outside of it. What do you think?

bigadaj

I'd be tempted to try and use the breakdown within the with profit funds if it is a significant part of your portfolio and provides a good level of data, though I wonder how consistent this will be over time.

It's personal preference really, and depends on the sums involved but ideally a high level of detail of breakdown on larger sums would be useful in my opinion.

dunstonh

A significant chunk of it is in a dormant Prudential With Profits DC pension.

Pensions cant go dormant. That only applies to bank accounts.

A with profits fund is typically a multi-asset fund in itself and can be ringfenced as such. However, some will be lower risk than others. So, the risk profile is really what matters. So, if its a littler lower risk than your normal profile then maybe you can compensate for that by moving up a little bit in risk on the other bit of your portfolio.