Review target asset allocation

Silian

Hi All,

My plan is to save a huge chunk of money each year in order to retire in 12 years time when I'll be 45. I am aware that there are many variables and that my plans might have to change completely (e.g. if they change the pension) but would like a review of my current planned asset allocation.

If everything goes according to plan, I'll have +-£600k saved in 12 years time - 50% in my pension and 50% elsewhere (e.g. ISAs). I am currently a higher rate tax payer. I am not putting all of the money that will get 40% tax relief into my pension. While this would be efficient, it would also mean that I'll be a very rich 55-57 year old (when I can finally access it) but unable to retire before then.

The asset allocation I am aiming for in +- 12 years time when I retire:
VCT
Percentage: 10%
Amount: £60k
Comments: Once I retire I won't get any more tax relief for these so will stop buying new ones. If I can make a profit, I'll sell the ones I hold, otherwise I'll hold onto them for dividends.

Fixed Income
Percentage: 20%
Amount: £120k
Wrapper: ISA as much as possible
Comments: High interest bank accounts, P2P lending and bonds. I'm not currently planning on holding a bond fund as the idea that "other people's decisions to sell their bonds affects my bond value" annoys me, and a think that I should be able to get a fair amount of diversity with £120k.

Equities (1)
Percentage: 50%
Amount: £300k
Wrapper: Pension
Comments: I currently only have a choice of about 4 funds (it's with Blackrock) so will put it all into their global equity tracker.

Equities (2)
Percentage: 20%
Amount: £120k
Wrapper: ISA as much as possible
Comments: I'm playing around with different funds right now, but I'm considering just putting this into the Vanguard Lifestrategy 100 to simplify things.

Regarding ISAs: My plan is to fill them up each year. The priority for me is to get my fixed income into them as much as possible (where it makes sense - I'm not going to put anything into a 1% rate cash isa) and fill the rest with equities. I might have to put some equities outside an ISA wrapper but I'll be careful that I won't go close to the £5k dividend limit (and I'll be careful of capital gains tax when I do eventually start using the money).

Any thoughts or comments? I think my VCT allocation might be a bit high. The tax relief is nice, but it is very risky.

Edit: Forgot to mention that I need more money between 45-55 as I'll still have mortgage payments.

masonic

Seems like a well thought out plan to me. Your split between cash, P2P and bonds will probably need some thought as current options may push you further up the risk scale than you'd have traditionally gone, but this will no doubt become easier in future years.

Silian

masonic wrote: »

Seems like a well thought out plan to me. Your split between cash, P2P and bonds will probably need some thought as current options may push you further up the risk scale than you'd have traditionally gone, but this will no doubt become easier in future years.

Thanks masonic.

Yep, I assume that P2P lending is fairly safe right now, but could go downhill in future .Hopefully this will be linked with an interest rate hike that will make bonds a better option.