SIPP allocation and DB

finellah

I have recently opened a SIPP to consolidate some old DC pensions and am considering how to invest it. Total value is £80,000.

In addition to the DC pensions I'm transferring I have a Nest pension with my current employer (paying minimum), value very small. I was lucky to catch the end of an index linked DB scheme with a previous employer which is currently worth approx.£9,000 per year (taken aged 65). I'm not planning to move that. I suppose between DB and state pension (expect will have full NI contrib years) I will have enough to get by. Other half has a little more DC but only £2,000 DB. No debt. 2 primary age children. We're both mid 40's. As we've both recently reduced working hours (life work balance adjustment!) we're not contributing as much to pensions as previously - £500 per month between us.

In my mind the DB pension is a seperate thing from the SIPP and I hadn't factored it into my initial thoughts on asset allocation - rough plan was 65 to 70% equity - much as it has been in employer default option (there weren't many options!).

I may want to start drawdown from SIPP before DB and state pensions kick in +/- aged 62

I wondered if/how other people factor in DB pensions into their asset allocation for SIPP/DC pensions. Any rules of thumb?

Thanks

crv1963

In our calculations we are viewing DB+SP as the main source of retirement income, DC pot (in wifes name) as means to retire before SP age, so plan to draw down from retiring and SPs kicking in. If any DC pot left once SP starts then to draw down remainder at a level just under PA level.


We have an imbalance too my DB pension will place me as a LR taxpayer, while she will have a much smaller DC pension. It may be woth putting more (if she earns enough) in your wifes name to even up the tax liability when you both retire?

finellah

Note that so far as I can see DB index linking is RPI but limited to 2.5%

Thrugelmir

Both the DB abd State pension schemes could be viewed as fixed interest elements. When weighing up assets allocations.

bostonerimus

You should definitely include SP and DB in your asset allocation; think of them as bond/fixed income and use their "Present Value" as an annuity when folding them into your allocation. I'm retired and have a DB and will get SP in the future and have my DC and regular account equity allocation at 75%....and I'm let it rise. Including DB and SP i estimate my overall allocation is 60/40

finellah

crv1963 wrote: »

In our calculations we are viewing DB+SP as the main source of retirement income, DC pot (in wifes name) as means to retire before SP age, so plan to draw down from retiring and SPs kicking in. If any DC pot left once SP starts then to draw down remainder at a level just under PA level.

We have an imbalance too my DB pension will place me as a LR taxpayer, while she will have a much smaller DC pension. It may be woth putting more (if she earns enough) in your wifes name to even up the tax liability when you both retire?

Thanks - yes we have been paying more into wife's pension than mine recently.

Thrugelmir wrote: »

Both the DB abd State pension schemes could be viewed as fixed interest elements. When weighing up assets allocations.

bostonerimus wrote: »

You should definitely include SP and DB in your asset allocation; think of them as bond/fixed income and use their "Present Value" as an annuity when folding them into your allocation. I'm retired and have a DB and will get SP in the future and have my DC and regular account equity allocation at 75%....and I'm let it rise. Including DB and SP i estimate my overall allocation is 60/40

Thanks - I was thinking that might be one way to look at it. If taking that approach even without considering SP I could go to 100% equites in DC pension and still be well below 50% equities overallI think. Will have a think about that - especially regarding drawing down DC +/- 5 years before DB and pension

kidmugsy

Conventional advice would be to go heavily into equities. My instinct would be to wait: Wall St is very high. You could always dribble it in. Or diversify e.g. with gold and commodities. How about foreign residential property companies?

Even Uncle Warren is 33% in cash.

finellah

kidmugsy wrote: »

Conventional advice would be to go heavily into equities. My instinct would be to wait: Wall St is very high. You could always dribble it in. Or diversify e.g. with gold and commodities. How about foreign residential property companies?

Even Uncle Warren is 33% in cash.

I think my instinct is similar. I guess while the DB pension makes for some sort of overall risk reduction compared to all retirement savings exposed to stockmarket, there isn't a potential rebalancing effect in a downturn.

I've not experienced a significant downturn while exposed to stockmarktet - DB ended/DC began in 2009 but I think I'd feel better having some dry powder to buy cheap equities.

Perhaps I'll be a little braver than my current 65/35 given DB and I still have 15+ years before drawing down.

Will look further into other diversifiers also - as suggested commodities/ properties but also perhaps more defensive (or less correlated) equity sectors - healthcare, insurance?? Any thoughts welcome...