ASI UK Smaller Companies Pension Fund and my retirement plan

ermine

GazzaBloom said:

What's a sensible growth rate to work with? all of the above funds appear to be doing better than 5% pa

You are getting sample bias. The longest time horizon there is 10 years. The last crash was just over 10 years ago. You are looking along the back of a bull run with no large retrenchments.

But you're determined to do it, so you will look for confirmation bias. In that case, all I can say is the very best of British luck to you. You're going to need it.

AnotherJoe

bostonerimus said:

Your reliance on the highly volatile UK small company sector is a basic flaw in your plan. That is compounded by the UK having to negotiate post Brexit trade deals which add to the uncertainty, particularly in the small company sector.

^^^^^^^^^^  This.

I think its a reckless strategy to go all in on one fund in one economy let alone one thats dependent on a country just about to embark on the biggest economic change in the past 60 years.

GazzaBloom

AnotherJoe said:

bostonerimus said:

Your reliance on the highly volatile UK small company sector is a basic flaw in your plan. That is compounded by the UK having to negotiate post Brexit trade deals which add to the uncertainty, particularly in the small company sector.

^^^^^^^^^^  This.

I think its a reckless strategy to go all in on one fund in one economy let alone one thats dependent on a country just about to embark on the biggest economic change in the past 60 years.

Yes, I know I need to diversify, but for the record I think the whole of Europe faces challenges as well without the UK as a member but never mind politics.

What would you recommend as a sensible diversified portfolio for an assertive accumulation over say next 4-5 years? There are 330 funds I can choose from in my employers scheme with Standard Life and the highest performing are UK equities, US equities and UK property.

I will be refining my planned annual drawdown amount, it's already down to £25K with living expenses £15K of that plus that may come down nearer retirement. We won't be planning to go on too many long haul exotic holidays, been there and done that over last several years with extensive travel around US & Mexico. We'll be going down to 1 car in retirement, probably an electric.

I also recognise that I need to target growing my pension pot to allow around a 5% or less initial drawdown rate that can reduce once state pensions kick in plus keep saving up in the cash & S/S ISA targeting a minimum of around 4 times the annual drawdown amount wherever that lands.

As for the adjustment to the pension pot portfolio after retirement, well there's plenty of time to consider that, I want to focus on growth for now.

Linton

Having looked at your spreadsheet...

In addition to the coments made by others that your assumed investment returns are very optimistic for a number of reasons..

1) Your assumption of 2% inflation is very optimistic.  It is the bottom end of the range that the BoE is charged with achieving.  The average over your base period is about 2.8% representing a 77% increase in prices in £ terms.  With 3% inflation scenario 4 is very negative.

2) You reset the drawdown amount at 66 and 69 - are the values used adjusted for inflation?

DairyQueen

GazzaBloom said:
What would you recommend as a sensible diversified portfolio for an assertive accumulation over say next 4-5 years? 

...
As for the adjustment to the pension pot portfolio after retirement, well there's plenty of time to consider that, I want to focus on growth for now.

Market cycles are such that those nearing retirement usually position their portfolios for drawdown around 4/5 years out. This means de-risking in order to mitigate sharp drops within that critical timeframe. However, your requirement for 'assertive accumulation' requires a high equity allocation and, over such a short period, this carries substantial risk that your portfolio will lose ground. This is counter-intuitive.

In a full-blown market correction a 'sensible', highly diversified, 100% equity portfolio could drop 50% with a two+ year recovery period.  Your portfolio isn't 'sensibly' diversified so a correction could see a much greater than 50% drop.

Adjusting a portfolio ready for drawdown doesn't begin after retirement.

A 'sensible, diversified portfolio' (equities) is only likely (but not guaranteed) to produce 'assertive accumulation' over a 10+ year period. A negative return for years/periods within that 10 years is guaranteed. The negative periods are impossible to predict. A portfolio that is not 'sensible' or 'diversified' (like your's) could drop so far that a positive return within that period is elusive.  

Given the late stage of the current market cycle the risk of a crash within the next 5 years is high. For me, it's so high that I have planned on that premise (50% drop on my core, global equity portfolio, 70+% on my high-risk satellite funds - including UK, US and Asia small caps). It will be a bonus if the market just corrects (20% drop on the core, 35+% on the high risk satellites).

Your planning assumes that there is an allocation that guarantees robust growth over a short timeframe. That allocation doesn't exist. You either de-risk and limit potential growth and losses (and reduce retirement income and/or delay retirement) or you accept the high risk that the market will go against you and you may need to continue working for several more years regardless.

GazzaBloom

DairyQueen said:

GazzaBloom said:
What would you recommend as a sensible diversified portfolio for an assertive accumulation over say next 4-5 years? 

...
As for the adjustment to the pension pot portfolio after retirement, well there's plenty of time to consider that, I want to focus on growth for now.

You either de-risk and limit potential growth and losses (and reduce retirement income and/or delay retirement) or you accept the high risk that the market will go against you and you may need to continue working for several more years regardless.

That's where I am. I accept the risk and and also would be happy to continue working for a few years to recover from a market drop. I would be able to make maximum contributions up to the annual allowance and save more into ISAs in those years.

  Everyone is waiting for the hammer to fall, a chap at work was so fearful he moved equities into cash holdings in December 2017 and missed the dip in 2018 but also the healthy rebound in 2019 and so the gains. The crazy thing is he's 35 and still think it's all about to go wobbly so is maintaining his position.

I am the polar opposite in terms or risk appetite.

Prism

GazzaBloom said:

DairyQueen said:

GazzaBloom said:
What would you recommend as a sensible diversified portfolio for an assertive accumulation over say next 4-5 years? 

...
As for the adjustment to the pension pot portfolio after retirement, well there's plenty of time to consider that, I want to focus on growth for now.

You either de-risk and limit potential growth and losses (and reduce retirement income and/or delay retirement) or you accept the high risk that the market will go against you and you may need to continue working for several more years regardless.

That's where I am. I accept the risk and and also would be happy to continue working for a few years to recover from a market drop. I would be able to make maximum contributions up to the annual allowance and save more into ISAs in those years.

I agree, thats roughly where I am too. Aiming for a certain amount by a fixed date is very difficult.  If you can be flexible then you can roll with whatever happens to the markets. I am a possible 6 years from at least partial retirement but still in 100% equities. Much more of a global allocation than you are thinking though

AnotherJoe

I'm finding it impossible to break up into multiple quotes to make reading a response easy so bear with this.

1. Yes, I know I need to diversify, but for the record I think the whole of Europe faces challenges as well without the UK as a member but never mind politics.

And the logic into picking out one small part of that area that "faces challenges" for ALL your investments is ??

2. There are 330 funds I can choose from in my employers scheme with Standard Life and the highest performing are UK equities, US equities and UK property.

You know that wording about "part performance doesn't ..." etc? Well, that's true.

They WERE the highest performing looking back. That says nothing about what they will be going forward. You, I and no one else knows how they will do this year next or over the next 20.

FWIW I'm in the same scheme with the same 330 choices.

My three picks (two of which I've held for some time, say 7 or 8 years ,  and recently added small companies are
SL ASI Global Smaller Companies Pension Fund

SL Vanguard SRI Global Stock Pension Fund

SL iShares Global Property Securities Eq Idx Pn Fd

Held 15% 70% 15 % respectively.

How will they do? As well as the world economy does. I think its a lot safer to bet on the world economy that the UK.

• If the world economy does badly, then so will the UK.
• If the UK does well, i reckon that means global must be OK.
• If the UK economy does badly that means either that global is bad, or its just the UK thats bad.

Look at it another way.

You already have your career and house in the UK

Why put all your eggs in one basket and put your whole pension in the UK as well? 

GazzaBloom

AnotherJoe said:

I'm finding it impossible to break up into multiple quotes to make reading a response easy so bear with this.

1. Yes, I know I need to diversify, but for the record I think the whole of Europe faces challenges as well without the UK as a member but never mind politics.

And the logic into picking out one small part of that area that "faces challenges" for ALL your investments is ??

2. There are 330 funds I can choose from in my employers scheme with Standard Life and the highest performing are UK equities, US equities and UK property.

You know that wording about "part performance doesn't ..." etc? Well, that's true.

They WERE the highest performing looking back. That says nothing about what they will be going forward. You, I and no one else knows how they will do this year next or over the next 20.

FWIW I'm in the same scheme with the same 330 choices.

My three picks (two of which I've held for some time, say 7 or 8 years ,  and recently added small companies are
SL ASI Global Smaller Companies Pension Fund

SL Vanguard SRI Global Stock Pension Fund

SL iShares Global Property Securities Eq Idx Pn Fd

Held 15% 70% 15 % respectively.

How will they do? As well as the world economy does. I think its a lot safer to bet on the world economy that the UK.

• If the world economy does badly, then so will the UK.
• If the UK does well, i reckon that means global must be OK.
• If the UK economy does badly that means either that global is bad, or its just the UK thats bad.

Look at it another way.

You already have your career and house in the UK

Why put all your eggs in one basket and put your whole pension in the UK as well? 

Yep your points make sense. 
The UK faces Brexit
Europe faces Brexit
US faces the Presidential election
China faces a growing virus and slowdown
Australia and developing countries face climate change catastrophes
How to do you pick your way through that?

GazzaBloom

Prism said:

GazzaBloom said:

DairyQueen said:

GazzaBloom said:
What would you recommend as a sensible diversified portfolio for an assertive accumulation over say next 4-5 years? 

...
As for the adjustment to the pension pot portfolio after retirement, well there's plenty of time to consider that, I want to focus on growth for now.

You either de-risk and limit potential growth and losses (and reduce retirement income and/or delay retirement) or you accept the high risk that the market will go against you and you may need to continue working for several more years regardless.

That's where I am. I accept the risk and and also would be happy to continue working for a few years to recover from a market drop. I would be able to make maximum contributions up to the annual allowance and save more into ISAs in those years.

I agree, thats roughly where I am too. Aiming for a certain amount by a fixed date is very difficult.  If you can be flexible then you can roll with whatever happens to the markets. I am a possible 6 years from at least partial retirement but still in 100% equities. Much more of a global allocation than you are thinking though

I wish you well and sincerely hope all works out for you..and me!
I need to diversify but will remain in equities, just in a few different territories.