Mix of dc pension pot / s+s isa / money in bank

Mick70

if you have a "traditional works dc pension pot" ,  some in a personal S+S ISA (risk 60:40) ,  and some in normal bank savings,   what proportion should you have in bank savings accounts ?   ie 10% of your overall retirement portfolio ?
I would imagine many have pension pots and almost nothing in bank savings accounts ? 

interested how most folk mix and match it 

Mick

QrizB

I'm not going to claim this is ideal, or even wise, but between me & Mrs QrizB we've currently got, roughly:

• 1% cash (net positive balance of bank accounts, credit cards and loans)
• 10% SS ISAs
• 30% DC pensions
• 60% DB pensions

We're both early 50s and looking to retire (or, at least, have the option to) by the end of the decade.

tacpot12

I'm retired and have about a year of pension income held in 'cash' (in Premium Bonds and cash within my SIPP). This represents about 3.5% of my retirement portfolio value.

dunstonh

what proportion should you have in bank savings accounts ?   ie 10% of your overall retirement portfolio ?

It doesn't really work that way.    You could have £1m and low expenditure or £250k and high expenditure.  The cash needs are going to vary if you use percentages.

You should look at your short term spending needs and an emergency amount on top.

I would imagine many have pension pots and almost nothing in bank savings accounts ? 

Some do. Some don't.  Some have it the other way around.      The wrapper doesn't really matter overall as you are looking to achieve things with the amount of money you have.

gm0

As above.  This is arguably best viewed as sequence risk planning for your particular scenario of age, DB, SP, spouse etc.

A way to look at it is via "desired" and "essential" income targets.  Taking the lower "essential" figure and after subtracting your income sources which are guaranteed (SP, DB) i.e. not subject to volatile investment returns then multiply that residual needed income amount by a "number of years" to get to a £ figure which is whatever % of total assets it happens to be - your DC pots/ISAs/Savings/PBs etc.  If you don't have many assets then the number of years is constrained.  You can argue it back and forth whether this overlaps with short term emergency funds or not and whether those should end "depleted" at the end of a pension income crisis period.

And of that "cash like" income supporting portion

Sone might be in the pension wrapper smoothing income between rebalancing (and immune to IHT currently)

Some might be outside in minimal risk asset types in S&S ISA

Some (if you are older than me) might be in NS&I Index Linked certificates
Or PBs

Or Chase savings account
etc.

Method:

Essential Income target - guaranteed income x number_of_ years = £.   £/investment assets = %

There are arguments to set number_of years at 2-3 or as much as 5-7 but few people can afford the lost investment returns of going to the extreme end.

Nonetheless historic data tells us that markets can take 7+ years to recover to nominal or the higher real value.  But even 2-3 years income to avoid selling risk assets low in the first instance to support income - will both buy time for other contingencies - work/move house/arrival of SP - and avoid selling in the initial dip (which may or may not be the only dip or the market low). Can't control that.  Can avoid selling some assets at an inopportune time x N years.  You choose N.  It's a guess based on affordability.  No science.

Linton

The % is not the important figure.   The minimum amount of cash you hold should be dependent on the number of years living expenses you wish to cover should non- 100% guaranteed income cease.  Any wealth beyond that can be put in investments allocated according to your objectives  and risk tolerance.

Mick70

Ah right , I thought it was advisable to have say one year worth of retirement income in the bank , incase the markets crashed when you were retired , so that you didn’t have to access your dc pot or S&S Isa and allow them to recover ? Looks like maybe I’ve misread things 

thanks replies my way , always helpful 

mick 

dunstonh

Ah right , I thought it was advisable to have say one year worth of retirement income in the bank , incase the markets crashed when you were retired

You can have cash inside or outside of the pension (or other wrappers) to achieve that.  personally, I go for 36 months.  Then with income unit yield, that really extends it to around 5 years before you need to consider selling units.

SouthCoastBoy

Currently I have the following  breakdown
630 in pension, of that 120 in cash
240 in s&s isas
480 in cash, some in cash isas some outside isas. 

I am planning to invest some of my cash into stocks, however not doing it just yet as waiting to see how current issues play out. I don't have any db.

sheslookinhot

SouthCoastBoy said:

Currently I have the following  breakdown
630 in pension, of that 120 in cash
240 in s&s isas
480 in cash, some in cash isas some outside isas. 

I am planning to invest some of my cash into stocks, however not doing it just yet as waiting to see how current issues play out. I don't have any db.

What will be the trigger for you to invest some cash into stocks ? 

SouthCoastBoy

sheslookinhot said:

SouthCoastBoy said:

Currently I have the following  breakdown
630 in pension, of that 120 in cash
240 in s&s isas
480 in cash, some in cash isas some outside isas. 

I am planning to invest some of my cash into stocks, however not doing it just yet as waiting to see how current issues play out. I don't have any db.

What will be the trigger for you to invest some cash into stocks ? 

Its dependant on children really, youngest still at uni and on a placement at Sydney Uni next year, she is only receiving a living allowance so that will cost me around 10k, plus as a family we will be visiting, so another 10k, then back to uni for final year another 7k most probably. Then who knows after that.

We also may be buying a more expensive property. Once I have clearer understanding of my expenditure, I will then reassess cash reserves. I want to get to a 70:30 split between equities and cash for retirement, which I may do without investing any more cash into equities.