Critique our updated 2023 retirement investment portfolio

GazzaBloom

I welcome some critique or feedback on our newly refreshed retirement portfolio updated for 2023

I am 55 (soon to be 56) and work full time in a relatively well paid job, my wife is retired early (but not drawing any pension) at age 52 to care for her aging mother who's health and mobility is deteriorating. We are debt and mortgage free.

I am already in receipt of a final salary pension that I took early at 55 and receiving £5,892 a year of which 52% will increase with CPI capped at 5%

My work DC pension (Aviva): £268,000: Invested as follows:

50% Blackrock US Equity Index Tracker
50% Blackrock (40:60) Global Equity Index Tracker (30% UK, 40% US, 30% ROW)
Fees: 0.16% per year

My wife's pension (Vanguard SIPP): £43,400: Invested as follows:

50% Vanguard S&P500 ETF (VUSA)
35% Vanguard FTSE Developed World Ex UK Equity Index Fund Accumulation
15% Vanguard UK Equity Income Index Fund Accumulation
Fees circa 0.25% per year

The combined asset allocation of our 2 pensions is 100% equities, approximately: 70% US, 15% UK, 15% ROW

Stocks & Shares ISA: £13,000: Invested as follows:

100% Legal & General Global Technology Index
Fees: 0.72% a year

Cash ISA: £15,000 (emergency fund) Instant access paying about 1.5% interest a year

We will be contributing for the foreseeable few years as follows:

£41,500 per year - salary sacrifice into my pension (I have some carry forward for the next few years)
£3,600 per year into wife's pension (£2,880 plus 25% from HMRC)
£10,000 per year into S&S ISA - may choose different funds each year from L&G Tech to increase diversification
Maybe £5K Cash a year (depending on what "things" we have lined up to do are) 

I have no date in mind to retire but have a target combined DC pension/SIPP and ISA pot of £550,000 minimum which may be achievable in 3-4 years. I am planning to direct my salary sacrifice contributions to cash (or maybe Gilt Index funds?) in 2024/2025 to build up £80K wrapped cash which could be used in retirement during downturns.

I have learned much from this forum over the years and welcome any thoughts/critique of our plans both good or bad.

MX5huggy

Why have you gone massive on US? I don’t see any reason not to go Global Tracker which is big on US already. Same with UK really although home bias is often accepted vision.

GazzaBloom

MX5huggy said:

Why have you gone massive on US? I don’t see any reason not to go Global Tracker which is big on US already. Same with UK really although home bias is often accepted vision.

Thank you - however, I don't believe we have gone 'massive' on US at 70%, that's the weight the largest market in the world holds globally at present.

A global tracker such as MSCI Global Index or VWRL hold circa 60-70% US. However, we are overweight on UK at 15% (rather than global cap weight of circa 4%), at the expense of some of the ROW allocation, which is my personal preference

Also, the fees for the 3 Vanguard separate funds is lower that the single VWRL fund which is 0.22% (VUSA is 0.07%, UK Equity 0.14% and Global ex-UK is 0.14%) plus the platform fee of 0.15%

If it wasn't for that we would probably be in a single global tracker each. 

TiVo_Lad

I was similarly surprised by your exposure to the US. It's not necessary the US per se, but the fact that you have 70% of your future tied to the performance of a single economy which means the swings will impact the value of your holdings (positively and negatively) quite strongly. As long as you're comfortable with that, it's fine. But I wouldn't personally want that level of exposure.

Qyburn

Why not switch to Virgin cash ISA paying 3% 

eskbanker

Qyburn said:

Why not switch to Virgin cash ISA paying 3% 

Switch what to a cash ISA, and (more importantly) why?

HHarry

eskbanker said:

Qyburn said:

Why not switch to Virgin cash ISA paying 3% 

Switch what to a cash ISA, and (more importantly) why?

Probably the £15k that’s currently in a Cash ISA.  Why?  Because 3% is bigger than 1.5%.

eskbanker

HHarry said:

eskbanker said:

Qyburn said:

Why not switch to Virgin cash ISA paying 3% 

Switch what to a cash ISA, and (more importantly) why?

Probably the £15k that’s currently in a Cash ISA.  Why?  Because 3% is bigger than 1.5%.

Fair enough, that escaped my attention in among all the detail about investments!

GazzaBloom

Qyburn said:

Why not switch to Virgin cash ISA paying 3% 

If you mean the cash held in ISA, it's an instant access emergency fund, held in the same bank as our current account for ease. It's purpose is not growth but ease of access instantly. I really can't be arsed chasing a couple of hundred quid a year up and down the High Street so to speak, I'll just pay more in if I need to. 

To be fair I'm not exactly sure what the interest rate is, I'll have to check, I think it's around 1.5%

GazzaBloom

TiVo_Lad said:

I was similarly surprised by your exposure to the US. It's not necessary the US per se, but the fact that you have 70% of your future tied to the performance of a single economy which means the swings will impact the value of your holdings (positively and negatively) quite strongly. As long as you're comfortable with that, it's fine. But I wouldn't personally want that level of exposure.

Well, as I said, that's what a global tracker will give you and the weighting the trillions in the global market suggest is correct. I am happy with 70% US, I have been 100% US in the past. I would not be comfortable with 70% in any other country though.

The major market leading companies in the US and many other countries are not tied to the performance of a single economy, but that's a whole separate thread...  

pricedout_1

US is heading for recession. Personally, I would rotate the US fund into a Global Equities fund with a lower allocation to US. Something like Vanguard LifeSTrategy100. But I would also allocate bonds as they are likely to outperform stocks in 2023 and at least will de risk further falls in stocks whilst providing a decent probability of at least a similar return even  if I'm wrong and equities don't all further.