How much cash in pension

Mick70

How much cash , as a %, should you hold as part of your pensions portfolio . 

Most seem to have a mix of a DC pot , S&S ISA, and cash .
cash is safe but has little growth .
so ideally how much cash should you have in relation to the others ?
mick 

retiringtoosoon

Nil. All equities or go home.

SouthCoastBoy

It depends where you are in relation to retirement, for me who is due to retire in June but just been offered a new job so that may be put on hold I have a 60:40 split of equities to cash. I don't hold bonds. The vast majority of my cash is held outside of the pension wrapper 

VXman

SouthCoastBoy said:

It depends where you are in relation to retirement, for me who is due to retire in June but just been offered a new job so that may be put on hold I have a 60:40 split of equities to cash. I don't hold bonds. The vast majority of my cash is held outside of the pension wrapper 

Is that 'part of your pension portfolio' then?   I have cash in various ISA's, savings accounts. I also have a SIPP. I don't count the cash outside that SIPP as 'pension' just savings.

SouthCoastBoy

Again I think this depends on age, if in 30s you may not include cash outside pension as part of your pension, however when you get to late 50s like me I see all investments being part of my pension planning

dunstonh

How much cash , as a %, should you hold as part of your pensions portfolio . 

Depends on your risk profile, timescale, capacity for loss and behaviour.

cash is safe but has little growth .

You can say that for all defensive assets on the whole.  However, most people don't have the behaviour to handle 100% equities.

Pat38493

In addition to above, this depends also on your risk appetite and how tolerant you are of volatility in your fund, and on how many years you want your retirement funds to last and your expected spending pattern.

A pretty common answer is "keep around 2 years of spending as cash", but I've seen posters on here say they keep 6 years as cash.

Also - quite a lot of folks would say you should move more of your fund into bonds or cash around the date of your retirement in order to partially mitigate early SOR shocks, but then move back towards equities as the years of retirement go by - glidepath I think it's called.

Historical modelling seems to show that you should be better off in the long term (say 30-40 years) by staying pretty heavy in equities and only having maybe a rolling year in cash, but you have to be able to tolerate some dips in your portfolio and accept that they are in line with various historical disasters and nothing "abnormal".

Personally my current thinking is that I won't keep more than a rolling year or so in cash out of my DC pots, but this would certainly not be the right answer for everybody.

Linton

About 16% of our liquid assets is held as cash.  Being retired, security of income for at least 5 years and flexibility of access for large one-off expenses is more important than the loss of long term return.  The remaining 84% is more than enough to provide all the return we need.

OldMusicGuy

You need a strategy and it also depends on your circumstances and risk profile. I've been retired four 5 years and to start with I held 20% cash in my SIPP to guard against sequence of returns risk. But then I have no DB pension and my large SIPP pot has to provide for both me and my wife. I am quite risk averse so my strategy was to minimise any losses in the early years of retirement. 

I now hold no cash in my SIPP as I used half of it to buy an inflation linked annuity early this year as rates on offer were good. So what's left in it is for the long term and can stay invested because savings, the annuity and SPs give us enough to live on for the next 15 to 20 years easily.

GazzaBloom

I am a few years out and currently 100% equity index funds but plan to start building retirement cash from next year and hope to hold 3 years worth of expenses or around 15% of starting retirement pot. I hold an emergency fund outside pension as cash but the 3 years of living expenses cash will be wrapped inside the pension as it will be built up using salary sacrifice pension contributions.

So, portfolio at retirement start, with current thinking, will be 85% equities / 15% cash. I may add a bonds index fund into the mix or maybe not.

Mothman

Someone with a large DB already in payment which covers most of their living expenses can probably get away with holding a smaller cash buffer. However if you are risk averse and struggle to handle volatility then a larger cash holding may be the order of the day. As a couple we hold about 10% of our portfolio as cash, but our only guaranteed income is one state pension.