Ready made portfolios for generating an income in retirement

qwertywerty

Hello,
Apologies if this is an obvious question. The big investment platforms such as Vanguard offer Target Retirement and Lifestyle portfolios but where are the ready made portfolios that asses attitude to risk and income needs when you are at retirement. I am a few years away but it's on my mind, does everyone DIY at drawdown, or am I missing something?
Thanks for any help

saajan_12

I wouldn't diy them with individual stocks ever - people tend to have biases eg well known companies and pick a smaller pool than some of the ready made portfolios that have 1000s of stocks, and hence give you much better diversification. 

If you look through the investment finder, you can often filter for region, risk rating, balance of bonds/stocks etc. 

Are you looking for higher / lower risk? May be able to guide from that eg bonds often lower risk, etc

LHW99

Probably a majority here will use drawdown, of some form or other. But Annuities are an option as well.

Also drawdown and annuities are used if you have a DC ("pot of money") pension, the other sort is defined benefit (DB) and those are set up to provide a given income level, based on your salary and years of work.

Are you sure which type you have?

qwertywerty

Thanks for the reply, DC scheme, not a SIPP, it's my workplace scheme, and I have ISA funds which I will use to generate an income in retirement. I look at them as effectively one pot as they have the same objective, I have cash funds for unexpected events and to cover about 2years expenditure. 
It just seems odd that there are no pre made portfolios catering specifically for generating income, while I'd be happy to do lots of research and build one from a mix of funds is there something that does this for me?
I mentioned vanguard as low cost and I have ISA with them, they recently started to offer SIPPs so maybe this is in future development 

dunstonh

, does everyone DIY at drawdown, or am I missing something?

Statistically, advisers still do the majority but DIY is ever increasing.  Most on this site will be DIY.  

Pathways are offered by most providers (simple multi-asset funds) but often they are not that good or limited on what style they offer.  Not bad.  Just nothing special.     Their remit is effectively simple options for simple solutions.  A few are introducing bucketing but they need you to give a bit more input on your spending.

It just seems odd that there are no pre made portfolios catering specifically for generating income, while I'd be happy to do lots of research and build one from a mix of funds is there something that does this for me?

Vanguard Lifestrategy, HSBC GS etc - pretty much any multi-asset fund.  These all meet the requirement for those using total return as their preferred drawdown method.

I mentioned vanguard as low cost and I have ISA with them, they recently started to offer SIPPs so maybe this is in future development 

Vanguard's in house distribution is quite small relative to their whole of market distribution.   Indeed, they scaled back their in-house distribution not too long ago.    You can buy more Vanguard funds or investment strategies via whole of market platforms than you can buy on the Vanguard platform.

Albermarle

The providers have been forced to offer four simple options ( the pathways mentioned in the above post)
They are all pretty similar from different providers I think. Here is an example.
Investment Pathways | What is investment pathways? | Fidelity

Audaxer

qwertywerty said:

Thanks for the reply, DC scheme, not a SIPP, it's my workplace scheme, and I have ISA funds which I will use to generate an income in retirement. I look at them as effectively one pot as they have the same objective, I have cash funds for unexpected events and to cover about 2years expenditure. 
It just seems odd that there are no pre made portfolios catering specifically for generating income, while I'd be happy to do lots of research and build one from a mix of funds is there something that does this for me?
I mentioned vanguard as low cost and I have ISA with them, they recently started to offer SIPPs so maybe this is in future development 

HL and AJB sites both show ready-made income portfolios, which I assume can be held in a SIPP as well as an S&S ISA:
Ready-Made ISA | ISA Portfolio Funds | Hargreaves Lansdown (hl.co.uk)
AJ Bell funds | AJ Bell
They might be a good solution for some, but the HL one in particular seems a bit high on costs. 

gm0

Normal products are deaccumulation products.  There are different fund packaging options which suit different ways to go about it.  But the reason that there is no specific product is because it is already covered by the asset allocation ranges.  And cannot easily be simplified to a specific separate "thing" that would suit a wide audience.

Drawdown as a DC retirement strategy is usually alongside/mixed with State Pension.  And may involve a "late" annuity purchase (to avoid outliving and perhaps simplify) or something special to bridge from early retirement to arrival of SP.  Which can be various things including fixed term annuities and a lot of different ideas on appropriate asset allocations for the short term bridge.  A period when capital depletion and need for returns is higher until the state guaranteed income cuts in.  So that is at risk from that being "the lost decade" if it was all in growth assets/equities funds.

So in other words. It depends.  Say drawdown is used for 40 years or so for an early retiree.  Or something more complex (as above).  The asset allocations which suit those different people - naturally will vary.

For those of us using drawdown in deaccumulation as "the (main) pension.  There is still a further range of varied circumstance on "how much income we want" and "how much we have saved from which to provide it" which would drive the essential or preferred mix of risky but growth oriented assets and the less risky but known cashflow assets.  The person with a large pot and limited income needs - can - but need not - take as much risk - as the other person with bigger income requirements and a pot which needs to be fairly elastic to provide them.  

And then there is the wide and thorny subject of "how" deaccumulation is managed and what is sold and when. 
And whether that, and income and rebalancing are blind to, or driven by - short term sequence of return.  e.g. A strategy which requires the option to "sell bonds first" in certain circumstances.  Is not well suited to a multi-asset fund where units mix the equities and bonds into a blended unit.

So a "drawdown" focused deaccumulation product (a fund list or fund blend essentially) could easily exist anywhere between 30% and 80% equities.  And be "right" for some specific set of consumers based on their goals, income vs pot and risk attitude. And there would immediately be somebody along with a sub-30% or 100% equities argument/use case

In practice then - normal tiered risk multi-assets or simple fund blends of different regions and asset classes provide plenty of lego blocks to create deaccumulation portfolios.  You *can* do it with a single choice multi-asset.  Or build something easily with a short list of fund picks.  e.g. One global equities. And one sterling hedged global bond fund.  In the mix of choice.  As a "classic" keep it simple example.   

Adding more funds and extensions is then an exercise in more active investing, or pushing for more diversification to perhaps lower peak to trough volatility alongside an acceptable level of return so that the capital sold + returns = income equation - keeps on ticking away.  And the ride is smoothed a bit by the added diversification.  This idea is fairly self-limiting as anything much less than 5% of the portfolio - doesn't do much.  So "a few more" rather than 50 more. (In my opinion).

I took a form of advice and was offered a tiered Aegon multi-asset based on the risk inputs I gave in the fact find.  I have built something of my own.  Which incorporates some of my own ideas about world trends.
I have tested so far as data allows for unintended overlaps (stock concentration) or bad behaviour in markets where data is available to me vs mainstream choices.  DIY avoidance of major inadvertent error rather than attempting to optimise to the last degree for maximum return.

zagfles

I think all workplace providers now have to offer "investment pathways" for retirement income, which are a number of options, usually 4 or 5 or so. See Understand and compare your investment pathway options - (moneyhelper.org.uk) 

qwertywerty

Really helpful comments here, thank you. I have more reading and thinking to do.
I appreciate you taking the time to reply and post such helpful content and detail.
With workplace schemes the default seems to be a lifestyle option, which moves portfolio into less volatile and mainly bond style investing but that seems really geared to annuity purchases rather than remaining invested to drawdown, yes?

jim8888

I have most of my SIPP in a Vanguard Lifestrategy 80/20 fund. That's 80% in equities and 20% in bonds. Received wisdom is (or was) that bonds lessened the risk in the portfolio, so you could "de-risk" by choosing and investing in a 60/40, 40/60 or 20/80 split, but the bond market tanked recently and, of course, this happened just as I'd switched some funds into the 60/40 allocation! What I like about this fund is that the fees are low, it's a global "fund of funds" and therefore spreads your investments (although quite a lot goes into the US market), it's dead simple to monitor and has outperformed just about every other fund I've held over the same period.