what percentage of equity do you hold in your retirement pension ?

phlebas192

We were 100% equities when we made the decision to retire 4 years ago. Taking the TFLS resulted in a fair chunk converted to cash (some of which has since been put into S&S ISAs) and I took advantage of the stock market rises to sell some equities and put into gilts.

Right now we are at 12% cash, 9% gilts and 79% equities.

mrklaw

currently 100% in my DC. Wife is in a 2035 TDF so will be some other mix. I have a DB also.

while yes we could be higher equities due to the DB, I’m coming aorund to the idea of solidifying almost everything.

• first two years from my DC in cash/MMF until DB kicks in
• DB for baseline costs
• fixed term annuity from wifes SIPP for bridge
• possibly even the same for my DC for bridge - 10k a year for 7 years
• then SP after the bridge means no DC draw needed.

then anything not reserved for those first two years and the annuities could be 100% in equities.

michaels

So I was thinking about this question in terms of the fact we all have an annuity commencing at about 67 (state pension) and possibly some of us also have DB so how do we factor this into our overall stocks/bonds/linkers/cash ratio.

My thought was to value these at the cost of an index linked gilt ladder starting today and lasting until average age of death with the annual index linked sum beign actuarily reduced to reflec tpayment today rather than in futre.

For example age 55 a suitable actuarial reduction on the state pension would be about 42% (approx what is used for civil service pensions) - so we need a linkers ladder that pays out 12500 x 58% = 7250 for say 32 year s(life expectancy at 55 is about 87). This would cost about 220k.

Now lets look at a retirement portfolio with a 500k pot and wanting a simple 50-50 split of shares and bonds. Effectively the state pension increases the pot size to 720k and gives a bond holding of 220k already so 50% of 720k shares is 360k and same for bonds but we already have the 'state pension' element of fixed income so we split out 500k 360k shares and 140k bonds to give the desired 50:50 asset split.

Linton

My % equity is what it needs to be to meet my needs. My long term growth portfolio is 100% equity, the Income portfolio is of a similar size and is 50% equity. The short term cash portfolio is about 20% of the total and is 0% equity. So overall that makes it about 60% equity.

I don’t see how you can rationally decide a %equity without doing an analysis based on your needs. Other people will have different needs and so will require a different %.

Storcko14

Age 59, early retired @ 58. 50% equities, 28% short / med duration gilts incl about a third in a bridge to SP ILG ladder, 20% cash (3/4 in STMM inside wrappers and the rest in easy access readies). 2% other stuff. No requirement for real growth so spending power preservation and minimising stress is the priority. 15-20% of total expenditure needs are covered by DBs and 2* full SP in 7 years will take that over 50%.

As others have said, asset allocation averages etc are pretty meaningless; everyone's circs are different so needs to be tailored.

phlebas192

https://forums.moneysavingexpert.com/discussion/comment/82003921#Comment_82003921

My way of calculating the 'worth' of the SP would be to calculate the cost of purchasing an RPI increasing annuity today with payment to commence when I reach SPA. Moneyhelper has a calculator which will produce quotes on that basis, https://comparison.moneyhelper.org.uk/en/guaranteed-income-for-life/your-details

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82004337#Comment_82004337

AS a very rough rule of thumb, a standard full SP, is worth about a Quarter of a Million Pounds.

Veloflyer

I don't work on percentages. I calculate what my annual basic spend is likely to be - factor in SP at the appropriate time - and use that figure plus a bit (for inflation and tax) to determine what I need in gilts - or maybe later an annuity - to cover me for the next 25 years plus to provide for basic spend. I am 61 by the by.

Equity pot is whatever is left less about 80K in the cash emergency fund. Equity pot will just be drawndown from as and when, or whenever I feel the urge for yet another classic bike resto/holiday/car etc.

Bravepants

https://forums.moneysavingexpert.com/discussion/comment/82003012#Comment_82003012

I do think it's useful to have some examples to draw upon to aid the decision making process though. People posting their own situations can often help the thought process. I joined this forum years ago just so i could see what everyone else was doing, and it helped me in my own decision making enormously.

Bostonerimus1

I'm around 80% equities. This is a risky allocation and could see serious losses if the current stock market tech bubble bursts. I only have such a high equity allocation because I don't depend on my investments for retirement income and so I can ignore a drop in the price of equities.