Pension investment spread

pete1976

Just wondering what people would recommend as a simple investment spread for my pension. At the moment I've got:

35% UK equity fund
30% International equity fund
25% UK commercial property fund
10% International bond fund

Does that sound reasonable? I only added the property fund on advice from an IFA a couple of years ago but am thinking about taking it out for the time being at least.

Should I be investing in more risky investments such as UK smaller companies or emerging markets since I'm only 31?

Thanks.

dunstonh

Does that sound reasonable?

Property is too high but should be included for a pension.

You have used international fixed interest but no UK fixed interest and you have given no breakdown of the international sectors you intend to use. At the moment it is too simple.

pete1976

Thanks for the reply dunstonh.

dunstonh wrote: »

Property is too high but should be included for a pension.

What would you recommend then?

dunstonh wrote: »

You have used international fixed interest but no UK fixed interest and you have given no breakdown of the international sectors you intend to use. At the moment it is too simple.

It's the Prudential International Bond. I thought it contained UK as well as international fixed interest but I've just looked it up and (if I'm looking at the right one - http://www.pru.co.uk/content/acrobat/BTBS2020.pdf) it's 54.1% Europe, 25.4% Japan, 19.5% North America, 1.0% Poland.

I'll probably be moving it away from Pru soon, just wanted an idea of what investment spread I should be using. If it's too simple, what do you recommend? I don't want it to be overly complicated!

dunstonh

What would you recommend then?

Cant recommend anything as it would vary with risk profile and how you use other assets. I would say that currently you wouldnt expect it to be much above 15% for bricks and mortar funds.

It's the Prudential International Bond. I thought it contained UK as well as international fixed interest but I've just looked it up and (if I'm looking at the right one - http://www.pru.co.uk/content/acrobat/BTBS2020.pdf) it's 54.1% Europe, 25.4% Japan, 19.5% North America, 1.0% Poland.

Europe excludes UK. Indeed, the fun objective also makes it specific to non sterling (as there are sometimes overlaps).

If it's too simple, what do you recommend? I don't want it to be overly complicated!

I dont do simple Actually you can do simple if you want a stakeholder spread. Typically you would look at the following sectors.

UK
US
Japan
Asia pacific exc Japan
Europe exc UK
emerging markets
specialist
UK fixed interest
International fixed interest
property

Now, if you have a simple pension contract with a limited fund range then you tend to find you have to cross some of those sectors off and compromise. You may find there is no asia exc Japan or japan fund but a general "pacific" fund. Emerging markets and specialist funds tend to get crossed off as well.

You then have to amounts allocted to each remaining sector to average out to your risk profile. Then you can fine tune that by using sub sectors within the regions, such as for UK you would have UK equity income, UK Equity and UK smaller companies. For UK fixed interest you would have gilts, corporate bonds and UK Other bonds for example.

meester

pete1976 wrote: »

Just wondering what people would recommend as a simple investment spread for my pension. At the moment I've got:

35% UK equity fund
30% International equity fund
25% UK commercial property fund
10% International bond fund

Does that sound reasonable? I only added the property fund on advice from an IFA a couple of years ago but am thinking about taking it out for the time being at least.

Should I be investing in more risky investments such as UK smaller companies or emerging markets since I'm only 31?

Thanks.

You need to look at the quality of the specific funds. If this is a company scheme the choice might be limited, and you need to pick carefully as a lot of pension funds are real dogs, as they do not need to make the same effort to attract customers as independent asset managers. The asset allocation of the individual funds is important, as is performance and charges.

Also if you have a lot of money in the pension, it's more important to take care, and in particular to diversify. A lot of pension funds are practically worthless and frankly it's not worth the effort selecting 15 separate funds for a tiny pension.

You probably want about 25% overall in bonds, to add some UK ones. A small portion in property, and the rest you should look to spread across equity sectors, including commodities, emerging markets, UK Equity Income, Europe, USA, Japan. Typically most of your equities will be UK blue chip companies, and smaller portions diversifying elsewhere.

swiss69

You may not find it too easy to switch out of the commercial property fund at the moment. Due to recent falls in commercial property valuations, many investors have tried to withdraw/switch money and due to the nature of the investment there has been insufficient liquidity in the fund to pay everyone or allow the switch to go through. Some funds are stating 6 months notice or more and you may want to contact them to find out where you stand with this.

As for how it is invested and whether this is acceptable for a 31 year old really depends on your risk profile.

I would however always say that whatever asset allocation you select with which ever company, you should review both on a regular basis. This becomes particularly important as you appraoch retirement. Someone with their fund invested totally in equities, retiring in March 2003 before the market began to rise again would probably have seen a reduction in fund value of more than 40%...Scary when you think that you are relying on that for the rest of your life!