I think they know the truth deep down themselves Brendan!Wow, that paper should be required reading for the Pensions Council and the guys in the Civil Service responsible for pensions planning.
No-one ever seems to consider sequence of returns risk for "safe" bonds...Whilst personally I stick to an all equities strategy and will do in perpetuity, I’m not sure I would do if I was entirely reliant on my portfolio and I no longer had the capacity to work. Our old friend ‘sequencing of returns risk’ is an issue whether we like it or not. Basically the scenario where markets are rubbish in the early years of retirement but you’re sucking out cash at the bottom which then never has a chance to recover so you run out of money at the end.
No-one ever seems to consider sequence of returns risk for "safe" bonds...
Reliance on portfolio is an important point. I was a late starter to my pension and am piling cash in monthly to 100% equities. But I have a small but not trivial NHS pension kicking in when I am 60 and then Irish and UK state pensions kicking in at the respective retirement ages.Whilst personally I stick to an all equities strategy and will do in perpetuity, I’m not sure I would do if I was entirely reliant on my portfolio and I no longer had the capacity to work. Our old friend ‘sequencing of returns risk’ is an issue whether we like it or not. Basically the scenario where markets are rubbish in the early years of retirement but you’re sucking out cash at the bottom which then never has a chance to recover so you run out of money at the end.
I agree. I would look at it the other way around. My 2 state pensions and NHS pension will pay about €550 per week in today's money. So I am insulated against stock market swings for my private pension which is 100% equities.It’s an interesting academic exercise to calculate capital value of contributory state pension value but not all that relevant.
I think of it (and so does government) as the bare minimum to avoid poverty.
Certainly not irrelevant enough to have am Xmas Eve fight over!So it is relevant then…
It doesn’t matter how you look at it, either the return the different pots can generate or the capital value of those pots.
The key point is not to consider silos in isolation. It’s all about the overall pot.
I think for people in retirement, an overall 60:40 allocation is pretty sensible. For that I’d exclude my home, but include investment property, cash, bonds, and DB pension income (including the State pension) as part of the ‘40%’, and then have the 60% equity allocation inside a pension vehicle.Certainly not irrelevant enough to have am Xmas Eve fight over!
The other thing to add (using my case) is spouse's pension. She also has Irish and UK state pensions and a small UK university pension and is starting on the Irish university (Public sector) pension scheme. Maybe I should be going higher risk!
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