Pension allocation

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FintanJ

Registered User
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119
I am 45. Now should I allocate my pension pot by fund type (eg should it be 100% indexed world equities). Assuming retire 65. So 20 years to go.

Specifically in relation to property. Sector has performed poorly in recent years. Are people keeping allocation in the expectation it will recover?
 
Many people think that pension "lifestyling" - shifting gradually from higher risk/reward assets to lower risk/reward assets as retirement nears - is a questionable or even detrimental strategy.

Bear in mind that if you're likely to roll your pension (after tax free lump sum) into an ARF then your investment timeframe is not only the next 20 years but your actual lifetime. And, to add to that, past performance of an asset class/sector is no real guide to future returns.

Ultimately what's the appropriate asset and risk/reward mix depends on your specific needs but many people may be penalising themselves and their retirement means by being unnecessarily conservative especially when the industry feeds the FUD factor.
 
Hard to say without some more information on your personal circumstances -

Do you own your home?
Do you have a mortgage?
Do you have any after-tax savings/investments?
 
Sarenco said:
Hard to say without some more information on your personal circumstances -

Do you own your home?
Do you have a mortgage?
Do you have any after-tax savings/investments?
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Own home with mortgage .
Modest investments outside of pension.
 
The specific part of your question will, I hope, get no takers on this forum. I think there was a time when financial advisors held themselves out as being able to put you in the next winning sector. They would go so far as to concoct geopolitical theories to support their "tip" not unlike the racing tipsters. That is all snake oil.
These days it is accepted that no advisor has the inside track to the latest silver bullet. Instead general wisdoms exist around diversification and the risk/reward trade off. Conventional wisdom would put you, with 20 years to retirement in a fund similar to Irish Life's MAPS 5, see below. Now I have no connection with Irish Life and I don't even know what DSC means but this looks a reasonable mix for your situation. Again I have no idea whether Irish Life are a competitive vehicle for this type of fund, but I am just conveying the principle.
 
I am not in conservative camp or lifestyle idea. Just interested in other people’s views.

I have an allocation to property in pension and questioning why.
 
What a bizarre post. !!! Not looking for silver bullet. Just looking for debate, other people’s views.
 
FintanJ said:
Specifically in relation to property. Sector has performed poorly in recent years. Are people keeping allocation in the expectation it will recover?
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Sorry, I thought you were canvassing views on the property sector. It seems you were simply surveying investor behaviour. By the tone* of your riposte I take it that this was merely out of curiosity and not to inform your own fund choice.
My answer to your general query stands. MAPS 5 would be a suitable investment mix in your situation subject of course to a full fact find not revealing exceptional considerations.

* I was a bit taken aback by the tone. Did you find my post offensive? No offence was intended.
 
FintanJ said:
Own home with mortgage .
Modest investments outside of pension.
Click to expand...
In that case you already have a significant exposure to property.

I think it’s bonkers to be anything like 100% in equities in the run up to retirement. But you’re a long way off that point so it’s fine in your situation.

Personally, I would liquidate your after-tax investments and throw the proceeds at your mortgage.
 
I have a 100% allocation to equities in my pension fund. Because I’ll ‘ARF’ at retirement, and because I’m married, I view the investment time horizon as the duration of both our lives.

Irish people tend to have enough exposure to property through their homes and rental properties (if relevant).
 
My opinion, I should have major allocation to an indexed world equity fund. But should it be 100%? If not 100%, what asset classes should balance be allocated to?
 
FintanJ said:
My opinion, I should have major allocation to an indexed world equity fund. But should it be 100%? If not 100%, what asset classes should balance be allocated to?
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A 100% world equity fund is fine. Liquid assets invested in the largest and best companies of the world. Your alternatives are:

Bonds
Property
Commodities

Will they outperform equities in the long term? Unlikely.
 
Believe me Duke, there are lots of advisors still peddling this story. Usually ones working for the large corporates who will say anything to get that lovely commission to put on the board against their sales targets. A common one is splitting the fund to diversify it...like the two different equity funds don't invest in the same companies!!!

Also, the MAPS funds aren't great. Pay more for lower returns.
 
@FintanJ

The mix that DoM has provided above would be typical on a Multi-Asset Fund for someone with a risk profile of 5. Another might be : 78% Equities, 9% Alts., 6% Bonds, 5% Property, 2% Cash.

Some companies go 1 - 6 , some 1 - 7 on Risk Profile, where the highest number is an 'all in' on equities (or commodities).

It's a process that you would typically go through if you went to an advisor but there are some profilers available on some product provider websites, like this one where you match the number arrived at with a corresponding Mixed/Multi-Asset Fund.


Gerard

www.prsa.ie
 
Sarenco said:
I think it’s bonkers to be anything like 100% in equities in the run up to retirement.
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What's the "run-up to retirement" exactly? What's the right percentage?

The life expectancy of a sixty-year old Irish male is 22. Wealthy people like those with significant pension assets live longer for other reasons so add a year to that.

Add in spouse as well and a married couple both aged sixty will (as a central estimate) have at least one of them alive and in need of income in 27 years time.

There is "bomb-out risk" of course, but it's a fair assumption that equities will do better (indeed a LOT better) over a three-decade horizon.
 
Steven, yes I would have guessed that Irish Life are not the most competitive. Certainly on charges - but are you also saying MAPS is actively managed and not very well at that? If they are not actively managed they will reflect the sector mix less charges.
I was illustrating the principle that it was really about sector diversification having regard to your risk profile. I had mistakenly taken OP to be asking for pointers as to which particular sector advisors would be recommending at the moment.
 
NoRegretsCoyote said:
What's the "run-up to retirement" exactly? What's the right percentage?
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There is no definitive, universally applicable answer to this question. It very much depends on your individual circumstances.

Personally, I intend to have 10 years of anticipated spending in “safe” assets (cash and government bonds) at the start of my retirement and I will gradually build up that amount over the 10 years prior to retirement.

Anything over and above that amount will continue to be invested in a global equity index fund.

It’s probably worth saying that my objective is to minimise the risk of running out of money before I run out of life. My objective is not to maximise my terminal wealth.

It is certainly true that there is a very high probability (but definitely no guarantee) that equities will outperform bonds over a 25+ year period.

But that’s not the full story when you’re spending down a portfolio.

The sequence of returns is also hugely relevant and hence my proposed 10 year buffer.
 
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