Zurich AVC Pension – Restructure from default Lifestyle strategy

I will have a PS pension at age 60 (now 56) and also an AVC with Zurich (current value 170k).

The AVC is following the default Lifestyle strategy. Growth is now minimal to negative (if you factor in inflation.). This low risk strategy seems to have really performed poorly the past 3 yrs, especially 2022/2023.

I want to restructure more towards better growth. Leaving the default strategy means I have to manage it going forward.

A risk assessment puts me at Medium to High (3 to 4).. Prisma 3, 4 and 5 on a 40/40/20 split is recommended. Does this make sense or just another default type solution ?

My concern is these are all invested similarly, just with different levels of asset split to change the risk. A lot of exposure to the same stocks /markets.

Would I be better going for one Prisma fund, and then something like Managed, Diversified and a global equity fund to spread the risk/growth?

Maybe overthinking....!

Had anyone been in a similar situation?

Well, pretty much every asset class performed poorly in 2022 - somewhat unusually, equities and bonds both produced negative returns.

It’s not really possible to give you any guidance on the basis of the limited information provided - we would really need more information on your overall financial position.

But, as a starting point, unless you know what you are doing, I would be inclined to leave well enough alone.

Thanks, here is more detail about my circumstances Here

Very low growth in 2023/24 when markets were doing well is at best standing still, going backwards when inflation is 2%. I could have got the same % return as the pension with money on deposit (leaving pension tax benefits out of it).

Like many people, I would be happy to choose what funds my pension holds/is invested in. Cash, Super Capp funds are risk/growth 1, on a scale of 9 or 10. Probably only suited for the last year of a pension or to lock in gains from previous 38+ years. I don't have much gain as the growth has been so low. My biggest mistake was only starting the AVC in 2017.

Ok, on the basis of the details previously provided, you certainly have scope to take on more investment risk.

In your shoes, I would opt for a 100% allocation to Zurich’s indexed global equity fund or, if that’s not available to you, Zurich’s international equity fund.

Luternau said:

A risk assessment puts me at Medium to High (3 to 4).. Prisma 3, 4 and 5 on a 40/40/20 split is recommended. Does this make sense or just another default type solution ?

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Given these funds are already diversified between asset classes in varying proportions, it makes little sense to split between them I think. You’d just end up with what looks like 100% of the middle one!

I think since you have a full PS pension coming and effectively this is your fun money, you probably just need to decide when you’re going to spend it and invest accordingly at this stage. It would’ve been better in global equities since first investment, but you are where you are. The thing now is whether this is intended to fund 10 years of exotic travel from age 60-70 say, so some of it will be spent in a 5yr timeframe (you don’t want this in equities really) and some in a 5-10 year timeframe, which is okay-ish for equities. Or if you have no need for it in the shorter term and are happy to leave it be if equities tank, then go for it.

But in short, it’s been invested like you need it for financial security when you probably don’t. If equity valuations weren’t so high right now I’d say stick it in global equities but with things the way they are, you might just end up with another 10 years of so-so growth.

conor_mc said:

Given these funds are already diversified between asset classes in varying proportions, it makes little sense to split between them I think. You’d just end up with what looks like 100% of the middle one!

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Thanks for the very considered reply. You explain the blend of Prisma return very well. I was surprised at the recommendation.

Correct, this would just be my fun money.. The linked post shows the overall position. Even without it, financially, I am ok.
My head is saying a 50/50 split of moderate risk/ growth and high risk/growth. The concerns is we are close to peak? This week with Deepseek shows potential for drops in the big tech stocks can come from nowhere very quick.

My NRA is 60, which is just 3.5yrs away. I would then opt for an ARF over an annuity. I am not very well versed on how the ARF would work, but assume I can still expect investment growth (while drawing 4% p.a). So if I opt for 100% equites I have more than. 3.5yrs of investment opportunities?

Luternau said:

So if I opt for 100% equites I have more than. 3.5yrs of investment opportunities?

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You could, hopefully, have decades of investment opportunity with your pension and ARF. Don't hamstring your potential pension/ARF returns by opting for unnecessarily conservative investment options.

Luternau said:

I am not very well versed on how the ARF would work

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An ARF is simply an investment (earning tax free growth) from which you are eventually required to draw a certain minimum amount down annually (4% from age 61 and 5% from age 71).

Luternau said:

The concerns is we are close to peak? This week with Deepseek shows potential for drops in the big tech stocks can come from nowhere very quick.

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Focusing on short term market volatility is a pointless distraction. You need to look at the bigger and longer term picture.

Luternau said:

My NRA is 60, which is just 3.5yrs away. I would then opt for an ARF over an annuity.

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Do you know what size your ARF pot will be?

Either way, you’ve multiple streams of income which are providing plenty for a single person. I think if you moved to a higher risk equity investment, you might get caught out by a drawdown off these lofty valuations in the coming years, but you can well afford to ride it out tbh.