advice on allocating pension funds


New Member

My question is a general one:

Person with 12 years to retirement: should allocate how much in equities/bonds/cash.

I'm in a self-managed employer pension scheme

I'm PAYE and putting 38% of salary per month into pension per including employer contribution.

The pension is getting significant now and it kills me when I see the balance drop by 5k or 10k

In December I was lucky and moved to cash before it dropped

This year when I look at the lie of the land considering :
* fed interest rate rises
* China economy dragging down world markets
* Brexit uncertainty
* talks of US recession
* talks of Europe recession
* talks of China recession
* is there a game of chicken on the equities versus interest rates? A bit like what happened in December when talk of interest rate increase will trigger market panic?

On the plus side:
* it's a run-up to the 2020 US elections
* markets are not pricing in a US fed rates hike for 2019 and more likely reduction
* interest rates still low enough to force money into equities

So I was considering going to financial adviser but I am reluctant because there must be a standard response in my situation.

Obviously I want to maximise my final pension (and ARF after retirement)

So does it make most sense to allocate say
33% cash
33% bonds/properties/cautious
33% equities
new contributions going to equities

OR be a risk taker and allocate
100% to equities?

My scheme allows only "world equity" and not North American to am reluctant to allocate 100% when it might include eg South America and Europe.

Does it make sense to stay equities for say next 7 years and reconsider then?
And secondly what would the adviser(s) say and how much does that cost? Is it worth it?

Given I am self managed: do advisers advise on weekly basis eg
* move X% to fund1
* move Y% to fund2

Or is it a fairly static approach? I imagine it's fairly static and if that is the case.. presumably the approach can be reduced to a small number of strategies


Frequent Poster
How long is a piece of string.
Traditionally it was the common view that one should seek to begin de risking gradually in the last 5 to 7 years, ie moving out on Equities and into Bonds and Cash. And the logic for this was since you had to ultimately convert 75% of the fund into an Annuity, Bonds were the basis on which Annuity rates were calculated.
But since the introduction of ARFs that logic is not so clear.
So I would consider what you intend to do with the 75% (after taking the 25% retirement lump sum) on retirement. If you strategy will be to buy an Annuity, then I would consider a gradual de risking strategy in the run- in to retirement. In this scenario you investment time horizon is only 7 years.
If however you intend to invest the 75% into an ARF, then you need to consider what sort of investment strategy you will adopt for the ARF. I makes little sense (in my opinion) to gradually de risk to say 100% Bonds/Cash if your investment strategy for the ARF will be more like a Managed Fund. In this scenario you investment time horizon is 7 years + 20 years (approx).
I accept that 25% of the fund will be taken as a lump sum on retirement, but I would be reluctant to let the 25% guide the 75%.
Any advisor who says that they advise in relation to investment strategy on a weekly basis, I would steer clear of. The old adage “it’s about time not timing” still holds good.


New Member

Thanks for the considered response

First off yes I would be planning on ARF ..
So you are suggesting to stay equities and I can understand that
But to tease out the answer further:
There are factors that might put an investor off
* the 10 years of markets increase
* onset of recession
* fed rate hikes
etc etc

Does the pension contributor ignore all such "noise" and stay the course fully invested?

Or does one take a more nuanced approach? Market highs like now keep back say 33% in cash and if market falls then add to equities
Wouldn't an adviser recommend bonds and property as well to make a balanced portfolio?


Frequent Poster
There will always be “noise”.
I am not necessarily suggesting 100% Equities, just as I would not suggest 100% Bonds. So if you are going the ARF route post retirement, I would look at a mixed strategy. The typical Level 4 Managed Fund might have a mix as follows:
60% Equity
25% Bonds/ Cash
15% Property
This will vary somewhat from manager to manager.
Remember that the typical retiree at age 65 now has an average life expectancy of some 20 years. So to some extent, your investment time horizon post retirement will circa 20 years. Add the 7 years yet to go to retirement and you are looking at circa 27 years.
There is a small article in today’s Irish Times which suggests that the difference between an investor who gets all the calls right (perfect market timing) and someone who gets all the calls wrong (worst market timing) is not as big as you might expect. So unless you have perfect foresight (a direct line to God) I think “time” rather than “timing” is the strategy.