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Tacpot12's Retirement Income Portfolio Review 2021

A helpful place to also put any annual reports etc, of your own portfolios
tacpot12
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Tacpot12's Retirement Income Portfolio Review 2021

#431751

Postby tacpot12 » July 31st, 2021, 7:33 pm

This is my first published review of my real life retirement income portfolio, as of 25 May 2021. The objective of the portofolio is provide 80% of the income I needed to support my early retirement, to increase this income inline with with inflation, and to leave maintain this income through to age 100, when combined with my state pension and DB pension entitlements which kick in at 62, 65 and 67. The other 20% of the income I need comes from a flat that I rent out and a house that was rented until last year, when I sold it and am slowly feeding the proceeds into a Stocks & Shares ISA. The ISA and the GIA that feeds it are not reported in this review.

I retired in September 2017, aged 53, and started to drawdown my pension in May 2019 when I reached age 55. I started and finished building the retirement portfolio in an AJ Bell SIPP during February 2018, migrating a Scottish Widows Personal Pension, a L&G Personal Pension left over from a previous employment and DC pension from my last employer. Between February 2018 and May 2019, the income was left to accumulate and create a cash buffer in the SIPP. This cash buffer was reduced from £14K to £10K in 2020 when I took the opportunity to purchase more shares in the one of the two EFTs in the portfolio at a very good price following the market response to the pandemic.

The portoflio is designed to be a buy and hold, although I did take the opportunity to buy the AJ Bell shares available to me as a customer when they had their IPO, but sold these quite quickly for a good profit.

I took financial advice about moving two DB pensions from previous employers, but the advice was not to move them, and I was happy to take this advice. (CETVs were £30K and £40K),

For reporting purposes I use close of business on 25th May as the cut off point for valuations and income.

The portfolio consists of 2 growth focused ITs, 13 income focused ITs, 3 Unit Trusts (one of which does not pay any income) and 2 EFTs diversified across markets and themes (20 holdings in total), consisting of:

Equity Growth: Scottish Mortgage Trust (SMT), Finsbury Income & Growth Trust (FGT)
Bond Growth: Schroder Long Dated Corporate Bond UT (0956932)
UK Equity Income: Edinburgh Investment Trust (EDIN), City of London (CITY), Mercantile (MRC), JP Morgan Claverhouse (JCH), Invesco Perpetual UK Smaller Companies (IPU), iShares UK Dividend ETF (IUKD),
UK Equity/Bond Income: Henderson High Income Trust (HHI), Invesco Bond Income Plus (BIPS), AXA Framlington Managed Income UT (B71DB36)
International Equity Income: Bankers(BNKR), JP Morgan Global Growth & Income (JGGI), European Asset Trust (EAT), North America Income Trust (NAIT), Schroder Oriental Income Trust (SOI)
International Equity/Bond Income: Artemis High Income UT (B2PLJN7)
UK Property Income: BMO Commercial Property Trust (BCPT), iShares UK Property ETF (IUKP)

I've rebased the portfolio's starting value to £100,000 for these reports, so all the figures below are pro rata to that amount. I am publishing data for the three full years that I have data for:

Income Performance



My initial forecast for yeild was 3.14%, pa but the actual yeild was above 3.9% for the first two years, then dropped to 3.77% due to the pandemic. I think this relatively small drop shows that Investment Trusts were willing and able to use capital reserves to support dividends to a small degree. Over the three years, the average yeild is 3.88%.

Capital Performance



My initial forecast for capital growth was 3% pa, but average growth over the three years has been lower at 2.38%

So my total return to date is 6.26% pa.

Comments and questions are apprecaited.

TUK020
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Re: Tacpot12's Retirement Income Portfolio Review 2021

#431775

Postby TUK020 » July 31st, 2021, 8:48 pm

tacpot12 wrote:The portfolio consists of 2 growth focused ITs, 13 income focused ITs, 3 Unit Trusts (one of which does not pay any income) and 2 EFTs diversified across markets and themes (20 holdings in total), consisting of:

Equity Growth: Scottish Mortgage Trust (SMT), Finsbury Income & Growth Trust (FGT)
Bond Growth: Schroder Long Dated Corporate Bond UT (0956932)
UK Equity Income: Edinburgh Investment Trust (EDIN), City of London (CITY), Mercantile (MRC), JP Morgan Claverhouse (JCH), Invesco Perpetual UK Smaller Companies (IPU), iShares UK Dividend ETF (IUKD),
UK Equity/Bond Income: Henderson High Income Trust (HHI), Invesco Bond Income Plus (BIPS), AXA Framlington Managed Income UT (B71DB36)
International Equity Income: Bankers(BNKR), JP Morgan Global Growth & Income (JGGI), European Asset Trust (EAT), North America Income Trust (NAIT), Schroder Oriental Income Trust (SOI)
International Equity/Bond Income: Artemis High Income UT (B2PLJN7)
UK Property Income: BMO Commercial Property Trust (BCPT), iShares UK Property ETF (IUKP)


Comments and questions are apprecaited.


Interested if you are willing to share your asset allocation % between the above, and how you arrived at these %ages

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Re: Tacpot12's Retirement Income Portfolio Review 2021

#431781

Postby JohnW » August 1st, 2021, 12:15 am

Any comparison seems a bit unfair, as readers have the opportunity to choose a brilliant asset mix after the event.
But when I back-test a 70/30 global stocks/government bonds portfolio from Jan 2015, and withdraw 3.9% of it each year to spend, I finish up with the current capital value being about 30% higher than it started (allowing for 0.8%/year fees).

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Re: Tacpot12's Retirement Income Portfolio Review 2021

#431792

Postby Dod101 » August 1st, 2021, 8:23 am

I retired at about the same age and need to focus on income as I had no prospects of any pension other than the SP.

I think you have a well thought through portfolio with a good spread of investments and you are not chasing yield. It is too early really for anyone to draw any meaningful conclusions but to me it looks good. Some will say that the you are relying too much on UK derived income and maybe holding both City of London and Edinburgh could be improved upon.

Personally I would leave it alone for now and seriously look at it again in a couple of years after the effects of the pandemic are hopefully behind us, but monitor it in the meantime.

Dod

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Re: Tacpot12's Retirement Income Portfolio Review 2021

#431916

Postby mickeypops » August 1st, 2021, 9:47 pm

Thanks for the review Tacpot. I’ll follow your updates with interest

MP

tacpot12
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Re: Tacpot12's Retirement Income Portfolio Review 2021

#432045

Postby tacpot12 » August 2nd, 2021, 3:07 pm

TUK020 wrote:Interested if you are willing to share your asset allocation % between the above, and how you arrived at these %ages


Hi TUK20

This is and wsa the rough asset allocation when the portfolio was constructed:

UK Equity: 48%
International Equity : 25% (US 8% / Asia 7% / Europe 8% / Emerging Mkts 2%)
UK Bonds: 14%
International Bonds: 7%
Commercial Property: 6%

I arrived at these percentages by deciding I wanted a strong home (UK) bias to the portfolio (70-75% home bias) . With hindsight I think I over did this home exposure, and have taken steps in my GIA and ISA to get more international exposure (I'm now thinking that the home bias should be closer to 60%). I have bought Vanguard FTSE Developed World ex-U.K. Equity Index units in my GIA, and as I move the money into my S&S ISA I am buying JP Morgan Global Growth & Income to hold in the ISA.

Having taken quite abit of risk in the accumulation phase, and having thought about the risk I wanted to take in the decumulation phase, I decided that my target for bonds/fixed interest holdings was no more than 20% of the portfolio, and ideally less than this. I have already decided that I will be selling the holdings that include bond holdings before selling other holdings.

I also wanted some exposure (c 5%) to commerical property, as I already had the rental properties for some exposure to the UK residential property market.

With these targets, the asset allocation fell out more or less automatically. I did have to map each of the funds I was interested in investing in to determine where they had holdings. Not all the funds made this easy, and I have used the X-ray reports available from Morningstar via AJ Bell to check that I have acheived the asset allocation that I intended!

I do subscribe the view that I have heard others expound that investing in "UK" assets does not mean that you are entirely relying on the UK economy. Many of the large and medium sized companies in the UK have significant income from offshore.

tacpot12
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Re: Tacpot12's Retirement Income Portfolio Review 2021

#432054

Postby tacpot12 » August 2nd, 2021, 3:32 pm

Dod101 wrote:I retired at about the same age and need to focus on income as I had no prospects of any pension other than the SP.

I think you have a well thought through portfolio with a good spread of investments and you are not chasing yield. It is too early really for anyone to draw any meaningful conclusions but to me it looks good. Some will say that the you are relying too much on UK derived income and maybe holding both City of London and Edinburgh could be improved upon.

Personally I would leave it alone for now and seriously look at it again in a couple of years after the effects of the pandemic are hopefully behind us, but monitor it in the meantime.

Dod


I also think that Edinburgh could be improved upon, but having see through the pandemic prices drop steeply, and in some cases remain depressed, but dividends remain very strong, I am relaxed about the capital value of the portfolio. I will have a good look in couple of years to see if the arguement to sell certain holdings have grown stronger.

It feels like things are going quite well. I've taken over £45,000 out as dividends, and still have £10K of cash in the SIPP, and the assets are worth 7% more than I paid for them 3 and a bit years ago.

Once I reach state retirement age, my the state pension entitlement, DB pensions and rental income will cover all of my essential outgoings, so I don't really need the SIPP to last beyond state retirement age, unless I want to have more money for discretionary spending. I haven't needed to sell anything yet and I am already a quarter of the way through the period that I am relying on the money in the SIPP to cover. Even if I received no more dividends and the capital value didn't change, I would still make it to my state retirement age, so I will be looking to take more out of the SIPP when I can decide to sell some of the assets that hold bonds.


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