The compromise portfolio
Page updated April 27 2020
Now that we have explained what our retirement income portfolios are intended to achieve and how we have arrived at the mix of assets, it’s time to present the individual holdings.
If you are an experienced or confident investor, you may wish to use the following as a basic guide around which to adjust your existing portfolio. But we have designed these portfolios with the novice investor in mind.
Select one of the three portfolios that suits you best. You then log in to the account where your amalgamated pension is held and invest your pot in the funds in the percentages shown, ensuring of course that your one-year cash buffer is intact.
For an explanation of how to actually take income from the portfolios, see Step 4.
Target for the compromise portfolio: an annual income of 4% of the initial portfolio value, rising each year roughly in line with inflation, with little or no erosion of capital, so that an appreciable legacy can be left. It may be necessary to buy an annuity at some stage, but if so the intention is that only part of your pot will be used for this – leaving cash behind that can be left to your heirs. No regular sale of part of your holdings to top up the natural income is intended, although it cannot be ruled out; it would depend on the portfolio’s yield – which varies all the time – when you invested.
Compromise portfolio: the holdings
One year’s worth of target income held outside the pension in an easy-access savings account or cash ISA.
Four investment trusts that invest in commercial property:
◆ Triple Point Social Housing REIT (real estate investment trust) (12.5% of the portfolio)
◆ Urban Logistics REIT (12.5% of the portfolio)
◆ Residential Secure Income (12.5% of the portfolio)
◆ Regional REIT (12.5% of the portfolio)
Two funds that invest in bonds:
◆ Janus Henderson Strategic Bond (12.5% of the portfolio)
◆ Jupiter Strategic Bond (12.5% of the portfolio)
One investment trust that invests in infrastructure:
◆ Sequoia Economic Infrastructure Income (12.5% of the portfolio)
One investment trust that invests pharmaceutical companies:
◆ Biopharma Credit (12.5% of the portfolio)
Five of the funds in this portfolio were changed on April 27 2020 as a result of the radically altered investment outlook brought about by the coronavirus epidemic. More details can be found here.
Currently the compromise portfolio is identical to the high-income portfolio. However, they may diverge in future. The withdrawal strategies are in any case different
The following table sets out how the portfolio would look if you invested a total of £300,000 in it (in addition to your cash buffer). The table also includes each fund’s ‘SEDOL’ and ‘ISIN’ numbers, as well as the stock market ‘ticker’ code in the case of investment trusts. These codes will help you to identity the exact fund or trust to invest in. (In the case of funds, however, some platforms have their own variants with different SEDOL and ISIN numbers. Funds do not have stock market ‘ticker’ codes.)
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