European pension allocation

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Glasir
Posts: 4
Joined: Fri Apr 05, 2013 4:14 am

European pension allocation

Post by Glasir » Sat May 04, 2013 7:56 am

I'm considering changing my highly conservative pension allocation (100% employer contribution) from 100% bonds towards a more growth focused simple portfolio.
(my previous post might have made things a little to complicated)

Age: 34; investment horizon 33 years, I'm thinking about an allocation in this pension plan for the next decade in a band between 70%/30% and 80%/20% with no more then 40% EU equity and no real estate.

These are the funds available within my pension plan excluding a couple 'idealistic' funds:

Code: Select all

type....MF name............................benchmark..................................................................TER
stock...SNS Wereld Aandelenfonds...........by region; America 37,5% Europe 37,5% Far East 15% emerging mrkt 10%.......1,07%
stock...SNS Amerika Aandelenfonds..........S&P 500 Net Total Return...................................................1,01%
stock...SNS Euro Aandelenfonds.............MSCI Europe Standard Net Total Return Index................................0,96%
stock...SNS Azië Aandelenfonds.............MSCI AC Asia Pacific IMI Total Return......................................1,26%
mix.....SNS Euro Mixfonds..................50% iBoxx € Overall, 50% MSCI Europe Standard Net Total Return Index.......0,90%
bond....SNS Euro Obligatiefonds............iBoxx € Overall............................................................0,71%
MM......SNS Euro Liquiditeitenfonds........REFI-interest European Central Bank........................................0,60%
realest.SNS Euro Vastgoedfond..............Global Property Research 250 Europe Index, UK 20%, UCITS...................1,26%
Current allocation		
bond....REAAL Doorlopend Garantiefonds.....only available if 100% allocated; 3%/year return 'guaranteed'..............0,87%
Full Managed option
mix.....SNS Optimaal Paars.................allocation changes with age, currently 90% world stock 10% EU realest......1,26%
reallocation costs new contributions/existing portfolio: 0,0%/0,5%.

Current tax-advantaged portfolio is low 5 figures, 75% in the pension plan and 25% in a Global Stock Index Fund (TER 0,59%) that I can only do small contribution to in the future.

I'm considering two major options for the pension fund:
1. A 'set and forget' world+bonds 2 fund portfolio.
70% SNS Wereld Aandelenfonds (global stock) and 30% SNS Euro Obligatiefonds (EU bonds) for current portfolio and contributions. The 'external' holding will push bonds down to 22.5% of portfolio at first.
2. A 'US companies will outperform the world for now' 3 fund portfolio.
45% SNS Amerika Aandelenfonds (north american stock), 35% SNS Euro Aandelenfonds (EU stock), 20% SNS Euro Obligatiefonds. The external will push bonds below 20% at first, but should be at or over within a year or two. Multinationals will fill the 'international exposure' requirement.

Chosen allocation would be rebalanced, but not to often to keep costs down, and I'm planning to not stray from the allocation to much for the next 10 years. Third option is to keep the guarantee (minimum of EUR 420k in 2044 if I stay the course) or switch to the 'full management' option. On a side note I know I have to be somewhat aggressive on the non-tax advantaged investments since I started a bit late :(

What would you guys and girls do with the available options? Am I forgetting something important?
Last edited by Glasir on Sat May 04, 2013 9:51 am, edited 1 time in total.

allsop
Posts: 1046
Joined: Sun Jun 15, 2008 7:08 am

Re: European pension allocation

Post by allsop » Sat May 04, 2013 8:55 am

Too bad that you cannot contribute much the global index fund, which seems to be the cheapest option.

Going from 100% bonds to less than 30% is a pretty big jump, but on the other hand this only for the 30% of your portfolio not in the pension part.

I assume that you are a Dutch based investor, after googling on the funds, and the various prospectus will give you more information about the investment style of the funds listed which is just as important as the funds as TER. Start with the Factsheet that by EU regulation is not supposed contain marketing.

My Dutch is pretty poor but the world fund have following link to documents that you might already know: http://www.morningstar.nl/nl/funds/snap ... B1Z&tab=12

From little I could gather I'm partial to your first option, and have allocation based upon regional GDP, which is interesting.

Glasir
Posts: 4
Joined: Fri Apr 05, 2013 4:14 am

Re: European pension allocation

Post by Glasir » Sat May 04, 2013 9:14 am

Yeah I've been scanning all the fact-sheets for the funds from the supplier SNS (warning: Dutch) You might recognize the financial institution as one of the recently nationalized failures :shock:.

With my long investment horizon I'm not to worried about risk exposure right now, though I do understand and see the value of limiting risks while I age.

allsop
Posts: 1046
Joined: Sun Jun 15, 2008 7:08 am

Re: European pension allocation

Post by allsop » Sat May 04, 2013 9:42 am

Went to your first thread, which I should have done in the first place....

The "pension fund" you refer to reminds me of similar funds in Sweden where each investment is guaranteed a minimum return but in addition have a variable return that in some circumstances can be taken back. This allows the "pension fund" to have stocks in the portfolio, within local regulations, so they are not 100% in bond unless they are in a very bad shape. Is this the case for your "pension fund" as well? The "pension fund's" yearly report should tell how much bonds they are holding.

A common problem, at least in Sweden, is that there are very high costs with transferring assets from them.

Glasir
Posts: 4
Joined: Fri Apr 05, 2013 4:14 am

Re: European pension allocation

Post by Glasir » Sat May 04, 2013 10:13 am

This is not one of our massive 'national' pension funds like the ±250 billion euro ABP, this one is closer to a private option not entirely unlike a 401k, with the caveat that 100% of the balance must be used at retirement to purchase a "retirement benefit plan" that handles the retirement income stream. (usually: X euro a month till death, beneficiary benefits, perhaps indexed to inflation. No assets for your heirs.)

The guarantee fund really is the odd one out: an insured 100% bond fund (59% government, 15% large cap corporate bonds, 13% semi government, 13% bonds with collateral)
I think the guaranteed value though is only calculated for the entire duration of your holdings once you retire, so a negative result wont get bumped to 3% if your averages are at or above 3% anyway.

allsop
Posts: 1046
Joined: Sun Jun 15, 2008 7:08 am

Re: European pension allocation

Post by allsop » Sat May 04, 2013 11:19 am

100% bonds for pension with withdrawal many years ahead is very conservative, even for most BHs, as you describe your situation.

Edit: So while Bogleheads principles are very useful they need to be adapted for non-US based investors, and taxation is the one factor you must take into account as this is the basis of part the order of BH principles as well as common advices given here in this forum with a US-based investor in mind.

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