October 2018 update – Review to June 2018
The latest Willis Towers Watson review of the economic assumptions underlying the optimised portfolios available through our platform has resulted in a revision to asset allocations this quarter.
Over the quarter there were modest decreases in the expected returns for UK cash, UK equities and property and a small increase in UK fixed interest. International fixed interest and international equities remain constant. Long-term volatility fell slightly across most asset classes.
The projected UK cash return forecasts have a tendency to influence projected returns on other assets such as equities and property. Over the quarter, the expected long-term returns for UK cash decreased from 1.78% p.a. to 1.72% p.a., the projected expected return for UK equity fell from 6.87% p.a. to 6.80% p.a., and the projected expected returns for UK commercial property fell from 4.40% p.a. to 4.33% p.a.
We have completed a review of the expense assumptions following the publication of new MiFID II data by fund managers over this year. This has caused a switch from cash to property at most allocations and also a switch from international to UK equities.
Having also reviewed the tax assumptions, and made allowance for the personal allowances on offer for interest, dividends and capital gains, the conclusion is that for the moment it is more intuitive to have the same allocations across all tax wrappers.
Please note that when you are using our online tools to construct or rebalance portfolios, you cannot currently select Risk Level 10 for a yield (income) investor. This is because within the asset allocation model, all of the equity income comes from UK (not international) equities. At the current time, UK equities only match the risk profile for Risk Level 9 and therefore no asset allocations are being produced for Risk Level 10.
View the standard asset allocations as at October 2018