The Best Investment Portfolios for Retirement

Use these model portfolios to help you understand how successful retired investors allocate their assets and manage investment risk in retirement.

Everyone is different. We all have different preferences, different needs and our tolerance to risk also varies. To that end, we have created four model portfolios that should appeal to different retirees:

  1. The Ultimate Retirement Income Portfolio for investors seeking a high income
  2. The Long-Term Capital Growth Portfolio for investors who want to grow their money
  3. The Cautious Turtle Portfolio for investors who want to moderate risks
  4. The Wild at Heart Portfolio for wealthier retirees who want to go all-out to find golden returns

The best model portfolios for retirement

About the best investment portfolios for retirement: These model portfolios and specific investment ideas are not recommendations or financial advice. They’re simply our best attempt to capture common investing principles into a ready-made portfolio for learning purposes. Please read our important disclaimer. If you’d like an independent and qualified professional to create an investment portfolio for you, consider finding an independent financial adviser.

These portfolios assume that you also control a separate pot of instant access savings which can cover your expenses for a period of at least 6 – 12 months.

The Ultimate Retirement Income Portfolio

1. The Ultimate Retirement Income Portfolio

Like a bumper salary in retirement, the ultimate retirement income portfolio targets a relatively high-income yield from a diversified portfolio of cash, bonds, peer-to-peer lending and equities.

This model portfolio invests exclusively in income-producing assets. Due to the disappointingly low yield currently available from government bonds and cash, the search for an attractive income yield results in a relatively high allocation to equities. When investors reassess their portfolios at retirement, they usually look to cut equities down to size to increase the stability of the portfolio value. However, no such option is compatible with the search for a high-income yield that could compete with an annuity.

Summary asset allocation: 

Cash20%
Peer-to-peer lending10%
Corporate bonds20%
Equities50%

Illustrative investment of £1,000

The interest rates and income yields quoted below were correct at the time of writing. Please follow the links below for more information directly from the financial provider, including the latest distribution yields and fees. Financial Expert has no commercial relationship with these providers.

Cash

£200 – 3-year savings account – yielding 2% (visit provider)

Peer to Peer lending

£100 – Zopa Plus – peer to peer lending – yielding 5% (visit provider)

Bonds

£200 – Nuveen ESG High Yield Corporate Bond ETF (NUHY) – yielding 5.2% (visit provider)

Equities

£100 – iShares Mortgage Real Estate ETF – yielding 5.03% (visit provider)

£100 – Invesco UK Equity Income Fund (UK) – yielding 2.3% (visit provider)

£100 – iShares International Select Dividend ETF – yielding 5.4% (visit provider)

£200 – Vanguard FTSE 100 Index Unit Trust – Income – yielding 3.02% (visit provider)

£1,000 – Total invested, yielding 3.8%

The weighted average income yield of this portfolio at the date of writing is 3.8%. This represents a tasty combination of interest, bond coupons and dividends. 

The 50% allocation to equities provides plenty of growth potential on top, so the expected income yield is not a capped or maximum return. Investments contain risk and this portfolio could disappoint or even result in losses during periods of market turbulence.

About this model retirement portfolio & investment selection

This income-orientated portfolio finds a balance between aggressive and conservative investing approaches.

A bond-heavy portfolio could possibly yield less income than a good bank account or annuity product. The higher equity allocation of 50% ensures that this portfolio has a good chance at targeting a respectable return.

That being said, it doesn’t even try to invest for an 8% yield as this would escalate the risk of capital loss. Income-seeking retirees are usually after a reasonable level of income. A 3.8% yield is high enough to demonstrate that your money is working hard for you, without generating a distracting amount of volatility.

Learn more about investing for income

If you’re looking to build a retirement portfolio that generates a steady stream of interest, dividends or bond coupon payments, you’ll love these articles:

In what is a coupon rate, we explain the terminology surrounding bond income. how to interpret flat yield, yield to maturity and the distribution yield of a bond fund.

If you’re a dividend hunter, then allow yourself to be inspired by the best dividend investing books currently available.

The Long-Term Capital Growth Portfolio

2. The Long-Term Capital Growth Portfolio

Since a significant pension rule change in April 2015, retired Brits have greater freedom over their defined contribution pension pots when they retire at age 55/57. Previously, Brits with moderate or small pots were forced to buy an annuity for life. Since the pension freedoms, other options are on the table, including investing the money in an investment portfolio and drawing down cash as it is required.

This long-term capital growth portfolio is designed to grow with the stock market and provide as large a pension value as possible to draw down from.

It’s a common misconception that retirement portfolios should produce an income. This is absolutely not the case.

A pension investment portfolio can aim to pure generate capital gains through appreciating in value. Rather than withdrawing income, you can instead simply sell units of funds or shares in companies as required to generate cash to draw down in line with your needs.

In this way, a capital growth portfolio is more convenient because you only need to sell just enough investments to fund your next withdrawal. You’ll avoid the administrative issues experienced by income investors such as having spare cash leftover (when dividends exceed drawdowns), or shortfalls when dividend income is insufficient.

Summary asset allocation: 

Cash15%
Bonds40%
Equities45%

Illustrative investment of £1,000

The interest rates and income yields quoted below were correct at the time of writing. Please follow the links below for more information directly from the financial provider, including the latest distribution yields and fees. Financial Expert has no commercial relationship with these providers.

Cash

£150 – 3-year savings account – yielding 2% (visit provider)

Bonds

£100 – Vanguard U.K. Inflation-Linked Gilt Index Fund – Gross Accumulation (visit provider)

£150 – Vanguard U.K. Investment Grade Bond Index Fund – Accumulation (visit provider)

£100 – Vanguard Global Corporate Bond Index Fund – Hedged Accumulation (visit provider)

£50 – Baillie Gifford High Yield Bond Class B – Accumulation (visit provider)

Equities

£200 – HSBC FTSE 100 Index Fund Accumulation C (visit provider)

£250 – FTSE Developed World ex-U.K. Equity Index Fund – Accumulation (visit provider)

£1,000 – Total invested

About this model retirement portfolio & investment selection

This model portfolio is designed to capture stock market returns while taking advantage of the stabilising effect of corporate bonds in an investment portfolio.

A 55% equity weighting is a tried and tested allocation that should allow the portfolio to comfortably outpace inflation. We’ve also specifically included inflation-link government bonds to provide further protection in this scenario.

It’s worth noting that you can create an equity and bond portfolio like the Long Term Capital Growth Portfolio without using as many as seven funds. An alternative one-stop-shop could be the Vanguard LifeStrategy® 60% Equity Fund – Accumulation (visit provider) which is a ‘fund-of-funds’ that invests 40% across a diverse range of bonds and 60% across UK and worldwide equities. As an accumulation fund, it automatically reinvests any income received from its constituent funds, allowing your portfolio to grow in value.

The Best Investment Portfolios for Retirement - Turtle

3. The Cautious Turtle Portfolio

For the risk-conscious retiree who wants to do much more with their money than buy an annuity for life.

As the best retirement planning books explain, an annuity often does little more than drip feeds your own lump sum back to you. If you want to take control of your investments to generate a real return but manage risk, then the Cautious Turtle model portfolio may provide some ideas for you.

Summary asset allocation: 

Cash25%
Bonds40%
Equities35%

Illustrative investment of £1,000

The interest rates and income yields quoted below were correct at the time of writing. Please follow the links below for more information directly from the financial provider, including the latest distribution yields and fees. Financial Expert has no commercial relationship with these providers.

Cash

£250 – Marcus Cash ISA (visit provider)

Bonds

£200 – Vanguard U.K. Government Bond Index Fund – Accumulation (visit provider)

£100 – Invesco Global Investment Grade Corporate Bond Fund (visit provider)

£100 – TwentyFour Absolute Return Credit Fund (visit provider)

Equities

£100 – Goldman Sachs Defensive Equity Fund Class A Shares (institutional only)

Alternative: Eaton Vance Parametric Global Defensive Equity Fund (visit provider)

£250 – Vanguard Global Equity Fund – Accumulation (visit provider)

£1,000 – Total invested

About this model retirement portfolio & investment selection

The Cautious Turtle Portfolio is a plan which reflects the importance of remaining within your lower risk tolerance, but also still benefiting from the returns of the financial markets.

As a portfolio that allocates the majority of value to cash and bonds, the Cautious Turtle Portfolio is set up to deliver a smoother ride through retirement. However, the trade-off is seen in the expected return. This portfolio should not be expected to return more than 3% per annum.

This is however a sizeable premium above and beyond a savings account alone. Those small margins can really add up to incredible differences in quality of life over long retirement periods.

The Best Investment Portfolios for Retirement - Wild

4. The Wild at Heart Portfolio

A model portfolio for sophisticated investors with:

  • High net worth
  • Large cash buffer to cover essentials
  • High risk tolerance
  • Desire to maximise the value of the estate for legacies rather than spend it in the next few years

This is not an ordinary retirement portfolio, but a diverse selection of investments for those who want to lean in towards risk.

Why would retirees choose a guns-blazing portfolio at this stage in their life, when most investors are carefully dialling back the risk of their portfolios to ensure that they can meet their needs?

The answer is that if you are wealthy and have a large portfolio that is technically surplus to requirements, it is likely that your time horizon rather than becoming shorter, will grow longer – beyond your own lifetime and into your children’s or grandchildren. That’s because the wealth will likely outlive you and pass onward to your friends, family and charitable causes as part of your estate.

Wanting to maximise the amount that will be given, and bearing no risk to qualify of life should the investments disappoint, fortunate retirees in this position may choose to explore more exotic opportunities for their money.

Indeed, this type of cash is possibly the most common source of cash that sits inside hedge funds, listed private equity funds and venture capital trusts. It’s money that their own can afford to lose, riding on the edge to (hopefully) dizzying success.

Summary asset allocation: 

Cash0%
Bonds20%
Equities50%
Property (REITs)10%
Hedge funds10%
Private market7%
Cryptocurrencies3%

Illustrative investment of £1,000

The interest rates and income yields quoted below were correct at the time of writing. Please follow the links below for more information directly from the financial provider, including the latest distribution yields and fees. Financial Expert has no commercial relationship with these providers.

Bonds

£75 – Invesco Global Investment Grade Corporate Bond Fund (visit provider)

£175 – iShares $ High Yield Corp Bond UCITS ETF (visit provider)

£50 – Vanguard Emerging Markets Bond Fund – Hedged Investor Accumulation (visit provider)

Equities

£200 – Vanguard ESG Developed World All Cap Equity Index Fund (UK) – Accumulation (visit provider)

£100 – HSBC FTSE 100 Index Fund Accumulation C (visit provider)

£100 – iShares Core MSCI Emerging Markets ETF (visit provider)

£50 – BlackRock Frontiers Investment Trust plc (visit provider)

£50 – ARK Space Exploration & Innovation ETF (visit provider)

Property (REITs)

£25 – Land Securities Group PLC (visit company website)

£25 – British Land Company PLC (visit company website)

£25 – SEGRO PLC (visit company website)

£25 – Derwent London PLC (visit company website)

Hedge funds

£25 – Lansdowne Partners LLP (visit provider)

£25 – Marshall Wace (visit provider)

£25 – Capula Investment Management LLP (visit provider)

£25 – Man Group (visit provider)

We selected these hedge funds from our ranking of the best hedge funds in the UK.

Private market

£20 – Venture Capital Trust – Maven Income and Growth VCT 5 PLC (visit LSE for more information)

£20 – Venture Capital Trust – Downing ONE VCT (visit provider)

£15 – Venture Capital Trust – Hargreave Hale AIM VCT PLC (visit provider)

£20 – Private equity – ICG Enterprise Trust (visit provider)

We selected the venture capital trusts above from our ranking of the best VCTs in the UK.

Cryptocurrencies

£15 – Bitcoin – via Coinbase

£15 – Ethereum via Coinbase

About this model retirement portfolio & investment selection

We introduced the Wild at Heart model portfolio as ‘all guns blazing’ and it certainly didn’t disappoint.

Many of the investments listed are difficult to access through even the best UK stockbrokers and will require a high minimum contribution. Again, these investments are extremely high risk and are only suitable for those who meet the definition of a sophisticated investor.

Those wealthy enough to be able to access such investments will likely have wealth management or private banking team who would offer financial advice on how to create a portfolio as exciting as this one. Financial advice is virtually essential to ensure that you are aware of all the risks involved and invest in the most efficient way.

The portfolio is structured such that no single company, hedge fund or VCT represents more than 2.5% of the overall investment portfolio. This was an important consideration because, at this risk level, it’s not unheard of for funds to encounter liquidity issues or suffer heavy losses before being closed altogether.

Learn more about investing for income

If you’re interested in learning more about alternative investments and private market access, take a look at the best venture capital books, the best hedge fund books and the best alternative investment books available.

Overall: the best retirement portfolios

We hope you’re enjoyed this rundown of the best model portfolios for retirement. We hope that these summary asset allocations and illustrative investment lists can help you begin your own research into retirement investments.