Q. I am planning to retire in about 5 years and have a number of investments, including 3 personal pensions and 7 ISAs and PEPs. In total, the money is invested in 19 funds. I’m finding it hard to keep track of all the funds and am not sure if I’m taking too much / too little risk.
I’ve heard that a ‘Wrap’ account could be an ideal solution and will also help me reduce my paperwork load. How do these work and should I consider using one?
A. For years the Wrap account has been used by individuals in the USA and Australia and is now available in the UK. The main benefit of using a Wrap is that you can manage and view all your investments in one place (providing the Wrap company allows it), thereby reducing the amount of statements you receive as the Wrap company acts as the sole administrator for all your investments.
So, using your scenario, you should be able to transfer all your funds on to a wrap account whilst retaining the tax status of each product.
The next step is to address the risk profile of your funds. This is known as ‘asset allocation’ and is very important to all investment portfolios. However, instead of looking at the risk profile of each individual fund, asset allocation is applied across all your funds, basically splitting your funds between cash, property, bonds and shares. So, for example, if you are a balanced investor you may have an asset allocation of:
- 3% cash
- 37% bonds
- 10% property
- 50% shares
You may also want to consider moving the money in your active funds to passive and index funds to reduce costs.
The key is to take action if you need to and make any necessary changes.
If you’ve got a question you’d like to ask us just contact us (if we publish it we’ll keep your name anonymous).
