Diary of a self-funded retiree: Entry 9
This is the ninth entry in our retirement diary, where I've been sharing how my wife and I are preparing for life after full-time work. Here's a recap of the topics I've covered so far.
Entry 1: How we've simplified our financial lives
Entry 2: Our investment strategy and asset allocation both now and in retirement
Entry 3: Our retirement budget, including how we plan to adjust our spending if markets shift
Entry 4: Downsizing, aged care, and how much to give the kids (and their kids)
Entry 5: How we plan to stay healthy and keep our minds active in retirement
Entry 6: What it takes to run our SMSF
Entry 7: How we're managing risk in retirement and making sure we don't run out of money
Entry 8: Spending some of our retirement living overseas
Diary entry 9: Taking stock of our retirement portfolio and applying for a UK state pension
In this diary entry, I look at where our retirement portfolio stands today, some changes we've made over the past year and what we might adjust next. We've also applied for a UK state pension, which is not means-tested and could provide a small boost to our retirement income.
What investments do we currently have?
We have investments in a self-managed super fund (SMSF) and some outside super. My wife also owns a one-third share in a house in Majorca.
I want our investments to be as simple to manage as possible because I currently make most of the financial decisions for us. If, for whatever reason, I am no longer able to do that, they should still be easy to manage.
Our SMSF investments
During the 2026 financial year, I rolled my old super from Colonial First State into our SMSF and cancelled the life insurance.
In terms of how the portfolio is positioned, at 67 and 66 respectively (my wife Jane hates me mentioning her age), we are still tilted towards growth assets at about 70%, largely because we have not yet started an allocated pension to withdraw money from our SMSF. Jane is still making non-concessional contributions.
There has been some discussion about the Treasurer reducing the capital gains tax discount. For SMSFs, the current rules reduce the 15% tax rate to 10% on assets held for more than 12 months. If the discount is reduced or eliminated, we may move some of our SMSF balance into an allocated pension account, where investment gains are tax-free. I think the best time to do that might be July 2026, when the transfer balance cap is scheduled to rise to $2.1 million.
The table below shows how our SMSF asset allocation has changed since December 2024.
Changes in our SMSF asset allocation
|
Asset class |
February 2026 |
December 2024 |
|
Global equities |
35% |
38% |
|
Domestic equities |
24% |
16% |
|
Cash |
24% |
26% |
|
Defensive |
12% |
19% |
|
Alternatives |
5% |
0% |
We stayed invested during the market wobbles following Trump's tariff "D-day" in April and added some exposure to gold and silver through ETFs.
After July last year we also added more growth assets, including non-US international shares. With the Australian dollar rising against other currencies, we may look at buying more European shares or emerging market ETFs soon.
We try to limit buying and selling to reduce tax drag but once we switch to an allocated pension that tax drag will largely disappear.
Our investments outside the SMSF
We have a few shares held in our individual names - InvestSMART shares for me - as well as some cash deposits with a few banks held in Jane's name, as her taxable income is lower. We use more than one bank because bonus interest rates, or the conditions required to earn them, often change and the difference can be as much as 3%-4%. Moving the money is easy - just one or two clicks - but setting the accounts up does take some effort.
I also have a company account where I am the sole director. It holds some cash and franking credits, and when the time is right - for example, when I am on a lower tax rate - I will pay a dividend and wind it up.
At the moment, we are using cash held outside super to fund our lifestyle, as we believe we should remain tilted towards growth assets as we get older. We also still have a line of credit against our home for emergencies if we think it is the wrong time to sell investments.
Applying for a UK state pension
We have friends who have recently started receiving a UK state pension of around £100 a week or more.
The eligibility rules are clearly explained on the UK government website. In simple terms, anyone who has paid National Insurance contributions for more than 10 years is eligible to receive a partial UK state pension.
If you've paid more than three years but fewer than 10 years of National Insurance contributions, you can make voluntary top-up contributions to get to 10 years or more.
In my case, I have nine years. By paying a voluntary lump sum of £923 to complete the tenth year, I'll qualify for a weekly pension of about £66.
Each extra £923 contribution I make will increase my pension by about £6 a week, or roughly £312 a year. That means the cost of the contribution is recovered in about three years. It's worth it for a three-year payback and a very good investment if I live much longer.
Because I live outside the UK, the pension won't be indexed to inflation and it will be taxable in Australia.
We have spent quite a lot of time sorting out our National Insurance numbers and correcting the address details for our Australian homes. Like most government agencies, you can only do so much online before you have to write or call.
I spent nearly an hour on hold with one part of the UK pension office while searching their website. I eventually found a form where I could fill in the required details and received a reply within three weeks. I haven't got my pension yet, but I expect to get it quite soon.
Jane's pension may take longer to sort out, as she has less than four years of National Insurance contributions and the rough numbers for the payback for buying the missing years are not that attractive.
My top tips
-
Make sure the administration of your financial affairs can easily be passed on to someone else if you are incapacitated.
-
Review your asset allocation on a regular basis, especially after big market moves.
-
Check that your investments outside of super don't make you overweight to certain asset classes.
-
If you have dud investments, sort them out now. Your children won't want the hassle of fixing them either.
-
Check if you are eligible for pension payments from other countries, either state or company ones.
What's next?
In my next diary entry, I'll share how I - and my wife - are coping with my move to part-time work now that I have a couple of free days a week.
You can read entry 8 here. Diary entry 10 will be published on 2 April 2026.
Frequently Asked Questions about this Article…
Our SMSF is still tilted toward growth at about 70% overall because we haven't started an allocated pension. As of February 2026 the split was: global equities 35% (down from 38% in Dec 2024), domestic equities 24% (up from 16%), cash 24% (26% previously), defensive assets 12% (down from 19%) and alternatives 5% (0% previously).
We're considering moving some SMSF balances into an allocated pension if changes reduce the capital gains tax discount. Currently SMSFs pay a reduced tax rate (15% cut to 10% on assets held over 12 months), but allocated pensions are tax-free for investment gains. The planned rise in the transfer balance cap to $2.1 million in July 2026 could be a good time to transfer amounts into an allocated pension.
We stayed invested through the market wobble and added exposure to gold and silver via ETFs. After July last year we increased growth exposure, including non‑US international shares. With the Australian dollar rising, we're also watching European and emerging-market ETFs as possible buys.
We use cash held outside super to fund our lifestyle while keeping our SMSF growth tilted. Outside super we hold some shares in our individual names (including InvestSMART shares), cash deposits in Jane's name to take advantage of her lower taxable income, and a company account holding cash and franking credits that we plan to pay as a dividend when on a lower tax rate and then wind up. We also keep a home line of credit for emergencies.
If you've paid more than three but fewer than ten years of UK National Insurance, you can buy missing years to reach the 10‑year minimum for a partial state pension. In my case I had nine years; a voluntary lump sum of £923 bought the tenth year and qualified me for about £66 a week. Each extra £923 increases the pension by roughly £6 a week (~£312 a year), so the contribution is typically recovered in about three years — a worthwhile payback if you live longer. Note: because I live outside the UK my pension won't be indexed to UK inflation and it's taxable in Australia.
Start with the UK government website to check eligibility, then confirm your National Insurance record and correct address details. Some parts can only be done by phone or post — I spent about an hour on hold before finding a form online. I submitted the form and received a reply within three weeks; the administrative process can take a little time but is manageable if you keep records of NI numbers and addresses.
Make sure financial administration can be transferred to someone else if you're incapacitated, review asset allocation regularly (especially after big market moves), check that investments outside super don't make you overweight in a specific asset class, sort out dud investments now so your children aren't left with the hassle, and check eligibility for state or company pensions from other countries.
We try to limit buying and selling to reduce tax drag inside the SMSF. Once we move assets into an allocated pension, much of that tax drag will disappear because investment gains in an allocated pension are tax‑free. As part of a recent change we rolled an old Colonial First State super account into our SMSF and cancelled the life insurance to simplify administration.
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