Discontinuing fund: where next?

Bimbly · 13 March 2018 at 9:44AM

At the beginning of the year, I decided to put more money into my DC pension, a work-based scheme which is an additional pot to the DB scheme I am also paying into. I decided for the first year (15k + 6k contributions), I would put this into equities with a balanced world market view. With a limited range of funds, I chose Aviva Adventurous Fund of Funds, which is a mixed asset fund with around 14% UK and some exposure to emerging markets in a passive tracker. The yearly charge was cheaper than individual funds.

Except now, my pension is being moved to the Aviva's MyMoney platform and this fund won't be available. My fund will be mapped onto Aviva Pension MyM BlackRock World ex UK Equity Index (Aquila C). Not a bad fund in itself, but no emerging markets, no UK and a rather large (60%) chunk of US (I know it's a big market, but that seems a lot).

The plan had been to leave this first year investment in the original equity fund for ten years, while I switched future contributions to a more balaned approach to include bonds. Except now I'm having to switch after 3 months. If I had been lucky and made a bit of money, maybe I would feel better about it, but I made the switch at the peak so that's not the case.

I have to move existing investments to this new fund between April and June. How do I best time that? I'm thinking either do it and get it over with or try to wait until the fund goes back to the height it had at the beginning of the year (which it might not do).

But the big question is, what do I do now? I could change my investments to try match the world markets. So keep the global fund and add a separate UK index tracker. These funds have a yearly charge of 0.22%. If I add emerging markets, the charge for that fund is 0.45% (is it worth it? How much emerging markets?).

I could do my own world mix, but I only have access to Aviva Pension MyM BlackRock (Aquila C) index trackers for Europe, Japan, UK, US, Pacific Rim (plus their global ex UK, 40:60, 50:50, "long term" and a good selection of BlackRock bond trackers). I mentioned the emerging markets for 0.45% charge. There's also a BlackRock 30:70 hedged which includes 10% emergjng markets at 0.30% charge. Other funds are more expensive, mostly managed multi asset things.

Ironically, I only went down the 'choose my own investment' route because the default lifestyle fund didn't seem right for me (25% corporate bonds and 40% of equities in UK, tapering to retirement). But now it's all change, should I just go into the newly revamped lifestyle option? They are multi asset funds holding 30-85% equities, tapering to less volatile approaching retirement as far as I can tell (no fund factsheets yet).

The third option is to go into their Fund Supermarket with circa 1000 available funds at an annual charge of £50 plus fund charges (whatever they might be). I don't know what funds are available or if there are charges for things like fund switching which is free on the MyM platform. This option seems a bit radical, although I like managing my own money and happy to rebalance funds etc.

Sorry this is so long. There will be more information in April, but I've been thinking about it a lot and wanted to ask on here now. I am 49 and aim to start accessing this money from age 60.

AnotherJoe · 13 March 2018 at 10:04AM

First, dont go into Lifestyle. Thats now outdated.
Second, since you want to manage your own funds then i suggest you pay the £50 and then choose, with 1,000 funds to look at that pretty much is going to be whole of market.

EdSwippet · 13 March 2018 at 1:37PM

Bimbly wrote: »

I have to move existing investments to this new fund between April and June. How do I best time that? I'm thinking either do it and get it over with or try to wait until the fund goes back to the height it had at the beginning of the year (which it might not do).

I suspect you are overthinking this. If you move to a set of funds with holdings that are broadly equivalent to what you currently hold, the timing doesn't matter at all. If there is a 'recovery' to come you will get it either way (and conversely, if there is a crash to come then you will get all of that too!).

Bimbly wrote: »

But the big question is, what do I do now? I could change my investments to try match the world markets. So keep the global fund and add a separate UK index tracker. These funds have a yearly charge of 0.22%. If I add emerging markets, the charge for that fund is 0.45% (is it worth it? How much emerging markets?).

A portfolio that only includes so-called 'developed' markets with sufficient global diversification should work just fine. A 0.45% charge for a 10% or so holding in emerging markets wouldn't kill you either. Or you could perhaps hold your emerging markets outside of the pension, for example in an ISA -- this is what I do.

Bimbly wrote: »

I could do my own world mix, but I only have access to Aviva Pension MyM BlackRock (Aquila C) index trackers for Europe, Japan, UK, US, Pacific Rim (plus their global ex UK, 40:60, 50:50, "long term" and a good selection of BlackRock bond trackers).

It is perfectly possible to put together an entirely satisfactory portfolio out of that selection.

Bimbly wrote: »

Ironically, I only went down the 'choose my own investment' route because the default lifestyle fund didn't seem right for me (25% corporate bonds and 40% of equities in UK, tapering to retirement). But now it's all change, should I just go into the newly revamped lifestyle option?

I would say not. Lifestyling is the solution to a problem that most people no longer have now that drawdown is fully available to everyone (in tandem with very low annuity rates), and seems to be MyM's default fund because it is 'safe' -- that is, it would be hard for anyone to level a charge of misselling against this default.

Nope, just use the new funds to put together something that approximately replicates the holdings in your current fund, and call that job done.

Bimbly wrote: »

The third option is to go into their Fund Supermarket with circa 1000 available funds at an annual charge of £50 plus fund charges (whatever they might be). I don't know what funds are available or if there are charges for things like fund switching which is free on the MyM platform. This option seems a bit radical, although I like managing my own money and happy to rebalance funds etc.

Probably a reasonable set of the funds you can find on any UK retail SIPP platform -- trackers such as Vanguard, HSBC, Legal and General, and actives such as Woodford. My own MyM account shows 1,200 funds available.

Be careful about MyM charges here though, and read them very carefully. The MyM fees document I see in my account shows that the scheme's annual management charge -- mine is 0.19%, but it looks like yours is 0.22% -- would apply on top of both the £50/year fund supermarket annual fee and the individual fund fees. So even a Vanguard 0.2% tracker would come out to 0.42% per year for you. In comparison, the Blackrock trackers are available for just the base MyM annual fee and nothing extra.

So, much as I like and trust Vanguard, the core Blackrock tracker funds available in MyM are also excellent. And at 0.22% for you all-in, very well priced.

Bimbly · 13 March 2018 at 4:22PM

Thanks Joe & Ed! Good thoughts so far.

EdSwippet wrote: »

I suspect you are overthinking this.

I suspect you are right! It's just, I had a plan and three months later I had to re-think my plan!

It's interesting to see you both don't favour lifestyling,as this is considered old fashioned, as the new MyM has a new lifestyling plan which takes drawdown into account, tapering the account in the last five years to a "flexible retirement" fund which is all bond trackers (and there are other options). As I plan to take all the money across 5-7 years, I didn't think it was that bad. But you are both probably right.

I will wait to see what the supermarket option is and will look at the charges compared to the BlackRock options.

Thanks for being my sounding board. Any more comments welcome.

EdSwippet · 13 March 2018 at 5:45PM

Bimbly wrote: »

As I plan to take all the money across 5-7 years, I didn't think it was that bad.

That's indeed a possible argument for staying lighter on equities than otherwise. Not mentioned in your original post.

Over the long haul, say a 30 to 40 year retirement, the return from gilts/bonds alone would tend to erode and here stocks would provide -- more accurately, historically have provided -- better inflation protection. Over a shorter period, this isn't necessarily the case.

Do you have another DB (say) pension that you can live on later, and plan to use this DC pension to just fund a gap between stopping work and the DB pension kicking in? If yes, this colours the arguments for/against lower risk holdings.

AnotherJoe · 13 March 2018 at 7:14PM

Bimbly wrote: »

It's interesting to see you both don't favour lifestyling,as this is considered old fashioned, as the new MyM has a new lifestyling plan which takes drawdown into account, tapering the account in the last five years to a "flexible retirement" fund which is all bond trackers (and there are other options). As I plan to take all the money across 5-7 years, I didn't think it was that bad. But you are both probably right.

Ah well thats new information and it may be useful in that case, though there's no need to select a lifestyling fund (and the restrictions on choice it imposes) just yet.

Bimbly · 14 March 2018 at 8:03AM

Thanks for talking it through with me, I feel much better now. It just helped to sort it all out in my mind.

Discontinuing fund: where next?

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