US Dollar Fund

suts wrote: »

My immediate concern is the strengthening of the pound and subsequent reduction in the value of the Fidelity fund due to the ex rate.

When you hold a fund, the exchange rate that matters is that between the pound and the currency of the items that the fund itself holds, and this may or may not be the same as the fund's denomination currency. For example, you could hold a fund denominated in USD but which only holds UK FTSE 100 stocks. If the USD/GBP rate were to halve overnight(!), the 'net asset value' of the stocks it holds as measured in USD would effectively double. So you would go from hold a fund worth say £100 at $131/unit to one still worth £100 and now at $232/unit.

A fund's internal 'accounting' currency is actually immaterial to you, then, and you need to separate that out from the currency of the fund's underlying holdings. Assuming none of your current Fidelity funds are currency-hedged -- you should check this -- the global funds should behave for you exactly as would pound-denominated funds holding the exact same stuff. The corporate bond fund might be US corporate bonds only, in which case that is the portion with the potential for maybe being a bit sub-optimal for a UK based investor. You can check this too.

By and large, your existing Fidelity stuff is probably okay.

I am not sure how this plan is constructed, though. Your statement that the pension is all in US dollars is confusing. Is this just the way Fidelity chooses to present the results from a more-or-less 'normal' UK pension, or is this really a US retirement savings plan, for example an IRA or a 401k? If the latter you won't be able to directly move this to a UK pension. The US pension system is entirely closed to things like QROPS, both in and out.

suts wrote: »

This scheme is a Legal and General Flexible Drawdown Lifestyle scheme.

Nothing wrong with Legal and General, but I would look more closely at the Lifestyle part of this. Lifestyle funds generally move away from equities and towards bonds as you reach (some definition of) retirement age. This was reasonable in the days when people bought annuities to cover retirement, but with annuity rates now so low they are under the floorboards, and with flexi-drawdown available since a couple of years back, most people now will not want annuities, making Lifestyling inappropriate.

If this is your employer's default option and you have a broader choice of funds available in your plan, consider moving to something without that equities-to-bonds automatic transition. It doesn't have to be a complicated set of funds -- it could even be the 80/20 split that you quoted, just direct rather than with the Lifestyling component. That asset allocation is fine, it's just the allocation shift that will occur as you get close to retirement that is the potential problem.

suts wrote: »

I may have not explained myself clearly enough with regards the Fidelity fund. ... I do not fully understand the line that states the plan is approved as tax exempt. Do you?

No, sorry. It's not quite clear even whether or not this is a tax-deferred pension under UK tax rules, though one would hope that it is. I have never encountered anything like this before.

When you paid into it (or your employer did), were those contributions from pre-tax or post-tax (or otherwise taxed) salary? If the first of these, it's a pension of sorts and you have to consider UK pension tax rules, and perhaps also those of the IOM/UK tax treaty. Otherwise it'll be closer to a normal unwrapped UK trading account, and there different tax rules apply.

Scour your plan documentation carefully for clues, and if necessary get your employer's HR department to provide guidance here. Don't trust random strangers on the internet to give you the full skinny here. Including me. I'm guessing at the moment.

Also worth keeping in the back of your mind that anything you might hold with a connection to the IOM or other Crown Dependency can be something of a 'red flag' to HMRC, so you'll want to be doubly careful to be on solid ground tax-wise here. Holding funds 'offshore', including in so-called tax havens, is not illegal in the UK, although HMRC does its utmost to give the impression that it is. (Also, notice regular conflation between illegal tax evasion and legal tax avoidance.)

suts wrote: »

The fidelity funds were also marketed as “lifestyle” and as you can see are already moving away from the 80% holding in equities. Do you agree I should look into changing this as well to hold the equities at 80%?

No easy answer, as everyone's risk tolerance and return requirements are different. Asset allocation introduces a whole big new set of unknowns that it seems you've skirted so far.

While you could go to-and-fro on this virtually forever, at age 44 I don't think you'd go far wrong sticking with 80% equities at this point. A rule of thumb is age-in-bonds, but many people see that as too conservative when it comes to capturing long-term growth.

Either way, the big concern is reaching age 68 and finding that your pension moved from stocks to bonds behind your back in the preceding 20 years without you noticing, and as a result has positioned you ideally for an annuity you don't want and poorly for flexi-drawdown that you do want. Simply by moving from Lifestyle options into an allocation that you control yourself, you can avoid that. You then have decades to spend zeroing in on your ideal stock/bond split as your circumstances change.