What Pension Fund??

K9cuddles

Okay.. i work for Legal and General so took advantage of them setting up a stakeholder for me in August 2002 I was contribution 11% (with there help) but now I'm working full time so the sum has gone up and will be upping it in July to me adding 4% and then the max 5% in July 07.

Anyways.. I've just reading the part of Martins book which says the younger you are the more riskier fund you should put your money in. Well I'm 23 soon to be 24 so i guess that's still young (having a pension since I was 20).

I'm currently in the UK Equity Index Fund, which I think it's pretty safe, so I'm gonna up the annte (spell??!!) but not sure where I can find a list of funds and then which one to pick!

Any adivce? I pay a reduce management charge not sure of the % but last year for the year was £14.17 so can't really grumble at that. It's made an £440.92 investment gain (pension value £3,971.34), previous year was £282.72 (pension value £2,038.86). Is this good??

Help!!

Thx

Sara

K9cuddles

Okay.. just read the booklet I got when I started the pension and Equity is high risk??!!! They also do a Life Style Profile which offers an automatic switche process which gradually redirects to a lower risk investment.. sounds ideal for me???

ReportInvestor

Some would say that regular savings into equities over 45 years is not high risk, and that you stand more "risk" of retirement poverty if you save in cash.

Life style profiling is similar to the stakeholder approach, but I wouldn't bother with that too much until you are contemplating your 50s, or if your fund has performed beyond expectations in the first 25 years. I'm pretty sure L&G would let employees switch cheaply.

If I were you I'd stick with the idea that you should be prepared to take risks early in the life of your pension, but be prepared to diversify your risk.

Some commercial property and some overseas investment would give you more of that diversification.

Meanwhile, if you are saving regularly each month into an equity income fund, the regular saving element reduces the risk significantly in first decade of your pension savings. If there is a bear market in stocks 2006-9 you could even benefit in the long term.

And congratulations on saving early . You are blazing the trail for your generation. Spread the word.

EdInvestor

Hi Sara


That's an index tracker fund you have there.Very basic standard fund, low charges.L&G All share tracker is one of the most popular.

Conventional wisdom has it you should spread your money around between a few funds however.

What other funds are on offer?

If you want a bit more risky the flavour of the month is Japan, which looks like it's finally recovered.But I have no idea how good L&G's Japan fund is.

Do you have access to the Property fund? Most insurers do them and they usually provide good steady returns, which these days are often as good as equities, though property is seen as lower risk.

For UK equities, I prefer "Equity Income" funds to trackers.They tend to have better returns because they choose the shares that pay the higher dividends.They also do a lot better when the market is down, so they're less risky.

As they say, the first rule of making money through investing is to learn how not to lose it.

K9cuddles

Thanks peeps for the info. .I agree... I should have my fingers in more pots! I found this link which by the looks of it you can split the % of what funds are invested specific areas.

How about..

25% - US Equity Index (High Risk)
25% - International Fund (High Risk)
25% - UK Equity Index (Moderate Risk)
25% - Propery (Moderate Risk)

As I get older change teh 50/50 split to 25/75 to moderate and then 100% 10 years or so before retirement (set at 55 wohoo!!).

Debt_Free_Chick

How is the International Fund invested? What proportion in US, UK etc .....? You may find that it has a substantial chunk in the US, so you would end up with more than your proposed 25% in the US market.

Whilst there is nothing "wrong" in this, you need to be aware of your total exposure to each market, either through a region-specific fund or a broader ranged fund.

My only other observation is that with 50% of the total invested in non-UK funds, you are exposed to a certain amount of currency fluctuation. In other words, all those investments are made in something other than GBP Sterling and then converted back to Sterling at the then exchange rate. Nothing inherintly wrong with that, but exchange rate fluctuations are likely to increase volatility and increase the overall risk within your investment portfolio.

What do others think?

EdInvestor

I quite agree DFC.

For instance people's gains in the US market recently (if any) have been completely overwhelmed by the strong pound. The yen is another currency which fluctuates according to the perceived needs of Japanese exporters, rather than the needs of foreign equity investors like us

I personally don't bother with overseas markets, as IMHO you get very considerable global exposure through the top UK listed companies because most of them are major multinationals. Others will disagree with this view of course

Extra risk exposure in the UK could be obtained through a fund which invests in small companies, or possibly through a commodities fund.

dunstonh

I personally don't bother with overseas markets, as IMHO you get very considerable global exposure through the top UK listed companies because most of them are major multinationals. Others will disagree with this view of course

Yes. I disagree. To limit yourself to one country, and one that has an underperforming stockmarket at that is short sighted. There is minimal extra risk investing in European markets nowadays.

My only other observation is that with 50% of the total invested in non-UK funds, you are exposed to a certain amount of currency fluctuation. In other words, all those investments are made in something other than GBP Sterling and then converted back to Sterling at the then exchange rate. Nothing inherintly wrong with that, but exchange rate fluctuations are likely to increase volatility and increase the overall risk within your investment portfolio.

What do others think?

The extra risk is shown in the post by Sara. However, we are also talking very long term here. The longer the term, the lower the risk becomes.

Sara, you could also investigate L&Gs personal pension. This product can have identical charging as the stakeholder but has a much better fund range.

K9cuddles

Well the table I got the funds are limited and not much info is given on each one! But more individual funds are run by external managers so there will be additional fees which I don't really want to inccur.

Most the high risk are outside the Uk!! (bar 1)

So what about;

25% - Uk Smaller Companies (Middle High)
25% - ??
25% - Uk Equity Index (High Moderate)
25% - Property (Low Moderate)

Can I actually split my funds like this??? Or do I have to pick a fund that is already split ie. Global equity whichis 70% Uk Equity Index and 30% Overseas Equity??

K9cuddles

dunstonh wrote:

Sara, you could also investigate L&Gs personal pension. This product can have identical charging as the stakeholder but has a much better fund range.

I'm not sure my employee would make any payments though! Looking on Martins site L&G Stakeholder have a good choice??!!!

dunstonh

I'm not sure my employee would make any payments though! Looking on Martins site L&G Stakeholder have a good choice??!!!

Strange. You would think that L&G would pay into either their stakeholder or their personal pension.

Well the table I got the funds are limited and not much info is given on each one! But more individual funds are run by external managers so there will be additional fees which I don't really want to inccur.

The extra charges on these external funds are not great and ruling out some very highly regarded funds because there may be an extra 0.1-0.5% extra charge is not, in my opinion, a sensible move. As a staff member you are no doubt getting the pension provided on discount terms as well. So the extra charge could easily be absorbed. Cheap is not always best.

L&G did revamp their 2005 stakeholder product to make some of these external funds available within the stakeholder charging structure with the funds being able to be maintained after year 10 but within the 1% structure. I dont know if L&G have made these extra funds available to you (on the assumption that you are on the old stakeholder contract).