Pension Pot?

EdInvestor

"Managed" is just a term which means there is a fund manager in charge picking stocks the fund should buy. A fund without a fund manager is called an index tracking fund - these funds invest in the stockmarket index ( eg the FTSE100) automatically, no manager is involved.As a result they usually have much lower charges than managed funds.

Mind you it can be rather difficult to tell the difference between managed funds and trackers at times, so you wonder what you are paying for.

For instance here are the top 10 holdings of shares in your managed fund:

BP 3.7
ROYAL BANK OF SCOTLAND GROUP 2.3
HSBC HLDGS 3.5
BARCLAYS 1.6
GLAXOSMITHKLINE 3.1
HBOS 1.6
VODAFONE GROUP 2.6
ANGLO AMERICAN 1.5
ROYAL DUTCH SHELL 2.5
ASTRAZENECA 1.2



And here are the top 10 shares in a tracker:

BP PLC
HSBC Holdings PLC
GlaxoSmithKline PLC
Vodafone Group PLC
Royal Bank of Scotland Group (The) PLC
Royal Dutch Shell PLC
AstraZeneca PLC
Barclays PLC
HBOS PLC
Anglo American PLC


What they have done here is take more or less the same shares but buy them in similar quantities to each other, wherease the tracker is weighted by the size of the share, so is currently dominated by oil shares (and banks)because the companies are so huge. The managed fund also shows the same pattern but not so extreme.

So your managed fund is less risky than a tracker would be: but with 87% in equities, I would still say it is unsuitable for someone like you who says he is a low risk person.

Just because a fund says it is "balanced" or "managed" does not mean it is low risk.

I'm afraid there's no real substitute for doing a bit of work on making sure your money is being properly looked after - you should be aware that fund managers' primary job is to make money out of you, not to make money for you - that is only secondary. .

They're are looking after their own interests, not yours.If the two coincide,well and good, if not it's just too bad.

Old proverb (anon):

Nobody looks after your money like you do.

RichardS

Yes but if my pension is in a Managed Fund - which it is - presumably there is someone with a bit of knowledge making decisions about my pension for me. This seems far better than me making these decisions because I know very little about any of it?????

EdInvestor

They may be making decisions about your pension, but these decisions are in their interest not necessarily in yours.

dunstonh

Independent financial advisors could do it for you. Indeed, the IFA responsible for the works scheme could advise you free of charge on a better portfolio. After all, that IFA is making money out of you and servicing of pensions is usually included in group personal pension agreements.

You are not expected to know what to do which is why advisors exist. Its a bit like getting your car serviced. Some can do it themselves, some can't and there are people to do it for them but you pay for it. Others think they can do it themselves but end up making a bodge job of it.

RichardS

Yeah but if an Advisor advises me on a portfolio and 6 months later that portfolio is suddenly looking a bad idea does he phone me back and let me know? I expect not. Presumably at least with a Managed Fund, the fund manager is continually looking at trends etc ?

dunstonh

If you pay the advisor for servicing then yes, you get ongoing servicing. If you don't then you get nothing for free. However, a portfolio doesnt change that quickly. A check every 5 years would be more realistic.

The managed fund will never be top performer and will rarely be bottom performer. It doesnt cover the range of sectors that a portfolio would and can higher risk than a portfolio would be whilst offering less potential for growth at the same time.

over last 12 months, the managed fund performed 40th out of 76 standard life funds available.
2 years 36th out of 68
3 years 35th out of 63
4 years 29th out of 59
5 years 22nd out of 30

You can call it consistent at least with it's mid to bottom half positioning.

It isn't for us here to say what funds are suitable for you as none of us have undertaken a risk profile on you. However, in each of those 5 years, there were lower risk funds, in addition to higher risk that were above the managed fund each time. Of course, past performance is no guide to future returns but that information is fairly consistent with the "managed" fund across the board.

Another way of looking at it is that you have a medium risk fund. A portfolio can be selected to match medium risk. Risk to you is the same but the potential is better.

RichardS

So how much (approx) would I pay an advisor to come up with a portfolio for me and service it every few years??? And would I then just phone Standard Life and say - look, take me out of the Managed Fund and put X% here and Y% here and Z% here. Is that how it works? Would I need to find a local advisor near to where I live or does that not really matter?

EdInvestor

OK Richard let me try and help you out a bit here with a fairly straightfoward look at the big picture.

I've put your figures through the calculator I posted before and it comes out like this for someone of your age, risk profile, existing and future savings and investment level-this applies to your total assets ( savings as well as pensions):

Cash 21%
Bonds (or property) 11%
Lower risk shares (UK stockmarket, big companies)45%
Higher risk shares (small companies, overseas funds) 12%

So now you can look at your total overall assets, including cash and see how you measure up.

How much have you got saved up in cash?

RichardS

I have no savings at all.

EdInvestor

Oh dear. For a lowish risk person you are running quite a high risk investment strategy.
I'm astonished to hear you haven't even got a "rainy day fund".

Let's compare the Managed fund with your appropriate asset allocation.

It's like this:

Cash 4.7%
Bonds and property 10.7%
Lower risk equities (UK stocks, big cos) 53% ( this might include some small cos)
Higher risk equities (small cap, foreign) 31.4%


Can you see the overall problem? Bonds,property and lower risk equities are in line, but
you have way too much in risky foreign shares and way too little in cash for your risk profile.

Frankly it would be more sensible to you for this year at least to max out the two cash ISA allowances avaiable to you at present, this years, if you're quick and next year's so as to catch up rather than contribute to the pension if you can't manage both.

I would also suggest you rearrange the pension investment so as to reduce the portion in high risk foreign equities and increase the portion in lower risk property.