Pension Investments

Monday3

Hello all,

I am 26, and currently have a pension pot of £15,000. I earn £37,500 pa and currently contribute 15% (8% from me and 7% from my employer) of it to through salary sacrifice. My pension is a stakeholder pension set up by my employer and the provider is Standard Life.

I understand the need to have a good pension provision however were I am little confused is to how to correctly invest my pension pot in order to get me the best possible return. When I joined my present employer and set up the pension I opted for Standard Life - Lifestyle option. This currently splits my contributions to:

60% Pension 2 UK Equity Fund
40% Standard Life Overseas Pension Fund

Is this a sensible way of investing my pension money? I am aware that there are other funds that I could invest in but I am not sure how to even start picking them.

Another question related to this is that recently after joining my present employer I started saving the maximum amount into a save as you earn scheme which gave me the option to buy my companies shares when it matures. The scheme I am paying into is set to mature in a few months and will have a value of about £9,600. My companies’ shares are now trading at about 5 times my option price so I am hoping for a good windfall (I am aware however the share price might go down (or even up) a bit between now and then). I do not need this money for anything else at the minute and would like to use it to boost my pension and I was wandering how the best way of doing this would be?

I don’t know if it matters to the above but I don’t have any debts other than £90,000 left on a repayment mortgage and £8,000 in student loans. I hold around £5,000 in instance access ISA’s as an emergency fund.

Any advice would be much appreciated.

Regards

dunstonh

I understand the need to have a good pension provision however were I am little confused is to how to correctly invest my pension pot in order to get me the best possible return. When I joined my present employer and set up the pension I opted for Standard Life - Lifestyle option. This currently splits my contributions to:

You are not really going to be able to build a portfolio within the std life stakeholder. It is not good enough.

Also, the single sector funds are the same funds that make up the managed fund. So, if you built a portfolio based on their limited selection using the same asset mix of the managed fund then you would end up with more or less the same performance except that you would have to frequently rebalance it and adjust sector allocations to suit the changing cycle.

So, unless you know what you are doing, I wouldnt go with single sector funds but go with a self balancing portfolio fund.

Another question related to this is that recently after joining my present employer I started saving the maximum amount into a save as you earn scheme which gave me the option to buy my companies shares when it matures. The scheme I am paying into is set to mature in a few months and will have a value of about £9,600. My companies’ shares are now trading at about 5 times my option price so I am hoping for a good windfall (I am aware however the share price might go down (or even up) a bit between now and then). I do not need this money for anything else at the minute and would like to use it to boost my pension and I was wandering how the best way of doing this would be?

Either ISA it or pension it depending on what is best. We cant say here.

Gatser

Monday3 wrote: »

My pension is a stakeholder pension set up by my employer and the provider is Standard Life.
I opted for Standard Life - Lifestyle option. This currently splits my contributions to:
60% Pension 2 UK Equity Fund
40% Standard Life Overseas Pension Fund

If your employer will pay into other pension schemes, I would research and consider something different.
You are right in starting to ask these questions now as you need greater flexibility to invest YOUR pension money is many different investments as it grows.
Stakeholder pensions are not known for offering that flexibilty because they sell themselves as cheap and aimed at the person who wants a pension but does not want to bother (much) with it.
This does not sound like you!

Monday3

Thanks you very much for your responses.

dunstonh wrote: »

You are not really going to be able to build a portfolio within the std life stakeholder. It is not good enough.

Also, the single sector funds are the same funds that make up the managed fund. So, if you built a portfolio based on their limited selection using the same asset mix of the managed fund then you would end up with more or less the same performance except that you would have to frequently rebalance it and adjust sector allocations to suit the changing cycle.

So, unless you know what you are doing, I wouldnt go with single sector funds but go with a self balancing portfolio fund.

[FONT=&quot]
I am using the stakeholder as it was set up through my company and I am working under the assumption that my choice is restricted to using Standard Life as my employer will only give me the salary sacrifice option and additional contribution if I use them. So I think I am stuck with them for at least part of my pension provision (I will however check when I am back in the office).

Dunstonh - Why will Standard Life not be good enough? Is it the funds they provide are not very competitive? Also could you explain what a self balancing portfolio fund is and is this something I could achieve through the Standard Life Stakeholder or will I have to set up a new pension?

Again thanks for the help, I like to try and understand were my money is going and it has bugged me for awhile that I have not fully understood how my pension monies are invested (though I can only blame myself for that!). [/FONT]

dunstonh

Dunstonh - Why will Standard Life not be good enough? Is it the funds they provide are not very competitive? Also could you explain what a self balancing portfolio fund is and is this something I could achieve through the Standard Life Stakeholder or will I have to set up a new pension?

The retail standard life SHP is not competitive in price and has a limited fund range. Its not expensive and its not the worst but its a stakeholder and stakeholder is a basic product.

Also could you explain what a self balancing portfolio fund is and is this something I could achieve through the Standard Life Stakeholder or will I have to set up a new pension?

Its one that controls the asset allocations and keeps it consistent with risk profile (by rebalancing the investments). The Managed fund is an example of this.

kidmugsy

"I am 26, and currently ..... earn £37,500 pa": perhaps you'll be exposed to higher rate income tax in a few years time and perhaps to higher outgoings too. You could consider saving the moey from your shares until it's the higher rate tax you'll avoid by making a pension contribution.