New Employer Pension

lemon26

Hi All! I've recently started in a new job (January) and have had to contirbute to an employer's pension scheme for the first time in my life as previously I was in the Armed Forces scheme and have 10-years worth of pension saved up until I'm 65.

My company scheme (Group Personal Pension) is administered by Zurich and I have a number of investment strategy choices I can make for that pension or I can pick my own funds from their list to invest in. At present I'm in their default strategy - 'balanced' - but, as I'm young I wonder if a more adventurous strategy may be best for at least the next 5-10 years, if not longer.

A bit about me, I'm 28, engaged, no kids, have no debt apart from two mortgages (am hoping to sell as soon as possible), can more than manage my monthly outgoings, hope to have around £50000 in the bank upon sale of house 1 and already have S&S ISA for future kid's uni fund.

I currently put 15% of my annual salary into my pension (mine and employer's contribution) and make use of the employee share purchase scheme for a nest-egg too.

The 'Balanced' portfolio uses the following funds for people more than 10-years from retirement:

L&G Global Equity Fixed Weights (50:50) Index ZP - 75%
Aquila Corporate Bond All Stock Index EP - 13%
Aquila Index-Linked Gilt Over 5 Year Gilt Index ZP - 12%

The 'Adventurous' portfolio uses the same funds but in different weightings for those more than 10-years from retirement:

L&G Global Equity Fixed Weights (50:50) Index ZP - 100%

As I don't anticipate retiring for the next 37-40 years and I also will get a guaranteed Armed Forces pension, should I be more advebnturous, at least for the next 5-10 years, if not longer?

Thank you in advance for your thoughts and opinions! L

Lokolo

Personally 100% equities is very risky, are you are in 1 asset class. I would personally at least have SOME fixed interest. So maybe 90% Global Equity and 10% Corp Bond All Stock. (obviously this is not advice, just what I would do! Eggs and 1 basket et al)

Although I do not know what other options you have available to you.

You also say 15%, is that maximising employer contributions?

CLAPTON

it would seem to me that at only 28 you would be better off in an 100% equity deal

at the moment gilts and bonds are doing well because interest rates are artificially low; however they can't go any lower and when they rise the value will tank


just my view of course

lemon26

Hi, thank you for your replies! I'm not currently maximising my employer contributions as they'll only contribute 1.5x my contribution. I can't put in my maximum yet until I've sold my 1st house and, even then, they will only multiply up to 7% of my salary.

I'm currently putting in 6% to get 9% from work, therefore 15% total.

If I upped it to the maximum they'll multiply, 7%, therefore 10.5% employer contribution so total of 17.5% of salary into pension.

After 7% personal contribution my work contibution will remain at 10.5%.

I am able to pick and choose my own breakdown of funds from a list that Zurich offer, however they have higher AMC than the funds they have picked for me.

jamesd

What are all of the fund offers? I'm particularly interested in any global funds and any emerging markets funds.

Given your age you should be looking to be very adventurous provided you can deal with the ups and downs. There's little reason to change that until you're around ten years from planned retirement.

atush

I am with James on this. I would like to see all Eq funds in your choices. If I were you i would be mainly eq based but with global exposure.

I would not invest in gilts at all at this time (as they are expensive now) so would veer away from balanced as there is gilt exp there. but corp bonds would be possible- depending on country/risk.

lemon26

Hi again, and thank you all again for your replies. I have just 'found' an extra £20 per month so I'm now contributing 7% salary to get maximum employer contribution of 10.5% of my salary. So, per year, I'm putting away 17.5% salary (£4113) into my new pension - is this enough?

I have now selected the 100% equity option as it makes sense, given the time until retirement, that I can see out the ups-and-downs of equities. That said, I am going to engage an IFA to see if he can pick funds to get better performance than the default 100% equity option of L&G Global Equity Fixed Weights (50:50) Index ZP http://www.fundslibrary.co.uk/fundslibrary.dataretrieval/documents.aspx?user=landgdoc&type=custom_field.www_landg_co_uk.factsheet_SHD&sedol=B1FR905

The individual funds offered vary and are from providers such as Aberdeen (1 fund), Aquila, Artemis, Baillie Gifford, BlackRock, Cazenove, Gidelity, GLG, Henderson, HSBC, Invesco Perp, JPM, L&G, M&G, Neptune, Newton, Russell, Schroder, Threadneedle & UBS.

The current L&G fund charges 0.22% in total and the funds on the list vary in charge between 0.22%-1.25% in total. Without me listing each and every fund, which would take a long time, can people suggest how I might break down my pension if I went for the individual funds? I can then say if they are on or off the list!

Thanks again! L

jamesd

AT 28 putting away 17.5% of salary is enough. It's unusually good for a 28 year old and should help to keep down your future pension costs because you won't need to do more than increase regularly as your pay increases.

The BGI Aquila funds are probably low cost trackers and you might look for the developed world fund to see if it's there. Something like a 70% in that, 20% in an emerging markets fund (say the one from Aberdeen if available) and 10% in a UK tracker might be a good starting point. Or perhaps 60:30:10 if you can handle the emerging markets volatility.

An alternative to a UK tracker would be one or both of M&G Recovery and Invesco Perpetual High Income (or Income). They managers can and do take opposite views and that can be useful.

lemon26

The Aquila funds listed are: 30/70 Global Equity Index (and 40?60, 50/50 and 60/40 versions), Consensus, Corporate Bond All Stock, Corporate Bond Over 15 Years, Equity Index, Index-Linked Over 5 Years Gilt, Japanese Equity, Over 15 Years UK Gilt, Pacific Rim Equity, UK Equity, US Equity and Work ex-UK.

Do any of these jump out? I already invest in the IP High Income outside of the pension in an ISA (only a few £100).

Zurich offer JPM All-Emerging Markets Equity, M&G Global Basics, Russell Emerging Markets Equity, Schroder Global Emerging Markets in the obvious emerging markets but also have a few Asia Pacific and Latin America funds.

For the developed world fund which, if any funds might you suggest? Any of the Aquila ones? The list is quite long so I'm trying to find a link to it from the Zurich site!

Thanks again, L

jamesd

World ex-UK is the one I was thinking of. Ex-UK means excluding UK. It's also developed world rater than whole world if it's the one I'm thinking of.

lemon26

Hi again! So would you suggest something like:

70% World ex-UK Equity

Aquila World ex-UK Index (charge 0.22%) or
Russell World Equity ZP (charge 1.05%) or
Schroder Global Equity / QEP Global Core ZP (charge 0.75% / 0.6%)

20% Emerging Markets Equity
20% Baillie Gifford Emerging Markets ZP (charge 0.9%) or
JPM All-Emerging Markets Equity ZP (charge 1.25%) or
Russell Emerging Markets Equity ZP (charge 1.25%) or
Schroder Global Emerging Markets ZP (charge 1.25%)

10% UK Equity
Aquila UK Equity Index (charge 0.22%) or
IP High Income ZP (charge 1.1%) or
JPM UK Specialist Equity ZP (charge 0.6%) or
L&G Ethical UK Equity Index ZP (charge 0.37%) or
Newton UK Equity ZP (charge 0.8%) or
Threadneedle UK Equity 2 EP (charge 0.45%) or
UBS UK Value ZP (charge 0.7%)

Would I be best to invest all of my 70%, 20% and 10% in a single fund or breakdown them down between two or three funds?

Here is a list of all of the funds offered by Zurich: http://zdownload.zurich.co.uk/document/pdf/zcp/131322.pdf

I don't live in the Channel Islands so ignore those funds followed with an asterix!

Thank you once again! L