New Aviva Pension - Portfolio choice

sterlingstash

Time for a new year financial makeover of my pension arrangements, so I am just about to start a new Aviva Personal Pension via Cavendish.

I'm 35 and with existing Aviva pension of c. £50k which I'll switch in to reduce the AMC from 0.9% to 0.4%. And for the first time in 10 years I am reviewing my fund choices.

I've got two issues at the moment

1. What to do about bonds. I have been almost totally in equities as seemed a good idea when I was in my 20s. So I missed out on all the bond gains of recent years, but I suppose at least I have been stocking up on equities at low prices which is reaping some return now. Do I start drip feeding into bonds even with expectation that they may fall, to perhaps pick up on any overshoot? I don;t think I should be allocating a chunk of the existing pot into bonds currently.

2. Managed funds or index trackers. I go for low cost passive portfolio in my S&S ISA (a la Monevator), but the cost differential between index trackers and managed funds are much lower in the pension.

Here is my starting point

60% Balanced Managed spread across three funds with decent track record and low fees to reduce risk of dud fund choice
20% in Aviva Aberdeen Multi-Asset ex Property (+0.25% AMC)
20% Invesco managed Pension (+0.25% AMC)
20% Aviva Mixed Investment 40-85% shares (no add. AMC)

then some trackers in areas which I would see as potentially good bets
10% Aviva European Equity (or the Blackrock Aquila index tracker)
10% Aviva Pacific Equity (or the Blackrock Aquila index tracker)
10% Aviva Blackrock Emerging Markets Index Tracker
10% ??

I know there will be heavy overlap with the above and haven't yet looked at how the overall portfolio allocation will look (or how I could check before I went for it...), but any initial comments?
Should I stick a strategic bond fund in for the last 10% or even 20%, new money only, and let that help start to slowly lifestyle the portfolio as I'm getting on a bit now!

Thanks for any (constructive!) critique of my ideas.

BLB53

I'm 35 and with existing Aviva pension of c. £50k which I'll switch in to reduce the AMC from 0.9% to 0.4%. And for the first time in 10 years I am reviewing my fund choices.

Would it not be cheaper to open a sipp with thelikes of HL or Sippdeal? Then you would not have Aviva's 0.4% AMC.

The issue of equity/bond mix could be addressed with the Vanguard LifeStrategy 80% option -total charges around 0.3% - personally, I would think you want to be overweight in equities for the next 20 yrs or so.

My two penn'orth anyway!

dunstonh

Would it not be cheaper to open a sipp with thelikes of HL or Sippdeal? Then you would not have Aviva's 0.4% AMC.

The 0.4% is for provider and fund. HL and SIPP are likely to be more expensive.

The issue of equity/bond mix could be addressed with the Vanguard LifeStrategy 80% option -total charges around 0.3%

0.30% on top of the platform charges and a 0.3% dilution levy on each contribution.

gadgetmind

BLB53 wrote: »

Would it not be cheaper to open a sipp with thelikes of HL or Sippdeal? Then you would not have Aviva's 0.4% AMC.

What can you hold with HL or Sippdeal that is really sub 0.4%?

Yes, some trackers are, but you need to watch the platform fees.

For the disinterested, many personal/group pension funds are non too shoddy.

mania112

Not sure why SIPP's are called as such.

I honestly don't think SIPP's should be self-invested. Someone going it alone should stick with the securities offered by PP's, even if that means paying a bit more.

In this case though, I think 0.4% is impressively low.

With regard to bonds, you can't go wrong with them. There's probably no need to go for government bonds (GILTS) however, as the outlook isn't too rosey for these - QE has screwed them for a few years.

However, with 30 years left on the investment-clock, you would struggle to make a mistake.

gadgetmind

mania112 wrote: »

I honestly don't think SIPP's should be self-invested.

The clue is in the name.

With regard to bonds, you can't go wrong with them. There's probably no need to go for government bonds (GILTS) however, as the outlook isn't too rosey for these - QE has screwed them for a few years.

And many other bonds inc corporate are shaky. (plus gilts are UK bonds, and there are many other sovereign bonds.)

mania112

gadgetmind wrote: »

The clue is in the name.

Oh that's what SI stands for. If you read the post, i'm explaining that in my opinion, given the far-reaching range of investments available in SIPPs, one should not be self-investing in a SIPP, without help from a professional.

I much prefer to see individuals (who 'think' they know about pensions) to stick with the safe constraints of a PP.

gadgetmind wrote: »

And many other bonds inc corporate are shaky. (plus gilts are UK bonds, and there are many other sovereign bonds.)

Again, I know. What's your point? You seem to enjoy arguing?

peterg1965

Rightly or wrongly, I have just sold my corporate bonds in my portfolio and and put the money into a European OEIC (Henderson Euro spec sits). Might be a bit riskier (maybe a lot riskier) but I think bonds have run out of steam for now and Europe has hopefully turned a corner and is on the up.

BLB53

The 0.4% is for provider and fund.

I may be wrong but I would be amazed if Aviva were charging just 0.4% for the whole package given their charges in the past for PPs were of the order of 1.7% on average.

I have my sipp with Sippdeal and have never been charged a dilution levy on the funds I hold - maybe this only applies in the IFA world?

What can you hold with HL or Sippdeal that is really sub 0.4%?

Well, the Vanguard UK FTSE tracker has charges of just 0.15% - yes there's the initial 0.5 to cover stamp duty but its not an annual charge. I agree, if Aviva's total package is only 0.4% that would be good value but, as I say, I very much doubt this figure is correct.

jem16

BLB53 wrote: »

I may be wrong but I would be amazed if Aviva were charging just 0.4% for the whole package given their charges in the past for PPs were of the order of 1.7% on average.

You are wrong. Look at the Cavendish website.

http://www.cavendishonline.co.uk/pensions/personal-pensions/aviva/

For holdings over £50k it's 0.4%. The look through the list of available funds and some have an additional charge.

http://www.aviva.co.uk/adviser/product-literature/view-document.cgi?f=sp99155c.pdf

The OP has listed which ones have an additional charge - 0.25% in 2 of his possible funds. If he chooses from a lot of the funds with no additional charge then it is just 0.4%amc.

I have my sipp with Sippdeal and have never been charged a dilution levy on the funds I hold - maybe this only applies in the IFA world?

It's nothing to do with an IFA. It's a dilution levy by Vanguard and applies no matter where or how you buy the fund. HL apply it as an initial charge.

http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/v/vanguard-lifestrategy-80-equity-accumulation

Look at the notes on the right.

Well, the Vanguard UK FTSE tracker has charges of just 0.15% - yes there's the initial 0.5 to cover stamp duty but its not an annual charge.

Plus £2 per month as it's a tracker.

sterlingstash

Thanks all for your replies. The Aviva AMC is low because Cavendish is an execution only FA. No advice from them so I am on my own with investment choices.

I've been a bit daunted by SIPPS which is why I'm sticking to the simple charging structure of the PP. I think that once started, the AMC will be the same throughout with the PP, whereas if SIPPS are anything like the S&S ISAs, the platform fees and charging structure seems to always be changing so continued research and then transferring might be required, and if I'm honest with myself I won't get round to doing that.

In terms of bonds, I guess the balanced managed funds might be expected to make decisions on the outlook on bonds and rebalance appropriately when things look less risky on that front? Then I suppose I could start to feed into a cautious managed fund as time goes on.

Thanks for all of your input.