Pension fund choice

GreenTricky

I am 30 and in the company pension and always just let it do its own thing having originally chosen one of the 'lifestyle' choices when I first joined. I decided to review this today and there doesn't really seem to be many funds available for us to choose from, ignoring the bonds, gilts and medium/low risk options leaves:

Blackrock DC 50/50 Global growth
Blackrock DC UK Equity optimum
LGIM Global Equity (50:50) Index
LGIM UK Equity Index
Blackrock Highgrowth/ Risk fund

I am currently in the last one. Apart from the two that are UK focussed, the other three all seem much or a muchness in terms of allocation, performance, fees from what I can tell.

Is there anything obvious I am missing that makes any one stand out? If they all perform similiarly, should I go for the one with the lowest additional fees (LGIM Global Equity (50:50) Index)?

Any of other suggestions for what I should be considering?

moscow6

Hello,

I'm also in a works pension with poor / limited fund options.

Cost is a consideration; what is the TER of each fund?

Linton

I suggest you go for one of the 50/50 global funds. It probably wont matter much which one, so use whatever criteria satisfies you - lowere fees, allocation to geographies that matches what you think is appropriate or whatever.

I dont see any point in going for either of the pure UK funds, you will get more than enough UK investment, probably too much, from the 50/50 funds.

The Highgrowth fund appears to be a collection of average funds including 50/50 funds which dont appear to me to be any higher growth than the 50/50 funds so I dont see any real advantage of going there.

GreenTricky

Am I right in thinking, if I can afford to save a bit more that putting additional in my pension is the cheapest way to do it? More efficient than putting it in an ISA?

Jegersmart

GreenTricky wrote: »

Am I right in thinking, if I can afford to save a bit more that putting additional in my pension is the cheapest way to do it? More efficient than putting it in an ISA?

Generally, yes. Putting additional funds in your pension means you can either do so pre-tax from your salary (into a company scheme) or get the full tax rebated if you do so into a SIPP or similar with your post-tax funds.

ISA's allow you to put your taxed funds into it and you will pay no tax on the *gains*.

Of course you should bear in mind that once funds go into your pension you cannot access it until you are at least 55.

J

Linton

GreenTricky wrote: »

Am I right in thinking, if I can afford to save a bit more that putting additional in my pension is the cheapest way to do it? More efficient than putting it in an ISA?

ISAs and pensions serve rather different objectives. Pensions are 100% for retirement and have additional tax advantages to ISAs but are more restrictive in that they cannot be accessed earlier than when you are 55 (under normal circumstances) and then usually only to provide an ongoing income. S&S ISAs can be fully accessed at any time. So it is probably sensible to use both. Cash ISAs shouldnt be considered as an alternative as their returns are too low.

In terms of efficiency pensions are more tax-efficient particularly for higher rate tax payers. The charges are probably similar though that will depend on the details of the schemes.

If you are going to put money in an S&S ISA it is recommended that you ensure you have 6 months living expenses in accessible cash before doing so. Then you wont be forced to sell your S&S ISA moneys in an emergency when possibly values are low. So its a question of balance between pensions, S&S ISAs, and cash possibly held as a cash ISA.

kidmugsy

At 30 I'd prefer ISAs to pensions unless my extra pension contributions (i) let me avoid higher rate tax, or (ii) brought with them extra employer contribution, or (iii) were by salary sacrifice. Otherwise I'd feel that the inflexibility of a pension was too high a price to pay for any likelihood of benefit. ISAs "freeze" your current income tax rate: do you expect your income tax rate to rise or fall over the next 25 years?