Standard Life Pension Funds

djbenny1

Hi guys,

First post here!

Hopefully I'm not asking something that has already been asked, a quick search didn't turn up what I'm after.

The company I work for matches my salary sacrifice pension contribution up to 10% - I'm 24 and have worked for them about 9 months now, don't want to lose out on any more of their money so I want to go up to the full 10% instead of the auto 1%.

I've been looking at funds etc. and have decided that I would definitely like to control my pension myself as far as possible, choosing funds etc.

I have chosen out 6 funds I would like to use based on a quick look at recent performance and a look on Citywire - 3 of these are recommended on there, the other 3 are a bit higher risk / potentially higher reward:

[Sorry I did put links in here to Trustnet but because I'm new the site won't let me post them!]

Using the Trustnet risk index I've calculated the percentages I would like to invest in each:

Standard Life SLI UK Equity Unconstrained 14
Standard Life UK Eq Income Unconstrained 18
Standard Life Schroder UK Smaller Companies 28
Standard Life BT Share 10
Standard Life UK Eq Unconstrained 13
Standard Life Investec UK Small Companies 17

However, after doing all this research, I found the following in the Standard Life Info booklet:

"You can change the mix of your investments as it suits you. But you can't invest in more than 12 funds at one time. You can invest in up to 20 funds over the life of your plan. If your contract is a Group Flexible Retirement Plan or a Group Personal Pension Flex you can invest in more than 20 funds over the life of your plan. In some situations there may be a delay in carrying out your fund switch requests."

I am concerned about the section in bold - surely this isn't what it seems? I only get to choose 20 funds in over 40 years?? I would be wanting to monitor this monthly, and if they're not doing well, change them at least once a year. Obviously if they're doing well I wouldn't touch.

Would appreciate your feedback on all of the above, but the last section (regarding switching funds) in particular!

Thanks,
Ben

Edit. I should add that I am a complete novice, therefore some (or all!) of the above could well be complete nonsense!

Triumph13

That's a horribly UK-centric portfolio. You need some international diversification as a first point.

As a second point given that you describe yourself as a complete novice the completely spurious exactitude of your fund percentages coupled with your stated intention of changing at least once a year sounds like 'fashion victim' to me - which is really NOT a recipe for success.

Start simple with a couple of nice global trackers or one global and one UK in an appropriate balance. You can add more funds as time goes on and your funds and experience increase.

djbenny1

Triumph13 wrote: »

That's a horribly UK-centric portfolio. You need some international diversification as a first point.

As a second point given that you describe yourself as a complete novice the completely spurious exactitude of your fund percentages coupled with your stated intention of changing at least once a year sounds like 'fashion victim' to me - which is really NOT a recipe for success.

Start simple with a couple of nice global trackers or one global and one UK in an appropriate balance. You can add more funds as time goes on and your funds and experience increase.

Thanks for the response.

Can you explain what you mean by "fashion victim"?

As I said the percentages are based on a simple calculation, previous years return weighted against the risk index given by Trustnet. Ie. Smaller percentages in high risk funds, higher in lower risk. That seemed like fairly sound reasoning to me

You may be right about UK-centric, but I guess it all hinges on the final question in OP which is how often can I change if I'm not happy with it?

Triumph13

djbenny1 wrote: »

Can you explain what you mean by "fashion victim"?

The most important thing about equity investing is that it only really works as a long term strategy. Shares are volatile assets that tend to give a good return over the long haul, but bounce all over the place in the short term.

You seem to be trying to find what is the current 'in' fund and to keep on swapping to stay with that trend. That pretty much by definition means you are going to be buying high and selling low all the time and is generally a great recipe for losing money.

Many people would dispute that active investing can beat passive anyway, but if you are trying to actively manage things then the whole art is to find unfashionable undervalued funds / shares.

djbenny1

Triumph13 wrote: »

The most important thing about equity investing is that it only really works as a long term strategy. Shares are volatile assets that tend to give a good return over the long haul, but bounce all over the place in the short term.

You seem to be trying to find what is the current 'in' fund and to keep on swapping to stay with that trend. That pretty much by definition means you are going to be buying high and selling low all the time and is generally a great recipe for losing money.

Many people would dispute that active investing can beat passive anyway, but if you are trying to actively manage things then the whole art is to find unfashionable undervalued funds / shares.

Ah OK - I understand.

What you say is true, but what I would say in response is that all of those funds have performed very well over the last 3/5 years and not just the last year, though obviously that's no guarantee of future performance!

Appreciate what you're saying though - it's much easier to jump on what has done well than what will do well!!

guymo

First, to answer your explicit question: I think the line you have asked about in bold means what it says. They do not want you transferring between funds all the time. As a result, it is more important than usual that you don't just jump in to fund selection without proper thought -- and it's always pretty important!

Now, here's what I think you should do:

The first step is to increase your pension contributions, as you have planned. Do this as soon as you can. This means that plenty of money will go into your pension and you can allocate it to you chosen funds later if you wish. In the mean time it will most likely go into one of the standard funds offered by SL which is not going to be a catastrophe, so there's no hurry to make your own fund selections.

Take your time. Use that time to study investment a bit. You seem to be both motivated and numerate so you will learn the basics quickly if you read a few books and web sites. Look here, monevator.com, and the bogleheads forum, and you will pick up plenty of advice and references to good reads. What you need to learn about is "asset allocation."

Once you have a more informed view on what you want to invest your pension money in, choose the best funds you can from the SL range and stick with them unless there's a good reason to change.

djbenny1

Thanks guys.

What I will do is start off with perhaps 3 funds, with at least one non UK one making up a good portion of it, see how that goes and go from there.

By the way, I found out that my pension is in fact the Group Flexible Retirement Plan, which should mean I can invest in more than 20 over the life of the plan!

Thanks for advice!