Skandia pension withdrawn from Cavendish Online?

WoB

I eventually got my finger out to start the application process for a Skandia pension via Cavendish Online only to discover Skandia is no longer an option for a personal pension there!

Does anyone know why? What are the other options to Cavendish as far as DIY personal pensions go? HL seems to be more SIPP based.

I think it might have to be Aviva for me then via Cavendish. Only investing in Index trackers so probably not a big deal.

WoB

Well, after checking through the Aviva fund options I have come up with the below for my new pension portfolio. This is based on a minimum 10 year plan with yearly re-balancing. I will be paying in around 1k per month (and transferring my current pot of 100k). Appreciate that I'm solely in with Blackrock but they had zero additional AMC etc. Would appreciate a sanity check from you guys/gals to make sure I'm not doing something completely stupid! :-) I realise you will all have varying opinions on what (and %) people should be invested in etc. I am looking a medium-high risk strategy. I thought about swapping out some of the bonds into property? Anyway, thoughts appreciated! :-) Does this look generally OK? Additional Annual Yearly Charge (AYC) shown (zero for all but Emerging Markets), so nothing extra above the AMC of 0.4% via Cavendish.

Equities (70%):

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UK (20%):
- Aviva Blackrock Aquila UK Equity Index Tracker (AYC 0%)
US (15%):
- Aviva Blackrock Aquila US Equity Index Tracker (AYC 0%)
Emerging Markets (15%):
- Aviva Blackrock Aquila Emerging Markets Index Tracker (AYC 0.2%)
Europe ex-UK (10%):
- Aviva Blackrock Aquila European Equity Index Tracker (AYC 0%)
Pacific ex-Japan (5%)
- Aviva Blackrock Aquila Pacific Rim Equity Index Tracker (AYC 0%)
Japan (5%):
- Aviva Blackrock Aquila Japanese Equity Index Tracker (AYC 0%)

Fixed Interest (30%):

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GILTS (10%):
- Aviva Blackrock Aquilla Over 5 years Index Linked Gilt Index Tracker (AYC 0%)
BONDS (20%)
- Aviva Blackrock Aquilla Corproate Bond Index Tracker (AYC 0%)

sterlingstash

I am with Aviva, and was inclined to go down the simple tracker route along the lines of your portfoilio - but within the pension, the cost structure is a bit different to ISAs so you could go for one of the Aviva managed funds for the same cost. You could forget about rebalancing and not be paying extra for someone who hopefully could tinker with asset allocation when storms are on the horizon in certain markets.

I spread mine between three managed funds to reduce risk of a dog fund - the Aviva mixed investment 40-85, Aberdeen multi asset and Investco managed. The 2 external funds cost an extra .25%. The invesco fund in particular has been well worth the extra cost.

WoB

Yes SS, I have been to'ing and fro'ing between whether to go for my own set of funds/rebalancing or managed funds. Given I am no expert and only recently started learning about this I am wondering whether I need the 'hassle' of re-balancing and thinking too much about all of this. I wonder whether ultimately I will have the same results for more convenience.

When I did look at some managed funds (mixed asset), the weighting seemed very high towards UK which I was trying to avoid going from what I'd read (diversification and all that!). Whether the fund manager would be in any position to re-balance any more intelligently (or luckily) than anyone else I'm not so sure. Isn't there a risk that the re-balancing occurs after the horse has bolted so to speak, defeating the object of someone investing passively?

I'm kind of torn between both options. I am going to have to suck and see soon as my current pension is in 95% equities and I want to benefit from the lower fees.

dunstonh

When I did look at some managed funds (mixed asset), the weighting seemed very high towards UK which I was trying to avoid going from what I'd read (diversification and all that!).

The whole point of multi-asset funds is that they are diversified and will include the diversification. How much they allocate to different sectors will depend on the volatility risk rating.

Whether the fund manager would be in any position to re-balance any more intelligently (or luckily) than anyone else I'm not so sure.

Rebalancing is ensuring the portfolio remains in accordance with the asset/sector allocations currently deemed appropriate to match the required volatility risk level. It is pretty fair to say that they will be better than that at you unless you decide to pay actuaries or an adviser (who would have paid actuaries for data) to tell you. Whether it results in a better return is impossible to say. Over time, an unbalanced portfolio will typically become higher risk.

Isn't there a risk that the re-balancing occurs after the horse has bolted so to speak, defeating the object of someone investing passively?

Depends on the frequency of the balancing. In the years leading up to a crash, the riskier assets would grow more. They would have had amounts taken out of them to put in the less volatile assets. Therefore reducing the loss when a crash comes. The reverse happens after a crash. The risky assets would have gone down the most. So, there wont be enough in those and they will be increased from the lower risk assets.

Rebalancing isnt about trying to time the market. It also has little to do with managed vs passive. (if you use passive investments only, then you still need to rebalance).

WoB

Thanks dunstonh. One question on Mixed Asset funds - are the assets invested in index trackers or individual funds? Are they purely rebalancing the percentages invested in each asset's index trackers? Apologies if this is a daft question.

Do you think that Mixed Asset funds are a good option for someone to get low costs and low maintenance with a comparable chance or return versus a well managed/balanced set of index trackers? I am wondering whether this would be a better option for me rather than picking out individual index trackers as per my earlier post.

dunstonh

One question on Mixed Asset funds - are the assets invested in index trackers or individual funds?

You can get multi-asset funds that only use trackers. Ones that only use managed and ones that use both.

Are they purely rebalancing the percentages invested in each asset's index trackers? Apologies if this is a daft question.

That is one way of doing it. However, its not just a case of resetting the allocations back to a determined figure periodically. The allocations they deem suitable will be updated periodically to follow economic events, perceived values based on historical returns, changes in volatility trends etc.

Do you think that Mixed Asset funds are a good option for someone to get low costs and low maintenance with a comparable chance or return versus a well managed/balanced set of index trackers?

Its less work to have a multi-asset fund. It can be the same price or cheaper. Which will turn out best is really hard to say as there are too many variables.

Until you get to around £20k, i would just go with a cheap multi-asset fund. Once you get over 100k, then I would be more inclined to build a portfolio of funds using a selection of trackers and managed in the respective areas where they are best suited. However what I would do as an experienced investor who has all the investment tools an IFA may not be the same as an inexperienced investor. Looking at your post #2, your allocations dont appear to really match on proper asset model. it is unusual to see such rounded allocations and there is no coverage of global bonds or property. So, could you be handicapping your performance potential if you made your own portfolio? Or could you get lucky and find your allocation happens to not include a sector that has a poor period?

Investing is about opinion. No-one knows what is best. Every strategy has pros and cons. Every strategy will have periods when it is better and worse than a different strategy. The main things to avoid are fashion investing (picking what is currently being marketed in the media), random selections of amounts into each sector/fund or not having any strategy and just hoping for the best.

sterlingstash

Dunston may correct me, but often the managed funds have holdings of the company's individual sector funds. The fund manager can then balance fund asset allocation between the different sectors which of course the sectoral fund cannot do.

I am sold on the passive index investing approach - but based on the cost savings that this brings compared to managed funds. If there is no cost difference, then the selling point of the tracker approach is largely undermined in my view. Of course, the particular managed fund you choose may go on to over or underperform, but because of the asset allocation rather than the costs.

dunstonh

Dunston may correct me, but often the managed funds have holdings of the company's individual sector funds. The fund manager can then balance fund asset allocation between the different sectors which of course the sectoral fund cannot do.

They are known as fettered fund of funds. You also get unfettered fund of funds which use funds from the marketplace.

I am sold on the passive index investing approach - but based on the cost savings that this brings compared to managed funds. If there is no cost difference, then the selling point of the tracker approach is largely undermined in my view. Of course, the particular managed fund you choose may go on to over or underperform, but because of the asset allocation rather than the costs.

With unbundled pricing, tracker funds are not as cheap as they once were as they are no longer benefiting from the cross subsidy of managed funds. It used to be 0.2% vs 1.5% or thereabouts. Now its more 0.5% vs 0.4-1.5%

sterlingstash

dunstonh wrote: »

With unbundled pricing, tracker funds are not as cheap as they once were as they are no longer benefiting from the cross subsidy of managed funds. It used to be 0.2% vs 1.5% or thereabouts. Now its more 0.5% vs 0.4-1.5%

Agree - price differentials have come down a lot - and I wonder how far this has fed into the body of research on passive vs active ie whether backward looking performance comparisons have been updated to reflect the current pricing.

Having a professional take care of your portfolio clearly has its value - and at the same price (Aviva funds) or fraction of a percent differential, it has my pension vote (as per my original post).

I still see enough of a cost difference within ISA wrapper to stick with trackers and have the fun of playing with allocations. But while the amounts are still small, the potential damage caused by my inexperience is limited!

WoB

Thanks again dunstonh. The more I get into this, despite much reading I realise I am very much out of my depth as far as choosing the index tracker funds and their relevant percentages of the portfolio.

I get the attitude to risk part and how the assets/location needs to be diversified. I understand that it's all about opinions and even experts don't know for sure where things will go.

My asset allocation selection was based on personalising the various monevator example portfolios. Again, it seems I am playing at being a DIY investor for the sake of low fees.

Despite having a little over the 100k you mentioned I am leaning towards a multi-asset option. This seems to be removing one part of the risk, which is me! I am also looking at opening a S&S ISA so will maybe lean towards more personalised investing here, with a mix of safer passive funds and some active funds for entertainment!

I really need to get my current 95% equity allocation moved out of the Scottish Widows pension and I think from a sensible point of view the Aviva mixed/managed funds is probably the easy option for me for now.

SS - is it simple enough to determine which mixed asset funds are active/passive? Appreciate the response - I think my perspective is that one strategy/set of funds may out perform another. Which one I have my money in is going to be pretty much pot luck so no good worrying about 'winning'. Guess we have to accept that on the whole, a reasonable spread of assets will compare on average to another similar spread. As long as there is an average gain (or loss) then that's as best I will do.