New portfolio - views requested

I'm looking at taking control of the funds my company pension is invested in and would appreciate comments on what I'm proposing to move into. I did ask this question before but only had one responder so hoping for a few more comments this time.

I'm almost 53 and I would like to retire around 56 - 58 (flexible). I intend to put 60% of my salary using salary sacrifice (including employer contributions) into my pension until I decide to call it a day. Current fund value is £140k and I'll be putting in the max £40k annual allowance each year for this period. I estimate my 'trigger' point would be a fund value of around £300k which would be somewhere close to 57 assuming 3% growth.

I'm intending to use flexible drawdown when the time comes.

We've got 6 months emergency cash and I'm due to collect approx. £12.5k p.a. in DB pensions at 60 in 7 years time. Full SP at 67

I'm limited to a subset of Standard Life investments of circa 228 funds and I can only hold 12 funds so things like P2P are out and I've semi-decided on the funds listed below - would appreciate any comments.

17.0% SL Vanguard Developed World ex UK Equity Index Pn GB00B42ZF501!
11.0% SL CF Woodford Equity Income Pension Fund ????????????
11.0% SL Henderson European Select Opportunities Pn GB0031731259
4.0% SL JP Morgan Emerging Markets Pension Fund GB00B3RT9Z85
5.0% SL Schroder UK Smaller Companies Pension Fund GB00B3K62B39
4.0% SL Japanese Equity Pension Fund GB0031728099
4.0% SL Asia Pacific ex Japan Equity Pension Fund GB0031728438
4.0% SL JP Morgan Natural Resources Pension Fund GB00B61JR401
5.0% SL Property Pension Fund GB0031728214
5.0% SL BlackRock Global Prop Securities Eq Tracker Pn GB00B6QSC699
15.0% SL Old Mutual Corporate Bond Pension Fund GB00B3K61H26
15.0% SL Index Linked Bond Pension Fund GB0031727794

I do have another £12k independently in a USA IRA a/c which is 70% USA with a bit of UK and Euro ex-UK also.

Appreciate any feedback

Comments

  • It is a little difficult because you're limited to the Standard Life universe of funds.
    Most of the funds you've chosen have reasonably high management fees (> 1%). I personally prefer low cost trackers and ETFs but if you've got to use Standard Life then I see your problem.

    I also am a bit of a simple investor and would only choose about 5-6 funds for my pension portfolio. Just because you can have 12 funds doesn't mean you should. If you're planning to rebalance your portfolio frequently this becomes a lot easier and cheaper if you only have a handful of funds.

    I'd personally just go for a ratio of Equities vs Bonds and Gilts of about 55% to 45% at your age (your current ratio is about 70%:30% which is a bit equity heavy if you were planning on retiring in 5 years).

    I'd ditch the JPM Natural resources fund and the SL Japanese Fund as you're already probably exposed to the underlying companies via your Vanguard Developed World ex UK fund.
    Likewise your expensive Woodford fund and Schroder UK smaller companies probably have quite a bit of overlap.
    I'd replace your two property funds with the cheaper STAN LIFE L&G HYBRID PROPERTY 70:30 PN S2 fund.

    Of course all this is just my opinion and I'm not an IFA ;)
  • kangoora
    kangoora Posts: 1,193 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper
    Cheers, I do get a 0.3% reduction on 'list price' for AMC charges from being in the company scheme. However, given that SL's cheapest tracker is 1.02% AMC I'm still paying 0.72% on any tracker.

    I was hoping the 10% in property would be viewed as only having 60% in equities but not sure if that is the case/how it works.

    Good point on the Japan fund, I was wondering why I seemed to have about 10% in Japan on Morningstar X-ray.

    The JPM Nat. Resources was a bit of a wild card, my theory being if the global economy starts to pick up in general this may improve seeing as it's nose-dived over the last few years.

    I think Woodford is mainly large cap so not convinced there is much overlap with the UK smaller companies but will take a look.

    I'll take a look at the L&G fund also you've identified.

    Thanks again for the comments, some food for thought there
  • Linton
    Linton Posts: 18,113 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    Overall I cant see much to argue about. I dont see the attraction in the Japan fund, and am not convinced that extra Nat Resources is called for. On the other hand more Asia-Pac and EM could be considered as these do not appear strongly in your Vanguard fund. You could also increase the Vangiard fund.

    I disagree with beansOnToast on the % bonds. If you are retiring at 56-58 you can expect to live at least another 30 years and should prudently plan for at least 40. As you are planning on drawdown 2/3rds of your pension pot may well not be touched for at least another 10 years. So you dont need to go further than you have with bonds. The strategy I use is to ensure that 8 years drawdown is covered by cash, bonds, absolute return and similar.
  • dunstonh
    dunstonh Posts: 119,335 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Most of the funds you've chosen have reasonably high management fees (> 1%).

    Although remember that life and pension funds use the TER as the AMC. Plus, they are usually bundled in single priced contracts (no platform charge to add on top).
    I also am a bit of a simple investor and would only choose about 5-6 funds for my pension portfolio.

    Which would likely mean you would not achieve optimal diversification. If you are going to portfolio build like the OP, then you need at least one fund for each of the major sectors. So, you are looking at about 10 sectors to achieve that. 5-6 cannot achieve a bespoke portfolio unless you you have a catchall global equity fund to replace the international sectors.
    I'd personally just go for a ratio of Equities vs Bonds and Gilts of about 55% to 45% at your age (your current ratio is about 70%:30% which is a bit equity heavy if you were planning on retiring in 5 years).

    That may be personal to you. However, it does not mean it is suitable for others. How does your risk profile factor in behaviour risk and capacity for loss? How do the the volatility risk levels change if someone uses high yield bonds instead of corporate bonds? If the person isnt buying an annuity, then should they be derisking?
    Of course all this is just my opinion and I'm not an IFA

    Investing is all about opinion. No right/best way to do it. Plenty of wrong ways though.

    onto the op....
    17.0% SL Vanguard Developed World ex UK Equity Index Pn GB00B42ZF501!
    If you are going to use a global equity fund then why use single sector funds as well that overlap that?
    5.0% SL BlackRock Global Prop Securities Eq Tracker Pn GB00B6QSC699
    This is a high risk fund. It should be treated as specialist. If you are using it as part of your property allocation to reduce overall portfolio volatility then this fund is actually increasing it.
    However, given that SL's cheapest tracker is 1.02% AMC I'm still paying 0.72% on any tracker.

    Although its not as bad as that as you are not paying a platform charge on top so if you went with a 0.2% tracker and a platform charge of 0.45% then you are paying 0.72% compared to 0.65%.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • kangoora
    kangoora Posts: 1,193 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper
    edited 18 February 2015 at 4:25PM
    dunstonh wrote: »

    onto the op....


    If you are going to use a global equity fund then why use single sector funds as well that overlap that?
    Good point, originally I had this in there - 'SL BlackRock Aquila Connect US Equity Pn Fund' - I can't even remember why I took that out now and put in the Vanguard. I think it was something to do with trying to balance all sectors with only 12 funds (and wanting 2 property and 2 bond/gilt as well) :(
    This is a high risk fund. It should be treated as specialist. If you are using it as part of your property allocation to reduce overall portfolio volatility then this fund is actually increasing it.
    Exactly why I started the thread and that was my reasoning, lower volatility, thanks for that input. My fund range has exactly one fund available in Global Property so time for a rethink :(

    Although its not as bad as that as you are not paying a platform charge on top so if you went with a 0.2% tracker and a platform charge of 0.45% then you are paying 0.72% compared to 0.65%.
    Not horrific then although I could shave off a couple of tenths going to a cheap supplier.

    I think my main issue with SL is they have no charting tools that I can find, all I can get is links to PDFs on the funds and I had about 20 open at one time when building the portfolio plus their servers all go to sleep at 11pm at night until 7:30 the next day - they must have had a hard life :)

    I'll have another go with using the Blackrock US fund and think about what to do with no Global Property - any suggestions for another asset class for this?
  • dunstonh
    dunstonh Posts: 119,335 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    I think my main issue with SL is they have no charting tools that I can find, all I can get is links to PDFs on the funds and I had about 20 open at one time when building the portfolio plus their servers all go to sleep at 11pm at night until 7:30 the next day - they must have had a hard life

    You have to remember that many of these types of plans are built with the expectation that the data is fed to an adviser and it is they that have the tools etc. They were not built with the DIY investor in mind. Plus, they were built in the days of had coding and cant offer much without significant investment.
    I'll have another go with using the Blackrock US fund and think about what to do with no Global Property - any suggestions for another asset class for this?

    The normal Std life property fund should be fine as that is physical property (unlike the BR which is property shares).
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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