New to Personal Pension

Jaguar_Skills

Hello all,

I do not have a wealth of knowledge with regards to investing or pensions but I know I want to start saving!

I am looking to put away £500 a month of my salary into a personal pension. As I understand it the higher % equities you have in an investment, generally the more volatile.

Having read some of the threads on here I think the fund I would most like to invest in is the Vanguard Lifestartegy, since it seems the easiest and most well diversified (once I have read Smarter investing I may branch out for my S&S ISA!?)

Do people have any opinions on whether it would be better to invest in both the 60% and 80% to get 70% equities or whether it would be more cost effective charges wise to just invest in the 80%.

Also I am a little lost with charges. I have looked at Cavendish, who seem reasonable. The charges are below, is anyone able to explain:

AMC 0.24%
Cavendish ongoing charge 0.05%
TER 0.24%
Service Fee 0.25%

On the above is that cheap or am I going to lose a lot of money in fees this way?

Thanks in advance...

dunstonh

Do people have any opinions on whether it would be better to invest in both the 60% and 80% to get 70% equities or whether it would be more cost effective charges wise to just invest in the 80%.

Both have different risk profiles. So, you should invest in the one that is right for you. L&G multi-index funds could also be considered as they actually fill the gaps where the VLS doesnt cover (on a typical risk scale). Investing in both 60 and 80 doesnt mean you get a risk level in between.

AMC 0.24%
Cavendish ongoing charge 0.05%
TER 0.24%
Service Fee 0.25%

On the above is that cheap or am I going to lose a lot of money in fees this way?

Nobody talks AMC nowadays (apart from pension funds which use the OCF as the AMC).

So, you have a OCF of 0.24% plus intermediary charge of 0.05% plus platform charge of 0.25% = 0.54%. That is fine. Although you forgot the dilution levy.

You can get cheaper using a personal pension or stakeholder pension. Indeed, regular poster Bowlhead, made a post this morning about people jumping on the SIPP bandwagon because its fashionable and they dont realise what they are doing and can end up paying more than they need to compared to sticking with conventional options. You are a good example of that as you seem to be picking funds without understanding them and going with an advanced option when a conventional option may be better.

Jaguar_Skills

I thought this Cavendish fund was a personal pension option! I wanted a conventional option!

berbatov10

Jaguar skills I was thinking same as you but pensions are FAR from straight forward, I have learnt so much from posts on here, or become more confused!?

dunstonh

Jaguar_Skills wrote: »

I thought this Cavendish fund was a personal pension option! I wanted a conventional option!

If is the Fidelity fundsupermarket platform based pension. It uses OEIC/UT funds rather than pension funds and is multi-layered in charges.

It is a more advanced option which is fine for what it does but it is aimed at the middle ground investor (experienced but only want access to OEIC/UT funds. No access to pension funds or directly tradeable assets).

greenglide

I thought this Cavendish fund was a personal pension option! I wanted a conventional option!

Cavendish do SIPPs, Personal Pensions and Stakeholder Pensions.

The ones sold as "theirs" are SIPPs (using the Fidelity platform). The Ps and Stakeholders are with AVIVA, Aegon and Friends Life.

berbatov10

So guys you would not advocate putting money into a VLS 60/40 fund (or similar) for a pension if you have little experience or indeed just want to invest and 'leave it to carry on' without much input

dunstonh

berbatov10 wrote: »

So guys you would not advocate putting money into a VLS 60/40 fund (or similar) for a pension if you have little experience or indeed just want to invest and 'leave it to carry on' without much input

There is nothing wrong with that if it meets the needs and no other better option exists. I have done that very thing with clients in the last year, albeit with a different provider. However, that was fitting a specific objective. A notch higher or lower on the risk profile would have lead to a different option being recommended.

Remember that people come on this site and see a bit of information about one option. Sometimes that option can become repeated and fashionable. However, it is not the only option and that option may not be suitable. It may be suitable. We cant tell on a few lines of text on a website.

berbatov10

Dusnston maybe I can give more information on my situation. I have a final salary pension scheme which I will draw in 4.5 years giving me a yearly pension of C £25k and a lump sum. When I retire I would like to do a lot of travelling etc so Iam looking for something that I can invest in, leave untouched (as such) and let it plod (hopefully not) along. I am not risk averse but I would not want to be putting it all into a 'casino' either I guess medium risk describes me. I look to use the £8000 Iam going to earn at higher rate tax as a lump sum (tax efficient) and then continue to contribute monthly.

jamesd

Say you were to invest in a UK or global tracker fund. You could expect one or two drops of 40% every ten years and one to thee drops of 20%. Just as a matter of routine in the roller-coaster in reverse that is investing. Bond funds might instead drop by 10-25% in the same circumstances, except that their prices are very high now so there is significant one way downwards risk for them. This lower up and down movement is why bonds are traditionally recommended as a way to reduce "risk", which really means volatility, the routine up and down movement magnitude. If you have to sell during a downturn that volatility/risk can become a capital loss if there hasn't been enough growth in the meantime to overcome the size of the drop.

Because of the current prices of bonds I normally suggest using commercial property funds as an alternative to bonds at the moment. You can't do this in the VLS funds because they just use bonds.

berbatov10

if I went for the 60/40 VLS it is not all shares though nor is it all bonds