DC Pension Choices

fraserkerr

Hi,

I am 31 years old and currently have a DC workplace pension invested in L&G Global 60:40 Index with a pension fund of app. £48k. I am contributing 5% each month which the company matches and adding an additional 20% via AVCs. I have just done some research on the above pension fund and it has a 5 year growth of 58% compared to over a 100% for the best performing global pension funds.

Our annual benefits enrolment are coming up and we can change the pension selection to a fund of our own choice. Does anyone have a recommendation for a better performing global pension fund with a low AMC of less than 1%. The AMC on the L&G fund is 0.1%.

Many thanks for any recommendations.

Fraser

dunstonh

I have just done some research on the above pension fund and it has a 5 year growth of 58% compared to over a 100% for the best performing global pension funds.

That is almost certainly not comparing like for like in risk or asset makeup.

For example, the sector average for that fund over 5 years is 56.37%. The benchmark 72.4% and the fund 57.75%. Mid table consistency is what you would expect for index tracking funds.

The top funds that have returned just over 100% in 5 years in that sector are specialist high risk funds focusing on niche investment areas; healthcare.

Does anyone have a recommendation for a better performing global pension fund with a low AMC of less than 1%. The AMC on the L&G fund is 0.1%.

Your workplace pension with L&G is unlikely to have access to whole of market. It will have a restricted pension range typically geared for a mainstream investor. So, whilst there are over 27,000 LSE quoted investments, chances are your pension product only has 10-100 pension fund options.

Before you decide how you invest you need to consider your risk profile, capacity for loss, behaviour when losses occur and your understanding of how investments work. If you were to invest in global healthcare, then could you accept a 60-70% loss on your value? (i.e. shrug it off and carry on and it not have an impact on your financial situation). Even the L&G 60:40 is above the average risk profile of a typical inexperienced investor in the UK. At 31, you have time on your side and many would consider that time dilutes risk. So, that could be perfectly fine for you. However, you need to be on guard if you are considering moving even further up the risk scale in to high risk specialist areas.