Standard Life stakeholder pension - thoughts on funds

masonic

civil12345 wrote: »

Make any sense? I think I may be confusing active and passive, maybe shouldn't have read that big thread that's been going on the past few days!

It can make sense to hold both active and passive funds in different sectors, but there isn't much case for doing so when the markets overlap. You need some conviction that the active strategy is going to deliver in order to choose it over passive, and if you really believe it will deliver superior returns, why dilute with passive holdings?

masonic

civil12345 wrote: »

Thanks masonic, why is it superior?

Counter-intuitively, it is because the Blackrock fund has been outperforming the index (see Trustnet factsheet). You might think that's good right? Well, not exactly, because it shows the tracking methodology is poor (it is probably not being rebalanced frequently enough). While this has resulted in positive performance in the past, it could just as easily result in poorer performance in the future (perhaps this is more likely than not). Conversely, the Vanguard tracker has tracked the index very closely from inception and will no doubt continue to do so.

civil12345

Thanks, this brings up another question. Is the difference between the fund you linked to and the SL one, just charges?

masonic

civil12345 wrote: »

Thanks, this brings up another question. Is the difference between the fund you linked to and the SL one, just charges?

The 'SL' version is what is known as a mirror fund, so it essentially is a copy of the underlying Blackrock fund managed by SL. Yes, these will typically differ in charges, normally they will be cheaper (often free in the case of trackers).

civil12345

It's a big difference isn't it, 5 year 81.53 compared to 72.44 for the SL fund.

masonic

civil12345 wrote: »

It's a big difference isn't it, 5 year 81.53 compared to 72.44 for the SL fund.

That chart shows performance for the S3 class of the fund, which has an annual charge of 1%. There is also an S5 class with a 0% charge, which is more likely what you would get (SL will probably be getting their pound of flesh from you through a separate charge). There will also be some variation in performance between the original and mirror fund due to slight differences between the timing of fund purchases and sales.

civil12345

Thanks. Can't find my documentation at the moment. I think the charge Standard Life apply is 1.00%, but I think that's discounted to 0.6% because of my employer.

Confused!

civil12345

So, it seems like I'm paying 0.6% to Standard Life (I'm paying 1.0% which comes off the fund price and get a rebate of 0.4% which increases the number of units).

There is also a charge of 1.0% on the funds, except the Baillie Gifford fund which is 1.3%.

With the stakeholder pension, am I correct that these are separate charges, or are they actually the same charge?

The one good thing is that it appers there are no dealing/trading charges.

It seems like the charges are quite high, esepcially compared to what I could achieve in an ISA or SIPP. Does this mean the passive indexing strategy is poor with these charges?

masonic

civil12345 wrote: »

So, it seems like I'm paying 0.6% to Standard Life (I'm paying 1.0% which comes off the fund price and get a rebate of 0.4% which increases the number of units).

There is also a charge of 1.0% on the funds, except the Baillie Gifford fund which is 1.3%.

With the stakeholder pension, am I correct that these are separate charges, or are they actually the same charge?

That looks confusing and expensive. I thought stakeholders were supposed to be cheap and simple. My own non-stakeholder pension charges me 1% but charges nothing more to hold "house" funds and trackers.

It seems like the charges are quite high, esepcially compared to what I could achieve in an ISA or SIPP. Does this mean the passive indexing strategy is poor with these charges?

You essentially have a level playing field in terms of charges, where normally trackers are 0.5% or so cheaper than any corresponding managed fund. It does make it slightly easier for a managed fund to outperform, but what you are lacking is a good choice in managed funds. So it may benefit you to look up some of the other options in Trustnet, look at the past performance and the fund manager's track record if it's available, and see if there is anything that would convince you the fund offers an advantage. But there is nothing in that list that looks particularly compelling to me, and at least with a tracker you know it won't significantly underperform vs. the market.

civil12345

Thanks again for the response masonic. I may have it wrong and the total after the rebate is 0.6% (0.9% for the Baillie Gifford fund).

You're right the list is very limited, I guess that's causing me the concern. I thought I was doing the right thing with the portfolio I have, to get a wide-range of assets, diversification and rebalancing within the two main funds.

I am considering moving to something like 30% UK tracker, 70% world ex UK tracker with the ones discussed above.