Is it possible to transfer?

tony4147

dunstonh wrote: »

5 years is just half an economic cycle and, importantly, the last 5 years only covers a growth period. No real negatives in there. So, if you look only at performance, you are broadly getting the highest risk funds giving the highest returns. They will be the same funds that suffer the biggest losses during negative periods. You need to include both negative and positive and average out. To do that, you need 10 years past performance to get a more realistic flavour.

If you are prepared to take increased risk then that does not mean you break the asset allocation models. You just move up the risk scale with asset allocations suitable for that higher risk level. Spiking one sector (in this case UK equity) increases the risk but not in a good way. You are gambling on UK being the best area (and it rarely is).

The links to the funds that SW have sent me only show the last 5 yrs performance and having a look on Trustnet that only shows 5 yrs, so where can I find 10 yr performance figures?

atush

Why do you think past performance will guarantee future performance?

tony4147

atush wrote: »

Why do you think past performance will guarantee future performance?

I don't, but it is a reasonable guide is it not?
There's no guarantees, but dunstonh was suggesting that 5 yrs is only half an economic cycle so I would like to know where I can find 10 yr historical data?
and as I said before I will be running this past my IFA, after all that is what he is paid for to advise and suggest!

jamesd

FatherAbraham wrote: »

We also know that the lifestyling option switches money into investments that have historically had lower risk when compared with annuity rates, which is entirely the point. Growth is not the only game in town.

Historically they have had lower up and down movements. Currently the prices of the bonds are close to 300 year highs so there is an expectation that as Bank Rate increases, bond prices will fall and bond holders will suffer capital losses. Which means that today bonds are actually high risk. This will change in a few years once rates get back to more normal levels but it's where we are today. Growth isnt' the only game in town, avoiding losses is also important. And so is getting the ups and downs to levels that people are comfortable with.

FatherAbraham wrote: »

Her views are rather idiosyncratic, yes, because such an approach would be profoundly risky for someone who intended to buy longevity insurance (an annuity), rather than draw down.

If someone was going to buy an annuity some degree of switching makes some sense, I agree. But not fifteen years before the date.

FatherAbraham wrote: »

Since default options tend to be used by those who are less confident about managing their money, and who are less well informed, a path which guides towards a reliable lifetime income makes more sense.

I don't agree but even if I did, that reliable lifetime income of choice today isn't annuity buying, it's deferring the state pension, which pays more income for the same amount spent. What has been happening in recent years is that people have been changing what they do away from just buying an annuity automatically and now taking lump sums and such are much more common than they used to be. Including by people who don't know much and who previously would have just been sold an annuity automatically.

FatherAbraham wrote: »

So if annuities should be purchased in ones seventies, your advice to set the scheme retirement age to 90 is rather inappropriate, wouldn't you say?

No. The lifestyling in this scheme starts 15 years before the specified retirement age. If a person wanted it to start a more reasonable five years before a planned annuity purchase the appropriate age for a late 70s purchase would be between perhaps 88 and 90 years old. That's "something like 90". How near 90 depends on the planned retirement age and desired period of lifestyling.

FatherAbraham wrote: »

As to annuity rates currently being "poor", perhaps you could tell us when, in the last three hundred years, there has been a moment at which purchasers thought that annuities weren't poorly priced?

I don't care whether they were good or bad in the past. What I care about is that today more income can be provided for the same purchase price by means other than buying annuities, like the state-backed inflation-linked income for life offered by deferring the state pension, at 2-3 times the income level an inflation-linked annuity would pay, depending on when a person reaches state pension age.

jamesd

tony4147 wrote: »

dunstonh was suggesting that 5 yrs is only half an economic cycle so I would like to know where I can find 10 yr historical data?

Unfortunately most places only provide five years of it. You can get a ten year summary at Morningstar for this fund, though. The annualised table just goes far back enough to show the 42.78% drop in 2008. It also shows the subsequent recovery and smaller companies have done quite well since then, though the past year hasn't been great for them. Some signs now of that picking up again. The FT often has older data as well.

In general you might expect a few percent a year higher average growth from smaller companies at the price of seeing a30% drop when the UK whole market drops 20% or 60% when it drops 40%.

So what you do when you add smaller companies is choose to accept bigger ups and downs in exchange for a reasonable expectation of higher growth.

When it comes to time to retire what you can do varies a lot. In most of the world people stay invested but quite often switch to investments that move up and down less. One of the big risks of retiring and drawing on investments is a big market drop just before or in the few years after retiring. Just before can often be handled by not retiring, though not always. just after is tougher. This is called the "sequence of returns risk" which refers to the difference between average returns and what people actually see based on when they actually retire and whether that's before or after a drop. There's also risk of a long term sustained drop that's even worse than a normal short one.

There are a range of ways of managing that set of risks. A very common way is to switch increasing portions of money into investments that move up and down less in the years before retirement, five years has historically often been suggested as a reasonable time. It actually varies - if you know there's just been a big drop it might not be worth doing as much of this. If you're in the middle of a boom market it would be very prudent to do more, anticipating that there will be a drop, even though one is not guaranteed in any particular timeframe.

One of the decisions you'll have to make is how big a drop you can accept in a bad year, so you can pick a mixture of investments that won't be likely to drop by more than that. Then your IFA can help you to put together a suitable mixture.

For drops after retirement there are assorted other tools that can be used besides lower volatility (less up and down movement) investments. Having a year's spending in cash for example has been shown to improve drawdown success rates. Deferring the state pension increases it by 5.8% a year for those reaching state pension age from 6 April 2016. Increasing with inflation but not inheritable. That's much more than inflation-linked annuities and give the long term UK stock market performance is around 5% plus inflation it's a pretty good deal compared to being invested as well. So deferring can look like a really good deal to swap unpredictable income for predictable for at least some of the pension pot.

There are limits to how much deferring is useful, since eventually after a decade or more it ends up not paying more than a comparable annuity could have done, and annuity rates increase with age, so eventually annuities provide a higher income for the money. Even at the start they can provide useful protection for core income needs. Level annuities are by far the most popular and they don't provide an inflation-linked income, but instead provide a higher initial income than an inflation-linked annuity. This sort of annuity can provide a quite useful bit of certainty that gradually decreases in inflation-adjusted value as the risk of early drops in investment decreases with passing time.

There are also limited-time annuity products that provide income and guaranteed values after five years or ten years, instead of lifetime income. Those can be useful sometimes but I'm not particularly keen because of the charges of those I've looked at. The charges matter because those increase the size of investment drop it takes before the product beats just staying invested.

I'm already after the first age at which I could retire and within ten years of reaching even my most ambitious targets. What I've been doing is increasing my investments in P2P, which are currently about 15% of my total investable money. I intend to increase that to more like 40-50%. This is in part because I think that a market drop is quite likely fairly soon, even though I don't know when, and in part because today I can get P2P returns that are likely to beat the long term UK stock market average anyway, so I don't need to sacrifice likely growth. Not many places offer direct P2P investing inside a pension at the moment and those that do are quite expensive until pot sizes exceed £100,000 because they have a fixed charge. Bonds have traditionally been good for this but the current high prices mean they aren't so good for it today. Commercial property remains another reasonable alternative.

A really useful thing that you're already doing though is learning more about investing and investments, so you're in a better position to make informed decisions about what you want to do, why and when.

tony4147

Jamesd thanks for your help.

A fund I'm interested in is the SW Schroder UK Smaller Companies.
Why when I when I look at the factsheets from two sources is it so different?
It almost reads as it it is two completely different funds even though the ISIN number is the same, and the performance graphs have the same peaks and troughs, but the percentage rises and falls are very different. Is it that the % rises and falls are taken at different periods in the year between the two factsheets?

http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=VAUSA05WA6&InvestmentType=SA


http://factsheets.financialexpress.net/swfc/SH05_SUC.pdf

dunstonh

Why when I when I look at the factsheets from two sources is it so different?
It almost reads as it it is two completely different funds even though the ISIN number is the same, and the performance graphs have the same peaks and troughs, but the percentage rises and falls are very different. Is it that the % rises and falls are taken at different periods in the year between the two factsheets?

Different snapshots, different periods and different ways of showing the returns. Morningstar uses the years to 6th August and shows annualised returns. FE is 30th June and shows discrete and cumulative.

hyperhypo

I hope the OP will come back to share the outcome of any conversation with his IFA....i for one would like to know what fund choices may have been made not least as am in very similar situation.

Paying c. 1500 pcm via salary sacrifice into an Aegon Group Stakeholder scheme, haved done so since June 2012 and amassed
£62k to date.

No IFA involved.
78 funds to choose from in scheme. Basic charge 0.3% whilstcontributing.

I moved away from the default scheme onto a "managed" Baillie Gifford scheme soon after starting ....so all contributions into one scheme...i didn't do any homework it was based on a desire to get away from the default and try and do better.... albeit in complete ignorance.

Going forward i want to consolidate this 62k and continue paying into schem for another 4-5 years ..i'm 56. I want to be able to use it and another old With Profits PP i have (NU Serps) to draw down to supplement a modest DB scheme that starts at age 63.
A slow and steady piggy bank will do.

Candidly, I have no real idea over how now to craft a strategy within the choice of 78 funds ...i can choose up to 10 ... to manage this fund for the next 4-5 years until i drawdon heavily at first, then less so as the DB kicks in. I thought i did with my Baillie G Balanced Managed Fund ....which has added c.£6K in value to fund over the past three years since i've beencontributing.... but now realise this is vulnerable to volatility within my 4-5 year window.

The more i think i'm getting somewhere the trickier the problem appears !

Part of me would love someone here to say ..having looked at the list of funds on Trustnet or whatever.... you could use yr current fund and split all of it into thirds, cautious managed, world equity index and UK equity.. pick x, y and z.
But i don't think it works quite like that ... i need to take the pointers and then work it out for myself, or engage and ask an IFA what is now a very specific question over what to do with £x in a given timeframe, with given mitigations etc.......which brings me back to wishing to try and work it out for myself with help and pointers on here.

how much an IFA might charge to assist in this fund selection ?

One of my mitigations other than the DB scheme is the old serps
Aviva pension ..until i aired and listened to views on what i might do with this ...my inclination was to transfer to a SIPP and improve it's performance ...i realised it might be viewed as a slow and steady and useful plank in the early retirement floor...so i left alone.

And have just had a letter from Aviva telling they're going to add a further 7.5 % to the final bonus.

Tony i hope your new IFA might be more directive over fund selection, if you decide go down that route... if you do please let us know how you get on as indeed i will when i get my head around my own fund choices.

tony4147

hyperhypo wrote: »

I hope the OP will come back to share the outcome of any conversation with his IFA....i for one would like to know what fund choices may have been made not least as am in very similar situation.

Paying c. 1500 pcm via salary sacrifice into an Aegon Group Stakeholder scheme, haved done so since June 2012 and amassed
£62k to date.

No IFA involved.
78 funds to choose from in scheme. Basic charge 0.3% whilstcontributing.

I moved away from the default scheme onto a "managed" Baillie Gifford scheme soon after starting ....so all contributions into one scheme...i didn't do any homework it was based on a desire to get away from the default and try and do better.... albeit in complete ignorance.

Going forward i want to consolidate this 62k and continue paying into schem for another 4-5 years ..i'm 56. I want to be able to use it and another old With Profits PP i have (NU Serps) to draw down to supplement a modest DB scheme that starts at age 63.
A slow and steady piggy bank will do.

Candidly, I have no real idea over how now to craft a strategy within the choice of 78 funds ...i can choose up to 10 ... to manage this fund for the next 4-5 years until i drawdon heavily at first, then less so as the DB kicks in. I thought i did with my Baillie G Balanced Managed Fund ....which has added c.£6K in value to fund over the past three years since i've beencontributing.... but now realise this is vulnerable to volatility within my 4-5 year window.

The more i think i'm getting somewhere the trickier the problem appears !

Part of me would love someone here to say ..having looked at the list of funds on Trustnet or whatever.... you could use yr current fund and split all of it into thirds, cautious managed, world equity index and UK equity.. pick x, y and z.
But i don't think it works quite like that ... i need to take the pointers and then work it out for myself, or engage and ask an IFA what is now a very specific question over what to do with £x in a given timeframe, with given mitigations etc.......which brings me back to wishing to try and work it out for myself with help and pointers on here.

how much an IFA might charge to assist in this fund selection ?

One of my mitigations other than the DB scheme is the old serps
Aviva pension ..until i aired and listened to views on what i might do with this ...my inclination was to transfer to a SIPP and improve it's performance ...i realised it might be viewed as a slow and steady and useful plank in the early retirement floor...so i left alone.

And have just had a letter from Aviva telling they're going to add a further 7.5 % to the final bonus.

Tony i hope your new IFA might be more directive over fund selection, if you decide go down that route... if you do please let us know how you get on as indeed i will when i get my head around my own fund choices.

I have contacted my IFA and have completed an attitude to risk questionnaire and should hear more next week.
He knows that I feel my contributions should be working better for me than being left in the 'default' SW pen portfolio funds, so I will see what he suggests.
He also knows my aspirations and the time frame I would like to have the choice of retiring if I wish.