Moving DC Schemes - What should I consider?

BennyBrownBoy

Hi,

I appreciate you can't give specific advice but would welcome any thoughts/comments on the following:

I have a small (£45K) DC pension invested in Scottish Equitable Blackrock Aquila 75/25 Equity & Bond Index Lifestyle (on advice of advisors appointed by my company). I have just changed company and the new pension provision defaults to Zurich Barclays Annuity Target Strategy B.

Having read the documents from Zurich there is the opportunity to select other funds, one of which is Barclays WorkingLife Flexible Retirement Target Strategy B, which claims to be more suitable for those who may wish to use their fund at retirement in a drawdown arrangement.

I can move my £45K to the new Barclays default fund (or the fund more suited to drawdown) but just wondered whether this was a wise move - should I leave it where it is and just start afresh with the new company scheme and fund?

What are they main things to consider to decide whether this is the right thing to do?

For background if required - I'm 52, wish to retire at 60, a higher rate tax payer and am not absolutely dependent on the DC scheme money I have accumulated so far (last 18 months) - I have significant benefits in a deferred DB scheme which will be more than adequate for my retirement.

Thanks in advance for your comments.

kidmugsy

I think I might start by noting the costs of each option. In particular I'd check whether the costs of the old DC scheme had increased for me now that I'm no longer an employee.

BennyBrownBoy

Thanks - I've checked and the costs have increased for the "old" fund now I am no longer an employee - from 0.5% to 1%.

Costs in the new scheme are 0.48% in total.

Is there anything I should specifically watch out for in comparing these funds?

Thanks.

kidmugsy wrote: »

I think I might start by noting the costs of each option. In particular I'd check whether the costs of the old DC scheme had increased for me now that I'm no longer an employee.

kidmugsy

BennyBrownBoy wrote: »

the costs have increased for the "old" fund now I am no longer an employee - from 0.5% to 1%.

Costs in the new scheme are 0.48% in total.

Is there anything I should specifically watch out for in comparing these funds?

(i) I'd tend to say that I might sleep more easily if I knew my DC money were diversified between two pensions, or at least between two funds within a pension.

(ii) But on the other hand we live in a low return world so that an extra 0.5% p.a. costs is a lot.

(iii) So I suppose a decent compromise would be to gather all the money together in your new DC pension, within which I'd diversify the money over several investments: two or more; certainly less than nine. How many do you think you could bear to keep an eye on? Two? Three? Four? I suppose that nobody can be certain that annuity rates will be so miserably low in eight years time, but even if they weren't perhaps you wouldn't want to buy an annuity at such a young age as 60.

(iv) I suspect things really turn on whether you have an appetite for active investment. Would you like to spread the money across funds of different sorts and rebalance according to their performance and your opinions, or would you rather leave the management to Barclays WorkingLife Flexible Retirement Target Strategy B, plus, say, one other fund, preferably offered by someone other than Barclays?