Retiready (Aegon): better performing alternatives?

jdw2000

Hi all,

I have £48K in Retiready. I am 40 years old. It's been said that it "won't perform spectacularly". Am I missing a trick by not putting it elsewhere? I do not want something too risky and lose a chunk and end up back in square 1. I am behind as it is. But if it's not a great product compared to others on the market then I should probably look around.


Many thanks.

dunstonh

It's been said that it "won't perform spectacularly".

The pension doesnt perform. The investments within your pension perform. Pensions have multiple investment options.

Am I missing a trick by not putting it elsewhere?

Probably not. After all, you haven't told us where you have it. Just the container name. So, this probably indicates that your knowledge of investments is low. So, you could do more damage than harm if you start playing with something you don't understand.

But if it's not a great product compared to others on the market then I should probably look around.

It is not the best provider and it is not the worst. It is exactly where most mainstream options are.

jdw2000

dunstonh wrote: »

The pension doesnt perform. The investments within your pension perform. Pensions have multiple investment options.



Probably not. After all, you haven't told us where you have it. Just the container name. So, this probably indicates that your knowledge of investments is low. So, you could do more damage than harm if you start playing with something you don't understand.



It is not the best provider and it is not the worst. It is exactly where most mainstream options are.

OK, I've just had a look at what funds my pension is invested in.

At the moment (Aegon have only recently switched me over to the Retiready place), my current investment is: SE Uni LFS Collection ARC.

This must be my old fund, or a generic one that they switch you with, however. Because once you are with Retiready you can choose your own level of risk. The five different levels of risk are catered for by these 5 funds:

1. Aegon Stability (4 different funds)
2. BlackRock Volatility Strategy I
3. BlackRock Volatility Strategy II
4. BlackRock Volatility Strategy III
5. BlackRock Volatility Strategy IV


Does anyone have any thoughts on any of the funds (included the one I am currently with, which has lost £1500 in the last week : )

dunstonh

my current investment is: SE Uni LFS Collection ARC.

That is a multi-asset fund with lifestyle risk reduction.

This must be my old fund, or a generic one that they switch you with

Its been a good default for many years.

Does anyone have any thoughts on any of the funds (included the one I am currently with, which has lost £1500 in the last week : )

Losing money is part of investing. It goes down as well as up. You average out the ups and downs.

I have no personal knowledge of those particular blackrock funds. The pension they have given you hasnt got much has it.

jdw2000

dunstonh wrote: »

That is a multi-asset fund with lifestyle risk reduction.



Its been a good default for many years.



Losing money is part of investing. It goes down as well as up. You average out the ups and downs.

I have no personal knowledge of those particular blackrock funds. The pension they have given you hasnt got much has it.

Not sure what your last sentence means. Got much of what?


I went to see financial adviser yesterday for a free consultation. And the advice he gave me was the following (bearing in mind that I am 40 years old, have £48K in my pension, and £45K in savings, and should ideally be on about £100 in my pension):

- Put my existing £48K pension onto a higher risk/reward setting. He seemed to say "the riskier the better". So in this case, it would be a BlackRock Volatility Strategy III or IV

- Set up a S&S ISA, with the same Aegon Retiready platform, using £15,240 of my savings. Put this on as risky a setting as I am happy with.

- Put the remaining £20K of my savings into an "Investment Account" until April next year when it can be added to my S&S ISA to make a total of £35,240 in the ISA by April. (He seemed to think that an Investment Account would be an addition feature of Retiready, but I can't see it. Is this necessary?)

- Keep £10K aside as emergency money in a high-interest account

- Do not keep cash in accounts unless it's for emergencies. Cash (due to inflation) will only lose money. Excess money must always be invested.

- Though he didn't say this, he did strongly imply that at my age I should be taking the higher risk settings if I want to achieve my goals (my goals being to grow my pot to around £700-£800K for retirement).

Linton

How much can you afford to put into your pension each year until you retire? Unless you (and your employer) contribute a large amount each year you may well not get anywhere near your aim by any sensible retirement age. I cant find data going back 25 years, but over 22 years the FTSE World index has returned about 500% which would put your total current savings nearly in the right ball-park. However there is no guarantee that the next 25 years would do anything like as well and some arguments that returns are going to be much less in the future.

Is your aim for £700-£800K inflation adjusted (at what inflation rate?) or at current prices. Over the past 25 years inflation has increased prices by about 60% which would raise £750K at current prices to £1.20M.

I would agree with the general advice given by your advisor if you really want to have a go at achieving your objective. However do you understand what higher volatility investing means? You will need to get used to losing much more than £1500 in some weeks and could lose perhaps 40% in some years as happened during the 2007/2009 crash.

dunstonh

Not sure what your last sentence means. Got much of what?

Sorry, I meant fund selection. Sometimes too much can be a problem but in this case, they have just 6 funds. Although I wonder if they have more and they are just the multi-asset ones. Perhaps you are getting a filtered list.

- Though he didn't say this, he did strongly imply that at my age I should be taking the higher risk settings if I want to achieve my goals (my goals being to grow my pot to around £700-£800K for retirement).

Risk and understanding risk is something that is very important when it comes to investing. Generically, risk is diluted by timescale. So, taking more risk (within reason) makes sense when its long term. However, your capacity for loss and your behaviour and knowledge have to be considered as well. It is all very well going higher up the scale but when your fund loses 40% of its value during a crash, how are you going to behave? Will you remember about how investments work and shrug it off or will you panic and move out into something less risky or will you add more that point?

If you ever hear someone slag off the stockmarket and that they lost money and wouldn't invest again then you know they are the type that didnt understand risk and pulled out when a loss period occurred. They were the problem. Not the stockmarket. They did not understand how it works and invested above their risk profile for their knowledge and understanding.

If your £1500 loss in a week concerns you then perhaps you dont have a good tolerance of risk. If it was just a throw away line but didnt concern you then perhaps you do you a better tolerance of risk.

Remember your pension is going to be a lot higher in value later. You won't be talking £1500. I have clients that lose hundreds of thousands of pounds during a crash. they can handle it as they understand the downside comes with the territory and they make more in the upside. If they didnt, they would be on a lower risk profile. Can you handle it mentally. Saying is one thing. When it happens is another. So, you need to be sure.

jdw2000

dunstonh wrote: »

Sorry, I meant fund selection. Sometimes too much can be a problem but in this case, they have just 6 funds. Although I wonder if they have more and they are just the multi-asset ones. Perhaps you are getting a filtered list.



Risk and understanding risk is something that is very important when it comes to investing. Generically, risk is diluted by timescale. So, taking more risk (within reason) makes sense when its long term. However, your capacity for loss and your behaviour and knowledge have to be considered as well. It is all very well going higher up the scale but when your fund loses 40% of its value during a crash, how are you going to behave? Will you remember about how investments work and shrug it off or will you panic and move out into something less risky or will you add more that point?

If you ever hear someone slag off the stockmarket and that they lost money and wouldn't invest again then you know they are the type that didnt understand risk and pulled out when a loss period occurred. They were the problem. Not the stockmarket. They did not understand how it works and invested above their risk profile for their knowledge and understanding.

If your £1500 loss in a week concerns you then perhaps you dont have a good tolerance of risk. If it was just a throw away line but didnt concern you then perhaps you do you a better tolerance of risk.

Remember your pension is going to be a lot higher in value later. You won't be talking £1500. I have clients that lose hundreds of thousands of pounds during a crash. they can handle it as they understand the downside comes with the territory and they make more in the upside. If they didnt, they would be on a lower risk profile. Can you handle it mentally. Saying is one thing. When it happens is another. So, you need to be sure.

The short answer is that I am not sure I can handle it. I took a risk assessment test and I came out as moderate. Right in the middle, with an ever-so-slight lean to risk.

I think on that basis I will set my pension and ISA to the middle (3/5) setting, which is where my assessment test put me. I might, as an experiment, set one of them to the 4/5 setting.


But are you broadly in agreement with the advice otherwise (including with the savings being better off in an ISA than a bank account)? Was I right in thinking that come April next year I can have 35K in the ISA?


EDIT: I had a look at what was in each of their 5 funds. Shares, property and cash. The more risky you want it, the more shares you have as a percentage of your pie. The riskiest option is 75% shares.

jdw2000

Linton wrote: »

How much can you afford to put into your pension each year until you retire? Unless you (and your employer) contribute a large amount each year you may well not get anywhere near your aim by any sensible retirement age. I cant find data going back 25 years, but over 22 years the FTSE World index has returned about 500% which would put your total current savings nearly in the right ball-park. However there is no guarantee that the next 25 years would do anything like as well and some arguments that returns are going to be much less in the future.

Is your aim for £700-£800K inflation adjusted (at what inflation rate?) or at current prices. Over the past 25 years inflation has increased prices by about 60% which would raise £750K at current prices to £1.20M.

I would agree with the general advice given by your advisor if you really want to have a go at achieving your objective. However do you understand what higher volatility investing means? You will need to get used to losing much more than £1500 in some weeks and could lose perhaps 40% in some years as happened during the 2007/2009 crash.

I will be putting in in excess of £5K per year. (I am 40 at the moment so that's £150K between now and when I am 65).

I am not too hung up on getting to £700-£800. That's aspirational really. I will do my best to hit that figure and see where I end up.

Linton

Having just looked up the details of the Blackrock Volatility Strategy funds....

The funds are based on a set of individual geography equity and bond trackers. The volatility is managed by the bond/equity ratio. So in principle much like the Vanguard Life Strategy funds. Just like those funds one could have serious questions as to the geographic equity allocation with a rather low US at 36% and a rather high 29% UK.

In the overall scheme of things the IV is hardly outrageously volatile and I would say as far as volatility is concerned a typically reasonable 100% world equity investment for anyone with a long time until retirement.

jdw2000

Linton wrote: »

Having just looked up the details of the Blackrock Volatility Strategy funds....

The funds are based on a set of individual geography equity and bond trackers. The volatility is managed by the bond/equity ratio. So in principle much like the Vanguard Life Strategy funds. Just like those funds one could have serious questions as to the geographic equity allocation with a rather low US at 36% and a rather high 29% UK.

In the overall scheme of things the IV is hardly outrageously volatile and I would say as far as volatility is concerned a typically reasonable 100% world equity investment for anyone with a long time until retirement.

So even the BlackRock IV (riskiest of the 5 settings) doesn't look unreasonably risky?

BlackRock also talk about a "safeguard" in their promotional literature:

"Many investors worry about losing their savings, so the added
safeguard moves money into safer investments (de-risks) when
the fund’s volatility climbs above a fixed level.
When it simmers down, the fund will gradually move back
(re-risks) into the mix shown on the previous page.

The process works on the basis that, when market volatility goes
up, stockmarkets tend to fall in value. If this happens, moving
some of the fund into safer investments should mean you’re
cushioned from the worst of these falls.
*BlackRock may choose to use its discretion to de-risk or re-risk
by amounts other than those stated".