Tracking DC Pension Investments

Ghostgirll

Hi there,

My Final Salary Pension Scheme has just closed and I'm now in the new Company DC Scheme. The DC scheme is run by Friends Life. From day one there is the option to remain in the default Low Risk investment option, the "Annuity Focus..." something or other (which I'm told is currently doing rather poorly) but employees can if they wish decide to make their own choices of where to invest their funds instead.

A final salary scheme does everything for you, and so all you really need are yearly pension statements, in order to know how your retirement will look, so I've no past experience at all of having to actually think about my pension at retirement, or learn anything much about fund investments, or how to choose, or indeed track them, over time.

What I was wondering was, is there a relatively straightforward programme or app (preferably for Mac, with iPad and/or iPhone compatibility) that anyone can recommend that can track and graph investments, for those who chose to make their own selection of investment funds rather that going with the default option?

Or indeed, is this a really silly think to even attempt to do yourself, with no previous experience of this sort of thing??

Oh, I live in the UK by the way!

Thanks very much for any help or advice!
Ghostgirll

AnotherJoe

Surely they have other options than an annuity focussed (which indeed over the past few years would be likely to have had comparatively poor performance)

How old are you ? The longer you have to invest, the bigger the risk its reasonable to take. I'd expect them to have a choice of options in various risk categories, as well as just dumping you in the deep end of the swimming pool of full freedom to choose what funds you want.

Ghostgirll

Hi AnotherJoe,

First-off, yes, at the moment they only have the Annuity Focus default option, although we've been told that a slightly more risky option will be added as a second choice "soon".

I'm 52 years old, and have 29 years in my final salary scheme with a DB pot of around £400,000

The new DC scheme started Jan 1st this year so my first contributions will in at the end of this month.

Current contributions are set at 4% employee contributions and 10% employer contributions, with additional "transitional" employer contributions of 13% in year one, and then additional 12%"transitional" employer contributions in year 2.

Employees have the option to also raise their contributions from 4% to 5% in year 2, and 6% in year 3, and if they do so then the employer will also raise their contributions from 10% to 12%.

LHW99

Definately worth increasig your contributions if you can afford to, to the point of getting maximum employer contributions.
What age can you draw the Final Salary part from? What age do you hope to retire?
If you plan to retire at 55 or so, you may not want anything too risky, on the other hand if you plan to continue to SPA (or later) then you have maybe 14-15 years, and a higher equity level fund could be worth thinking about.

Ghostgirll

Your first question is difficult to answer in short form, as I'm currently in dispute with both the Company and the Trustees over the fact that although I have nearly 30 years service there was a TUPE transfer in 1998, and I'm claiming that 2 early retirement benefits (both originally available from age 50 under certain circumstances, and neither of which needed Company consent and therefore would today retain what's known as an Unqualified Right to a pension from that age in spite of new HMRC regulations and government legislation) would have TUPE'd along with me and remain accessible today. There's a vast amount of detail involved in this claim, but to put it as simply as possible, if these 2 benefits did TUPE then when the Final Salary Scheme closed on Dec 31st I became immediately entitled to an "unreduced" pension, due to their contractual nature, and the specific wording of the Rules relating to those benefits.

Otherwise, I can still already access an early retirement benefit, as a Deferred member, but this benefit, far from being "unreduced" is subject to huge actuarial reductions (basically cost-neutral). You only need to be 50 for that one.

I have no particular plans to retire from employment early, as such, although if the 2 benefits did TUPE then I would be able to claim the one aimed at my age group (50 to 57) and continue working if I wished. Same goes for the actuarially reduced Deferred benefit, but that doesn't seem like a sound idea unless I lost my job, as I'd loose almost 50%.

My retirement age is 62 by the way.

One other relevant factor is that there's a likelihood that my place of work will not survive for another 10 years and so there's a possibility I could be made redundant before NRA (or possibly sold off via another TUPE transfer to a far less reputable employer, as we have been if for sale since 2011).

EdSwippet

Ghostgirll wrote: »

What I was wondering was, is there a relatively straightforward programme or app (preferably for Mac, with iPad and/or iPhone compatibility) that anyone can recommend that can track and graph investments, for those who chose to make their own selection of investment funds rather that going with the default option?

Any number of web sites could probably do this for you -- Trustnet, Morningstar, even Google Finance itself. The thing is though, all this would give you is a backwards look at what did well and what did not up to now, whereas what you really want (and what nobody can provide, despite many claims!) is a way to know what will do well in future.

Up until just under a year ago, my employer used Friends Life as its group personal pension provider. It seems that the default setting these days for such schemes is to use a 'fund of funds' that gradually moves from stocks into gilts over the five to ten years before some notional standard retirement age, in preparation for taking an annuity in retirement. All well and good if you plan to retire at that standard age and plan to buy an annuity. The thing is, a lot of people don't meet that template. Especially as annuity rates are currently so low as to be subterranean.

Which leaves you the job of figuring this out yourself. And on top of this, employers often provide little to no guidance or advice here, for fear of falling foul of financial advice regulations or making a (potentially expensive, for both you and them) mistake.

If you look through the funds available, can you see any Blackrock index trackers? They do a 50:50 UK/global mixed fund which would be a decent cover for perhaps the entire stocks element of a simple passive portfolio. Blackrock also has a range of gilts tracker funds that you could use for a gilts element. Mixing stock and gilts gives you a decent shot at an 'all terrain' vehicle like portfolio, rather than a sports car that runs well on the flat but cannot cope with difficult conditions. Tracker funds should be relatively easy to spot in Friends Life; they well be the ones without additional charges above the baseline agreed to by your company when they entered into the scheme with Friends Life, and with the word 'tracker' somewhere in their description (if not an actual keyword).

Finally, for general ideas on how to compose a simple passive portfolio, including how you can identify the stock/gilt ratio you might want to use, I'd suggest perusing this section of Monevator.

Hope that helps. This can be a large topic, so feel free to return if you have more questions.

Ghostgirll

You're correct, EdSwippit, for me personally it's actually very unlikely that I'll be taking out an annuity.

By the way one other important factor that I forgot to mention and which is probably relevant is that because of the way our new DC Scheme is set up, I can actually use whatever is in it as part, or all (depending on if there's enough in it) of the commuted lump sum from my final salary scheme. This has something to do with the fact that both funds are set up under the same umbrella so to speak.

Ok well bearing in mind it's a new DC fund, starting with nothing it bar my first month's contributions, so in other words very little to loose, I was thinking maybe I would have a go at the following (I've only been tracking these since October 2016 by the way, but they seem to be doing far better than the FL default Annuity Focus):

FL MyM BlackRock World ex-UK Equity Index (Aquila C)
Code: GS2002209_01
annual charge 0.27%

FL MyM BlackRock (30:70) Currency Hedged Global Eq (Aq C)
Code: GS2002217_01
annual charge 0.33%

FL MyM Legal & General (PMC) Ethical UK Equity Index
Code: GS2002221_01
annual charge 0.42%

FL MyM BlackRock Over 5 Year Index-Linked Gilt Index (Aq C)
Code: GS2002180_01
annual charge 0.27%

With a straight 25% into each.


Course I could be way off course here, so somebody feel free to yell DANGER!! if I'm being rash (or worse)

Thanks

EdSwippet

Ghostgirll wrote: »

... I was thinking maybe I would have a go at the following (I've only been tracking these since October 2016 by the way, but they seem to be doing far better than the FL default Annuity Focus)

Again though, this is backward-looking. Will they continue to do well into the future? I'm not saying they won't, just that neither of us knows. Also, you're not really comparing like with like here. The FL default fund is designed to be lower volatility, lower risk, and therefore by definition is likely to have lower return than a high risk, high volatility portfolio.

Ghostgirll wrote: »

Course I could be way off course here, so somebody feel free to yell DANGER!! if I'm being rash (or worse)

I wouldn't call this rash, but it's not what I would do (indeed not what I have done). Personally I've a preference for pure trackers, and index linked gilts in particular might be dangerous alone. What I actually did is split to 50% in Blackrock 50:50 global equity and 25% in each of Blackrock index linked gilts and Blackrock ordinary gilts. Arguably I have a UK bias that is too large, but it suffices for me. Of course, I am not you, so what I do is not necessarily appropriate for you.

Rather than "having a go", though, I'd recommend spending some time deciding on an overall strategy and allocation that works for you and then doggedly sticking with it. Moving between funds regularly is a great way to ensure that you always hold last year's winner and miss next year's entirely; not a way to efficiently build a retirement pot, then.

greenglide

If your new DC scheme allows the contributions to fund the TFLS from the DB scheme in the same way that AVCs can in some DB schemes then it is important to move away from equities as your pension age approaches in the same way that "lifestyling" funds do for annuities.

The funding of the TFLS from the DC fund rather than from the DB scheme is generally a non brainer so the choice of investments must take this into account.

Ghostgirll

EdSwippet wrote: »

If you look through the funds available, can you see any Blackrock index trackers? They do a 50:50 UK/global mixed fund which would be a decent cover for perhaps the entire stocks element of a simple passive portfolio. Blackrock also has a range of gilts tracker funds that you could use for a gilts element. Mixing stock and gilts gives you a decent shot at an 'all terrain' vehicle like portfolio, rather than a sports car that runs well on the flat but cannot cope with difficult conditions. Tracker funds should be relatively easy to spot in Friends Life; they well be the ones without additional charges above the baseline agreed to by your company when they entered into the scheme with Friends Life, and with the word 'tracker' somewhere in their description (if not an actual keyword).

Finally, for general ideas on how to compose a simple passive portfolio, including how you can identify the stock/gilt ratio you might want to use, I'd suggest perusing this section of Monevator.

Thanks Ed, that's very helpful.

If I'm doing this right on my FL My Money account then my possible investment options look to be the following:

FL MyM BlackRock UK Equity Index (Aquila C)
Code: GS2002175_01
Show performance details


FL MyM M&G Feeder of Property Portfolio
Code: GS2002176_01
Show performance details


FL MyM BlackRock Over 5 Year Index-Linked Gilt Index (Aq C)
Code: GS2002180_01
Show performance details


FL MyM BlackRock Institutional Sterling Liquidity
Code: GS2002187_01
Show performance details


FL MyM BlackRock Emerging Markets Equity (Aquila C)
Code: GS2002189_01
Show performance details


FL MyM BlackRock Corporate Bond All Stocks Index (Aquila C)
Code: GS2002201_01
Show performance details


FL MyM BlackRock World ex-UK Equity Index (Aquila C)
Code: GS2002209_01
Show performance details


FL MyM BlackRock (30:70) Currency Hedged Global Eq (Aq C)
Code: GS2002217_01
Show performance details


FL MyM Legal & General (PMC) Ethical UK Equity Index
Code: GS2002221_01
Show performance details


FL MyM Legal & General (PMC) Pre-Retirement
Code: GS2025358_01
Show performance details


FL MyM LGIM Diversified
Code: GS2134135_01
Show performance details


I've only just got my FL registration done though, so I'm still working my way round the site and learning where to get information about my pension and how to make changes, etc.

AlanP_2

Although you don't want to take an annuity, as few do these days, it is worth bearing in mind that if you (sensibly) intend to take the DC pot as the TFLS element then to all intents and purposes the pension has the same objective - cashing in the investments on a specific date and taking the cash.

You won't be leaving it invested for 20-40 years of retirement and drawing a bit out each year.