Work pension with Standard Life - change to new default option?

A_Kay

I'm after a bit of advice as unfortunately I'm a bit lost

I'm currently a member of my workplace pension and have been advised that the default investment option has recently been changed to reflect the move towards drawdown rather than annuity purchase for the scheme members, and as part off this the existing employees have been offered the chance to move into the new scheme.

In the factsheet provided on the SL website there is limited information as the scheme was only launched in December 2016, however it appears the portfolio is broken down as follows:

SL Vanguard FTSE Developed World ex UK Pension Fund - 42.0%
SL Invesco Perpetual Global Targeted Returns Pension Fund - 20.0%
SL SLI Global Absolute Return Strategies Pension Fund - 20.0%
SL Vanguard FTSE UK All Share Index Pension Fund - 18.0%

I'm currently 29 years old putting 15% into my pension as a mix of employee/personal contributions - would anyone be able to shed any light on whether moving into this scheme is likely to be a good strategy in the longterm? Thanks

dunstonh

I'm currently a member of my workplace pension and have been advised that the default investment option has recently been changed to reflect the move towards drawdown rather than annuity purchase for the scheme members, and as part off this the existing employees have been offered the chance to move into the new scheme.

Most providers are pulling their lifestyle funds to avoid any future allegation of mis-selling. They no longer suit people unless they are buying an annuity.

would anyone be able to shed any light on whether moving into this scheme is likely to be a good strategy in the longterm?

Risk profiles are personal and not one-size-fits-all. You appear to have selected a broadly low/medium fund selection there. For a 29 year old that seems a little low but we dont know your behavioural attitude when the statement comes in and its x% lower than the previous one. So, you need to have a think about your risk profile.

AnotherJoe

Are you sure you mean "move into the new scheme" rather than "choose a different set of funds in the same scheme" ?
My company uses SL and that's what's happening also, adjusting fund choices. However this only affects people aged over mid 50s, since the default scheme won't start making adjustments to your funds (into very low risk) until that sort of age so it would be more useful to know what funds you are currently invested in.

At your age 15% is agood amount to be investinG but if you could add a few more % that would make a big difference longer term and give you more possibility of retiring earlier.

jamesd

The new default mixture of funds is decent enough for a mixture that ignores age, as a generic not too bad set. As a young person it's far too low risk/growth to be ideal and just scrapping the middle two funds might be a decent start.

But there's a catch. The two Vanguard funds that remain are excellent examples of their type but both can be expected to see a drop of 45% or so in a bad year like 2008 before recovering, as happened in the following great 2009 and 2010 years. If you can stomach that, they are good.

What the middle two do is reduce the ups and downs. But at the cost of lower growth. You can raise or lower the amount in them to do that.

We're fairly likely to have a biggish drop in the next few years, so you might want to go with the Vanguard ones only and see how you react when you don't have a huge amount of money at stake. Then you can use that to help decide on a long term mixture. Plenty of time to go and it's a good thing to get some practical experience of your feelings during drops.

Two useful bits of newspaper and TV coverage translation for you:

1. "Big falls" and "huge drops" mean "great time to be buying, I should be increasing my pension contributions and maybe switching some form the middle two to the Vanguard ones".
2. "Record highs" means " prices are rising, if this carries on for a while I should consider moving some into the middle two for a while".

1 means "sale now on" and 2 means "price rise, groan". But that's not what the media coverage will be saying so you need to learn to translate it correctly.

westv

jamesd wrote: »

We're fairly likely to have a biggish drop in the next few years,

The Shiller PE ratio is looking rather high.