AVIVA Work pension choosing funds?

cashbackproblems

Hi


My work have an Aviva pension which they pay into for the last few years, and its always been invested in the default Lifestyle funds which vary according to your age. However I have just realised you can select your own funds from a list they have and wondering if it is worth doing so and how many to pick?


I have been investing in shares and funds for many years and am a very high risk investor so a standard ftse tracker or whatever they use would not appeal to me


Just wondering if worth choosing my own or leaving as is?

peterg1965

I think that lifestyle fund investment is falling out of favour, as it tended to be geared towards annuity purchase at retiring age by gradually reducing risk within the last ten years before pension age. Now that there is more choice on what one can do with a pension pot on retirement, it is probably more appropriate in general to invest in funds directly according to your wishes and risk profile.

Other factors are other pension provision, size of pot and age. If you are still some time away from retiring I would select a range of equities. Do you know how many funds are available to you in the Aviva range within your company scheme?

I have a work based DC money purchase scheme that defaulted to a lifestyle fund, as soon as I could I moved to a selection of 6 equity funds but my situation could be very different from yours.

ischofie1

Probably is.
I have 7 funds that cover all the sectors I want to be in (quite high risk but not ultra high).
Something about this No is considered what you need to cover all bases.
A lot depends on your age. Generally speaking the further you are away from accessing the pension the more risky/volatile funds you consider being in.

AnotherJoe

cashbackproblems wrote: »

Hi


My work have an Aviva pension which they pay into for the last few years, and its always been invested in the default Lifestyle funds which vary according to your age. However I have just realised you can select your own funds from a list they have and wondering if it is worth doing so and how many to pick?


I have been investing in shares and funds for many years and am a very high risk investor so a standard ftse tracker or whatever they use would not appeal to me


Just wondering if worth choosing my own or leaving as is?

It might not "appeal" but you might want to consider if your pension is worth gambling with along the same risk metrics as other money that presumably your future is not so dependent upon?

I would likely be classified also as a high risk investor but if my "gambling funds" are say 10 on a scale of 1-10 then my pension funds are probably 6 or 7. You act as if trackers are staid, but can be regarded as reasonably high risk if you are all in to equities without bonds or other mitigating investments.

For example my pension funds are invested in low cost global trackers, no bonds, 100% equities, that is probably relatively high risk. A tracker does not necessarily mean low risk, a UK tracker would actually be relatively high risk since you are staking a lot on the UK economy, one single economy, same would be true for example for a commodities tracker or a biotech tracker, energy etc. (So arguably a FTSE All Shares tracker is high risk than my global trackers as its just one economy.)

Why dont you take a look at what you'd think is a good bet for long term growth, perhaps some world funds, some emerging markets, some sectors like biotech or high tech, whatever, and move into those, if you think the default funds arent good enough?'

Or perhaps leave half in the current default selection, move half to your chosen funds, and see how you do against the dull alternative. High risk doesn't always mean high growth, sometimes dull funds in the long term will outperform risky ones.

p.s. I agree that Lifestying funds are probably a poor choice although unless you are within 5 or so years of retirement they will likely be no different to the non lifestyle version of the same funds.

quotememiserable

I always go self select on mine, but the default will be designed to be a good option, so there's no panic about it.
Partly, it depends how old you are. Lifestyling doesn't normally start until 5 years from your selected retirement date. Also, the younger you are, the more risk is appropriate. If you make low risk investments for a long term vehicle, that's a very high risk approach overall. I'd look at what the options are and go along to FE Trustnet or somewhere and take a look at the 1, 3 and 5 year performances. I like the Amanah and Ethical choices on my platform, not for any reason of principal, but because they're consistent good performers.

TrustyOven

I've been thinking about this for a few months. My current AVIVA works pension has the following split (last time I checked):

  53.6% Global Equity (no sector or geography breakdown)
  21.7% Bonds  (doesn't say what breakdown of govt bonds / Gilts / corporate bonds)
  18.7% Cash or equivalents
   4.4% UK equities
    1.4% Property
    0.2% other

This seems weird to me to have 40.4% in cash and bonds, given that my SIPP is 100% in Vanguard LS100 and that I have a ~25 year horizon before I can even access the pension pots (I'm in my early 30s).

Everyone's different, but I'll be looking to change my selection.

AnotherJoe

I would agree. I suppose that that sort of fund is aimed at people who will panic if their investments drop much. For 25 years at least (and maybe another 20 after retirement before an annuity might look interesting) I would be 100% equities but it's not just about what is the "best" but also what you can tolerate from a volatility POV and what you need to meet your goals.

cashbackproblems

Having done some research the funds it is invested in include:


Aviva Pension Global Equity S6 - 5 yr performance 79%
Aviva Pensions UK Equity S6


I was looking at replacing the above 2 with 6 funds one being this, but now doubting this as the below fund performance was only 34% over 5 years, so maybe making me think is it best just to leave as is?


Aviva Pensions BlackRock Aquila Emerging Markets Index Tracker S6

AnotherJoe

You know that phrase you see "past performance does not indicate future performance yada yada yada". ?
Well, thats literally true, so attempting to divine what a fund will do in future from the past is pointless.

What you need to ask yourself is "do i think emerging markets will do better than most markets over the next 20 years?" If your answer to that is "yes" then buy some. Ask the same for the UK economy. Or any other sector you wish to emphasise even if slightly.

And then, what about the global equity ? Will do that well? If so maybe the majority of your funds in that (as they are now) and then top up the 50% that was in bonds and funds with more of that and more of a few sectors you might gamble a little.

For example, not a recommendation to you, I have most of my funds in global trackers mostly ex UK or only 6-7% UK (eg reflecting UK economy to world) and then 3 extra sectors - Biotech, Emerging Markets and Property. I'm thinking of ditching the property it seemed like a good idea at the time but I'm not so sure now.

Or maybe you'll just think "I like that global equity so I'm just going all in 100% on that"

Malthusian

You should leave it as it is until you understand the basics of how to build a portfolio from the ground up. One of those basics is "past performance is not a guide to the future".

cashbackproblems

Ok I switched to the below:


Aviva Pensions BlackRock Aquila Emerging Markets Index Tracker S6
Aviva Pensions BlackRock Aquila European Equity Index Tracker S6
Aviva Pensions Fidelity Worldwide Special Situations S2
Aviva Pensions Stewart Investors Asia Pacific Leaders S6
Aviva Pensions Threadneedle Latin America S6