Workplace pension with Scottish Widows - options?

Pepod

Good afternoon,

I have a workplace pension with Scottish Widows - currently worth around £11000 and putting in (me + work combined) approx £7.5k per year now. I am 26.

Currently this is in the Consensus series 2 fund, but I have been doing a fair bit of reading up on things and feel like at my age I should be in a 'riskier' fund - which I would be happy with. The problem I have is that I do not know how risky is too risky, if that makes sense... I appreciate that 40-85% shares would be riskier than 20-60% for example, but when I am on Trustnet trying to see what fund have performed well I don't really know which sectors I should be looking at. I can of course sort by 1y /3y performance etc and pick the highest but I assume this is not the way to do these things.

If anyone can give some pointers or advice it would be much appreciated - as most of my colleagues don't look at their pensions at all and I don't want to regret not paying enough attention or being active enough about it in later years.

Thanks in advance

ischofie1

I think you wil not regret taking an interest in your pension at such an early age.
From my experience, those that stay in a works default fund invariably do worse than those that pick funds themselves, even if some of them do in a haphazard sort of way.
At your age I'd be heavily in to equities, At least 80%. As long as you understand there will be plenty of ups and downs and you must not panic on the downs.
Also make sure your equities are spread across the various categories (small CO's, med/large CO's, Emerging markets, REIT's & may be recovery funds). Keep Global as much as possible, don't be tempted to go too heavy in your home market.
Also keep an eye on the cost of the funds. Cheap trackers often perform better than glorified actively managed funds.

If you want a read to educate your I'd recommend "Smarter Investing by Tim Hale"
It keeps things in simplistic terms & may be the best £15-£20 you've ever invested.

Good luck.

Pepod

Thanks for the information and advice - I will look into that book.

In the meantime, is something like SW Fidelity Global Special Situations Pension Series 2 along the lines you would be suggesting I look at?

IanSt

Pepod wrote: »

In the meantime, is something like SW Fidelity Global Special Situations Pension Series 2 along the lines you would be suggesting I look at?

I don't know what funds you have access to in your pension but I'd look to more of a global index tracker than a specific global active fund. It's impossible to know which funds will make you the most or least money, but over a large timeframe I'd prefer the majority of my investments to be in a tracker.

Given enough luck (it's rarely 100% skill) then someone could choose a series of active funds that could beat a tracker, but on average it's more likely that they'd lose out. And unless you were willing to continue to move your funds into the new 'best thing to be in' then choosing a global tracker is likely to beat most global active funds that you chose once and stayed in.

There are some areas where actives can consistently beat their tracker alternatives, but in my opinion you'd need to have thoroughly read up on investing before you started thinking of them and until then I'd stick to the global tracker.

TrustyOven

Pepod wrote: »

Thanks for the information and advice - I will look into that book.

In the meantime, is something like SW Fidelity Global Special Situations Pension Series 2 along the lines you would be suggesting I look at?

Seems expensive.

OCF of nearly 2%
AMC of 1%
SW might give you a bit of a rebate, but you'd have to check.

https://www.trustnet.com/factsheets/p/e088/sw-fidelity-global-special-situations-pension-series-2

What exactly is a Special Situation?

Why did you chose this one? It would be interesting to know your thought-process.

Pepod

The current TAFC of the Consensus fund is 1%, the TAFC of the SW Fidelity one is 1.95% so 0.95% more.

I was looking at the funds available to me and their performance against the PN Global Equities sector on Trustnet. THere are not many tracker funds available to me through SW (only one for that sector) and do not seem to perform particularly well.

Pretty much all the other options have charges/fees that are not much less apart than the fidelity one (all seem to be in around 1.8-2.0 TAFC), aside from this one: Scottish Widows Global Equity Pension Series 2 (can't post a link myself unfortunately) at 1%. Just by looking at information online it appears to me (self admittedly inexperienced) that the Fidelity one performs better enough to warrant the .95% extra charge. Maybe I have this wrong?

Another option I have is: Scottish Widows Pension Portfolio One Pension Series 2, which isn't in the same sector. It has a charge of only 1% although despite performing well in its sector I thought perhaps something riskier might be better at my age?

As for special situations, my understanding of it is that in general it perhaps tries to be more opportunistic and capitalise on a change of circumstance etc. I have also read that after initial successes a decade ago it became somewhat of a marketing tool to include 'special situations' in the name.

So there is essentially my limited thought process - more than happy to be shown why it is flawed or incorrect if that's the case. I am just trying the find out as much as I can and take as much advice on board to hopefully achieve a good outcome.

dunstonh

The current TAFC of the Consensus fund is 1%, the TAFC of the SW Fidelity one is 1.95% so 0.95% more.

If the SW plan is an auto-enrolment scheme, then the internal funds will be capped at 0.75%. It could be lower than that depending on the terms as SW support discounting. The fund factsheets willl not show any discounting but assume the default 1% charge.

Pepod

It is indeed an auto-enrolment scheme - I do actually have a fee list that shows different (lower) fees but I assumed this was out of date (couple of years old) and didn't realise there was discounting.

Going by this list the fee I am charged for the Consensus fund is then 0.55% (same for the Portfolio One) and for the Fidelity fund it would be 1.5%, so whilst cheaper the difference is effectively the same at 0.95%

Is it as simple as looking at whether the more expensive fund is outperforming the cheaper one by at least 0.95% per year on average to decide if it is worth it, or is this simplistic and is there more to it than that?

dunstonh

The rules changed in April as to regard maximum charges on auto-enrolment schemes and default funds. Default funds with the big insurers tends to be internal funds.

Is it as simple as looking at whether the more expensive fund is outperforming the cheaper one by at least 0.95% per year on average to decide if it is worth it, or is this simplistic and is there more to it than that?

It is about value and potential. You dont know the future returns but if you feel the extra charge will be covered by extra returns then it is worth paying. If you feel they wont then you dont.

The two funds have different risk profiles. So, a lot of the performance will be down to the different asset mix.

Prism

My wife has her workplace pension with Scottish Widows and I certainly found it hard to find many 'good' funds. Also the charging system seems hard to work out. If I compare the same fund over 5 years between her pension and my Aviva pension the gain is quite different e.g 119% gain vs 137% gain in favour of Aviva. Maybe the platform charges are taken out of the fund directly whereas I can see my Aviva charges directly.

Overall i think its a fairly poor platform with limited fund choices and fuzzy charges somewhere in there. Likely to transfer the bulk of the value to a SIPP for next year

dunstonh

My wife has her workplace pension with Scottish Widows and I certainly found it hard to find many 'good' funds.

Lloyds have starved SW of funding and they have really poor products with generally poor internal funds.

Maybe the platform charges are taken out of the fund directly whereas I can see my Aviva charges directly.

It is unlikely you are using a platform with an AE scheme.