Aviva Designer pension default funds: should I consider adding more funds?

rudigarude

Hi everyone,

Two years ago I moved jobs out of a traditional academic institution (i.e. a University) to a research institution. Because of this I had to stop paying into the defined benefits USS pension and now pay into an Aviva salary sacrifice defined contributions designer pension. I'm 35, currently the pot is at 12K split across the following three funds;

• 60% Aviva Pensions BlackRock 50:50 Global Equity Index Tracker S6
• 20% Aviva Pensions BlackRock Over 5 Years Index-Linked Gilt Index Tracker S6
• 20% Aviva Pensions Corporate Bond S6

These funds were automatically set up when I enrolled on the plan so I can choose to sell a percentage of that I have here and reinvest into other Aviva funds.

Over the two years (I know, too small of a time scale but still worth mentioning) the pot has grown by 5.8% which I'm very happy about so I'm in no rush to touch it but I would be interested in knowing what people think of these funds and if I should consider maybe adding a 4th fund to this (e.g. making up 10% into another fund)?

Many thanks,

Rudiga

AnotherJoe

IMO way too conservative for someone aged 35. Barely keeping pace with inflation.
I'd go "all in" on the first one and accept the higher volatility.

Reluctantpensioner

I have the same Aviva pension scheme for some of my pension and hold many of these funds (but I'm 64).
The 5 year annualised returns on these funds are: 10.31, 8.97 and 6.55 per annum.
So they have returned on average: 9.29%.
Less the Aviva annual charges, which vary depending on your company's scheme.
Much better than inflation.

That said, at 35 a higher equity:bond ratio is often recommended.

Bimbly

I have a pension scheme with Aviva. Mine offers a choice of what are called "lifestyle" funds with names like adventurous or social growth. You are normally put into the default one of these which will de-risk investments approaching retirement (fewer equities, more bonds). You can see the funds the pension is invested in by logging into your account and that may be where you are. I think these are fine for most people who want to pay their contributions and forget about it.*

In my scheme (and probably yours), you can opt not to be in a lifestyle fund and choose your own investments from their "select" range of funds. This is what I have done.

I found the following book helpful: Smarter Investing by Tim Hale.
I also read DIY Pensions by John Edwards which was recommended on here (I suspect by the author!) which I found a good over view if you've not read loads on the subject already.
I love the Monevator site too.

You probably want to think about how much do you want to be weighted to UK equities (the 50:50 fund is half UK) and how much do you want to reflect the world markets. How much do you want to invest in bonds and your attitude to risk. What are the benefits/ risks of corporate bonds vs government bonds.

I am currently:
80% Blackrock (BR) global ex-UK equity
10% BR UK all stocks equity
10% BR emerging markets equity

But this is an additional pension pot I am paying into on top of the defined benefits scheme my employer runs, so it's extra money which is why I am all in with shares at the moment. My fund is also not currently huge. I will start de-risking into bonds next year.

Remember, if you leave the lifestyle option, you will need to re-balance your portfolio yourself and not leave it to languish. But only between one and four times a year, whatever you decide.


* For people with a lot of money in their pot, paying for a bit of advice doesn't go amiss.

Bimbly

I should add that, if managing your portfolio is not something you want to do, you probably have the option of moving from the default lifestyle fund into one of the others which might suit you better.

When I was first with Aviva, there were only three options (growth, adventurous and social responsibility (I think)). Now we have the option of up to 20. What you have will depend on your employer.

I am very keen to manage my own portfolio, but most people don't feel this way.

dunstonh

The Aviva designer pension is an older version of their pensions. If you are wanting to build a bespoke portfolio, it may well be better to look at alternatives. The older Aviva plans are often best left on the multi-asset funds rather than the in-house single sector funds (which if you built an asset allocation to match the multi-asset fund, the returns would be about the same).

AnotherJoe

Bimbly wrote: »

But this is an additional pension pot I am paying into on top of the defined benefits scheme my employer runs, so it's extra money which is why I am all in with shares at the moment. My fund is also not currently huge. I will start de-risking into bonds next year.

Are you planning to buy an annuity or use the money in the near future then?

Bimbly

AnotherJoe wrote: »

Are you planning to buy an annuity or use the money in the near future then?

Situation is, I am saving to have enough money to retire at 60 and to pay off my mortgage. I would take this money out over a five year period before the DB pensions kick in at 65. I am 49.

So I cannot afford to be too cavalier with risk. Each year I am planning to increase my bond allocation by ten percent, at least for the first four or five years. I will post on this forum at the end of the year before I start investing in bonds.

Thought for the OP: you might look at the Blackrock global ex-uk equity fund if you want to add another fund which will reduce your bond percentage holdings and reduce your UK bias (50% of your 50:50 fund is already in the global fund). But do read more and understand your feelings about where your pension is invested rather than take my word for it.

TBC15

AnotherJoe wrote: »

IMO way too conservative for someone aged 35. Barely keeping pace with inflation.
I'd go "all in" on the first one and accept the higher volatility.

Hear, hear. Far too conservative at 35. You have 20yrs of investment ahead before you could use the investments.

Your money is not working for you.

rudigarude

Hi Everyone,

Thank you for all your constructive comments. I think this has confirmed what I had suspected of the default setup of this pension. I hadn't especially considered doing anything until last month we had a presentation (by someone from the firm who brokered the plan for the UK research institutes who aren't eligible to pay into the USS scheme) about the features of the plan.

I will comment on some of your comments specifically;

AnotherJoe wrote: »

IMO way too conservative for someone aged 35. Barely keeping pace with inflation.

TBC15 wrote: »

Hear, hear. Far too conservative at 35. You have 20yrs of investment ahead before you could use the investments.
Your money is not working for you.

I agree with both of you, thank you for being so direct.

Bimbly wrote: »

Mine offers a choice of what are called "lifestyle" funds with names like adventurous or social growth.

Bimbly wrote: »

I should add that, if managing your portfolio is not something you want to do, you probably have the option of moving from the default lifestyle fund into one of the others which might suit you better.

Yes this is exactly what I have, currently set to ICP default. I certainly don't have a problem with managing this myself, however I obviously need to start developing a strategy, reading and learning more about the funds etc.

I'm not oblivious to any of this being a frequent reader of MSE but as it stands (as I'm saving for a house deposit in a cash LISA) I have no experience of picking funds, strategy etc etc.

Bimbly wrote: »

I found the following book helpful: Smarter Investing by Tim Hale.
I also read DIY Pensions by John Edwards which was recommended on here (I suspect by the author!) which I found a good over view if you've not read loads on the subject already.
I love the Monevator site too.

These sound fantastic, thank you, I will try and acquire copies this weekend which hopefully will help.

Bimbly wrote: »

Remember, if you leave the lifestyle option, you will need to re-balance your portfolio yourself and not leave it to languish. But only between one and four times a year, whatever you decide.

Yeah this was briefly mentioned in the presentation along with the need to de-risk manually as one gets closer to retirement.

Once again, thank you everyone for your replies.

Rudiga