Pension Review

asif10

Hi,
I am looking to get some "free" feedback on my pension portfolio. Since my pension pots are small I am not really considering at this point using an IFA.

I am 38 years old and looking to retire at 55 or 60
I am self-employed and make employer contributions of 1,500 per month (18,000 pa)

I have 2 pension an old BT pension which I no longer contribute and a SIPP pension I opened around 6 months ago.

BT Pension – 32k
I am going to leave this as is as for the time being as when I stopped my contribution around 12 years ago it was only had 7.5k so has built up ok.

SIPP Pension – 12k
ISHARES UK EQUITY INDEX CLASS D (10%)
VANGUARD LIFESTRATEGY 80% EQUITY (40%)
ISHARES EMERGING MARKETS EQUITY INDEX D ACC (15%)
LEGAL & GENERAL EUROPEAN INDEX (10%)
FIDELITY INDEX US FUND (20%)
NEPTUNE UK M (5%)

I am looking to diversify my portfolio so have been looking to spread my exposure around the world such as merging markets etc.

Any feedback would be appreciated, even if it’s to tell me I have a rubbish portfolio. Also looking at people who may also have these funds or used to

Thanks in advance

kidmugsy

asif10 wrote: »

an old BT pension which I no longer contribute ... BT Pension – 32k

I thought that old BT pensions were based on final salary. Is that wrong?

asif10

kidmugsy wrote: »

I thought that old BT pensions were based on final salary. Is that wrong?

I joined BT as a grad a year or two after they had stopped final salary pensions

enthusiasticsaver

I have invested my SIPP in the Vanguard LS 60 only. Surely your UK exposure is high as you have the UK element of the Vanguard LS, UK equity index, presumably part of the European fund and the Neptune? The Vanguard funds are already balanced and globally diversified so if you use it as a core and then add other satellite funds does that not upset the balance?

asif10

enthusiasticsaver wrote: »

I have invested my SIPP in the Vanguard LS 60 only. Surely your UK exposure is high as you have the UK element of the Vanguard LS, UK equity index, presumably part of the European fund and the Neptune? The Vanguard funds are already balanced and globally diversified so if you use it as a core and then add other satellite funds does that not upset the balance?

I am glad you have mentioned this, i had feeling that some of my funds might be exposing me more to the UK then I would like. If i have calculated it correctly my uk holding in total is around 23% combined

DairyQueen

VLS are popular funds, and with good reason. They are simple, cheap, well-diversified, global passives which invest across all developed markets. VLS is automatically rebalanced. Holding VLS means you don't need anything else unless you are actively interested in DIY-ing. Even then, you need a good reason - i.e. a specific strategy - to invest in anything else.

- Why are you investing in other trackers that are covering the same ground as VLS? This isn't diversification, it's duplication.
- The other stand-out anomaly is that Neptune fund. An actively managed FTSE 250? Duplication plus extra charges. I would dump that one pronto.
- Why VLS80? The other funds in the portfolio are all equities and therefore the brake on volatility provided by the 20% fixed interest has been diluted to the point where it is meaningless. If you have a high attitude to risk then 100% equities at your age would be the appropriate allocation. You are investing for at least 17 years so have time to ride-out the inevitable market falls. However, could you bear to see your portfolio lose 20% of its value? Or 50%? And not sell? That's the real test of appetite for risk.

You have no need to hold any funds other than a single VLS until you are much more familiar with DIY-ing. Even then, it isn't really necessary. Once your portfolio reaches around £80-£100k, and having spent time researching, that may be the time to add other funds.

First step: check the underlying investments of VLS80.

Some investors adopt a passive strategy, others prefer actively managed funds. Some hold a global passive core with actively-managed satellites. If you adopt the latter then any additional funds could address assets/markets that don't feature in VLS: non-developed markets (e,g, India, China), or small caps. Or you may wish to weight your portfolio toward a sector/s that you currently favour (e.g. property, commodities, healthcare, gold). This is the only diversification worth considering if you hold VLS.

Nothing wrong with the ishares trackers except VLS has already covered the same ground. You either need a portfolio of trackers, or VLS, not both.

You have chosen some good funds but with no obvious strategy.

I expect the pros will be along shortly with more expert advice than I can offer.
Good luck.

asif10

DairyQueen wrote: »

You have chosen some good funds but with no obvious strategy.

100% correct, as you have guessed I really don't have a strategy. My original plan was to go with a passive fund like VLS80 or VLS100 but as you mentioned since i don't have a strategy, I have started adding other funds.

You have raised some very good points especially with why I have chosen VLS80 but then to "lose" commodity holding through the other funds.

DairyQueen wrote: »

- The other stand-out anomaly is that Neptune fund. An actively managed FTSE 250? Duplication plus extra charges. I would dump that one pronto..

I have come so close to dropping this fund mainly because of the charges and I believe i had some exposure to via VLS80, something to consider i think

DairyQueen

asif10 wrote: »

100% correct, as you have guessed I really don't have a strategy. My original plan was to go with a passive fund like VLS80 or VLS100 but as you mentioned since i don't have a strategy, I have started adding other funds.

Go with your original plan. I know it's tempting to 'tweak' but you will just add to the charges and management without a strategy.

Your funds will do as well as the markets if you invest in just one VLS (choose depending on your appetite for risk). Don't be tempted to dabble until you have researched to the point where you feel comfy that you see the wood through the trees. In other words, the strategy is key.

You'll be fine because you are interested.

asif10

DairyQueen wrote: »

Go with your original plan.

I have to admit this is something i am now considering, i have taken a look at the structure of the VLS100 and VLS80 funds and can see i was wasting charges by buying other funds when the VLS already had them.

DairyQueen

Well spotted

You just passed 'Investing 101'.

Alexland

I agree stick to a single fund solution unless there is a very good reason to complexify.

Start by determining your volatility tollerence - are you willing to run with 80% or 100% equities and see drops of 40% or 50% along a journey that over the long term is more likely to generate a higher return?

VLS80 is a great fund but if you want less UK exposure then consider Blackrock Consensus 85 or HSBC Global Strategy Dynamic. If you go 100% equities then consider the HSBC FTSE All World fund.

Remember to reduce your equities exposure gradually as you get closer to withdrawal to avoid selling low. For someone in drawdown 60% equities, 30% bonds and 10% cash seems to work well.

Alex