Review of pension portfolio of funds

Mistermeaner

Hi

Would appreciate input and comments on how I have set up my pension investments.

Its a DC pension held by Scottish widows (was zurich). Balance currently £240K and I am paying in as much as I can (£40K/annum)

I am turning 40 this year. Planning to retire at 57.

I buy funds monthly, and rebalance annually in the following proportions:

Zurich Aquila Emerging Markets Equity Index CS1 (charge 0.29%) 5%

Zurich Aquila UK Equity Index CS1 (charge 0.078%) 10%

Zurich Aquila World ex UK Equity Index CS1 (charge 0.085%) 50%

Zurich managed CS1 (charge 0.416%) 5%

Zurich Property CS1 (charge 0.610%) 10%

Zurich Threadneedle American Smaller Companies CS1 (charge 0.885%) 5%

Zurich Threadneedle Asia CS1 (charge 0.59%) 5%

Zurich Threadneedle European Smaller Companies CS1 (charge 0.895%) 5%

Zurich Threadneedle UK Smaller Companies CS1 (charge 0.895%) 5%




Thanks

dunstonh

That is a very old pension type that is likely to be easily beaten on costs by modern alternatives. Plus, if you intend to run a bespoke portfolio of single sector funds to a defined investment strategy then you are unlikely to find that pension fund selection satisfactory.

As for asset mix, you clearly don't mind being very high risk. However, what place does the managed fund have in your allocations? You have built it with single sector funds but then stuck 5% in a multi asset fund.

Property is high at 10% on current market trends.
Why are you breaking the asset allocations of the global tracker? I can understand a UK allocation but not the others if you are using a global fund.

What are you allocations using the underlying assets? (forget sector as you have funds that invest across different markets)

A_T

No bonds/fixed income? Could halve in a global crash. But maybe you have large cash deposits elsewhere?

Mistermeaner

Thanks as always Dunstonh for your input

Responses:

dunstonh wrote: »

That is a very old pension type that is likely to be easily beaten on costs by modern alternatives. Plus, if you intend to run a bespoke portfolio of single sector funds to a defined invesmtent strategy then you are unlikely to find that pension satisfactory.

I am not sure what you mean by 'old pension type'... I don't have much choice as this scheme is provided through work (whom add 11% to my contributions) - could I do better by setting up a SIPP?

dunstonh wrote: »

As for asset mix, you clearly dont mind being very high risk. However, what place does the managed fund have in your allocations? You have built it with single sector funds but then stuck 5% in a multi asset fund.

Yes I am OK with high risk (17 years until access and will then go into drawdown). It doesn't really have a place I guess - it used to be 50% with the other funds making up the remaining 50%...guess I should just ditch the managed fund?

dunstonh wrote: »

Property is high at 10% on current market trends.

Thanks - I had this though as well based on something you wrote in another thread - would 5% be more reasonable ?

dunstonh wrote: »

Why are you breaking the asset allocations of the global tracker? I can understand a UK allocation but not the others if you are using a global fund.

I wanted to add more smaller companies exposure (as I understood smaller companies to be under represented in such global trackers) and also to add more asia/emerging markets for the same reason - is this a flawed approach? (NB: there is no global small companies fund available)

dunstonh wrote: »

What are you allocations using the underlying assets? (forget sector as you have funds that invest across different markets)

I don't know - is there an analysis tool I could use to determine this? I have all the fund fact sheets that list both the top holdings and sector split (e.g. financials / healthcare etc etc etc) so could manually calculate it but will take a while!

Mistermeaner

A_T wrote: »

No bonds/fixed income? Could halve in a global crash. But maybe you have large cash deposits elsewhere?

Thanks AT

This is correct but with a 17year timeframe (at least) before going into draw down I am OK with this risk

and yes I also have ISA's and cash savings outside of my pension

Linton

Broadly, the asset mix and strategy look OK for me. With a 17 year time frame I am not over concerned about your high equity allocation at this stage. Assuming you are planning on drawdown you could begin to decrease it steadily to around 60% by the time you retire, and/or increase the cash/bonds/safer investments in your non pension-holdings so you have perhaps 5 years income needs safe from equity crashes.



Some details:
-As has been said the Managed Fund is rather out of place and Property is questionable.

-According to Morningstar the World Index fund is only about 4% Far East which seems rather low and I suspect ignores China. On that basis I would use some of the money from Managed and Property to increase the % Threadneedle Asia and also add Japan Small Companies to complete the SC coverage.

dunstonh

I am not sure what you mean by 'old pension type'... I don't have much choice as this scheme is provided through work (whom add 11% to my contributions) - could I do better by setting up a SIPP?

Zurich havent offered that type of pension for years for new set ups. They were focusing on their investment platform. Then they sold their legacy book off as they didn't want it any more. Your pension product was built and priced around 15-20 years ago. It's old. Whilst some old things can be turn out to be valuable gems worth keeping. Most end up showing their age and being easily beaten by modern alternatives.

A SIPP or modern personal pension could offer lower costs and more investment choice.

Yes I am OK with high risk (17 years until access and will then go into drawdown). It doesn't really have a place I guess - it used to be 50% with the other funds making up the remaining 50%...guess I should just ditch the managed fund?

Broadly speaking, you either use a multi-asset fund or you use a portfolio of single sector funds. Some people may use a core and satellite approach. I don't like that personally but that is just opinion and it is a viable option. At 5% in a multi-asset fund, you are not matching any recognised strategy and you have to ask yourself why you are using it. I cant say as I cant give advice on the boards. However, you can guess what I think.

Thanks - I had this though as well based on something you wrote in another thread - would 5% be more reasonable ?

again, i cannot give advice but just let me say that property does not exist at all on our high risk allocations at the moment and where it does exist, it does not get above 3%. Its very low at present. However, our allocations are structured to meet a target volatility range and use economic data and historic valuations which alter those allocations over time. Yours lacks that and is probably going to be more rigid in nature. Rigid allocations should see an amount allocated and single digit is more typical for property.

I wanted to add more smaller companies exposure (as I understood smaller companies to be under represented in such global trackers) and also to add more asia/emerging markets for the same reason - is this a flawed approach? (NB: there is no global small companies fund available)

You are making compromises by sticking with that pension. When choosing a provider you should pick where and how you want to invest. Filter out those that dont match your investment wishes. Then the features and options and quality of software you want the provider to offer (you want drawdown but your current plan doesn't offer it - not an issue now but you are going to have to move at some point). Then charges (some people put that higher up but they shouldn't. No point paying less for something that doesn't meet your needs). At the moment, you are letting the provider dictate your invesmtent choice, it doesnt have good software or funcationality and the charges dont look attractive.

I don't know - is there an analysis tool I could use to determine this? I have all the fund fact sheets that list both the top holdings and sector split (e.g. financials / healthcare etc etc etc) so could manually calculate it but will take a while!

I think trustnet breaks the underlying regions down. Sector is an interchangeable word. as is asset allocation. Sometimes either is used to describe industry type or the region/area. (e.g. UK equity). If you are putting x% into US equity, for example, then you should either be looking at funds that have in excess of 90% in that area (90% is our level but others will have their opinion) or you should aim to hit your x% allocation to US by looking at the underlying assets. An Asia Pacific fund could have as much as 20% in US equities. So, when building to a regional sector allocation, you should make sure the funds actually invest where the fund name suggests they should.

You will have noticed I used "opinion" a lot. Investing is a lot about opinion. Ask 100 different people to build a bespoke portfolio (i.e. not multi-asset) and you will get 100 different builds.

Mistermeaner

Thanks guys; I'll have a play with allocations based on this feedback after I have analysed the underlying allocations

Main issue raised that I don't think I can do anything about is the pension product itself - I get all of the benefits of salary sacrifice and 11% compnay contribution where it is and unless someone tells me differently I don;t think I can retain those benefits AND have my choice of SIPP platform (or is it possible to 'pay into' the workplace pension but then transfer funds out each month to a personal SIPP of my choosing?)

NB: I agree the fund choice and platform is rubbish - i separately use Charles stanley direct and Hargreaves Lansdown and much prefer their interfaces and fund choices

Linton

is there an analysis tool I could use to determine this? I have all the fund fact sheets that list both the top holdings and sector split (e.g. financials / healthcare etc etc etc) so could manually calculate it but will take a while!

Morningstar Portfolio/Xray provides a detailed analysis of your portfolio including country, industry sector, and company size allocations. It is relatively expensive at £133-£160/year. However you can get a months usage for £19 which may be useful for an annual rebalance. Trustnet does something similar for free but it is much less detailed and sometimes incomplete.

dunstonh

Main issue raised that I don't think I can do anything about is the pension product itself - I get all of the benefits of salary sacrifice and 11% compnay contribution where it is and unless someone tells me differently I don;t think I can retain those benefits AND have my choice of SIPP platform (or is it possible to 'pay into' the workplace pension but then transfer funds out each month to a personal SIPP of my choosing?)

If it is the current AE scheme of the employer then you are stuck with it for now. The free money from the employer trumps it all.

Albermarle

Zurich havent offered that type of pension for years for new set ups. They were focusing on their investment platform. Then they sold their legacy book off as they didn't want it any more. Your pension product was built and priced around 15-20 years ago. It's old. Whilst some old things can be turn out to be valuable gems worth keeping. Most end up showing their age and being easily beaten by modern alternatives.

A SIPP or modern personal pension could offer lower costs and more investment choice.[/QUOTE

This is the same as my current employers workplace pension . In 2015 Zurich relaunched it as 'Money4Life' following the pension reforms, and you can do everything on line , move seamlessly into drawdown etc .18 months ago Zurich sold this arm of the business to Scottish widows, who operate it as a standalone business. So all website functions remain the same ,same staff etc except it is now branded Scottish widows .
So it is already a modern personal pension ( and due to employer negotiated discounts , cheaper than many SIPPS)