Moving out of Scottish Widows?

JER1

I am close to making the decision to take my money out of my old workplace pension scheme, money4life with SW. I no longer work for the company that I had it with and am living off savings until I retire next year, I will start drawing down my pension in 9 months when I reach 55. The sum I have invested is around £850k.
The charges with SW are around .35% pa all in, for the following funds:
- SW Aquila Corporate Bond All Stocks Index CS1 = 25% of pot
- SW Aquila IL Over 5 Year Gilt Index CSW = 19%
- SW State Street Strategic Diversified CS1 = 20%
- SW Aquila World ex UK Equity Index CS1 = 30%
- SW Aquila UK Equity Index CSW = 3%
- SW Aquila Emerging Markets Equity Index CS1 = 3%
My dilemma is based around the current SW charges for this fund being very low (I think) compared to a more ethical fund choice for which we are being quoted 1.2% fees by the fund and a further .75% for the IFA pa. The ethical stance we're advised costs more because it is active not passive, which I understand. But my charges will go from around £3K pa to £17k pa. I'm also advised that the SW risk of share split above is around a 6 or 7 out of 10, and we ant to be more like a 4. I thought that the SW had dropped the risk of my funds as I got closer to retirement which they know is next year??
So I could do with your thoughts on the following if you would be so kind:
1 - Is it sensible to try to find some more ethical fund choices within the existing SW options - Not sure there are many - but it will save me a lot of money in not moving to much higher charges?
2 - Is there a more passive ethical set of funds that are low t medium risk, ones that are not testing anything on animals, investing in any arms etc - some ethical funds still aren't ethical enough for us and we are quite specific in our wishes.
3 - If we have to go "active", what is a reasonable level of total charges
4 - Do Ethical specialist IFA's have more to offer us than a standard IFA due to our specific needs?
5 - Are the existing SW funds I'm in around a 6 - 7 out of 10, when you consider that the equity and emerging ones are such a small percentage of my total pot, are bonds risky - I thought they were safer and a lot of my money is in them?
Many thanks for anyone that will share their views, I rely on this site for so much information, and it's my first post..!

Albermarle

The charges with SW are around .35% pa all in

I also have a Money4Life and my employer also negotiated very competitive rates like yours.
It is more like the rate an IFA can get ( they have preferential rates ) but of course you have to pay them as well.

or which we are being quoted 1.2% fees by the fund and a further .75% for the IFA pa

You could buy the funds yourself in a SIPP , it's not necessary to employ an IFA to do it ( although you may wish to )
I think SW have some ethical funds but as you have noticed they go from light green to dark green and I suspect SW will not have any pure/dark green ethical funds .

If we have to go "active", what is a reasonable level of total charges

Cost of active funds typically run from 0.6% to 2 %- then + pension charge of say 0.3%

SonOf

1 - Is it sensible to try to find some more ethical fund choices within the existing SW options - Not sure there are many - but it will save me a lot of money in not moving to much higher charges?

It you are a genuine ethical investor, its unlikely SW's ethical funds would be sufficient for you. If you are casually ethical then it would likely be ok.

2 - Is there a more passive ethical set of funds that are low t medium risk, ones that are not testing anything on animals, investing in any arms etc - some ethical funds still aren't ethical enough for us and we are quite specific in our wishes.

When you start specifying areas you wish to reject/include, you are looking at a SIPP using UT/OEIC funds really. Its less likely that passive funds would fit the bill but until you complete an ethical questionnaire and filter the funds out to match that, its difficult to say.

3 - If we have to go "active", what is a reasonable level of total charges

Depends on your objectives. Charges can be higher when you go more into niche areas and less when more general (but even that is a generalisation. You would probably be looking around 0.5% with an active spread. Maybe less if you can meet your objectives with a hybrid spread.

4 - Do Ethical specialist IFA's have more to offer us than a standard IFA due to our specific needs?

No. IFAs have to be whole of market by definition and are not allowed to restrict in any area. So, if an IFA "targets" a particular group, it doesnt make them any better or worse than an IFA that does not market themselves that way. There is one fairly large IFA that has sub-brands and different websites for a whole range of areas. It gives the impression that they are a specialist in an area but in reality, it is just a collection of different websites.

5 - Are the existing SW funds I'm in around a 6 - 7 out of 10, when you consider that the equity and emerging ones are such a small percentage of my total pot, are bonds risky - I thought they were safer and a lot of my money is in them?

Bonds generically can range from low risk to high risk. Gilts tend to be lower risk than bonds.
Interesting that you are high in bonds but using Corp bonds and index linked gilts but you are not using any gilts. With the risk level of your portfolio, I would expect to see less corp bonds and index linked gilts but more gilts. However, other opinions are available.

JER1

Thank you both Albermarle and Son of. I realise that this has a lot of angles, and reading what others think is the only way that I can learn more about the subject. It's one of the biggest decisions we make when we look at the way we are going to draw and invest our pensions when we get to the right age to do so, up to now I have been good at putting the money in tax efficiently, but this side of things is all new to me.

bluenose1

There are some great blog posts on ethical investing.
My favourite blogger of all time, Ermine, who somehow says much more eloquently everything I agree with has just written a blog post on the subject.
https://simplelivingsomerset.wordpress.com/2019/11/28/passive-investors-are-you-destroying-your-childrens-world/#comments

An ethical UK Investor blogger who really has took up the mantle.
http://diyinvestoruk.blogspot.com/2019/05/im-getting-up-to-speed-on-climate

JER1

Thanks Bluenose1 for taking the time to reply, I did a lot of searching online last night and am starting to get my head around things. I'll go onto those blog posts now and absorb best I can the detail.

Floccinocci

If you're looking to start drawing down your pension in the next year or so, it might be best to look at lower risk funds - or income generating ones - rather than a riskier ethical fund. Given you have a good sized pot accumulated, you don't want to risk losing capital value when you are so close to utilising your pension.

SonOf

If you're looking to start drawing down your pension in the next year or so, it might be best to look at lower risk funds - or income generating ones - rather than a riskier ethical fund.

If the OP is going to be investing for another 25-35 years, then why reduce the risk just because they are hitting drawdown?

Why income generating funds? Whilst yield is a valid investment strategy, it is not the only one. Many people use growth strategies in retirement and use the growth to pay the withdrawals.

It is possible to build ethical portfolios across the whole risk spectrum. So, you cannot call an ethical fund riskier like that.

Floccinocci

The OP states he is retiring in 9 months time and will start accessing the funds for this purpose. Investing in capital growth whilst drawing down leaves a lot of risk in his retirement portfolio. Ultimately its the OP's decision on how he invests, but in most cases at retirement people de-risk their portfolios so as to not be impacted as much by market volatility. Given no one had pointed this out, I felt it may be useful for the OP to be aware of.

michaels

Floccinocci wrote: »

The OP states he is retiring in 9 months time and will start accessing the funds for this purpose. Investing in capital growth whilst drawing down leaves a lot of risk in his retirement portfolio. Ultimately its the OP's decision on how he invests, but in most cases at retirement people de-risk their portfolios so as to not be impacted as much by market volatility. Given no one had pointed this out, I felt it may be useful for the OP to be aware of.

The OP hopefully intends to be retired for a long time - removing volatility risk would appear to put them under considerable inflation risk.

SonOf

The OP states he is retiring in 9 months time and will start accessing the funds for this purpose.

Just because he is retiring in 9 months does not mean he will be drawing every penny of the pension at that time. The bulk of it may be invested for another 25-35 years.

Investing in capital growth whilst drawing down leaves a lot of risk in his retirement portfolio.

No it doesn't.

but in most cases at retirement people de-risk their portfolios so as to not be impacted as much by market volatility.

No they dont. Most remain invested at the same level. Although some may lower a notch.