Dc pension Standard Life SLP

LifeOf

Looking for information/opinions/advice from those of you far more educated on this topic than myself.
I admit that all the information I have read so far re this has baffled me and tbh I think I need someone to break it down into layman's terms.

I have a Dc workplace pension. Its new, along with the job, so currently auto enrolled on the standard plan. It is the Active Plus III Universal SLP (Standard Life). I have upped my % to 10% and the employer is matching 4% and will increase over time. I have 20-30 years to pay into this pension, 20 if I retire at 55 and 30 if I retire at 65, just using those two basic numbers to show the potential amount of time my pot has to grow. I class that as long-term but others might suggest it is more medium to long?
The figure in the pot is small and therefore not worth mentioning.
I have the usual real life bills and mortgage so I cannot afford a s&s ISA or the likes just now. Maybe in 5 years.

I have looked at Standard Life options and the fact I'm defaulted to the Active Plus III with reduced cost rate but I was wondering if a higher risk fund would be more beneficial given the time it will have to grow (20-30yrs).
I'm not overly risky but at the same time not risk adverse, pension is something that comes off my wage before I see it and unless I have a unusual urge to check SL website I don't look at it until the yearly statement will come through.

What would be the most sensible option for my timescale? Leave as is or increase the risk and ride out the falls and growth for 20+ years.

As you can see I am cluelesss on this topic and my workplace offers little information on potential other fund options. I don't have much in the pot or extra cash to warrent a IFA so here I am.

Tia

Albermarle

As you can see I am cluelesss on this topic

Well you have at least looked into your pension , which is more than most people do !
20 to 30 years is long term so ideally you should be in a fund that has a high equity ( shares ) % , so you probably need to switch away from the default fund.

my workplace offers little information on potential other fund options

Normally your employer should provide you with a username and password for the SL website .
Here you can check what alternative funds are available .
Although you should be able to switch funds on line , you will probably have to call them to change where new payments are allocated ( I have a SL pension and I had to do this )

LifeOf

Thanks for the reply Albemarle.
Plan III comprises of 47.3% equities, Plan IV 62.3% equities and Plan V 82.5% equities.
Why are is a high equity fund more beneficial?
Sorry for my ignorance I'm just bamboozled with the information I've been reading

Workerbee999

I have just been auto enrolled into this fund too, after starting a new job, and have been looking at the website at this default plus potential alternatives.

The Active plus III has total AMC charges of 1.131%. I get the group pension fee reduction too but it’s not clear to me yet if this is knocked off all options equally or only the default.

As a passive alternative I have been looking at:

Standard Life Overseas Tracker Pension Fund (1.005%)
SL Vanguard FTSE UK all share index Pension Fund (1.017%)
SL iShares Emerging Markets Equity Index Pension Fund (1.175%).

I plan to work for 5 years, with £30k pa being invested in total. I’m 49 now, will retire at 54, but don’t plan to access this until around 64 as I have my previous employer pension to cover 55-63. So with 15 years to invest I’m thinking I can afford to go 100% equities in these funds for at least 5 years while contributing, before de-risking - historical returns have been a lot better than the Active plus III and although it’s more risk (and I know history doesn’t really mean anything) I’m hoping any downside will be offset by regular investment at lower unit prices with the 15 year timeframe for any recoveries. (I also have DB and full state pension as guaranteed income for general living costs).

Would be interested in any views on these Fund choices at my age/timescale and also any views on % split between these funds. Ideally I’m looking for 2% average growth pa after charges and inflation, so that would need to be around 5% pa absolute?

Hope it might be of interest to the OP too. Thanks

LifeOf

Thanks Workerbee, you seem to be in a similar position. I kept looking at the Active Plus Plans because I wasn't sure if the group pension fee reduction applied equally to the rest. I did contact SL and their reply was "If you switch your fund, you will retain your discount on the charges" so on that, I concluded I'm able to choose outside of the Active Plus Plans. I will however contact SL in New Year before switching to make 100% sure and get final fee amount per annum.
Hope that helps you with one of your questions.

Albermarle

I did contact SL and their reply was "If you switch your fund, you will retain your discount on the charges" so on that

This is normally the case.

Why are is a high equity fund more beneficial?

Based on historical info going back a couple of hundred years, equities will grow/perform better than other forms of mainstream investment ( especially with dividends reinvested as happens with most funds ). In the short/medium term they can/will go up and down, and every few years they go down a lot , but always ( so far ) recover . So they are good for long term investments , which means minimum 10 years and preferably longer.
However being 100% in equities you need strong nerves to hold on to the investments, when they seem to be in freefall ( like in the 2008 crash) , so most average investors are too risk averse for this so have < 100% and this % drops as they get older.

Ideally I’m looking for 2% average growth pa after charges and inflation, so that would need to be around 5% pa absolute?

Historically this would be more typical returns from a medium risk portfolio ( 60% equities)
From a 100% equities you could normally expect better than this . However a caveat here is that the last 10 years have been generally very good for investors ( including 2009) so is probably unlikely the next 10 will be as good.

MaxiRobriguez

You're 35 so won't be retiring at 55 if you're planning to use just your DC pension as by the time you'll get there the access age will be 58 if not higher. So you have minimum 23 years until retirement, not 20. Sorry. Doesn't sound like much difference, but gives you extra three years to ride out volatility.

I'm three years younger than you but planning to retire early 50's (I have a S&S ISA plan) so our timeframes for our DC pensions are broadly similar. Mine is 100% in equities at the moment and will continue to be so for the next ten years. As Albermarle has stated, equity returns have been good so there's every probably they won't be as good this next decade, however, there aren't really any alternative options. Previously investors would have a bond allocation but bonds have also done well this decade and typically yields are very, very low now. It almost makes bonds uninvestable for me, I'd much rather use the dividends from equity as an "income" generator (which gets reinvested) and then ride out the capital volatility.

However, if there is one thing I'd want you to take away and consider from this thread it's that performance of your investments in the early stages of building your pot are almost completely irrelevant in terms of the total worth of the pot when compared to how much you are putting in.

For example, if you currently have £5,000 in your pot, are putting in £250 a month (10% on a £30k salary) and employer is putting in £100 (4% of £30k) and you generate high typical returns, and do this every year until 58, you might come out with a pot around £175k.

If you up your contribution to £500 a month (ie, 20% of £30k) and change nothing else, you'd be looking at nearer £300k, annd it's not actually cost you £250 a month more because you get to avoid tax on it.

So - my advice would be to up the equity allocation in your pension and ride out the volatility, but in the mean time see if you can put more into your pension now to get the value of the pot as high as you can as early as you can so the performance of the investment does more for you in 2030 and beyond.

LifeOf

That's good advice, I am currently looking at my finances in order to squeeze a little extra for pension contributions. I did open a LISA just incase I could incorporate it into my pension plans, already bought a house so not able to use it for that.
Is it better to do active or passive plan, I know active are slightly more expensive but with the previous 10 good years is it better to have an actively managed plan than a passive? I will most definitely be looking at the higher risk plans that have a higher equity percentage.
For as much as retiring at 55 would sbe wonderful, in real life I doubt I'll be retiring then, my plan is to go part time in my mid to late 50's. I will also meet the, current, criteria for full SP however I am not looking at that £8k in my calculations in order to have a safety net.

Sadly, I feel very late to the pension party and uneducated but I'll be working my ar*e off, within my means, in order to be in a much better position later on in life.

Appreciate all advice so far &#55357;&#56397;

LifeOf

After thought I'm going to go with SL Passive Plus V fund. I'm not clued up enough to do my our pick and management so I need a all in one.

Would this be suitable?

scalextric

I am with Standard Life and have 8 different funds, wondering if I should reduce this down to 2 or 3

AnotherJoe

LifeOf wrote: »

What would be the most sensible option for my timescale? Leave as is or increase the risk and ride out the falls and growth for 20+ years.

The most sensible would be a 100% equities fund such as the SL Vanguard SRI Global StockPension Fund


... but, do you have the nerve to hold on to that through good times and bad? As long as you dont keep checking it you'll be good but if you panic and look when theres a headline about a crash and swap it for cash as soon as it drops, then its not for you.