Finance Review

AnotherJoe

Cotta wrote: »

Just got off the phone to my administrator, my pension pot is called a growth fund and below is how it is invested:

AVC + Pre97 SCC + Core ER Contributions + Transfer in contributions + ER Matching Contributions + EE Saver Contributions

You've got that the wrong way round


Your contributions are AVC + blah blah .
Its invested in a growth fund ... but which one of probably 10 thousand possible different "growth" funds?

chockydavid1983

Yeah, what you want is a breakdown of the actual funds it is invested in. Then you can see important things like how diversified it is, how much equities vs bonds vs cash you have etc.

eskbanker

Cotta wrote: »

Is the below what's needed? Not sure what any of this means or why 2 and 3 are the same.

Core ER Contributions - 19.95%
Core ER Contributions TV - 1.22%
Core ER Contributions TV - 50.39%
EE Saver Contributions - 18.96%
ER Matching Contributions - 9.48%

No, that shows where the money came from (ER = employer, EE = employee), but the above posters are asking for where it went to, i.e. exactly what is that pension money invested in.

penners324

Who's the Pension with? Most pension companies have an online portal that you can access your own pension plan.

MarkCarnage

Willis Towers Watson are likely to be the scheme administrators, the fund itself won't be theirs, but you may be able to access WTW portal to check which fund. Most 'Growth' managed funds are likely to have about 60-80 or even 90% in shares, usually spread across global markets. Sounds like the default fund choice for someone your age.

Going back to your original questions, as others have suggested, you would likely be taking on quite a large geared exposure to the UK residential property market by retaining your existing property as a BTL, and then having to gear up to buy a larger family home.

BTL is rapidly becoming, or has become, a market for professional or institutional investors due to costs, taxation and regulatory requirements increasing. You are also exposed to the risk of having a single property, with possible costs of void periods plus the usual maintenance etc. You don't appear to have much in the way of liquid funds to cushion any adverse outcomes there.

Would seem easier all round to realise the equity in it, use some towards the new house and maybe invest some of the rest by topping up your pension provision (more tax efficient) or use ISAs or a combination of both.

bostonerimus

Are you and your partner in agreement about finances and have you discussed a plan an approach together?

Cotta

Third time lucky, is the below the relevant information?

Capital Allocation

• Global Equity FW 50:50 Index 50.3
• BlackRock DC Aquila Life Market Advantage Fund 24.9
• Standard Life Global Absolute Return Strategies Fund 12.5
• Fulcrum Diversified Core Absolute Return Fund 12.3
  

BLACKROCK DC AQUILA LIFE MARKET ADVANTAGE FUND

Financials – 100


FULCRUM DIVERSIFIED CORE ABSOLUTE RETURN

Asset Allocation

• Short Term Government Bonds 61.3
• North American Equities 10.6
• Diversifying Strategies 7.8
• Commodities 7.4
• Japanese Equities 5.5
• EM Rates (10 year equivalent) 2.9
• Developed Rates (10 year equivalent) 2.7
• Asia ex-Japan Equities 2.3
• Emerging Market Equities 2.3
• UK Equities 1.2
• Other ‑ 4.0
  

GLOBAL EQUITY FIXED WEIGHTS (50:50) INDEX FUND

• Financials 23.1
• Consumer Goods 14.6
• Industrials 13.5
• Consumer Services 10.6
• Health Care 10.5
• Oil & Gas 8.6
• Technology 7.1
• Basic Materials 6.0
• Utilities 3.2
• Other 3.0
  

CHARGES

Annual management charge 0.320%

Additional expenses 0.022%

Total expense ratio 0.342%

MarkCarnage

Yes, that's the right information. Quite competitive annual management charge/expense ratio overall.

Funds are a mix of global index tracking and absolute return. Standard Life GARS has been underwhelming, not sure about the Fulcrum fund performance, but with over 60% in short term government bonds, it's going to be fairly unexciting. I'm struggling to see why you need a 25% allocation to absolute return at your age, but the asset mix has the handprint of Towers Watson all over it.

So it's ok, and quite decent for charges. Absolute return may perform ok relative to shares in next few years, and will dampen overall volatility of returns.

Cotta

MarkCarnage wrote: »

Yes, that's the right information. Quite competitive annual management charge/expense ratio overall.

Funds are a mix of global index tracking and absolute return. Standard Life GARS has been underwhelming, not sure about the Fulcrum fund performance, but with over 60% in short term government bonds, it's going to be fairly unexciting. I'm struggling to see why you need a 25% allocation to absolute return at your age, but the asset mix has the handprint of Towers Watson all over it.

So it's ok, and quite decent for charges. Absolute return may perform ok relative to shares in next few years, and will dampen overall volatility of returns.

So worth staying on the default setup then?

MarkCarnage

So worth staying on the default setup then?

Right now I wouldn't disagree with that. Don't take this the wrong way, but your level of investment knowledge suggested in this thread means that you should do a fair bit of research or homework before thinking of changing. Don't know what the alternatives are either. The cost is reasonable, the fund mix might be better, but that is my view, and may depend on your risk tolerance too.

The Blackrock Market Advantage fund is also an absolute return fund but a bit more aggressive than GARS, and its performance has been somewhat better. GARS has basically not made any money for the last 5 years, and has seen significant outflows from the fund. The Fulcrum fund performance has been somewhere between the GARS and Blackrock Market Advantage. All have target performance of cash or inflation plus 3-5% on a rolling annual basis, and GARS in particular has fallen a good bit short of that.

If the above is the default, or one of the default strategies, there should be some questions being asked by whoever has governance oversight of it. In some DC Schemes there are trustees fulfilling this role.

Basically half your fund has been performing in line with global equity markets (so pretty well in recent years) and the other half has returned a bit better than cash but not much. If equity markets hit a rougher period, which is entirely possible or indeed likely in the next 5 years, then the index tracking bit will follow what markets do. You will then hope that the absolute return bit delivers the cash plus 3% or whatever that it promises....

However, also worth remembering that as you are relatively young and still putting money in regularly, that your contributions will buy the tracker units more cheaply if markets do fall and there will still be a quite a lot of time for them to recover and provide better returns before you retire. Pound cost averaging is the term for it.

The cost of this default mix is relatively cheap too.

Keep a closer eye on it, and try to learn a bit more about the funds within it. The websites of the fund managers plus the likes of Morningstar will give you information about them.