Aegon workplace pension

DJ90

Hi everyone,

I have been a reader of this forum for several months and after reading many threads within the pensions board, prompted me into looking at my workplace pension in more detail to determine if I am making the most out of my money within my pension.

I am 29 years old, and my current workplace pension (£13000) is invested within Aegon, where both myself and my employer contribute 5% (Maximum my employer will currently contribute) which is around £440 a month combined. I am aware this is low - hence why I am trying to rectify this sooner rather than later!

Within a couple of months, I should be in a position where I can contribute a further £650 a month into my pension and I am trying to figure out if my current workplace pension is a suitable place to keep investing, or if I should consider something else (i.e. A lower cost SIPP).

My current workplace pension is invested within what is called "Balanced Core Lifestyle Portfolio" fund which is around the 48% equity mark (with 25.9% in UK equities) and is classed as a below average risk fund (which I am guessing is a fairly standard default fund). I would potentially like to change this fund to be slightly more aggressive at some point (which I can do with Aegon) but at the moment they have many funds which I am currently struggling to understand.

My initial thoughts on the plan itself seemed OK, until I saw that the total charge is set at 1.01%. After doing some other research around similar funds and various SIPP's this looked quite high? (i.e. The people's pension is 0.5% per annum for example).

I have also read some reviews around Aegon pensions and let's say the reviews are not great. After reading these I am slightly concerned that in 30+ years time I will struggle to consume the money that I have worked hard to save - and combined with the overall annual charge has prompted me to question if my workplace pension is the best place for the bulk of my pension savings.

So my main question is:

- In my position, would you continue to invest into my workplace pension with the additional money per month (so total £1090 each month).

Or continue to pay in the minimum into this workplace pension (£440 per month) to maximise employer contributions and look elsewhere at a SIPP to fund the additional contributions (£650 a month) (i.e. the upcoming Vanguard SIPP with the 0.15% annual charge + any OCF's).

If I am massively overthinking all of this/Misunderstood then feel free to shoot me down but any advice would be much appreciated!

Many thanks in advance!

AlanP_2

It is quite common for employers to have a discount against the published charge so you may be paying less than 1.01%, Aegon should be able to tell you if your employer doesn't know.

Most employer schemes are with solid, "boring" companies like Aegon as they are safe & dependable in the main.

You could save a bit on fees by going fully DIY possibly and you could certainly gain access to many more investment options but do you need many more options if you are struggling to understand Aegon ones?

At 29 being less than 50% equities is very conservative in my view, I have advised my daughter (25) to be at 80%+ if not 100% in her works pension.

Does your employer offer a Salary Sacrifice scheme as that would certainly tilt the equation towards increasing through workplace scheme?

SonOf

My initial thoughts on the plan itself seemed OK, until I saw that the total charge is set at 1.01%. After doing some other research around similar funds and various SIPP's this looked quite high? (i.e. The people's pension is 0.5% per annum for example).

Aegon's fund factsheets often assume the default charge at stakeholder level (1.0% AMC)
You will not be paying 1% on your workplace pension. We used that fund for someone not too long back and it came to under 0.4% IIRC.

Yours will be no higher than 0.75% but probably less than that. Dont rely on fund factsheets for the actual charge.

I have also read some reviews around Aegon pensions and let's say the reviews are not great.

Which Aegon were they talking about? Aegon Retireready? Aegon retirement choices? Aegon Cofunds? Aegon Scottish Equitable (and if this one, which pension type was it as they have dozens of pension versions)?

Plus, reviews on pension companies that do not pester and farm for positive reviews tend to be poor. Whereas those that pester for reviews tend to be more positive as they try to get people to review early in the process. You should largely ignore reviews as the people posting are probably not in a position to give an unbiased review with adequate experience.

- In my position, would you continue to invest into my workplace pension with the additional money per month (so total £1090 each month).

You have given no valid reason not to do this.

Or continue to pay in the minimum into this workplace pension (£440 per month) to maximise employer contributions and look elsewhere at a SIPP to fund the additional contributions (£650 a month) (i.e. the upcoming Vanguard SIPP with the 0.15% annual charge + any OCF's).

There may be little or no reason to do this (or there might be but you havent given any).

Albermarle

Or continue to pay in the minimum into this workplace pension (£440 per month) to maximise employer contributions and look elsewhere at a SIPP to fund the additional contributions (£650 a month) (i.e. the upcoming Vanguard SIPP with the 0.15% annual charge + any OCF's).

There are a lot of posters on this forum who ask a similar question .
There seems to be a general feeling for some reason that -workplace pension is expensive/dull/poor performing ; whilst a SIPP is cheap/exciting/good performer.
It's not based on anything solid , its just a trend/good marketing maybe, or because the SIPP has an app. .It is in fact very easy to send up paying more in a SIPP if you pick the funds they recommend.

DJ90

Hi all,

Appreciate the quick detailed responses.

The reason I mentioned a SIPP was due to the lower fees being charged, but if my allocated workplace pension charges are lower than previously mentioned then the benefits of moving seem minimal.

It sounds like I need to do a bit more resource around the fees that I am currently being charged.

SonOf

It sounds like I need to do a bit more resource around the fees that I am currently being charged.

Most employer/provider welcome packs will tell you the charges of your pension. 0.75% is the cap for auto-enrolment on default (and most internal funds - providers own brand in house funds - will usually match the default). External funds may cost more. Your current one would be a default fund so cant be above 0.75% but is available cheaper than that depending on which Aegon you are referring to and the terms obtained by your employer.

Dox

DJ90 wrote: »

It sounds like I need to do a bit more resource around the fees that I am currently being charged.

Establishing the facts is always a good starting point, but sometimes you don't realise you have a question to ask! Happily you do now, so with luck will start to feel a bit more content with your current workplace offering.

DJ90

Last post should have said research and not resource!

I’ll get on the phone to Aegon on Monday to get further information to clarify.

Thanks for the advice all!

Alexland

Also DJ90 you haven't answered the earlier question about if your employer operates Salary Sacrifice to save the National Insurance on the contributions into your workplace pension? This is much more efficient than a direct SIPP contribution.

For a number of years I used to contribute into my workplace pension via Sal Sac and then do lump sum partial transfers into a SIPP.

If your employer does Sal Sac but you prefer a SIPP then it might be worth finding out if your workplace scheme supports partial transfers-out for active members e.g requests to move 90% of the value while leaving 10% so the account doesn't get closed for further regular employee and employer contributions.

Alex

DJ90

Hi Alex,

My workplace pension is indeed a salary sacrifice scheme. After further reading I can see why putting more money into the workplace scheme is more beneficial than other sources, certainly if my employer passes on those extra savings to me (Again, something I’ll need to check with my employer).

Our employer moved pension providers a year or so ago and we didn’t really get a great deal of information around the move except for the fact that it was a lower fee platform. At that point I was in the process of getting married and moving house. My pension was lower in my list of priorities due to the other big expenses, so just trying to make sure that I am now utilizing my money in the most efficient way.

Thanks,
DJ

Albermarle

certainly if my employer passes on those extra savings to me (Again, something I’ll need to check with my employer).

Some employers pass on their NI savings in a salary sacrifice arrangement, some do not, and some pass on part of them.
Even if they do not pass any on you will still save on NI yourself. If the employer passes on all their savings to you as well, that is the icing on the cake.