Selecting a fund for 2055 retirement/pension

oli356

I took a look at my Aviva pension (work pension) the other week and it seemed like it was quite bond heavy and not enough shares - I'm new to investing but thinking that more shares = riskier but I'm only 25 so retirement is 35-45? years away so time for bad things to recover. Pension has got just over 29k in at the moment, but I've increased the contribution as of this month so 18.7% of my salary between me and my company should be contributed.

The current asset allocation that seems to have been selected by my employer / their financial advisors looks like this:

Fixed interest 35.87% Developed market equivity (excl UK) 30.54% UK equities 15.11% Emerging market equity 9.80% Global equities 4.13% Cash/Money market 2.65% Other 1.01% Property 0.89%

There is a 0.26% annual charge which covers:

• Your Scheme annual management charge, less any Active member discount if this applies
• The Fund annual management charge

I had a search for Vanguard funds as an example - the LifeStrategy 80% equity has a 0.39% annual charge and the Vanguard Target Retirement 2055 is 0.41%

There are 1118 different funds on the Aviva site to choose from and I'm a bit lost where to even start. I don't particular have the interest to look into funds in such detail to look at any country bias, so some global diverse fund is what I think I would be looking for..

Any advice greatly appreciated

Audaxer

Your current allocation is about 60% equities, so that would be classed as medium risk. As you have about 35 years ahead of you before you are likely to access your pension it does seem a bit conservative to have 36% in fixed interest. I think a low cost globally diversified fund like for example one of the Vanguard LifeStrategy funds, HSBC Global Strategy funds or L&G Multi Index funds, at a risk level of your choice would be a decent option.  If you did go for a fund with a much higher percentage of equities, you would have more volatility, but with so much time on your side, that is a good thing as when there are falls in value you will be buying units at cheaper prices.

oli356

Audaxer said:

Your current allocation is about 60% equities, so that would be classed as medium risk. As you have about 35 years ahead of you before you are likely to access your pension it does seem a bit conservative to have 36% in fixed interest. I think a low cost globally diversified fund like for example one of the Vanguard LifeStrategy funds, HSBC Global Strategy funds or L&G Multi Index funds, at a risk level of your choice would be a decent option.  If you did go for a fund with a much higher percentage of equities, you would have more volatility, but with so much time on your side, that is a good thing as when there are falls in value you will be buying units at cheaper prices.

That is what I thought, 60% is too low, 80+ seemed better, not sure if going 100% would be too much.
There is only 1 HSBC fund showing on Aviva which is "Aviva HSBC Islamic Global Equity" which is high risk, top holdings are Apple, Microsoft, Facebook etc, fee is low at 0.17% though.
There is only 3 L&G funds, none look suitable (global property, UK equity, all fixed interest). 

The Vanguard ones so far seem to be the most diverse, though unsure if 0.39 - 0.41% fee is considered alot. Also need to look at the difference between the LifeStrategy and the Retirement plan funds which are both equity heavy. 

Audaxer

oli356 said:

Audaxer said:

Your current allocation is about 60% equities, so that would be classed as medium risk. As you have about 35 years ahead of you before you are likely to access your pension it does seem a bit conservative to have 36% in fixed interest. I think a low cost globally diversified fund like for example one of the Vanguard LifeStrategy funds, HSBC Global Strategy funds or L&G Multi Index funds, at a risk level of your choice would be a decent option.  If you did go for a fund with a much higher percentage of equities, you would have more volatility, but with so much time on your side, that is a good thing as when there are falls in value you will be buying units at cheaper prices.

That is what I thought, 60% is too low, 80+ seemed better, not sure if going 100% would be too much.
There is only 1 HSBC fund showing on Aviva which is "Aviva HSBC Islamic Global Equity" which is high risk, top holdings are Apple, Microsoft, Facebook etc, fee is low at 0.17% though.
There is only 3 L&G funds, none look suitable (global property, UK equity, all fixed interest). 

The Vanguard ones so far seem to be the most diverse, though unsure if 0.39 - 0.41% fee is considered alot. Also need to look at the difference between the LifeStrategy and the Retirement plan funds which are both equity heavy. 

The Ongoing Charges for Vanguard LifeStrategy 40 and 60 funds is only 0.22% and I assume it is the same for VLS80 and VLS100. They are certainly not considered expensive. I'm not sure about the Vanguard Target Retirement funds.

Albermarle

The Ongoing Charges for Vanguard LifeStrategy 40 and 60 funds is only 0.22%

I think the higher figures the OP quotes includes Aviva platform charges and taking that into account they are still on the low side.

OP - just so you are aware the 0.26% all in charge for your current fund is very competitive/low .

Thrugelmir

oli356 said:

Fixed interest 35.87% Developed market equivity (excl UK) 30.54% UK equities 15.11% Emerging market equity 9.80% Global equities 4.13% Cash/Money market 2.65% Other 1.01% Property 0.89%

For a base portfolio you can see why it's offered as a default option. A medium risk option. Certainly is globally diverse which is a key building block for your portfolio. I'd fret less and see how the fund performs in the near term. Equities have hit the headlines after an extended bull run. The virus trigger may expose the fragility of some companies share prices. As ultimately a company has to deliver financial performance. To underpin the valuation placed on it by investors. 

While allowing your portfolio to build. Read, research, listen and watch. Then you can add additional funds into your portfolio in an informed manner. . 

oli356

Albermarle said:

The Ongoing Charges for Vanguard LifeStrategy 40 and 60 funds is only 0.22%

I think the higher figures the OP quotes includes Aviva platform charges and taking that into account they are still on the low side.

OP - just so you are aware the 0.26% all in charge for your current fund is very competitive/low .

Yeah that's right, it includes the platform charge too.

Thrugelmir said:

oli356 said:

Fixed interest 35.87% Developed market equivity (excl UK) 30.54% UK equities 15.11% Emerging market equity 9.80% Global equities 4.13% Cash/Money market 2.65% Other 1.01% Property 0.89%

For a base portfolio you can see why it's offered as a default option. A medium risk option. Certainly is globally diverse which is a key building block for your portfolio. I'd fret less and see how the fund performs in the near term. Equities have hit the headlines after an extended bull run. The virus trigger may expose the fragility of some companies share prices. As ultimately a company has to deliver financial performance. To underpin the valuation placed on it by investors. 

While allowing your portfolio to build. Read, research, listen and watch. Then you can add additional funds into your portfolio in an informed manner. . 

Yeah as a somewhat 'one size fits all' portfolio it seemed a good one; just being so far off retirement, something with a bit higher risk seemed possibly more suitable. Seems like in 2018 there was -5.08% performance and in 2019 +16.45% growth, for whatever that is worth anyway....

Albermarle

Seems like in 2018 there was -5.08% performance and in 2019 +16.45% growth, for whatever that is worth anyway....

Which would be pretty typical for a middle of the road default fund. If you had a higher equity fund then both the above figures would be larger and of course you would have suffered more from last weeks market drops.

I am thinking that in the 1000+ funds Aviva offer, there must be one like you have now,  but with a higher equity content and still with that very low overall charge .

Thrugelmir

oli356 said:

Albermarle said:

The Ongoing Charges for Vanguard LifeStrategy 40 and 60 funds is only 0.22%

I think the higher figures the OP quotes includes Aviva platform charges and taking that into account they are still on the low side.

OP - just so you are aware the 0.26% all in charge for your current fund is very competitive/low .

Yeah that's right, it includes the platform charge too.

Thrugelmir said:

oli356 said:

Fixed interest 35.87% Developed market equivity (excl UK) 30.54% UK equities 15.11% Emerging market equity 9.80% Global equities 4.13% Cash/Money market 2.65% Other 1.01% Property 0.89%

For a base portfolio you can see why it's offered as a default option. A medium risk option. Certainly is globally diverse which is a key building block for your portfolio. I'd fret less and see how the fund performs in the near term. Equities have hit the headlines after an extended bull run. The virus trigger may expose the fragility of some companies share prices. As ultimately a company has to deliver financial performance. To underpin the valuation placed on it by investors. 

While allowing your portfolio to build. Read, research, listen and watch. Then you can add additional funds into your portfolio in an informed manner. . 

Yeah as a somewhat 'one size fits all' portfolio it seemed a good one; just being so far off retirement, something with a bit higher risk seemed possibly more suitable. Seems like in 2018 there was -5.08% performance and in 2019 +16.45% growth, for whatever that is worth anyway....

Once you've a decent sum invested in this fund. You could then split your contributions , adding satellite funds to provide "spice" to your portfolio, With higher risk comes higher volatility. Nor is there any guarantee of a better return.  Be patient. When investing long term there's no rush. Reinvestment of income (compounding) kicks in the longer the money is invested. 

oli356

Albermarle said:

Seems like in 2018 there was -5.08% performance and in 2019 +16.45% growth, for whatever that is worth anyway....

Which would be pretty typical for a middle of the road default fund. If you had a higher equity fund then both the above figures would be larger and of course you would have suffered more from last weeks market drops.

I am thinking that in the 1000+ funds Aviva offer, there must be one like you have now,  but with a higher equity content and still with that very low overall charge .

I would think so as well, need to spend some more time going through the fund list; there's always the Vanguard type of funds at 0.4% atleast if I can't find anything else with a global diverse portfolio and lower fees. 

Thrugelmir said:

oli356 said:

Albermarle said:

The Ongoing Charges for Vanguard LifeStrategy 40 and 60 funds is only 0.22%

I think the higher figures the OP quotes includes Aviva platform charges and taking that into account they are still on the low side.

OP - just so you are aware the 0.26% all in charge for your current fund is very competitive/low .

Yeah that's right, it includes the platform charge too.

Thrugelmir said:

oli356 said:

Fixed interest 35.87% Developed market equivity (excl UK) 30.54% UK equities 15.11% Emerging market equity 9.80% Global equities 4.13% Cash/Money market 2.65% Other 1.01% Property 0.89%

For a base portfolio you can see why it's offered as a default option. A medium risk option. Certainly is globally diverse which is a key building block for your portfolio. I'd fret less and see how the fund performs in the near term. Equities have hit the headlines after an extended bull run. The virus trigger may expose the fragility of some companies share prices. As ultimately a company has to deliver financial performance. To underpin the valuation placed on it by investors. 

While allowing your portfolio to build. Read, research, listen and watch. Then you can add additional funds into your portfolio in an informed manner. . 

Yeah as a somewhat 'one size fits all' portfolio it seemed a good one; just being so far off retirement, something with a bit higher risk seemed possibly more suitable. Seems like in 2018 there was -5.08% performance and in 2019 +16.45% growth, for whatever that is worth anyway....

Once you've a decent sum invested in this fund. You could then split your contributions , adding satellite funds to provide "spice" to your portfolio, With higher risk comes higher volatility. Nor is there any guarantee of a better return.  Be patient. When investing long term there's no rush. Reinvestment of income (compounding) kicks in the longer the money is invested. 

I've not seen anything to suggest that I can split contributions with Aviva to different funds, though not seen anything to suggest otherwise also. Will have to look further/ask if I can't figure it out, I would have assumed you could though... Flexibility... And yeah, was a good idea to start contributing when I started work at 17 years old, albeit only at 3% but now as I'm trying to keep below higher rate tax band the 10% will go further. Of course if circumstances change I might need to reduce my contribution. 

AnotherJoe

IMNSHO at your age you should be in 100% equities. I would change the 35% fixed interest to equities right now and benefit from the panic-CV sale currently going on. 

I also would dump the 15% "U.K." in favour of global because really it won't be "U.K. " it will be major U.K. companies like BP which are really global but you end up over concentrated in a handful of industries, one of which, oil, is about to visit hell in a hand basket. 

There also seems little point having less than 1% in property(or anything else). It's not enough to make a difference