Pension newbie... do I go with Vanguard Pension, or look elsewhere?

jackhulk

Hello

I'm currently learning about and would like to start a pension, however I'm not sure which is the best option for me. I've sat down for the first time over the weekend having a good read online about all the various options etc, but as such my understanding is still very limited at present so hopefully you can answer some of my questions please.

I’m happy to take medium level of risk and whilst I’m financially literate, I would rather have more of a hands-off approach to begin with at least. I will be looking to initially pay in 40k, and hopefully continue this annually for a number of years if things continue to go well.

1. The majority of pensions I come across online are SIPP, but should I also consider personal pension or stakehold pension?

2. If I choice a SIPP to begin with, if I change my mind at a later date is it possible to switch to personal or stakehold pension?

3. Vanguard is currently top of my shortlist due it established history, low fees and straightforward looking website making it easy for newbie to get started. I would go for the 'Target Retirement 2035 Fund', but what other funds do you think I should consider, either within Vanguard or another provider?

4. Two concerns I have with Vanguard was brought to my attention via this article. It states the that Vanguard has 'no human strategic overlay' and as such could be a 'bad thing in a severe market sell-off'. It suggests that Wealthsimple and Moneyfarm are robo-advice firms with a more human strategic overlay. What are your thoughts on this please, and what exactly is a human strategic overlay? Would a human step in and start trading according to limit lose during a severe market sell-off?
Second concern is that it advises that the funds have a 'US equity focus with typically around 25 - 30% of assets invested in US equity trackers' so US does well, so does the fund, but if US takes a downturn then so do these US focused funds. As such are Vanguard funds viable option, or should I look towards funds with a more global focus?

5. Within that same article there is a small table showing Vanguard performance ranking compared to other similar funds. How would I go about making such comparisons myself on a larger scale comparing various funds from various providers? Is there a simple to use website where I can compare different funds historically? If not how to you go about selecting which fund to go with? Apart from that simple table in that article, I have no idea how other funds might compare to Vanguards etc. As above Vanguard is on top of my shortlist due to established history and low fees, however I would consider paying more fees if potential returns are higher, but I need a way to compare.

6. I understand that Vanguard has a limited fund selection, but it has ready-made portfolios that are very appealing to me right now as I learn the ropes. Which other providers offer such ready made portfolio that I should consider please?

Many thanks!

NoMore

Usually you start with your Works pension first. Investigate that as they will likely match contributions upto a certain percentage.

DT2001

You are talking about £40k p.a. - I would use an IFA as you talk about a hands off approach. You can either get one off or ongoing assistance. I know there are those who do not like IFA’s, I think mainly because of the fees however getting the correct strategy for your goals is the important thing and they’d get plenty of background to ensure you were on the right path. Maybe you are jumping the gun asking about Vanguard.

Albermarle

It would be useful to know:
Do you have a pension with your employer and what are yours and their % contribution? Or are you maybe self employed starting a pension for the first time ?
What is your taxable income pa?

jackhulk

I'm sold director of my limited company and no other employees so there is no work pension. This will be my first pension. IFA would be an option going forward, but right now I need to get my funds into a pension ASAP, and before my year end of 31st March in order to make use of this years allowance and save on corporation tax.

With regards to 'hands off', I'm more refer to starting off with a ready-made portfolio to begin with instead of trying to build from scratch.

If anyone can directly answer the above questions please, would be much appreciated thank you.

constantly_confused

Considering you are trying to get this sorted before the end of the tax year I would suggest opening a pension with a provider that has zero transfer fees (vanguard, fidelity via Cavendish etc....)

You can then deposit your £40k temporarily in cash and soon (like really soon) after either instruct an IFA or do some further research and manage it yourself.

The only bad option here is to do nothing.

cloud_dog

As far as I am aware thr Vanguard SIPP (sic) currently doesn't support employer contributions.

dunstonh

cloud_dog said:

As far as I am aware thr Vanguard SIPP (sic) currently doesn't support employer contributions.

Now that is rare with an individual pension.   Quite a glaring omission if that is the case.  

Albermarle

Considering you are trying to get this sorted before the end of the tax year I would suggest opening a pension with a provider that has zero transfer fees (vanguard, fidelity via Cavendish etc....)

I think HL ( HArgreaves Landsdown ) has no exit fees anymore + if you go with Fidelity, probably better to go to Fidelity Personal Investing direct rather than through Cavendish . Is in fact slightly more expensive going direct but simpler.

Malthusian

4. Two concerns I have with Vanguard was brought to my attention via this article. It states the that Vanguard has 'no human strategic overlay' and as such could be a 'bad thing in a severe market sell-off'. It suggests that Wealthsimple and Moneyfarm are robo-advice firms with a more human strategic overlay. What are your thoughts on this please, and what exactly is a human strategic overlay?

It means you pay a human fund manager to time the market. (Sell some investments during a crash and buy back in when they think the market has started to go up again.)

There is no evidence that any fund manager can consistently time the market successfully. The expectation is that any such strategy will reduce returns due to cash drag.

The likes of Moneyfarm reduce volatility during downturns to protect their own necks. Their customers have limited financial knowledge by definition and almost certainly won't miss the returns they'll lose out on due to Moneyfarm's fiddling around. However they do notice large crashes so it's in Moneyfarm's interests to limit their impact, even if it makes their customers worse off in the long run.

Second concern is that it advises that the funds have a 'US equity focus with typically around 25 - 30% of assets invested in US equity trackers' so US does well, so does the fund, but if US takes a downturn then so do these US focused funds. As such are Vanguard funds viable option, or should I look towards funds with a more global focus?

If you want to make strategic asset allocation decisions then Vanguard global funds are not really aimed at you. You should be looking at buying individual index trackers to suit your strategy.

Most global funds have more than 25% - 30% in the US due to the proportion of global GDP it accounts for.

If the US takes a downturn everything takes a downturn, so it's unlikely a 25-30% weighting to the US would result in significant underperformance compared to any other globally diversified investment.

xylophone

As far as I am aware thr Vanguard SIPP (sic) currently doesn't support employer contributions.

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/personal-pension-account

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