Switch from Lifestyle fund

LucyHoneyC

Hello everyone, looking for some advise in regard to my pension scheme with my current employer. This is a Group Personal Pension Plan I was enrolled in when joined the company four years ago. Provider is Aegon and the money is invested in the default fund (Aegon Lifestyle Universal Collection). The fund has not done brilliantly since my joining the scheme in term of growth.

In looking for more info about the fund and to understand why other funds in similar category (mixed asset 40-85% shares) have done much better in the last 5 years or so, it looks like this fund is specifically targeted to the annuity option at retirement. This is not what I want to do, as I prefer the drawdown strategy.

For reference I'm 53 yo and plan not to touch this pot until the age of 65 or possibly 68 (I have a SIPP which currently holds my main retirement money).

I have been looking at what options/funds are available via Aegon, and was thinking about switching to the following funds/allocation (charges for the Universal Lifestyle Collection are 0.75%):

- Aegon Baillie Gifford Managed Pn >>> 50% (charge is 1.27%) - Mixed Asset 40-85% shares

- Aegon 70/30 Defensive Managed Collection (ARC) Pn >>> 30% (charge is 1.11%) - 0-35% shares

- Aegon BlackRock 50/50 Equity and Bond Tracker >>>> 20% (charge is 1.01%) - this is the only tracker of the three.

I have a medium-low appetite for risk, so I was looking for an overall more cautious portfolio with one portion of it to have exposure to global shares to see if I can get the value of the pot to grow.

Am I completely off the track or does the above choice/split loonk sensible?

Thanks for reading   

georgehere

Look into the details of your lifestyle fund to find out what the underlying investments are. There is probably a connection to the retirement date that you input to the scheme and when the system works out that you are getting closer (maybe within 8-10 years) to retirement, it will start changing the mix of investments automatically. So right now, depending on that date, you may discover that how you are invested today is not actually that different from the other funds you are looking at and all you would be doing is increasing the charges by moving funds.
As for the bigger question you have posed ' what should I do with the pension in my employer scheme for the next 15 years' - you will get a lot of input from reading the first 2 or 3 pages of posts in this forum. Working out what suits you will take some time and effort, but on the other hand, there's no rush.

Albermarle

As above , first check the proposed retirement date that is registered with Aegon. This has no legal standing but if you are in a lifestyle fund they will use this target date to adjust your fund balance as you get closer to it. Normally it is very simple to change the date in the system .
Also as above do not rush to move to more expensive funds.
The fund has not done brilliantly since my joining the scheme in term of growth.
One persons view of what is good, and not so good performance will be different . Can you put some figures on this ?
I have a medium-low appetite for risk, so I was looking for an overall more cautious portfolio
Although you are disappointed with the lifestyle fund performance , you are looking to change to a MORE cautious portfolio . A medium -low risk portfolio naturally will not produce spectacular returns . 
So it is good you are looking into your pension investments ( the large majority do not ) but probably a bit more thinking time needed before making any changes .

dunstonh

The fund has not done brilliantly since my joining the scheme in term of growth.

  It is effectively a fund of funds with underlying passives. it is a low cost fund (often available at 0.1% where unbundled) and investing in passives means discrete performance will be in the mid-table area.   It is 60% equities.  So, the medium-risk nature means you will not get 100% equity level growth.

Perhaps your expectation is not matching reality or you are not invested in line with your risk profile.

In looking for more info about the fund and to understand why other funds in similar category (mixed asset 40-85% shares) have done much better in the last 5 years or so, it looks like this fund is specifically targeted to the annuity option at retirement. This is not what I want to do, as I prefer the drawdown strategy.

The mixed 40-85 sector includes funds that have 40% equity to 85% equity.    Its a massive sector and if you were to lay it out on a typical 1-10 risk scale, the funds would cover risk 4 to 9.    You cannot compare performance in that sector without comparing risk.

I have a medium-low appetite for risk, so I was looking for an overall more cautious portfolio with one portion of it to have exposure to global shares to see if I can get the value of the pot to grow.

So, what you have is realistic for your risk profile. Albeit minus the lifestyle reduction (it is usually available in a non-lifestyle version)

The charges you mention seem to be too high for an auto-enrolment scheme.   Are these the real charges or the factsheet charges?   Factsheets assume the default maximum and are not necessarily what you are paying. For example, the internal funds (several you mention) would be capped at 0.75% but could be as little as 0.1% plus platform charge or 0.4% if bundled (no other charges)

LucyHoneyC

Hello,

thank you everyone who took the time to reply, appreciate it!

Here the answers the key questions that were asked:

Albermarle said:

As above , first check the proposed retirement date that is registered with Aegon. 

The set retirement date in my plan is 2033.

Albermarle said:

The fund has not done brilliantly since my joining the scheme in term of growth.
One persons view of what is good, and not so good performance will be different . Can you put some figures on this ?

The total contribution towards this fund since Nov 2015 (employer, mine and gov top-up) is approx 56K. As of today the value of this pension pot is only approx 59K. I perhaps have wrong expectations (and as there have been monthly payments into this pot I don't really know how to calculate an annualized return for the period Nov 2015 - May 2020 TBH), but would have thought that at least 3 decent years (2016, 2017 and 2019) would have allowed this pot to grow a bit more. Below is the annualized discrete performance of this fund from Aegon fact-sheet for reference.

dunstonh said:

The mixed 40-85 sector includes funds that have 40% equity to 85% equity.    Its a massive sector and if you were to lay it out on a typical 1-10 risk scale, the funds would cover risk 4 to 9.    You cannot compare performance in that sector without comparing risk.

The fund includes approx 57% equities, most of which are NA equities. Risk is average, which I think is what I'm aiming for.

So, what you have is realistic for your risk profile. Albeit minus the lifestyle reduction (it is usually available in a non-lifestyle version)

I was not aware that there might be a non-lifestyle version of this - As I'm quite far from what is set as my retirement date in my Aegon account (13 years precisely) though, at this stage I surely should still be in the accumulation phase?

dunstonh said:

The charges you mention seem to be too high for an auto-enrolment scheme.   Are these the real charges or the factsheet charges?   Factsheets assume the default maximum and are not necessarily what you are paying. For example, the internal funds (several you mention) would be capped at 0.75% but could be as little as 0.1% plus platform charge or 0.4% if bundled (no other charges)

These are the charges that are on the funds fact-sheets from the Aegon's website. The yearly management for the Universal Lifestyle Collection fund I'm invested is 0.75%, which I understand is the standard for a Group Personal Pension Plan with Aegon. I would have thought that the charges on the fact-sheets are the actual ones to be applied but I will double-check with Aegon whether this is the case or not.

Any advice is welcome, thanks for reading

Albermarle

I am not an expert at funds etc but at first glance the fund performance is very poor for a 57% equity fund. However the benchmark % look equally poor . Are these maybe annualised returns?
I would have thought that the charges on the fact-sheets are the actual ones to be applied 
Workplace pensions often have a discount from the standard fund charge . Often is not obvious from the paperwork and you need to check with Aegon/employer. 

dunstonh

These are the charges that are on the funds fact-sheets from the Aegon's website. 

In which case, they are not going to be the real charges.

The yearly management for the Universal Lifestyle Collection fund I'm invested is 0.75%, which I understand is the standard for a Group Personal Pension Plan with Aegon. 

That is the default maximum.  There are GPPPs paying half that.

. I would have thought that the charges on the fact-sheets are the actual ones to be applied but I will double-check with Aegon whether this is the case or not.

They are not.   You would have to be a on legacy plan from around 2000 to be on those charges.

I was not aware that there might be a non-lifestyle version of this 

There is.  However, whether it is available to you or not depends on the options selected by your employer.   Some employers opt for a cut down version on fund selection.

LucyHoneyC

Albermarle said:

I am not an expert at funds etc but at first glance the fund performance is very poor for a 57% equity fund. However the benchmark % look equally poor . Are these maybe annualised returns?
I would have thought that the charges on the fact-sheets are the actual ones to be applied 
Workplace pensions often have a discount from the standard fund charge . Often is not obvious from the paperwork and you need to check with Aegon/employer. 

Thanks @Albermarle yes that is my thinking in regard to the fund performance - 57% equity allocation and as of today 56K have has been paid into this pension and the current value stands at just under 59K.
My strategy behind the 3 funds I was looking at is that the Baillie Gifford (with approx 75% equities) would hopefully do the heavy-lifting over the next 13-15 years, while the other 2 more defensive ones, would work better in case of subsequent years of equity volatility.  Or is that obviously a wrong approach?

 Aegon Baillie Gifford Managed Pn >>> 50% - Mixed Asset 40-85% shares

- Aegon 70/30 Defensive Managed Collection (ARC) Pn >>> 30%  - 0-35% shares

- Aegon BlackRock 50/50 Equity and Bond Tracker >>>> 20% - this is the only tracker of the three.