Long term pension investment funds - Aegon workplace pension

DanJ90

Hi all,

I'm looking for some opinions on my long term pension investments that I plan on holding within my workplace pension fund. My current pension is held within Aegon of which I believe I pay a 0.45 per annum management charge on top of any fund charges.

I have just turned 30, and currently invest 20% each month (15% me, 5% employer - which is around £920 a month) with a 20k pension pot. I am not looking at touching the fund for at least 30 years (60 years old as a minimum, unless I get lucky!) so I am interested in higher risk/100% equities for the duration of this period.

I have been studying  the available fund list for some time now, and I feel that I am starting to get investor "analysis paralysis" so looking for some opinions from people with more experience than myself to confirm that I am not overthinking what I am doing/provide useful pointers that I maybe have missed.

There aren't really any multi asset funds that I feel are particularly aggressive enough - the "best" fund that I can see in this category is the Aegon BlackRock consensus fund which is 80% equities (with 26% of this within the UK - I feel this is too high). All others appear to have a large UK percentage which I am not keen on.

I have therefore narrowed down the following funds where fees do not appear to be excessive:

1) Overseas equity tracker - 100% equities but no UK holdings. Benchmark is the FTSE World Excl. UK - Of which it is lagging behind slightly over the past few years performance so not sure if this is worth it with point 2). https://digital.feprecisionplus.com/documents/aegonportal/en-GB/YN33/FS 

2) Aegon BlackRock World (Ex-UK) equity tracker - Again 100% equities with holdings in 2049 companies. Similar to the Vanguard offering. https://digital.feprecisionplus.com/documents/aegonportal/en-gb/I843/FS

3) Baillie Gifford Balanced Managed - Slightly higher fees (0.2 more than the above two funds) as this is an active fund with 399 holdings at around 75% equities - but looks to have outperformed its benchmark every year since its inception (bar one year) so appears to be well run. https://digital.feprecisionplus.com/documents/aegonportal/en-gb/SN91/FS 

There are also various higher risk/growth funds available such as Fundsmith/Baillie Gifford Alpha Growth and International - Which I guess would be classed as too high risk (foolish even?) to be simply invested in one of these funds only.

So I have a few thoughts:

1) Put all of my current pot and future contributions into the BlackRock World (Ex.UK) equity tracker/Overseas equity tracker- Is this diverse enough? (with the exception of missing UK components, which I could potentially add in, but not really looked at yet).

2) Put all of my current pot and future contributions into the BG Balance Managed fund.

3) Same as 1) but maybe add 20/25% of future contributions into something like the Fundsmith Equity fund/BG Alpha Growth/ International funds.

Any thoughts/opinions are more than welcome!

Notepad_Phil

You've probably got another 30 years or more before you'll be able to access the pension so in your shoes and with those funds available then I'd go 100% equities in an as globally diverse tracker fund as was available.

Now according to the fund sheets the Overseas Tracker is FTSE World ex UK whilst BlackRock World Ex UK says that it actually tracks FTSE Developed ex UK, so normally I'd go for the Overseas Tracker as the FTSE World ex UK holds more countries in it -  however it's a close run thing to choose between them so if you prefer the BlackRock then I wouldn't be unhappy with it.

And if you could add UK into the mix as well then I'd go for that too.

Albermarle

There is a healthy debate about how much UK% you should have . In terms of global financial markets UK is about 5% and the FTSE 100 is a poor performer in particular , so the 'globalists ' would say 5% max for UK .
On the other hand many traditional pension funds and portfolios have up to 40% in UK . Some investors feel more comfortable with UK and it reduces currency risk to some extent. Even some more modern multi asset funds have 25%, although they are not just equities . 
Or you can  sit on the fence and say maybe about 15% looks about right for equities.

DanJ90

Thanks for the reply both.

I definitely will be adding UK to the portfolio list, I just haven’t got round to researching that as of yet as I don’t think it will form the majority of my funds. I currently invest in the HSBC FTSE all world index fund within my ISA which I feel is more along the percentage split I would like to allocate I think.

I was maybe thinking of doing the following after further research:

80%: FTSE Dev world Excl. UK/Overseas equity tracker
10%: Emerging Markets equity tracker
10%: UK Equity tracker

With the amount I have and will continue to invest based on my initial post - is the above perhaps too fine tuned at this point until my pot is larger? 

AnotherJoe

Instead of a UK tracker I'd suggest any of small companies, health, renewables. All these are almost certain to do better than a uk tracker (whatever it's tracking - 100, 250,350, AS? )  over the next 30 years 

DanJ90

Thanks AnotherJoe.

Presumably you are referring to something like this? https://digital.feprecisionplus.com/documents/aegonportal/en-GB/SQ51/FS

There are a few U.K. specific funds (Most of them actively managed with higher fees) so something for me to research.

NedS

I agree with AnotherJoe. At your age, I'd much rather put 10% in something like that UK smaller companies fund than a UK equity tracker. The UK AllShare index is not a growth index and you should see far better long term performance from a decent smaller companies fund. Either of your global fund choices look fine IMHO.

DanJ90

Thanks Ned - Good to know I’m heading in the right direction.

LAPORTS1

I'm in a slightly different position to DanJ90: I've recently moved jobs, the new company have (thankfully) quickly set up a workplace pension with Aegon and started me on a 'default' fund (Aegon Growth Tracker (Flexible Target) Pn). 

I know it's a tough question but I was hoping some of our more knowledgable forum users could suggest if this is a good/bad/indifferent fund. Looking at the allocations it seems very UK heavy. Perhaps I should be looking at other global funds.

I have a target retirement date of between 12 and 15 years, not quite the time that DanJ90 has but obviously I would like to maximise the growth potential before I hang up my boots.

Thanks
LAPORTS1

Albermarle

Traditional pension funds do tend to be very UK heavy. Partly because many of the pension investors have some distorted view that UK safe  but foreign investments dodgy. On the other hand many more experienced investors still like to keep some 'home bias' Lets say it is a matter of debate but 40% UK is high & 5% is a minimum .
Generally these default funds are not good or bad but the problem is that they are a one size fits all , so may not suit you/your situation . With 12 to 15 years to go you could probably be in a more aggressive fund for the first few years at least. However you would have to be prepared for some big ups and downs and not everyone can tolerate that.

AnotherJoe

DanJ90 said:

Thanks AnotherJoe.

Presumably you are referring to something like this? https://digital.feprecisionplus.com/documents/aegonportal/en-GB/SQ51/FS

There are a few U.K. specific funds (Most of them actively managed with higher fees) so something for me to research.

Anything like that that isn't FTSE100 etc !

Over 20-30 years for sure it will do better than just tracking a broad UK mainstream companies index. Though I've never had an investment  in this area, its my understanding that UK small companies has a very good track record. At the very least they arent burdened with dinosaur industries circling the toilet bowl and just about to head down towards the sewers.

For me though the no-brainers are healthcare and renewables.