Lifesight - default options v selecting funds?

jimmy_81

Hi all, hoping I might be able to get some useful advice on how to manage my company DC pension.

My company scheme is through Lifesight. So far, I've just left things in the default fund allocation, Lifecycle Drawdown Low Risk - currently about 50:50 between the Lifesight Equity and Lifesight Diversified Growth funds. Given recent events, they seem to be performing reasonably well.

However, I've got a nagging feeling that at 39 years old with some time to go before retirement I should be looking at higher risk, (hopefully) higher return approaches.

I can select a higher risk strategy while staying on the managed Lifecycle approach, or alternatively, I can fully self-manage the fund allocation. Obviously the funds available are limited, but there seems to be a reasonable range of options.

What's the general verdict on how to best approach this? I've tried researching it online but found it hard to find real, genuine advice on the pros v cons of the various options.

I'm a bit reluctant to jump into managing the fund allocation myself as, frankly, I have no idea about investing and I'm worried about making mistakes. I gather that it's probably best to look for solid index-tracking passive funds with lower fees, right?

However I'm also not sure that just selecting the "higher risk" Lifecycle option will really gain me all that much either... 

Would appreciate any advice, information, or links to genuinely helpful material. In particular, if anyone has direct experience with Lifesight that would be great!

dunstonh

What's the general verdict on how to best approach this? I've tried researching it online but found it hard to find real, genuine advice on the pros v cons of the various options.

If you know what you are doing and the fund choice is wide enough, then self selecting and building your own portfolio can result in better returns.  If you dont know what you are doing, it could result in lower returns (I had one this morning who did just that in the past and the selection was awful - mainly the asset allocation was way off what could be considered sensible and its cost him around £100k compared to what he was in before).

I'm a bit reluctant to jump into managing the fund allocation myself as, frankly, I have no idea about investing and I'm worried about making mistakes. I gather that it's probably best to look for solid index-tracking passive funds with lower fees, right?

No.  Index tracking funds invest in a single area (exception of global equity inc UK).  So, unless you go 100% equity and pick a global tracker you would need to build a portfolio of index tracking funds and decide the weightings into each.

Multi-asset funds are the method of choice for someone not wanting to make that decision (and not going 100% equity).

However I'm also not sure that just selecting the "higher risk" Lifecycle option will really gain me all that much either... 

Its a fair concern.   I had one recently that went up the risk scale with his workplace pension about 5 years ago and the performance of that higher risk fund was worse than the medium risk funds he was in previously.  Extra risk does not automatically mean better returns.     I personally dont like fully managed multi-asset funds but they are very common on workplace pensions.   If there is a multi-asset fund with underlying passive investments then they can be a good option

Albermarle

So far, I've just left things in the default fund allocation, Lifecycle Drawdown Low Risk - currently about 50:50 between the Lifesight Equity and Lifesight Diversified Growth funds. Given recent events, they seem to be performing reasonably well.

Often the problem with these funds is that they derisk too much as you approach retirement but that will not affect you for many years yet . Diversified growth fund could mean anything really but presumably has some % equity in it so with over 50% equity overall it would not normally be classified as low risk but more medium.

Normally you are right that higher % equity is recommended for someone still a long way from retirement and  some posters on this forum are 100% equity but in this case you need to be prepared for some volatile periods .

One option could be to keep some in the default fund and move some to a higher risk fund - a kind of half way house, although as said it is not guaranteed to be more lucrative.

As Dunstonh says , I would not go for a mixture of index trackers until you understood better how it all works .

Thrugelmir

jimmy_81 said:

However I'm also not sure that just selecting the "higher risk" Lifecycle option will really gain me all that much either... 

Focus on what you can afford to save. Compounding will come to your aid as the years pass. Only ever risk what you can afford to lose.