Vanguard Pension

Alexland

Deleted_User said:

If you are starting to invest today and planning to drip into the market for the next 30 years, starting slower and then accelerating (like most of us) then in a perfect world you’ll have a few nice crashes early on.  Returns in the first 10 years are the opposite of critical. 

Maybe I lived my life backwards but I made far higher contributions from earnings in my 20s and 30s than I intend to in my 40s and 50s when I expect my earnings and working hours will further reduce. I was fortunate to have a few colleagues that helped me understand that it was better to get the compounding process working early rather than later. I didn't want to spend my 50s under the thumb of trying to increase pension contributions while helping pay for the kids university and house deposits so decided to make every effort to get those contributions done in advance as early as possible with further contributions just derisking the outcome.

Msjf

I did the same and it's one of the things I thank my younger self for most. I paid £200 pm into a Company AVC scheme in the late 80s and 90s when I was in my 20s and 30s, despite some challenges also paying down a 100% mortgage on my first property purchased in 1991.   When I then set up my own business as sole Director, the Company paid whatever employer contributions it could afford.

This meant that when I became a parent in my early 40s, I could take a break from work and then return part-time after a couple of years, feeling secure that retirement plans were still on track. Business also suffered a significant downturn in 2009 and I put pension contributions on hold for a while. If I hadn't benefitted from compound growth from extra pension contributions in my early adult life, the AVCs and personal pension having since been consolidated into a SIPP  - with the help of great guidance and tips on this forum: thank you so much! - I wouldn't now have the security of drawdown income to supplement variable part-time earnings and would have had a crisis this year with loss of income and not meeting coronavirus financial support criteria.

Mutton_Geoff

Deleted_User said:

Returns in the first 10 years are the opposite of critical. 

I disagree, and so does Einstein. It would be more advantageous to put in 10 years then stop than delay any/increased contributions until later.

https://www.telegraph.co.uk/finance/personalfinance/investing/10742396/When-saving-for-10-years-pays-more-than-saving-for-40.html

[Deleted User]

Mutton_Geoff said:

Deleted_User said:

Returns in the first 10 years are the opposite of critical. 

I disagree, and so does Einstein. It would be more advantageous to put in 10 years then stop than delay any/increased contributions until later.

https://www.telegraph.co.uk/finance/personalfinance/investing/10742396/When-saving-for-10-years-pays-more-than-saving-for-40.html

Ok but the word “returns” does not mean what you think it does. Check this out:

1. https://www.investopedia.com/terms/r/return.asp
2. https://www.investopedia.com/terms/r/retirement-contribution.asp

You are talking about 2 but you are disagreeing with a statement referring to 1. Hence your confusion. 

Linton

Mutton_Geoff said:

Deleted_User said:

Returns in the first 10 years are the opposite of critical. 

I disagree, and so does Einstein. It would be more advantageous to put in 10 years then stop than delay any/increased contributions until later.

https://www.telegraph.co.uk/finance/personalfinance/investing/10742396/When-saving-for-10-years-pays-more-than-saving-for-40.html

Contributions in the first 10 years are critical, returns far less so.  Assuming contributions increase with inflation It could well take 10-15 years before the annual return exceeds the annual contribution and a few years beyond that before cumulative returns exceed cumulative contributions.

If you dont believe me do what I did and spend 5 minutes setting up a spreadsheet model firstly with normal returns in the first 10 years and then with zero returns in the first 10 years.

[Deleted User]

Linton said:

Mutton_Geoff said:

Deleted_User said:

Returns in the first 10 years are the opposite of critical. 

I disagree, and so does Einstein. It would be more advantageous to put in 10 years then stop than delay any/increased contributions until later.

https://www.telegraph.co.uk/finance/personalfinance/investing/10742396/When-saving-for-10-years-pays-more-than-saving-for-40.html

Contributions in the first 10 years are critical, returns far less so.  Assuming contributions increase with inflation It could well take 10-15 years before the annual return exceeds the annual contribution and a few years beyond that before cumulative returns exceed cumulative contributions.

If you dont believe me do what I did and spend 5 minutes setting up a spreadsheet model firstly with normal returns in the first 10 years and then with zero returns in the first 10 years.

Right. In fact, someone with a 40 year investment horizon benefits from a few really deep bear markets through the first half of his career. Does not work for someone approaching retirement or retired. 

shell145

Can I jump on this thread please?
I'm 33, self employed and looking to start my first pension. I want something that I can set up, add in £13k lump sum, set up a direct debit of £600/month and forget about (other than perhaps make additional adhoc transfers into)

I am looking at Vanguard - Target Retirement 2050 Fund, which is 79% Equity and 21% Bonds.
Ongoing charge 0.24%. It says no entry & exit charge, does this mean there is no charge for any money I transfer in or for transferring the pension in the future if I should wish to do so?

I also see it is 0.22% ongoing charge for their Lifestrategy funds. I am not sure, if at age 33, perhaps I should go for LifeStrategy 100% for a number of years, rather than the Target Retirement 2050 fund which is 79% equity

Many thanks

[Deleted User]

shell145 said:

Can I jump on this thread please?
I'm 33, self employed and looking to start my first pension. I want something that I can set up, add in £13k lump sum, set up a direct debit of £600/month and forget about (other than perhaps make additional adhoc transfers into)

I am looking at Vanguard - Target Retirement 2050 Fund, which is 79% Equity and 21% Bonds.
Ongoing charge 0.24%. It says no entry & exit charge, does this mean there is no charge for any money I transfer in or for transferring the pension in the future if I should wish to do so?

I also see it is 0.22% ongoing charge for their Lifestrategy funds. I am not sure, if at age 33, perhaps I should go for LifeStrategy 100% for a number of years, rather than the Target Retirement 2050 fund which is 79% equity

Many thanks

Personally, I would go for 100% equity if I were your age. You will likely get a better return. Then you can start adding bonds within 10 years from retirement. 

VLS100 is a good option. There are a couple of other good options discussed in another thread, eg HSBC’s all world fund. 

If you are with Vanguard SIPP then there are no entry or exit charges. There is an ongoing account charge of 0.15%. 

shell145

Deleted_User said:

ersonally, I would go for 100% equity if I were your age. You will likely get a better return. Then you can start adding bonds within 10 years from retirement. 

VLS100 is a good option. There are a couple of other good options discussed in another thread, eg HSBC’s all world fund. 

If you are with Vanguard SIPP then there are no entry or exit charges. There is an ongoing account charge of 0.15%. 

I've bit the bullet and done it! I set up a pension with vanguard 100% equity. My 15k lump sum became 18.75k, 650/month by d/d. it feels good! I was umming and ahhing for over 18 months. Something is better than nothing. thank you

[Deleted User]

shell145 said:

Deleted_User said:

ersonally, I would go for 100% equity if I were your age. You will likely get a better return. Then you can start adding bonds within 10 years from retirement. 

VLS100 is a good option. There are a couple of other good options discussed in another thread, eg HSBC’s all world fund. 

If you are with Vanguard SIPP then there are no entry or exit charges. There is an ongoing account charge of 0.15%. 

I've bit the bullet and done it! I set up a pension with vanguard 100% equity. My 15k lump sum became 18.75k, 650/month by d/d. it feels good! I was umming and ahhing for over 18 months. Something is better than nothing. thank you

Well done. Its all about putting the money in and maximizing your time in the market. Keep putting the money in and try not to look at the value more than once a year. Its all noise until you get closer to retirement.