What Sort of Split Between Workplace Pension Portfolio and S&S ISA?

Wonky_Dan

Hello all. I've finally started getting to grips with my personal finances at the age of 33 after ignoring them for far too long. I'm looking for some advice or opinions about how I should set up my pension and ISA portfolios.
I currently have a workplace pension with Scottish Widows money4life and I'm putting in the max amount to get my highest employer match. Now I've looked into the holdings of the default plan I'm in and its mix is roughly 18% corporate bonds, 30% UK, 43% global, 4% emerging markets with an additional 4% Europe, 3% Pacific. My plan was to sell out of this default fund and recreate a global tracker with a bit more accurate weightings. 

I also have a S&S ISA with Vanguard which I've recently opened, investing in the Global all cap fund. 

Now my issue is that I keep flip flopping on what to do with the pension portfolio. It will be by far my biggest investment so I feel it should perhaps be more aggressive. At first I had it set up with 25% bonds, 10% Emerging markets, 10% UK for a little home bias and 55% Dev World Ex UK (that is currently how it is invested) but felt that was too conservative so changed future payments to 100% equities on the same, still weighted as a global tracker. I'm then wondering if I should add small companies funds for extra risk/reward and making it a little different from a standard global tracker, then flipping back to thinking I should have bonds, then thinking it makes sense to underweight the US slightly while it seems expensive and other markets are still below their pre covid levels so that I'm buying some cheaper equities. I started off with a simple idea and now I've over complicated it which has led to decision paralysis. I feel I'm pretty risk tolerant seeing as I've spent the last decade not even knowing my pension existed and I also have years to go before I'll be retiring.

I guess my question is, does it make sense to have my pension and ISA both setup as simple global trackers or should I look at making one portfolio different, slightly safer with a bond allocation or more aggressive 100% equities with some small companies funds or similar? 

Once I've actually settled on an allocation I'm going to just leave it and if needed, re balance twice a year.

I hope that makes some kind of sense, it was easier to make sense of in my head!

Brynsam

Good for you for tackling this at all!

I think you probably are over-thinking things a bit, which is pretty easy to do in such a complicated field. Why not change the question and ask yourself what you are trying to achieve? Your pension is definitely long-term savings which you won't be able to access until you are well into your 50s; your ISA may serve other, short term functions. By focussing on what you want each type of investment to do, you may find it easier to reach an answer. 

Wonky_Dan

Brynsam said:

Good for you for tackling this at all!

I think you probably are over-thinking things a bit, which is pretty easy to do in such a complicated field. Why not change the question and ask yourself what you are trying to achieve? Your pension is definitely long-term savings which you won't be able to access until you are well into your 50s; your ISA may serve other, short term functions. By focussing on what you want each type of investment to do, you may find it easier to reach an answer. 

Thanks for the reply! I think it's information overload as I've been reading books and forums pretty heavily so have been exposed to all sorts of views. I'm obviously totally new to investing.

I don't think I really have a goal other than building wealth, maybe for an early retirement or at least being able to go part time and do nice things. That's where the ISA comes in I guess, as an easily accessible supplemental income. I feel like 100% equities in both pension and ISA is best for maximum growth but then the current bond situation keeps coming up. Some people like them still and others feel there is no point in holding them. So perhaps It would be an idea to go 100% equities with a simple global tracker for the pension as that's long term and higher risk and then have a bond allocation in the ISA in order to soften any potential market falls for what is going to be a fund I may need to access earlier than the pension? 

Mutton_Geoff

Even when you run out of employer top ups, you can still put up to £40k a year (or the equivalent of your annual taxable salary if lower). There is an immediate 25% tax benefit putting money into a SIPP rather than an ISA (that you've also already paid tax on). Well done for planning at a young age. I'd keep it simple (Vanguard/Blackrock/HSBC single fund) and max out the tax benefits into a SIPP but make sure you have a 3-6 month rainy day fund in an easy access account.

ISAs (especially cash ISAs) are a bit over rated now in times of low interest/low growth as it takes a large sum to beat the £1,000 tax allowance on savings interest and the CGT limit on a GIA account.

Brynsam

Mutton_Geoff said:

Even when you run out of employer top ups, you can still put up to £40k a year (or the equivalent of your annual taxable salary if lower). There is an immediate 25% tax benefit putting money into a SIPP rather than an ISA (that you've also already paid tax on). 

Don't forget that the £40K maximum is the limit on the total of personal contributions, the 25% claimed by the provider on your behalf and added to your DC pot, + any employer contributions (which are paid gross, so you don't need to take tax into account for those).

Wonky_Dan

Hmm, I'm replying but my posts don't appear to be getting put up.....

Wonky_Dan

I was unsure about the SIPP as I felt uncomfortable about the money essentially being locked away. I know it's an investment and I have no intention of spending it anytime soon but still....
I wish I'd started learning about all this earlier!

Albermarle

Wonky_Dan said:

I was unsure about the SIPP as I felt uncomfortable about the money essentially being locked away. I know it's an investment and I have no intention of spending it anytime soon but still....
I wish I'd started learning about all this earlier!

It is always a trade off and only you can decide how to play it , assuming you already get max employer pension contributions .
Pension has a tax benefit over the ISA ( minimum 6.25%) but the money is tied up long term. 

NottinghamKnight

If you pay higher rate tax then I'd put more into pension, if not then I'd fill an isa, though you can of course do part one and part another. 

Thrugelmir

Wonky_Dan said:

 Now I've looked into the holdings of the default plan I'm in and its mix is roughly 18% corporate bonds, 30% UK, 43% global, 4% emerging markets with an additional 4% Europe, 3% Pacific. My plan was to sell out of this default fund and recreate a global tracker with a bit more accurate weightings. 

Accurate weightings according to what or who?  What do you know that the investment manager doesn't? 

Cus

Thrugelmir said:

Wonky_Dan said:

 Now I've looked into the holdings of the default plan I'm in and its mix is roughly 18% corporate bonds, 30% UK, 43% global, 4% emerging markets with an additional 4% Europe, 3% Pacific. My plan was to sell out of this default fund and recreate a global tracker with a bit more accurate weightings. 

Accurate weightings according to what or who?  What do you know that the investment manager doesn't? 

I assumed the OP means a global equity only tracker weighted more in line with market caps.  So not 30% UK, no corp bonds etc.