Pension Fund Changes - Sense Check

BankerInTheBlack

Good Afternoon everyone,

I’ve been a long time reader here and find all the information fascinating. I’ve spent a lot of time researching and learning and wondered if some of you would mind sense checking my thoughts for me?

I’ve been invested in my default workplace pension plan (Mixed Investment 40-85% Shares) for a number of years without much thought unfortunately. I’m currently 35 and earn circa 40k p/a (this is unlikely to rise much as I work in the charity sector so I'd like to ensure I make the most of my pension).   My current pension pot is £70k. 

Having spent time considering my risk appetite, I’m willing to take much higher risk than I do at present.  I’ve read lots of material and come to the conclusion that I’d like to invest in 100% equities.  I’m currently leaning towards a global equity tracker, although I do also like the look of some of the managed global equity funds.

The workplace pension plan is with Aviva (formerly Friends Life) and there are a limited number of funds available.   

Plan of Action:

95% of current pot and future contributions to “Av BlackRock World (Ex-UK) Equity Index (Aquila C)”

5% of current and future contributions to “Av BlackRock US Equity Index (Aquila C)”

The addition of the second fund provides 5% cover in the UK market (equal to the UK’s share in the world equity market). 

AMC on each of these funds is 0.73% which is the lowest of all the funds available to me. 

Questions

Does my thought process seem okay? I’ve digested so much info I’m worried I cant see the wood for the trees!  I've tried to be as informed as possible before asking any stupid questions...I hope I've avoided this pitfall! 

Would anyone have any further thoughts on anything I should consider?

Thanks for all your useful contributions to other posts and for any pointers you can give me!

green_man

Do you mean the 5% is in a UK index, you have put a US index?  This would obviously not make sense?.

Assuming it is a UK index tracker you mean the yes this would make reasonable sense, at your age I would be in 100% equities.  

However I personally would be slightly reluctant to move all my current pot to equities at the moment.  Put all future contributions into those funds but maybe hold off with the pot as there is quite a lot of potential downside at the mo’ IMO.

The main thing is to keep pumping the money in even if there is a big crash (in fact particularly if there is a big crash). You can’t go too far wrong with a world tracker until you are at least 10 years from retirement.

green_man

However just looking at those charges that seems quite high for a basic World tracker unless that also includes platform charge etc.

dunstonh

green_man said:

However just looking at those charges that seems quite high for a basic World tracker unless that also includes platform charge etc.

The vast majority of workplace pensions and traditional personal pensions dont have a platform charge as they are not platforms.  They are mono charge. i.e. AMC only.      As the funds appear to be pension funds (Av at the front), then this would appear to be one of those.

BankerInTheBlack

Thanks for the response @green_man.  I do indeed mean 5% in the 'UK' index tracker...I checked that multiple times and still missed it! 
Re: moving my current pot, I can see the default fund I'm in at present is currently invested in 80% equities. So it would only be an additional 20% in equities compared to present.  I suppose this does give me a little more protection in the volatile times.  I will continue to contribute circa £350/month regardless.

Re: the charges, I have to admit I can't quite get my head around them.  There doesn't seem to be platform charges listed...only Annual Management Charge next to each fund option.  They range from 0.73% to 1.48%.  Accompanying paragraph:

"The Annual Management Charge (AMC) shown below is the charge that will apply to any regular contributions you make into your plan.  The charge for other types of contribution may be higher or lower than the charge shown below.  The AMC does not include fund additional expenses.  These relate to the administration of the fund and could include custody, depositary, regulatory and trustee expenses.  They are paid directly out of the underlying fund.  If you want more information about the funds or charges shown below, please contact us"

Albermarle

I am pretty sure with Aviva they just have the AMC charge.
Your default fund seems high % equities . Not saying that is bad as from what you wrote it probably suits you . However it seems high for a default fund , so might be worth checking again that you have read the info correctly.

BankerInTheBlack

Albermarle said:

I am pretty sure with Aviva they just have the AMC charge.
Your default fund seems high % equities . Not saying that is bad as from what you wrote it probably suits you . However it seems high for a default fund , so might be worth checking again that you have read the info correctly.

Hi @Albermarle thanks for the reply and clarifying the AMC (and @dunstonh).  Re: the default fund, I also thought it seemed high.  It's the Aviva My Future Growth fund (classified as Mixed Investment 40-85% Shares), however when I look at the fact sheet it gives the following percentage breakdown:

1		International Equities	71.20
2		Global Fixed Interest	14.80
3		UK Equities	6.70
4		UK Corporate Fixed Interest	4.60
5		Alternative Investment Strategies	1.00
6		Property	0.90
7		Others	0.50
8		Others	0.10
9		Money Market	0.10
10		UK Gilts	0.10

As you rightly said, given my age, I'm happy to move towards 100% equity...this had been my plan.  I'm still leaning towards moving all current and future contributions to the global equity index tracker, however, @green_man's comment above has made me wonder if I should hold off moving my full pot at present. 

[Deleted User]

Your plan looks fine to me, although I assume there is a typo in your original post. Presumably the second fund is UK. 

BankerInTheBlack

Deleted_User said:

Your plan looks fine to me, although I assume there is a typo in your original post. Presumably the second fund is UK. 

Hi @Mordko, thanks for the reply. Yeah that should have said UK not US! Any thoughts on shifting the full pot now or only future contributions until things calm down?  Appreciate no one has a crystal ball!

[Deleted User]

AlistairMSEnew said:

Deleted_User said:

Your plan looks fine to me, although I assume there is a typo in your original post. Presumably the second fund is UK. 

Hi @Mordko, thanks for the reply. Yeah that should have said UK not US! Any thoughts on shifting the full pot now or only future contributions until things calm down?  Appreciate no one has a crystal ball!

I see no reason to wait. If asset allocation A is better than B then why spend an extra day having your money in B?  

You must be prepared that things won’t be smooth in the short term. In the long term it becomes an irrelevance. Spot Black Monday and other disasters on this plot: https://www.forecast-chart.com/historical-sp-500.html

cfw1994

Looks fine to me. 
We also use Aviva, and the AMC is the total cost (although our AMC charge is a little lower)

Our default fund was BlackRock (50:50) Global Equity Index Tracker....which was 'okay', but your fund was another option, & the 10 year comparison between them was fairly chunky for two funds that "sound similar" - approx 100k in the former would have got to around 200k (ie, doubled), whereas your fund tripled (around 300k)     

Only question then is whether you have other funds you might want to look at, & perhaps consider putting a small % into.   
We have around 80, and whilst past performances is clearly no indication for future results, I personally have a fondness for US tech (my line of work!), and have some of mine in a Baillie Gifford American fund - the 10 year figures for that took that 100k to almost 900k!

OF COURSE it is entirely possible that things in such a fund could go pear-shaped, and your chosen fund is a good overall tracker, I would say....but if you fancy "spreading those bets" even further, that is an option to look into.   
For me, it involved a slack day printing and comparing fund sheets (with the proviso that past perf is no guarantee to future, etc)......if only to gain a better appreciation for what funds are invested in.