Very basic pension advice..... absolute beginner!

trevjl

Thanks. Yes, I can change them. I will take a look and maybe change to something less cautious.

speedysloth

Albermarle said:
I am not making any judgement , but considering your income , your pensions at age 58 are really very small .

Is it a new job ? Or do you like to spend ?
Anyway your plan to add a lot more to your pension for the next few years is very wise.
As you are a higher rate taxpayer , do not think about investing in ISA's etc, just get as much in the pension as possible ,as the higher rate tax relief is a very generous tax break which might not last forever. 

Just life. For years wage was low and I had no spare money, and pension was minimum. The increases in the last 10 years have been eaten up in a divorce settlement, new mortgage, starting over etc. I do have the house to fall back on as I could downsize and take out around £100k+ equity. I'm not a big spender and have no debt other than the mortgage. 
Plus, to be honest, I've not educated myself on pensions. It was a wake-up call last year when I started.

Albermarle

trevjl said:

MallyGirl said:

If you like the John Edwards book then he has a few related ones that are worth a read too.
At this point you just need to do quite a bit of reading. Gather the info on your current pensions - fees, what they are invested in. Watch for the word 'life styling' as this is an approach that moves your investments into a lower risk portfolio (more cash/bonds) for you ready to buy an annuity. For most people this is no longer appropriate but it is often on the default plan.
work out what you can afford to put in - you are in catch-up now.

Sorry to hijack a little. Can you elaborate. I am in this position with my company Avia DC pension. It was doing great up till a year or two ago, but seems to have rather stagnated with a pretty rubbish £900 investment gain in the last 12 months on around +£180K pot. I looked yesterday and it is in a "lifstage" investment 82%/18%. Much too cautious for my liking as I have a DB to come too.

A lot of funds in traditional pension funds like these ( whether lifestyled or not ) tend to have a high UK % .
The UK stock market has been a laggard in global terms and especially in 2020. A more globally diversified medium risk portfolio would typically have grown about 5% last year ( not bad taking into account Covid ) . This may be as much an issue as the lifestyling.
However the UK markets did perk up a bit in Q4 last year ,and some think they will do better this year , so as always with investments there is no black and white solution.

speedysloth

Albermarle said:

A lot of funds in traditional pension funds like these ( whether lifestyled or not ) tend to have a high UK % .
The UK stock market has been a laggard in global terms and especially in 2020. A more globally diversified medium risk portfolio would typically have grown about 5% last year ( not bad taking into account Covid ) . This may be as much an issue as the lifestyling.
However the UK markets did perk up a bit in Q4 last year ,and some think they will do better this year , so as always with investments there is no black and white solution.

OK that's interesting..... So I know there are no absolutes, but in a 'general' year, if you had a globally diversified medium risk portfolio, what would be the 'average' growth you might expect to see? 

Albermarle

speedysloth said:

Albermarle said:

A lot of funds in traditional pension funds like these ( whether lifestyled or not ) tend to have a high UK % .
The UK stock market has been a laggard in global terms and especially in 2020. A more globally diversified medium risk portfolio would typically have grown about 5% last year ( not bad taking into account Covid ) . This may be as much an issue as the lifestyling.
However the UK markets did perk up a bit in Q4 last year ,and some think they will do better this year , so as always with investments there is no black and white solution.

OK that's interesting..... So I know there are no absolutes, but in a 'general' year, if you had a globally diversified medium risk portfolio, what would be the 'average' growth you might expect to see? 

The recent decade has been good to investors and probably the typical 60% equities type investment could have made on average 4to 5% above inflation ( so around 7% in total ) It is probably fair to say the outlook for the next decade looks a bit flat and 1 to 2 % above inflation is as good a guess as any.

jsinc

trevjl said:

Sorry to hijack a little. Can you elaborate. I am in this position with my company Avia DC pension. It was doing great up till a year or two ago, but seems to have rather stagnated with a pretty rubbish £900 investment gain in the last 12 months on around +£180K pot. I looked yesterday and it is in a "lifstage" investment 82%/18%. Much too cautious for my liking as I have a DB to come too.

A number of Aviva Funds including Lifestyle and Diversified Assets range changed late 2019/early 2020. You should have received info about it: https://workplace.aviva.co.uk/funds/  I don't know if/how this affected your work scheme but may be worth checking.

trevjl

Albermarle

A lot of funds in traditional pension funds like these ( whether lifestyled or not ) tend to have a high UK % .
The UK stock market has been a laggard in global terms and especially in 2020. A more globally diversified medium risk portfolio would typically have grown about 5% last year ( not bad taking into account Covid ) . This may be as much an issue as the lifestyling.

You are indeed correct. I have had a look and the Global tracker is 40% UK. Guess the question is when is a global tracker not  global. It has been below benchmark forever and appears to my middling knowledge pretty pants. I'll be looking to see if Aviva offer anything better 

Albermarle

Many traditional pension funds have this kind of UK % . I think it goes back in history when many UK investors preferred not be too invested in 'foreign ' markets, plus it removes potential exchange rate issues There are some pros and cons to having a 'home bias' to use the jargon, and it is debated often on this forum.
The globalists keep the UK % to around 5% as this represents the size of the UK financial market in the world . However this approach also means having around 60% in the dominant US market which despite recent very good performance can make some people nervous .
Popular funds like Vanguard Life Strategy have a 25% UK bias but most of their competitors do not .
There is some hope, and some recent evidence that the UK market will start to perform better in future ( just a prediction though) 
You probably need to readjust your fund portfolio to reduce this 40%, but to exactly what level would be open to debate .

robatwork

I've always made an assumption that broadly speaking UK property prices reflect UK investment interest. That is, if I have a house in the UK, its value will over the long term go up or down roughly the same as the FTSE.  Obviously this depends on factors like location and which FTSE index, and happy for my assumption to be proved disastrous.

My point is that if you have a house here then you are already "invested" in the UK, given you're prepared to downsize and release equity. So a higher exposure to worldwide markets is sensible in your position.

Secret2ndAccount

robatwork said:

I've always made an assumption that broadly speaking UK property prices reflect UK investment interest. That is, if I have a house in the UK, its value will over the long term go up or down roughly the same as the FTSE.  Obviously this depends on factors like location and which FTSE index, and happy for my assumption to be proved disastrous.

My point is that if you have a house here then you are already "invested" in the UK, given you're prepared to downsize and release equity. So a higher exposure to worldwide markets is sensible in your position.

Whilst there is some correlation, I don't think the link is strong. Obviously in a recession, everyone is poor - house prices and shares go down. In a boom, both go up. But that's about the end of it.

There is constant government intervention in both markets. They give a stamp duty holiday; that messes with house prices. Then they do quantitative easing, which affects the markets. They force down interest rates. Maybe a bit of correlation there as they force savers to go into risk investments, pushing up share prices. At the same time, mortgages get cheaper, so house prices rise.

The same house in London vs Lancashire can vary in price by a factor of 10. This doesn't apply to shares.

If business becomes more efficient, share prices go up. There is virtually no effect on house prices.

If the pound falls (or rises) in value, the effect on stock markets is significant; on house prices not so much.