Potentially silly question

MTB1986

I think I may know the answer to this already, but wanted to make sure I’d understood correctly if anybody can give me a bit of guidance please... I’ve got a work pension that my employer makes salary sacrifice contributions to on my behalf, the fund performance has never been great (I’ve been in it for over 10 years) but I’ve never understood enough before to change it. It was a lifestyle fund (default option) and I’ve just now changed it to 100% non-UK equities fund, am I right in thinking this is likely to provide better returns long term (I’m 34) than the default lifestyle fund generally speaking? I can give more details if needs be. Thanks in advance!

El_Torro

Based on the information you have provided so far the answer is most likely to be yes.

Why are you avoiding UK equities? I can understand not wanting to be overweight in the UK but I don’t see why you would want to avoid it altogether. 

cloud_dog

Over the next 2 or 3 decades probably is the answer.  However you will likely also experience much higher volatility in the value of your pension, more growth will also mean bigger drops when that occurs but, over the long term (2 or 3 decades) the overall pathway will be upwards.

You may want to maintain an eye on your pension and depending on how you plan to draw the pension, and how much initially, you may want to investigate and consider de-risking your pension (exposure to equities) as you approach retirement.  As mentioned, to what degree you do this will very much depend on how you plan to take/use the pension money.  The upside is you have a couple of decades to gain that understanding and become comfortable with an approach. 

MTB1986

El_Torro - I can only choose between UK only or Non-UK equities as far as I can see from the funds I have available, so went for the latter

dunstonh

 I’ve just now changed it to 100% non-UK equities fund, am I right in thinking this is likely to provide better returns long term (I’m 34) than the default lifestyle fund generally speaking?

No.
Whilst UK large cap has not been very good for a long time, the UK is very good when it comes to small cap and medium cap.    So, eliminating the UK as a whole is not a good idea.

Also, the best performing area in one cycle is rarely the best performing area in the next.  Indeed, they often have a complete swap around with the worst in the previous period being top or near top in the next and vice versa.

Albermarle

MTB1986 said:

El_Torro - I can only choose between UK only or Non-UK equities as far as I can see from the funds I have available, so went for the latter

You should normally be able to have a % in both ? So you could have 80% non UK, 20% UK ( for example ) 

[Deleted User]

Yes.
Lifestyle funds have bonds. Their proportion grows over time. Expected returns on an all equity portfolio are higher. 

MTB1986

Thanks dunstonh, that makes sense. Ah yes I think I can split it actually, there aren’t any mixed funds but I could do as you say Albermarle and do 80/20. Might do that instead, I was under the impression non-UK was the way to go solely but I’m happy to put some into UK too. Thank you for the guidance everybody who has posted. 

MTB1986

Thanks cloud_dog, reading things on this board and asking questions has already taught me much more than I knew previously. Glad I’ve discovered this board now and not when it’s too late!

Albermarle

MTB1986 said:

Thanks dunstonh, that makes sense. Ah yes I think I can split it actually, there aren’t any mixed funds but I could do as you say Albermarle and do 80/20. Might do that instead, I was under the impression non-UK was the way to go solely but I’m happy to put some into UK too. Thank you for the guidance everybody who has posted. 

The 'correct ' UK % is a matter of some debate . 5% would normally be seen as a minimum , although some have up to 40% .
One thing does seem to be generally agreed on though , is that the UK part should not be all concentrated in the FTSE100 .

cfw1994

Albermarle said:

MTB1986 said:

Thanks dunstonh, that makes sense. Ah yes I think I can split it actually, there aren’t any mixed funds but I could do as you say Albermarle and do 80/20. Might do that instead, I was under the impression non-UK was the way to go solely but I’m happy to put some into UK too. Thank you for the guidance everybody who has posted. 

The 'correct ' UK % is a matter of some debate . 5% would normally be seen as a minimum , although some have up to 40% .
One thing does seem to be generally agreed on though , is that the UK part should not be all concentrated in the FTSE100 .

I'd lean towards a low UK %....but this is personal thoughts/views: no-one on this thread has a crystal ball ;-)
My main pot moved firmly away from the UK towards a US/International leaning many years ago, & time has proven that to be the right thing...although, as dunstonh rightly points out, these things can swing from one to another.   Working in the Tech industry (US-based), I would not bet against the US though, I *personally* feel that will be where the broad growth will be.