DIY Pension Management

Maureen43

Hi All

I have recently looked into using an IFA to look at my pension pots / retirement planning. Their fees (3.5% at start then 1% per year) felt disproportionate for a £60k pension pot, so I have decided not to use an IFA's services and to go it alone instead.

I want to know if I am in the best performing funds with the most competitive fees. I'd be grateful if anyone could give me any advice on how to get started with this. Are there other things I need to consider?

Many thanks

Maureen

TimSynths

Morning Star is pretty good-

Morningstar Financial Research, Analysis, Data and News

I've got my Sipp with Vanguard for low fees.

Marcon

Maureen43 said:

Hi All

I have recently looked into using an IFA to look at my pension pots / retirement planning. Their fees (3.5% at start then 1% per year) felt disproportionate for a £60k pension pot, so I have decided not to use an IFA's services and to go it alone instead.

I want to know if I am in the best performing funds with the most competitive fees. I'd be grateful if anyone could give me any advice on how to get started with this. Are there other things I need to consider?

Many thanks

Maureen

Fees are only one part of the equation. A high risk, high performance fund may appear to cost more, but if it returns a better outcome, the fees could be more than worthwhile..and, of course, past performance is no guarantee etc etc.

Why not post details of where you are invested now, how old you are/your attitude to risk and see if some of the well-informed IFAs posting on this board - and others! - can comment helpfully?

AlanP_2

There is plenty to consider, and it will take a bit of time and effort to get your head around it all but welcome to the club.

For a £60k pot as you say an IFA is probably not a realistic option so you are looking at DIY options.

Have a read of DIY Pensions by John Edwards https://www.amazon.co.uk/DIY-Pensions-Simple-Retirement-Planning-ebook/dp/B00B7QN8XM as a pretty good starting point.


I would suggest that being in "the best performing funds with the most competitive fees" sounds like a good idea but probably isn't once you look under the hood,

The best performing fund over a given time frame will vary so would you be making comparisons over 1 day, 1 month, 1 year, 5 years, 10, 20?

To be the "best performing" they need to be taking more risk than a lower performing fund. Great when things work out and the value increases but when markets fall they will typicaly fall further and faster than the lower risk fund. Have a look at the performance data for something like the HSBC Global Strategy or Vanguard Life Strategy (VLS) range to see what I mean about how VLS80 or VLS100 compares to VLS 20 or VLS40. Would you be comfortable with something like VLS 80 with a possibility of 30-40% drops in value? If you would be concerned and start losing sleep that is more risk than you are comfortable with so consider VLS60 instead for example.

This can be tricky to do until you have "been there and got the T-shirt" and depends on many factors. A comment was made on another thread recently asking how the poster would feel if his pension pot fell by more than his annual salary, even though intellectually he knew it should recover given enough time.

For most people the objective is to invest in something that achieves what they want after costs.

For someone in their mid 20s that might be to grow the pot as fast as possible so using what they hope will be high performing options makes sense and they could go 100% equity and rely on rising markets over 30+ years to smooth out any falls along the way, also benefiting from "buying low" when prices fall.

Someone in their 60s intending to start using that pension from next week might be a lot more reluctatant to take a chance on markets continuing to rise over the next 30 years particularly if they have no other source of income. They might be around 40-70% equities, 20-30% bonds and a largish cash pot.


So what you need to consider are your objectives and timescales? your attitude to risk, how much you need to live on in retirement, when you want to retire, your overall financial situation (mortgage, debt, other savings etc.), career / salary prospects, current and future tax rates, pension contribution %'age and £ value, employer contribution, any other pensions, family unit situation e.g. is there a spouse or partner with / without pension and so on.

These are the sort of things an IFA would cover in initial meetings before they start to think about what investmement choices are suitable.



PS - The HSBC and VLS options mentioned above are multi-asset funds of the type mentioned by Dunston below.

 

dunstonh

I have recently looked into using an IFA to look at my pension pots / retirement planning. Their fees (3.5% at start then 1% per year) felt disproportionate for a £60k pension pot, so I have decided not to use an IFA's services and to go it alone instead.

The fee in that scenario is not unreasonable.  It's a small fund and it is very common for advisers to charge 1.0% p.a. on small funds and taper their charges as the values get higher.    In reality, many IFAs wouldn't even offer services to you as it's too small to be viable.  Unfortunately, EU directives have made it difficult for advisers to offer services to smaller investors cost effectively.   

I want to know if I am in the best performing funds with the most competitive fees.

That is an impossible question.     You can never know in advance what the best performing funds would be and in all likelihood, you shouldn't be investing in the best performing funds apart from perhaps the odd single digit percentage.   You would be getting on a rollercoaster ride.    It is also likely that many of those funds would be at the higher end of the cost scale too.   So, your two objectives would conflict with each other.

In reality, with a small pension fund like yours, its better to stick to multi-asset funds and not try and build your own portfolio.  You don't have the skillset to do build a structured portfolio and there is no point until you get to larger values.  Mutli-asset funds are perfect in your situation.

Albermarle

Also suggest you read this forum regularly as you will learn a lot . Just remember investing choices is largely about your own circumstances, personality and knowledge level and other peoples opinions are just that.

As mentioned as well as the investing side , you need to get up to speed on issues like pension tax relief etc .

thickasabrick

Maureen43 said:

Hi All

I have recently looked into using an IFA to look at my pension pots / retirement planning. Their fees (3.5% at start then 1% per year) felt disproportionate for a £60k pension pot, so I have decided not to use an IFA's services and to go it alone instead.

I want to know if I am in the best performing funds with the most competitive fees. I'd be grateful if anyone could give me any advice on how to get started with this. Are there other things I need to consider?

What worked for me was creating a net worth spreadsheet and tracking the number of units of each fund using the free portfolio tools from Morningstar, Trustnet and Yahoo Finance. 

Log onto the pension provider portal and list each of the funds and how many units of each fund you have purchased.
For defined benefit you may only get a projected annual pension value at retirement age and it's current transfer value.

For more accuracy obtain the transaction history of each of your pension pots.  Should list the date the units were purchased and the price paid. Use the date, number of units purchased on that date to build up to the final figure you have for the number of units for the fund. If you can't get this information use the total number of units and the price on the day you view the figures in your pension provider portal.

Can take a bit of digging as sometimes the description of the fund pulls up multiple selections when looking on Morningstar, Trustnet or Yahoo finance. The fund factsheet should list the ISIN or SEDOL number which makes searching for it more accurate.

The Morningstar free portfolio tool has a Performance tab which displays a graph which you can compare against e.g. Global Equity PP.

The Trustnet free portfolio tool displays a perfomance graph comparing against aggressive, balanced and cautious example portfolios for either 1, 3 or 5 years. It's quite a nice visual aid.

I also track the service charges for each of the pension providers (platform). Easy enough with my SIPP as it is listed in the transactions. 

You may also have historical ongoing adviser charges if your pension was setup by an IFA, in that case you would have to dismiss them and inform both the financial adviser and the pension provider that you were no longer using their services and the fees would stop.

OldMusicGuy

You need to understand why the statement "best performing funds" is the wrong mindset for managing your own investments. First, you can't judge funds on past performance. Second, if you keep switching funds to chase returns, you will be making a common mistake of DIY investors, which is to switch funds too frequently in the hope "there's always something better" (I know, because I fell prey to this one). 

I echo what AlanP-2 said above as one who has been on this journey (and am now very happy I do not pay what I regard as extortionate IFA fees). Read the John Edwards book as a starting point, it's a great first step on the way. Most importantly, set yourself clear financial objectives and also understand (and question) your attitude to risk. The "best" funds for YOU are the ones that will help you achieve your financial objectives at a risk level you are comfortable with. 

MaxiRobriguez

You have a £60k pension pot...

What does the final total need to be to give you a decent retirement (hint: you can use your current salary, divided by 3, multiplied by 2, multiplied by 25 for a rough estimate), and how long do you have left before retiring to generate that sum?

You can then see how much you need to contribute/gain on in your time remaining to see how far you are off and what sort of risks you'll need to take to generate the sum,

Chances are you'll be further off than you think, and your choices will be:
1) Work longer
2) Save more now
3) Take much riskier investments (which may lead to failure, and increasing duration of #1).

zagfles

See this thread from someone with a similar size SIPP asking about advice

https://forums.moneysavingexpert.com/discussion/6256645/how-to-get-advice-on-60000-in-sipp/p1

Maureen43

Thank you all for your generous help. I have bought the book and will read the associated threads.

I'm 52, would ideally like to retire at 60 and am risk averse! I am also horrified by how unlikely it is that I will actually be able to retire at 60, based on my fund value. I started paying into my pension at 22 as well!