Pension Fund Strategy (Scottish Widows)

michaels

Albermarle said:

Scottish Widows Premier Pension Portfolio 2 (Series 2) (0.25)

This is a managed/multi asset fund with about 75% equities , so medium/high risk.

I had the non premier version of this and it is highly weighted to the UK/FTSE100 with all the consequences that arise from that.

michaels

RTK_1982 said:

Yeah 0.25% management fees on these funds.  They are advertised as 1% but we get a company discount of 0.75% on any funds chosen..  

I think there is a standard 0.25% that they charge to administer the policy so would be 0.5%. 

That's my understanding anyway, might drop them an email to make sure that is the case

0.5% is OK, I am 0.75% with SW, have moved most funds to a global index tracker elsewhere, total cost about 13bps, the difference in charges mounts up on an average sized fund over a number of years.

EG (0.75% - 0.13%)*£500,000 *30 years = £93k!

RTK_1982

michaels said:

RTK_1982 said:

Yeah 0.25% management fees on these funds.  They are advertised as 1% but we get a company discount of 0.75% on any funds chosen..  

I think there is a standard 0.25% that they charge to administer the policy so would be 0.5%. 

That's my understanding anyway, might drop them an email to make sure that is the case

0.5% is OK, I am 0.75% with SW, have moved most funds to a global index tracker elsewhere, total cost about 13bps, the difference in charges mounts up on an average sized fund over a number of years.

What do you mean when you say BPS for the cost?

underground99

RTK_1982 said:

michaels said:

RTK_1982 said:

Yeah 0.25% management fees on these funds.  They are advertised as 1% but we get a company discount of 0.75% on any funds chosen..  

I think there is a standard 0.25% that they charge to administer the policy so would be 0.5%. 

That's my understanding anyway, might drop them an email to make sure that is the case

0.5% is OK, I am 0.75% with SW, have moved most funds to a global index tracker elsewhere, total cost about 13bps, the difference in charges mounts up on an average sized fund over a number of years.

What do you mean when you say BPS for the cost?

BPs is 'basis points', there are 100 BPs in a percent. So 13bps is 13/100 of a percent.

AnotherJoe

RTK_1982 said:

Hi

This is the first I have taken proper interest in pension contributions but realising now is the time to focus on this if I want a decent pension pot at retirement (39 years old - £43k in current pot now with a total £500 a month contributions).

I have 100% of my pension invested in Scottish Widows Baillie Gifford North American.  I know it's high risk but would be the type of companies I would like to invest in if I had the money (top heavy with Tech companies like Tesla, Amazon etc)

I'm thinking of splitting the contributions between a few other low cost equity index funds to cover all the markets

SW SSgA Emerging Markets Equity Index (0.25%)

Scottish Widows Ethical Pension (Series 2) (0.25%)

Scottish Widows Premier Pension Portfolio 2 (Series 2) (0.25)

SW SSgA Europe ex UK Equity Index (0.25)

SW SSgA Asia Pacific Ex Japan Equity Index Pension (0.25)

SW SSgA Japan Equity Index Pension (0.25)

Just wondering what other people's strategies are when it comes to funds? 

Thanks

Joe

A realisation that came much later than it should have to me, is to invest in "smaller" companies as well as larger. Your funds above will just be larger companies.

Now, "smaller" isn't your corner shop, these are usually pretty large multi billion dollar market companies, but even so are often missed out by most global index funds because of the way indexes are weighted.

Lets take a few of your indexes above, that almost certainly means take a handful of names you know like Samsung, Sony, Toyota Hyundai , and they will be the majority in those funds above, as they would have been if you just invested in a single global fund (likely with the exception of emerging markets). Depending what the "ethical" fund above is that might just be duplication, for example, same as a global but excluding oil and armaments. And if you want to exclude those well why then invest in all the other funds which will include them?

So my suggestion is, invest in just two funds, global and smaller companies. Global will cover almost everything you've mentioned, smaller will be new.

Global as an index and smaller as managed, I think most agree that indexes dont work as well for smaller. That was my experience also, though of course just one data point.

I have two SIPPs roughly the same size and one of them follows this, roughly 50/50 global/smaller.  I dont rebalance, I'm letting them run. If smaller continues to outpace larger, all to the good.

JohnWinder

AnotherJoe said:

Global as an index and smaller as managed, I think most agree that indexes dont work as well for smaller. That was my experience also, though of course just one data point.

Not sure most would agree indexes don't work for small cap.  Yes, we are told that, but the recent SPIVA and Morningstar evaluation of active funds suggests otherwise.

'What, then, does the Barometer say about funds domiciled in the UK and Europe?...

The figures are even worse over the long-term, with just 25% of active funds doing better than their tracker counterparts over 10 years….

In 63 (of the 65) of these fund categories, investors would have been better off choosing a passive over an active fund. ...One of the two categories where active funds have managed to outperform is UK Mid-Cap Equity….Denmark Equity funds were the only other group able to beat their passives over 10 years.’  

https://www.evidenceinvestor.com/europes-active-managers-failed-in-2020/

The SPIVA report showed that of GBP denominated funds, 59% of active UK small cap equity funds underperformed their benchmark after 10 years, on a risk adjusted basis.

As compelling as all the reasons small cap is a good field for active managers are, one would have to have doubts.

ex-pat_scot

i had a similar approach to you on the selection of funds in SW.

I've now moved to SW SSgA Int Eq Indx as a global tracker. After discount, I'm on 0.19% AM charge.

RTK_1982

Thanks good posts.  Definitely makes sense for me to pick one of the global trackers over splitting over those 6 funds.  SW SSgA Int Eq Index is showing as 0.25% fee for me after discount.