Vanguard - Pension Financial Planning

andyuk01

My situation

The company i work for was recently purchased by a third party. When we were part of the larger company there was a 'discount' on the AMC with Standard life who managed the master pension trust, based on my fund selection i was paying 0.38% 

With the removal of this discount, the fees are around 0.9% of the fund value

Age 39 and pension value of £198k currently, total contributions of just over £20k per year 

Given the total fees of 0.9% are less than the fee I'd pay Vanguard for their advised service (around 0.89%, declining slightly over time) I'm highly tempted to move my existing pension to this service. I've completed the risk assessment, the initial interview with Vanguard and I'm happy with their proposed allocation and how they will rebalance the fund allocation over time

It doesn't look like Vanguard allow employer contributions so the plan would be to transfer money from SL to Vanguard every year as the SL pension allows partial transfers out 

The last time i posted there were some helpful comments on this i'd missed and the same applies here, is there anything obvious I've missed with this plan?

TIA 

MaxiRobriguez

Missing anything? The 0.9% is expensive. You could easily half that if you didn't need the advised service...

[Deleted User]

I would move but also, you can easily lower costs with Vanguard by investing a little time and reading a couple of books (eg by John Edwards).  Vanguard’s funds are designed so that its easy to invest without additional advice. 

andyuk01

MaxiRobriguez said:

Missing anything? The 0.9% is expensive. You could easily half that if you didn't need the advised service...

That was the original plan and the crux of the dilemma 

Transfer money out of my SL / employer funded pension on a regular basis to a lower-cost platform and pick my own funds, saving the vanguard management fee 

But, I'm aware that the success I've had in picking funds with SL was more through luck than judgment and now my pension is approaching a reasonable value I'm becoming a little more cautious and starting to see the value in the annual review and rebalancing, at least for the next few years 

I suppose the question could be better expressed as 

Is the 0.5% fee levied by Vanguard worthwhile for someone in my situation, which is a high appetite for risk and plan to increase pension contributions over the next few years with a progressively lower appetite for risk over the next 15 years 

In my head there will be a point in the future where my pension will be largely allocated safer funds / bonds so that the 0.5% for rebalancing won't be required, but in the accumulation phase its a worthwhile expense for the benefit it brings 

Maybe relevant but i have a small ISA of £50k that satisfies my desire to tinker with funds and how they are allocated - of my pension, happy to not get involved

andyuk01

Deleted_User said:

I would move but also, you can easily lower costs with Vanguard by investing a little time and reading a couple of books (eg by John Edwards).  Vanguard’s funds are designed so that its easy to invest without additional advice. 

Thanks

I've always liked the simplicity and structure of the vanguard funds, even if i didn't use their advised service i would still move to them 

dunstonh

The company i work for was recently purchased by a third party. When we were part of the larger company there was a 'discount' on the AMC with Standard life who managed the master pension trust, based on my fund selection i was paying 0.38% 
With the removal of this discount, the fees are around 0.9% of the fund value

That is highly unusual and somewhat strange.   
Normally discounts are retained on existing plans but changed for the replacement.  Plus, 0.9% is above the 0.75% auto-enrolment cap on default funds (which usually means the internal funds).

Given the total fees of 0.9% are less than the fee I'd pay Vanguard for their advised service (around 0.89%, declining slightly over time) I'm highly tempted to move my existing pension to this service.

Vanguards ongoing advice charge is the same as the most commonly used IFA charge.  The main difference is that Vanguard is restricted to its own offering and their advice service is very limited.    It appears to be aimed more at the smaller, inexperienced investor who needs hand holding picking investments.  A bit like a robo-provider.

I've completed the risk assessment, the initial interview with Vanguard and I'm happy with their proposed allocation and how they will rebalance the fund allocation over time

How does it differ from their Lifestrategy or Target retirement funds that you can buy non-advised and without the 0.5% fee.

kuratowski

andyuk01 said:

pension value of £198k currently, total contributions of just over £20k per year 

At these values Vanguard, may not be the most cost effective platform for you.  Have you considered one of the fixed-fee platforms?  I.e. iWeb/Halifax/interactive investor.

I've always liked the simplicity and structure of the vanguard funds, even if i didn't use their advised service i would still move to them 

And you would be still able to buy Vanguard funds if you wished, from other whole of market providers, but would also have access to a wider range of investments from other fund managers.

andyuk01

The explanation that was given is that the 0.68% 'discount' on the AMC is only available to active members of the scheme, once our new pension account was in place and the TUPE process completed, we lost that discount 

I've completed the risk assessment, the initial interview with Vanguard and I'm happy with their proposed allocation and how they will rebalance the fund allocation over time

How does it differ from their Lifestrategy or Target retirement funds that you can buy non-advised and without the 0.5% fee.

I'm not 100% sure - hence the question before pressing the button

I compared the suggested allocation of funds following the review they completed and it is similar to the allocation of funds in the 100% lifestrategy fund, the only real difference was the split in US / UK equities with the advice recommending a 40% US equities mix, 10% UK, the lifestyle fund looks to be in 20% each (plus some more via the Ex UK developed world fund) 

My intention was to gradual move to a more cautious fund allocation over time (starting in 8ish years) which i could do with one of the target retirement funds outside their advised service, or by adjusting my risk profile within the advised service 

Albermarle

As said it is strange that you should lose the previously existing discount . I think that used to happen more regularly in the past when you left an employer, but I thought it was not even allowed anymore , although I am not 100% sure.

Is the 0.5% fee levied by Vanguard worthwhile for someone in my situation, which is a high appetite for risk and plan to increase pension contributions over the next few years with a progressively lower appetite for risk over the next 15 years 
'Is paying a financial advisor  worth it ' is a question asked many times on this forum . The answers normally vary quite a lot ( to put it diplomatically ) and in the end it is up to you ,as its difficult to exactly assess the benefits .
However there is a consensus that you are better finding a local IFA , than ones who work directly for an investment company or who work for large national 'wealth management' companies.
Also there is probably a consensus that you need one more if your affairs are complicated ( trusts, blended families, divorce, very large funds , major IHT/LTA issues etc ) 

 In my head there will be a point in the future where my pension will be largely allocated safer funds / bonds so that the 0.5% for rebalancing won't be required, but in the accumulation phase its a worthwhile expense for the benefit it brings 
I think most people would say the drawdown stage is more critical than the accumulation phase . In any case going too safe in drawdown is not recommended. If things go wrong in the accumulation phase you have time to correct it and you are still bringing in a salary . 

Thrugelmir

andyuk01 said:

The explanation that was given is that the 0.68% 'discount' on the AMC is only available to active members of the scheme, once our new pension account was in place and the TUPE process completed, we lost that discount 

I've completed the risk assessment, the initial interview with Vanguard and I'm happy with their proposed allocation and how they will rebalance the fund allocation over time

How does it differ from their Lifestrategy or Target retirement funds that you can buy non-advised and without the 0.5% fee.

I'm not 100% sure - hence the question before pressing the button

I compared the suggested allocation of funds following the review they completed and it is similar to the allocation of funds in the 100% lifestrategy fund, the only real difference was the split in US / UK equities with the advice recommending a 40% US equities mix, 10% UK, the lifestyle fund looks to be in 20% each (plus some more via the Ex UK developed world fund) 

My intention was to gradual move to a more cautious fund allocation over time (starting in 8ish years) which i could do with one of the target retirement funds outside their advised service, or by adjusting my risk profile within the advised service 

Nothing to distinguish Vanguard from other robo advisors with this offering. My personal concern would be that you are restricted to Vanguard products. Rather than potentially exposure to best in class. 

andyuk01

Albermarle said:

As said it is strange that you should lose the previously existing discount . I think that used to happen more regularly in the past when you left an employer, but I thought it was not even allowed anymore , although I am not 100% sure.

Is the 0.5% fee levied by Vanguard worthwhile for someone in my situation, which is a high appetite for risk and plan to increase pension contributions over the next few years with a progressively lower appetite for risk over the next 15 years 
'Is paying a financial advisor  worth it ' is a question asked many times on this forum . The answers normally vary quite a lot ( to put it diplomatically ) and in the end it is up to you ,as its difficult to exactly assess the benefits .
However there is a consensus that you are better finding a local IFA , than ones who work directly for an investment company or who work for large national 'wealth management' companies.
Also there is probably a consensus that you need one more if your affairs are complicated ( trusts, blended families, divorce, very large funds , major IHT/LTA issues etc ) 

 In my head there will be a point in the future where my pension will be largely allocated safer funds / bonds so that the 0.5% for rebalancing won't be required, but in the accumulation phase its a worthwhile expense for the benefit it brings 
I think most people would say the drawdown stage is more critical than the accumulation phase . In any case going too safe in drawdown is not recommended. If things go wrong in the accumulation phase you have time to correct it and you are still bringing in a salary . 

Thank you for those comments 

Appreciate it is a vague and often asked question, i guess my situation is relatively simple 

I'm aiming for the LTA at 57/58, my other half has a good DB pension from the police and by the time I'm approaching 55 the mortgage will be paid off. Barring any major lifestyle changes my earnings potential should continue to increase. No real debt and a cash buffer for rainy days with no financial complexity