When to diversify a pension?

WSB

For the past 23 years when I was self-employed I was paying into my Ltd company's executive pension scheme.

At the age of 50, I've now got a permanent job with its own pension scheme and closed my Ltd company, therefore can no longer contribute to my previous Ltd company pension scheme which is fine.

The self employed Ltd company Global Equity pension (St James Place) savings value is currently £531K which I think sounds reasonably healthy.

NB: I will no longer be contributing to this pension as my Ltd company is closed but I am contributing to my permanent company pension scheme.

The advisor at St James Place keeps advising me that I should switch from the current Global Equity fund that I've been with from the beginning to the Strategic Growth portfolio which encompasses 12 funds.

I understand that diversifying to reduce risk when you get closer to retirement is a sensible thing to do but I'm not sure whether at the age of 50, this is too early.

Also, as my current fund seems to have been performing well, I'm a bit reluctant.

I'm guessing the advisor will make some commission when I switch, hence his pushing.

Just trying to work out whether to leave my pension as is in the Global Equity fund or diversify as the advisor suggests, into a 12 fund package.

Thoughts, suggestions please?

Dazed_and_C0nfused

You seem very confused with your position?

What has your self employment got to do with your limited company's pension?

Are you still self employed or did this stop when you closed the limited company?

Why do you think closing the limited company prevents personal contributions, whether it to be St James Place or another scheme?

NB.  Having been brave enough to own up to investing with St James Place (why didn't you choose an IFA????) you may want to don a hard hat for the comments that are likely to follow!

WSB

Not at all confused with my position. Apologies if the post came out that way.

I just put down all the details, in case there is any bearing on responses.

I am no longer self employed and don't intend to go back to it.

Don't really want to go into the history of why this pension was setup in the first place.

I know a lot of people don't like SJP and I don't defend them either but that's what I have and would rather not detract from my original query.

Basically, it is my Ltd company's company pension plan (Ltd company now closed). Namely, pension contributions came straight from the company. As the Ltd company no longer exists, I can no longer pay into it and I can't pay into that scheme personally. That's the rules of the scheme.

That's fine though and I'm now paying into my new perm job's scheme.

My query is simply, should I keep the pension in the single Global Equity fund or diversify into the 12 fund scheme as per the SJP advisor (yes, I guess he has a vested interest)?

Dazed_and_C0nfused

You say you aren't confused but you seem to be getting self employment (sole trader or partner) mixed up with being the director of a limited company.

Were you ever actually self employed???

I will let other more knowledgeable comment on the investment issue.

WSB

To answer your question, I was a director of a limited company.

dunstonh

For the past 23 years when I was self-employed I was paying into my Ltd company's executive pension scheme.

For reference, you were not self employed if you operated as a limited company.

The self employed Ltd company Global Equity pension (St James Place) savings value is currently £531K which I think sounds reasonably healthy.

What type of pension is it?   Is it really an executive pension plan or a personal pension plan?
Does it have any transitional reliefs? (such as increased tax free cash potential)

I'm guessing the advisor will make some commission when I switch, hence his pushing.

Commission has been banned since the end of 2012 on new business but can continue on business set up prior to that.  Fund switches rarely generate a commission.

I understand that diversifying to reduce risk when you get closer to retirement is a sensible thing to do but I'm not sure whether at the age of 50, this is too early.

What method of retirement income will you be looking to use?  How dependent on his pension fund are you going to be?   Do you have other assets you can rely on?

Also, as my current fund seems to have been performing well, I'm a bit reluctant.

How do you know it is doing well?  It is with SJP after all and you probably have little experience of the wider market to compare it to.
The fund you are in is expensive (1.81%). Cumulative performance is consistently below average (quartile 3 or 4).  Discrete performance flicks between quartile 2 and quartile 4.   It's a bit of a dog to be honest.    If an IFA had recommended that fund you would be sacking them for incompetence.  A tied sales rep can only recommend from their own range though. 

Albermarle

To be a little pedantic, normally the phrase 'derisking' is used when talking about the years that you approach retirement. 
Diversifying is something normally recommended at all stages of investment. Your current global equity fund is diversified by holding probably thousands of different company shares from across the world.

However of course to derisk a portfolio that only contains equity , then you are forced to diversify the portfolio more .
There is a lot of debate on this forum , the best way to derisk/ preserve capital during a market downturn , especially as markets have been so positive for the last few years.
Traditionally just replacing a % of equity with bonds was the normal route , although some like a more diverse portfolio , with say Gold, infrastructure funds , property funds and cash.
Some people never derisk and ride out the equity markets even in retirement , although this would be a minority.
When to start derisking is debatable and depends when you plan to retire . Usually 50 might be a bit early but probably not too many years after that.

In any case the SJP advisor must know you and your circumstances better than people on an internet forum .

My query is simply, should I keep the pension in the single Global Equity fund or diversify into the 12 fund scheme as per the SJP advisor (yes, I guess he has a vested interest)?

If you think the advisor is wanting to move your money for their own interest , rather than in yours, then that would indicate you do not trust them , which is not a good sign. I suggest you need to find out more detail, what is in it for them , if anything .
SJP are known for moving people into investments to lock them into SJP more , so maybe that is also something to look out for. .

Prism

You mention you feel it might be too early to diversify for retirement so the question is when do you plan on retiring as you could access your pension in 5 years time as it stands? If you plan on working for another 15 years+ however then I wouldn't be looking to reduce the risk level just yet assuming you are still happy with 100% equities.

WSB

Thanks all.

It definitely is an executive pension plan and not a personal plan.

I set up this pension with SJP, 23 years when I went contracting.

Paid into it for all that time from my Ltd company and didn't take much notice of it.

I've heard in recent years about SJP being expensive etc and hearing bad things but I've always been reluctant to move as I'd get stung on the transfer. My thoughts being that it's better to leave it where it is rather than the lower transfer value.

As for other stuff, my perm job scheme I pay 6% into and the company pay in 8%.

I also have a paid off investment property which brings in £1100 per month.

We're mortgage free on the residential property also.

As I said, I'm 50 and plan to retire at 60.

Albermarle

I've heard in recent years about SJP being expensive etc and hearing bad things but I've always been reluctant to move as I'd get stung on the transfer. M

Normally after you have been with SJP 6 years I think , there should be no transfer penalty , but I guess it depends how this scheme was set up. 

WSB

Just found a statement to hand (would need to dig out the most recent), at 31/12/18 the value was £288K and the transfer value was £280K, so a drop in value of £8K.

Going back to performance though, if the fund was worth £288K in 31/12/18 (NB: I put in £12K per year) and now (just over 2.5 years later) it's worth £530K, is that not good?  Or am  I missing the point.

Have no loyalties to SJP but just don't want to lose out by transferring.  Maybe I'm missing the point here too.