Pension funds

NNN13

I have a workplace pension (with L&G) which is invested in the L&G PMC multi asset G25 fund (L&G fund code B6KY) - risk profile 4 out of 7.  This is the default fund where I have been investing into since joining the scheme.  I am contributing c.£2k a month to the pension, through salary sacrifice and including employer contributions.

I have c.£150k invested in this pension fund, and now turning to look at whether this is the best fund for my pension to be invested in.  There is a lot of 'bonds' in this fund, and the equity part is only c.38% which appears to be very low given that i have at least 20 years before i can access the fund (I am currently 35).

I would welcome everyone/anyone's thoughts on whether this is an appropriate fund for my pension to be invested in, or whether I should look at changing the fund to something else that is within the L&G offering?

pip895

I would say you could do with more equity - with your timescales 80%-100% equity would be more appropriate - remember you are unlikely to want to withdraw it all at age 57 or 67 - I am retired and in drawdown and still have >70% equity. 

Linton

I agree that 38% equity for someone with 20 years to retirement is too low. 

Here is some bumph on the L&G G25 range:
https://www80.landg.com/DocumentLibraryWeb/Document?reference=W12336GPP_FundsGuide.pdf

It does show your fund in the 40%-85% equity band.  Perhaps you should check your 38% figure.   Employer's pension schemes may only provide a very limited range of funds so it would be worth talking to your employer's pension people to find out what else is available.  Looking at the brochure I suspect that if you wanted significantly higher % equity you would have to build your own portfolio from separate equity and bond funds.

Albermarle

I would say you could do with more equity - with your timescales 80%-100% equity would be more appropriate

Yes but only if the OP has a suitable risk tolerance , say more like 6 our of 7. A fund like this could drop 40% in the short medium term , although long term should grow of course .

NNN13

Thanks for the responses so far. 

With regards to risk tolerance, given that this is a pension and as stated i have at least 20 years before accessing it (and even then not all at once), then my risk tolerance would be more like a 6/7 out of 7.  A drop of 40% would be fine over the short/medium term given that contributions (£2k) are occurring each month and would just buy more units in the dip. 

I have fund investments in my ISA which are with Vanguard and they are c.90/10 equity/bond split. 

It does show your fund in the 40%-85% equity band.  Perhaps you should check your 38% figure.   

My default fund factsheet has 38% equities, 19% corporate bonds, 10.5% government bonds, 18% Alternative credit and 14% 'alternatives' (RE, PE, infrastructure). 

Would something like the:
L&G PMC International Fund G25
L&G PMC Future World Fund G25
L&G PMC Ethical Global Equity Index Fund G25

be more suitable for a risk/equity allocation perspective given the above. 

Albermarle

NNN13 said:

Thanks for the responses so far. 

With regards to risk tolerance, given that this is a pension and as stated i have at least 20 years before accessing it (and even then not all at once), then my risk tolerance would be more like a 6/7 out of 7.  A drop of 40% would be fine over the short/medium term given that contributions (£2k) are occurring each month and would just buy more units in the dip. 

I have fund investments in my ISA which are with Vanguard and they are c.90/10 equity/bond split. 

It does show your fund in the 40%-85% equity band.  Perhaps you should check your 38% figure.   

My default fund factsheet has 38% equities, 19% corporate bonds, 10.5% government bonds, 18% Alternative credit and 14% 'alternatives' (RE, PE, infrastructure). 

Would something like the:
L&G PMC International Fund G25
L&G PMC Future World Fund G25
L&G PMC Ethical Global Equity Index Fund G25

be more suitable for a risk/equity allocation perspective given the above. 

I would check the geographical spread of these funds . As with all investing there are different opinions .
Some say the split should be in line with the capitalisation of financial markets , which approx means 60-65% in US and around 5% in UK . A few like to go even more into the US.
Most UK investors though will have  more in their home market . Say between 5 and 40% . maybe 15%/25%  is typical ?
Also is there any % of Emerging markets . Ideally should be some , if not a lot.

gm0

L&G Ethical Global Indexer (if its the FTSE4Good Developed one) can be poor value or a total bargain as a basic passive tracker.  Don't get over excited about the ethical bit.  It's global equities with a very few "knockouts".   In our old workplace this was 0.06% drag. Bargain. But the "modern" version of it is more like 0.3%.  So it depends when it was added to your scheme. 
So mileage varies for using this as a passive. Global equities 100% but only a fairly short stock list ~1500 if I recall correctly - of stocks vs the 6000 of the largest funds.  But the list is plenty long enough to be a decent diversification proxy within global equities - if you look at trustnet and back test it. So it'll do. Is it heavy with US large cap and tech stocks - FAANG - sure - but so are all passive global equities trackers.

So depending upon costs in your workplace scheme this could do or perhaps better the World ex UK and UK only (FTSE All Share TR) equities funds can be used to create a "global passive" equities holding with your desired level of at weight or home market overweighting of the UK whatever that ends up being.  Those funds are more like 0.12% typically and I think the cost of them varies less.  Scheme pack and fact sheet time.

% equities seems low.  Depending on your view of how close to the precipice we now are you might want to separate what happens to new contributions from switching existing funds. Many schemes allow this. So that is also an option if you'd prefer not to risk up aggressively. 

NNN13

Thanks for the responses.

I think that i will go with the following for new contributions:

20% (or c.£400 a month) into the PMC UK Equity index fund (FMC - 0.15%) - (probably high home bias...)
60% (£1,200 a month) into the PMC World ex UK equity index fund (FMC - 0.2%)
20% (£400 a month) into the default fund (as above)  

This after 5 years, will bring the equity allocation up to c.70% in the total fund (without rebalancing completely now when there could be a drop in equity value in the near term).  If there is a significant drop it may give me an opportunity to rebalance sooner.

Unless anyone thinks that this is a completely stupid idea - thoughts welcome...