Which pension fund to choose?

timmy963

My workplace pension is with L&G and currently invested in the L&G Multi Asset PMC Pn 3 fund. I'm paying 8% of my salary which is matched by my employer.

However, long term I think is far too cautious for my liking and will really hinder growth due to being only about 40% in equity.

Looking at the funds available, the only one I could find which wasn't very overweight with UK was L&G Ethical Global Equity Index PMC Pn 3 which seems represent the global market share far more and seems to fit what I'm looking for.

I'm probably looking at 30 years before I retire which should be long enough to smooth out any bumps in the road.

Is there anything I might be missing or any funds which might be better suited? I would rather have a single fund rather than having to potentially re-balance all the time.

Below are the funds I can choose from on the L&G platform:

Cautious Managed Lifestyle Profile

Consensus 10 Year Lifestyle Profile

Consensus 3 Year Lifestyle Profile

Consensus 5 Year Lifestyle Profile

Consensus Index Lifestyle

Consensus Index/Over 15 Year Gilts 6 Year LSP

Consensus Index/Over 15 Year Gilts 7 Year LSP

Consensus/Over 15 Year Gilts Index 5 Year LSP

Distribution/Over 15 Year Gilts 10 Year LSP

Dual Fund Lifestyle Profile

Gbl FW 50:50 Cur Hgd/AAA-AA-A CorpBond LSP

Glb Eq 50:50 /Consensus 10 Year LSP

Glb Eq 70:30 Index/Over 5 Yr IL Gilts 5 Yr LSP

Glb Eq FW 50:50 Index/Over 15 Yr Gilts 11 Yr LSP

Glb Eq FW 50:50 Index/Over 5 Yr IL Gilts 6 Yr LSP

Glb Eq MW 30:70 Idx 75% Cur Hgd/AAA-AA-A CrpBnd LS

Glb Eq MW 30:70 Idx 75% Curr Hedged 10 Yr AVC LSP

Glb Eq MW 30:70 Index 75% GBP Cur Hedged 10 y LSP

Glb Equity FW 50:50 Idx/Over 15 Yr Gilts 10 y LSP

Glob Eq 70:30/Over 15 Yr Gilts 5 Year Lifestyle

Global Eq FW 50:50 /Over 5 Yr IL Gilts 11 Yr LSP

Global Equity 70:30 Index Lifestyle Profile

Global Equity 70:30 Index/Fixed Interest LSP

Global Equity 70:30 Index/Index-Linked Gilt LSP

Global Equity Fixed Weights 50:50 Index Lifestyle

Global Equity FW 50:50 Index/Fixed Interest LSP

Global Equity FW 50:50 Index/Property 10 Yr LSP

Global Equity FW 50:50 Index/Property 7 Yr LSP

Global Equity FW 50:50 Indx/Over 15 y Glts 5 y LSP

Global Equity FW 50:50 Indx/Pre-Retiremnt 7 y LSP

Global Equity FW 50:50/Pre-Retirement 10 y LSP

Global Equity FW 60:40 Indx 10 y Lifestyle Profile

Global Equity FW 60:40/Fixed Interest 5 y LSP

Global Equity FW 60:40/Over 15 y Gilts 5 y LSP

L&G Annuity Lifestyle -Future World Multi-Asset

L&G Cash Lifestyle -Future World Multi-Asset

L&G Drawdown Lifestyle -Future World Multi-Asset

L&G PMC 2015 - 2020 Target Date Fund 3

L&G PMC 2020 - 2025 Target Date Fund 3

L&G PMC 2025 - 2030 Target Date Fund 3

L&G PMC 2030 - 2035 Target Date Fund 3

L&G PMC 2035 - 2040 Target Date Fund 3

L&G PMC 2040 - 2045 Target Date Fund 3

L&G PMC 2045 - 2050 Target Date Fund 3

L&G PMC 2050 - 2055 Target Date Fund 3

L&G PMC 2055 - 2060 Target Date Fund 3

L&G PMC 2060 - 2065 Target Date Fund 3

L&G PMC 2065 - 2070 Target Date Fund 3

L&G PMC 2070 - 2075 Target Date Fund 3

L&G PMC AAA-AA Fixed Int O15 Yr Target Duration 3

L&G PMC AAA-AA Fxd Int All Stks Target Duration 3

L&G PMC AAA-AA-A Corp Bond All Stocks Index 3

L&G PMC AAA-AA-A Corp Bond Over 15 Yr Index 3

L&G PMC Aegon Ethical Equity 3

L&G PMC Aegon High Yield Bond 3

L&G PMC Aegon Strategic Bond 3

L&G PMC All Stocks Gilts Index 3

L&G PMC All Stocks Index Linked Gilts Index 3

L&G PMC Artemis Income 3

L&G PMC Asia Pacific (ExJap) Dev Equity Index 3

L&G PMC Asia Pacific Ex Jap Equity Index 3

L&G PMC Asian Income Fund 3

L&G PMC BMO Responsible Global Equity Fund 3

L&G PMC BMO Responsible UK Income Fund 3

L&G PMC BNY Mellon Global Income 3

L&G PMC BNY Mellon Real Return Fund 3

L&G PMC Cash 3

L&G PMC Consensus Index 3

L&G PMC Distribution 3

L&G PMC Diversified 3

L&G PMC Dynamic Diversified Fund 3

L&G PMC Ethical Global Equity Index 3

L&G PMC Ethical UK Equity Index 3

L&G PMC Europe (Ex-UK) Equity Index 3

L&G PMC European 3

L&G PMC Far Eastern 3

L&G PMC Fixed Interest 3

L&G PMC Fossil Fuel Free Climate Equity Index 3

L&G PMC FTSE Global Developed Small Cap Ind Fund 3

L&G PMC Future World Fund 3

L&G PMC Future World Multi-Asset Fund 3

L&G PMC Global Eqty Fixed Weights 50:50 Index 3

L&G PMC Global Eqty Fixed Weights 60:40 Index 3

L&G PMC Global Equity 70:30 Index 3

L&G PMC Global Equity Market Weights 30:70 Index 3

L&G PMC Global FW 50:50 Idx GBP Currency Hedged 3

L&G PMC Global Real Estate Equity Index 3

L&G PMC Henderson Diversified Alternatives 3

L&G PMC High Income 3

L&G PMC HSBC Islamic Global Equity Index Fund 3

L&G PMC Index-Linked Gilt 3

L&G PMC International 3

L&G PMC Janus Henderson Fixed Int Monthly Income 3

L&G PMC Japan Equity Index 3

L&G PMC Lazard Emerging Markets 3

L&G PMC M&G PP All Stocks Corporate Bond 3

L&G PMC Majedie UK Equity 3

L&G PMC Managed 3

L&G PMC MFS Meridian Global Equity 3

L&G PMC Multi-Asset 3

&G PMC North America Equity Index 3

L&G PMC Over 15 Year Gilts Index 3

L&G PMC Over 5 Year Index Linked Gilts Index 3

L&G PMC Overseas Bond Index 3

L&G PMC Overseas Equity Consensus Index 3

L&G PMC Pre-Retirement 3

L&G PMC Pre-Retirement Inflation Linked Fund 3

L&G PMC Pre-Retirement Inflation Sensitive 3

L&G PMC Retirement Income Multi-Asset 3

L&G PMC Standard Life Global Abs Return Strat 3

L&G PMC Sterling Liquidity 3

L&G PMC Stewart Inv Asia Pacific Leaders Sust 3

L&G PMC Stewart Investors Glbl Emrg Mkt Ldrs 3

L&G PMC Sustainable Property Fund 3

L&G PMC Threadneedle Dynamic Real Return Fund 3

L&G PMC Threadneedle Global Select 3

L&G PMC Threadneedle Managed Equity 3

L&G PMC UK Equity 5% Capped Passive 3

L&G PMC UK Equity Index 3

L&G PMC UK Smaller Companies Index 3

L&G PMC World (Ex-UK) Equity Index 3

L&G PMC World Emerging Markets Equity Index 3

Legal & General Annuity Lifestyle

Legal & General Cash Lifestyle

Legal & General Drawdown Lifestyle

Managed Lifestyle Profile

Multi-Asset Lifestyle

Triple Fund Lifestyle Profile

Triple Index/Pre-Retirement Lifestyle Profile

UK Equity 5% Capped Passive/Bond/Gilts 10 Yr LSP

UK Equity Idx/Global Equity FW 50:50 Idx 10 y LSP

UK Equity Index 10 Year Lifestyle Profile

UK Equity Index 5 Year Lifestyle Profile

barnstar2077

Oddly, my works pension is with Aviva, but I have just switched to a global ethical fund for the same reason, as it actually is weighted more like the worlds stock markets real distributions.  It is also 5 out of 7 on the risk scale, which suits me too.  I think the default fund was 60% UK, which did not sit well with me at all.

Ironically the number one holding is Apple, who encourage a disposable culture and farm out the manufacture of incredibly expensive phones to foreign sweat shops, and their cheap labour, and then wash their hands of the consequences. 

MX5huggy

Look at the HSBC Islamic that’s fairly global and diverse if I remember correctly. 

gm0

You have long investment horizon. So you can buy units all the time through the expected volatility to come in equity markets.  This suggests picking as high a % growth assets as YOU are comfortable with.  Quite a few on the board would say 100% equities with your long accumulation horizons.   Others would shoot a bit less.  100% can definitely involve watching it drop by half (or more) which feels terrible the first time even if logically you should realise you are now buying half price units and when they all go back up that will likely be a good outcome for you longer term - decade +

Then you get to the question of whether the scheme has an active you like the look of - fund manager and mandate - or if you want to follow the "whole of market - lowest cost" philosopy - Lars Kroijer etc.

L&G PMC Ethical Global Equity Index 3  is an interesting passive example.  Covered on monevator recently.  I have used it.  It's not a bad proxy for "global equities".  It's not very ethical - the stocks excluded from the 1500 list is mild indeed.  And the "retail" (rack rate) for this fund unit is around 0.3% cost - more than you need to pay for simple global index tracker passive. 
But it exists in many pensions versions and may have been added to them long ago. And therefore can be much cheaper depending upon what was negotiated. Certainly that was my situation with an LGIM fund list during accumulation so you need to check the fund codes and the specific pension documentation carefully for costs. Same names on LGIM web site unless you match exact ISIN etc. will lead you astray.   Something around 0.12% is a good benchmark for the fund part of global funds plus whatever your scheme charges you to run it - which could be zero or not depending upon your employer and the trust setup.

So what I would suggest is that you look at the equity funds which are pure equities and the others which are more complicated i.e. multi-asset  and assess whether they have the level of risk you want for your accumulation investment - as examples:

L&G PMC Multi-Asset 3
L&G PMC Future World Fund 3

Ask yourself - are there enough equities (or less likely - too many) ?

Or if you have some personal insight beyond what the markets have priced in that suggests you want to 2nd guess geographic split of your money then you have some regional options in the list and could "rolll your own".  Not that I recommend it but your fund list would let you assemble something along these lines.  That can be modeled on Trustnet although very recently opened versions will be problematic.

All the "lifestyle" options have some auto-sell equities / buy bonds functionality - either in the scheme or the fund that cuts in for a number of years - often 10 later on approaching retirement. There should be age graphs in your scheme documentation. 

Or you can choose when to do this yourself and use ordinary funds.  I am allergic to the lifestyle funds but they serve a genuine need derisking investment value on a specific date against a low probability of large volatility in a short window. 
But if you are using drawdown and largely remaining invested in retirement then the "ready to buy an annuity feature" makes a lot less sense.  Which is not to say your risk appetite won't change.  But you can think about that in your 40s+ and later.
To be fair - some lifestylers now have different versions for different objectives which are not quite as aggressively based on annuity purchase and so you may find the fire and forget aspect appealing even if I did not.

Another build a portfolio approach with L&G funds is the regional trackers and adding a bit more equity diversification. In this example using "Small" and "Emerging".

So % are not a recommendation just illustrating the thought process:

Building up 100% equities (or the equities part of the holding if not 100% overall)

L&G PMC World (Ex-UK) Equity Index 3 - overseas developed - e.g. 85%

mixed with

L&G PMC UK Equity Index 3  - 5%
L&G PMC UK Smaller Companies Index 3 - 5%

These two are for the UK home market bit - which you can take a view on at weight (less) or "home market bias" a bit more - 4%-20% UK.  The Smaller fund gives you some slightly smaller capitalisation stocks so more diversification within equities here.

And if you want to spread your wings beyond developed markets to some further shores then a little taste of:

L&G PMC World Emerging Markets Equity Index 3- 5%

A lot of people like active management and country specific funds for specific emerging markets as some greater understanding of the actual country and it's version of corruption and market manipulation and growth stocks is felt to be important. 
So this fund may not be that attractive since it follows the casino markets at a distance - indexing.  On the other hand it blends them together.

This last "portfolio" example is heavily exposed to the US and large cap and tech stocks as all global market cap passive at weight indexing approaches are.  Half.  Almost all large cap.  Which is mostly Tech.
Only exceeded by the active funds that have taken that bet further and gone in even harder on even fewer tech stocks. But there isn't much on this list that does that - there are a few 3rd party fund manager options Stewart/Threadneedle that you could look at more closely I suppose.

Hope this helps bring an opaque list somewhat to life.

Thrugelmir

timmy963 said:

However, long term I think is far too cautious for my liking and will really hinder growth due to being only about 40% in equity.

Has the fund manager been reducing equity exposure and taking profits recently?  The fund has a remit to invest anywhere between 40% - 85% in equities. Being now at 40% is at the lower end of the spectrum. 

bostonerimus

This is a great example of too much choice. If you have 30 years look for something at least 60% equities. Look for a multi-asset fund or build your own simple 3 or 4 fund portfolio that uses global cap weighted low cost index funds. Don't over think things and keep your costs as low as possible.

Notepad_Phil

MX5huggy said:

Look at the HSBC Islamic that’s fairly global and diverse if I remember correctly. 

From memory the top 5 companies in that fund alone make up over 30% of the fund and it holds some 40% of its assets in technology stocks, so maybe not as diverse as something like the World (Ex-UK) Equity Index 3 fund.

Personally in my L&G pension I hold the World (Ex-UK) fund along with percentages in the Asian Pacific and European funds, but I'm happy in holding 100% equities and taking a tilt away from the US.

You may not be happy as I am with these funds, but I think you should be looking for a high equity percentage given that you have 30 years to go until you retire, and even then you'll still probably need to have a good amount in equities to provide a decent retirement income.

timmy963

Thank you everyone for your responses, especially gm0.

I've looked at the suggestions and I've looked further into it and found the 'L&G Global Equity Market Weights 30:70 Index 75% Currency Hedged PMC Pn 3' which ticks quite a lot of the boxes I'm looking for:

Large, medium and small companies
Emerging markets
Cheap at 0.14%
Passive
Excluding 30% UK bias, based on global market weight
No underlying company picking strategy
Simple being a single fund

However, although I don't mind UK bias, it is a tiny bit more than I would like and looks very similar to a VLS100 with 5% more UK bias and is performing very similar.

Is there anything I might be missing or any more suggestions? And there any pitfalls due to the 75% currency hedge? From what I've researched it is to protect against positive and negative currency fluctuations which can actually be a positive or negative depending on which way currency values would go.

I do wish they had something like the Vanguard FTSE Global All Cap Index Fund, but the only alternative would be to mix a number of funds and then have the need to re-balance every year or two which I don't really want to have to do as I prefer simplicity.

Thanks.

[Deleted User]

Currency hedging is a drag on long term performance because there is a cost involved. Having investments in different currencies actually improves diversification and reduces volatility. 

In summary, by hedging you would be reducing diversification AND paying for the pleasure.  Not recommended. 

[Deleted User]

I did not look under the bonnet but based on titles I would pick

20% L&G PMC UK Equity Index 3

80% L&G PMC World (Ex-UK) Equity Index 3

A bit more complex than a single fund but 2 funds are easy to manage and you know exactly what you are getting here. And the cost should be around 10 bp.  Just rebalance back to 80/20 in January each year.

timmy963

I've just had a look at both those funds and I think I will do what you suggested.

Although I would prefer a single fund, it is the closest I can get to what I am looking for I reckon.