Life's Swerve ball....do I switch from Aegon and consolidate?

Rodders2409

Hello lovely people,

It's been a while since I first posted the original 'Life's Swerve ball' post, and thanks to the many who contributed, I'll not drag everyone through it again but here's a quick summary.

Six years ago my better half was diagnosed with Parkinson's, two years ago that was changed to Multiple System Atrophy (MSA) which is not good, nasty in fact, terminal but we're not sure exactly of the 'when'...maybe 12-18mths. My very first post was to work out how I could sort things out, pension wise, allowing me to become a fulltime carer.

Tick.....so thanks for all the input, because without it I wouldn't have been able to stop work 2 years ago and be at home 24/7. 

Here's the question I need some input on please, because some things have changed since I kicked this all off.

Age 55
Currently not working but could if really, really needed.

The original plan was to max out my pension contributions whilst i was at work, then at 55yrs take the 25% tax free, add that to savings, and divide over the 12yrs until SP kicks in, in addition to drawing down roughly 4% pa to keep things ticking over. The plan was good on paper, and there was an upside as I could work and there is a strong possibility that inheritance would be coming my way in the next 5yrs. 

There have been changes to the plan with regards to income because, due to my better half's developing condition, additional support has been provided.

Income -
£7000 net pa from a rental property, almost cast iron income as long tenant (15yrs) and zero signs of ever changing. 100% in my name
£8000 (approx) pa - Personal Independance Payment (PIP) for my better half, this was not ever included in my original plans because it was hard to get, but is welcome.
£2000 (approx) pa - Carers Allowance for me, this was not ever included in my original plans but is welcome. 

Savings
£25000 which we are tapping into as and when we need to.

Pensions
AEGON GrowthTkrFlexTgt2024 (ARC) - £344,000
Friends Life (three different pensions) - £107,000
HL SIPP - £39,000

Because of the PIP and Carer's financial support I did not take the 25% lump sum and we don't draw the 4% against the pension, which is a good thing. Instead I pushed the process back to when I'm 57, for obvious reasons given the prognosis.
I believe we're OK for the next 2 years as we live within a £22K budget.

When I decided to push it back to 57 I had in mind that I might reconcile all of them into Vanguard LS60 because at the time my AEGON pension wasn't necessarily that well regarded. I'm not looking to have the lowest of the low risk as I'm not that way inclined, I was happy with the level of equities in the AEGON scheme even if I have no intention of ever fine tuning them....a safe general all rounder is OK. 
I'm looking to understand if Vanguard is a better option than AEGON because when I put both the products in the Trustnet Charts tool it does suggest that it's a better option, and is a similar risk profile etc...

I will add, I may not wish to go back to work, ever, but could if necessary....at that point, a steady income with a reasonable risk profile (6 or 7) would be OK. 

Any info or opinions are welcome.

dunstonh

When I decided to push it back to 57 I had in mind that I might reconcile all of them into Vanguard LS60 because at the time my AEGON pension wasn't necessarily that well regarded

By whom was it not well regarded?   It certainly doesn't have the best software and it's not whole of market (although it has a fair chunk and HSBC GS Balanced is on there).  Whole of market doesnt matter if you are going with a basic option.    What it does have going for it is it is usually cheap.   Aegon have been throwing discounts around on their pricing to make up for the reduced software quality.   The fund you are in is very cheap.   You are looking at something like 0.32% total charges

I'm looking to understand if Vanguard is a better option than AEGON because when I put both the products in the Trustnet Charts tool it does suggest that it's a better option, and is a similar risk profile etc...

Why are you limiting yourself to just Vanguard and Aegon?   Personally, I would not be picking either

NannaH

Aegon have fairly high charges, DH’s work pension is with them.
As soon as he retires, he will transfer into something like ii or aj bell as that will be the pension he uses to fund 5-6 years till state pension and will be a series of UFPLS payments for a completely tax free £16k yearly  income.  His other Sipp won’t be touched until 67. 

I’d say that drawing income in the most tax efficient manner is as important as the investment choices,  also I personally feel that vls60 isn’t the best choice for very long term,  I’d rather have 2/3 years in cash within the pension and a higher level of equity investment,  vls80 or equivalent. 

As you have what will probably be a £500k+ pot,  you could also look at switching to income funds and just take the yield,  3% would give you £15k and you wouldn’t need to sell funds to provide the income.  

Rodders2409

Thanks Dunston,

I think, and it's from memory here which isn't a strong point!...that I had been scanning through this forum and a few others plus I'd looked at the 'crown' ratings from the Trustnet site etc...Iake your point though that it's a somewhat emotive statement. 

I do recall that cost was a plus though, which is OK provided it is performing adequately when compared to others of a similar ilk.

If there were better options I should look into I'm very interested in being pointed in their direction, that'd be great.

Best wishes,

Albermarle

£2000 (approx) pa - Carers Allowance for me, this was not ever included in my original plans but is welcome. 

I think Carers Allowance is worth £3500 pa , although it is potentially taxable . 

Regarding the Aegon and Friends Life pensions . I would be checking how flexible they are when it comes to taking income from them . Older pensions in particular can be restricted in the options they offer .

Also when you do start to drawdown , having multiple pensions can complicate things 

So apart from the actual investments choice , which is a separate issue ,  you maybe better off consolidating your pensions to some extent anyway.

dunstonh

Aegon have fairly high charges, DH’s work pension is with them.

Aegon have multiple distribution channels and multiple pricing models.   For workplace pensions, it is often the employer and scale that decides the charges.  There is no one fixed price.       The OP has the ARC version.  The retail version of ARC can be very cheap (as I mentioned).   However, it is possible that he has the standard charged version.

I think, and it's from memory here which isn't a strong point!...that I had been scanning through this forum and a few others plus I'd looked at the 'crown' ratings from the Trustnet site etc...Iake your point though that it's a somewhat emotive statement. 

Crown ratings are a distraction and not something you should rely on.  Some fund houses pay for FE to analyse their funds.  Some do not.     VLS60 has not been as strong for a while as its management decisions have not paid off compared to similar alternatives and the Aegon fund has marginally outperformed.  Although the de-risking should be kicking in on yours now (which you can change if you want).  It pays never to be attached to one fund house.  What is best one day will not be the next.    

Rodders2409

Thanks Albermarle & Dunston,

I think you're right about the costs based on the scale of our Company's work with AEGON, in fact they were forced to drop charges and be more competitive two years before I left work. My understanding is that I'm still getting the preferential rates from them even though I no longer work there. I'll  heck though. 

Yes, I was looking to move the Friends pensions to a more modern platform that allows drawdown, and at the same time consolidate to save hassle, that said I take your point Donston...in which case splitting across them both ight be an option or is thee a better 'general purpose' fund house / product that might be an option?

I have been offered to de-risk and haven't done that as yet because I'm not yet sure if it's what I want to do, which I understand is slightly contra to me wanting some stability, my thoughts being Vanguard at 60% equites is reasonable for me, and the Aegon product is quite similar.  

dunstonh

I think what it really boils down to is that you have two similar funds in terms of risk and performance and probably in the similar ballpark in costs overall.   So, in the accumulation stage, it doesn't really matter if its Vanguard or Aegon.

However, when you come to drawdown, you are looking more at service, software and speed as well as one supporting the drawdown methods you intend to use.   In the lead up to that, consolidating and going with the best option functionally should be the priority.    I suspect that wouldn't be Aegon (at least, I wouldn't pick Aegon for it - others may).    I wouldn't pick Vanguard either.  However, that's only because I use funds from across different fund houses and wouldn't only want Vanguard funds.   You seem happy with VLS60 on that front.   So, have a think about what you want and how you want it and then consider the best option that fits that.

Albermarle

I have been offered to de-risk and haven't done that as yet because I'm not yet sure if it's what I want to do, which I understand is slightly contra to me wanting some stability, my thoughts being Vanguard at 60% equites is reasonable for me, and the Aegon product is quite similar.  

If you go into drawdown and you want the pot to last a lifetime ( however long that is) then there are some basic rules that you should research .
Based on historical data, there are ' Safe Withdrawal rates ' where if you limit your withdrawals to a certain % each year , the chances of you running out of money before you are very old are small . In fact if markets are kind you may even end up with more money that you started with .
However these calculations are based on the pot remaining invested in the markets in a medium risk portfolio ( VLS 60 would be classed as such ) and derisking too far would probably mean a worse result .
The theory of Safe Withdrawal rates seems to be widely accepted, but not by everybody as it relies on historical data .
 The % can be between 3% and 5% depending on who you believe.
A reasonably large cash buffer so you can reduce pension withdrawals during market drops can help a lot.

Rodders2409

Thanks,

Yep, I agree there's very little in it between the two funds, so I'll just leave as is for now, and in a couple of years when I'm looking to consolidate I'll re-evaluate based on functionality and costs at that time.

I'm I right in thinking that as I'm still accumulating, and in a general AEGON bucket fund similar to Vanguards LS60, that everyone like them are much the same as each other in terms of performance, because in the end at this level of risk etc they're all chasing the same goal.  

Also, I'm not going to be spending the kind of time many do, probably wisely, monitoring and moving investments etc, so would you still select different platforms to mitigate risk or is there a real performance difference in the type of fund I'd probably end up choosing....bit of an open ended question, I know 🙄

Albermarle

I'm I right in thinking that as I'm still accumulating, and in a general AEGON bucket fund similar to Vanguards LS60, that everyone like them are much the same as each other in terms of performance, because in the end at this level of risk etc they're all chasing the same goal.  

To a large extent you are right . There can be some differences though . For example typical traditional pension funds like Aegon tend to have a high UK% ( not sure about your fund specifically ) which has dragged on returns compared to ones with a higher US % .

o would you still select different platforms to mitigate risk or is there a real performance difference in the type of fund I'd probably end up choosing....bit of an open ended question, I know 🙄

If you stay with mainstream platforms, the risk of something going wrong is minimal . However the choice of investment within the platform can obviously have an effect .