Pension fund choices again

Victorwelldue

I've posted a couple of times before on pension board on this topic but have still taken no action due to life/work etc getting in the way, plus wasn't confident enough in my own knowledge but giving it another go now.

I have a workplace DC pension L&G default fund which is a Lifestyle profile currently 100% invested in their default multi-asset fund which is approx. 40% equities with 0.13% charges. I'm 50 looking to retire in 8-12 years (subject to returns/pot size of course) and think I could tolerate 60% equities with Lifestyling switched off. I'd be planning drawdown unless annuity rates change dramatically by the time I chose to retire. I only have £140K pot at present but should hopefully be able to contribute the max AA every year until retirement via salary sacrifice.

As there isn't a "ready made" fund with 60% equities available for me to choose from, one strategy I'm considering is basically trying to mimic the muti-asset fund I'm already in and just tinker with the equity/bond split proportions. The way I see it this effectively means its the L&G fund manager picking the funds and I'm just changing the split. If this is a good plan (and I'm sure you'll all tell me if its not) then picking the equities I think is the easy part - its the bonds etc that I find tricky as current fund has all sorts of things such as corporate bonds in various currencies, global real estate, emerging sovereign debt etc that I find hard to duplicate with the fixed interest choices available to me.

So I've come up with below choices and would appreciate any input as to whether these seem like a reasonable blend for a 60% equity, diversified multi-asset fund?

Albermarle

I think moving up the equity % a notch or two is probably a good idea . Some would say go higher but you have to feel comfortable with your choice. One reason for this is that the outlook for bonds is not great for various reasons.

Compared to a global index tracker , your geographical equity split is very low on US and very high on Emerging/Japan/Asia Pacific. That is not to say that you can not deviate from the usual split , but it does seem a bit lopsided . Presume this is how the L& G fund was split?

I will leave others to comment on the actual bond funds, as it is a more complicated area ( in my opinion )

Victorwelldue

Albermarle said:

Compared to a global index tracker , your geographical equity split is very low on US and very high on Emerging/Japan/Asia Pacific. That is not to say that you can not deviate from the usual split , but it does seem a bit lopsided . Presume this is how the L& G fund was split?

Yes its exactly the same split, all I've done is "grown the proportions" from 40% to 60%. My logic was that for a 40% equity fund its performed quite well so don't change the actual choices, but I'm worried that's also down to the non-equity bit of the fund that I cant use the same trick on, and I don't want to end up doing more harm than good.

AlanP_2

Can you transfer the majority of your workplace DC out to a separate SIPP but still leave the scheme running?

Some let you some don't. 

The benefit would be gaining access to the range of multi asset 60/40 funds on offer from other providers.

Downside it is likely to be a bit more expensive. 


Just checking the L&g multi index range isn't available in work scheme is it? 

Victorwelldue

AlanP_2 said:

Can you transfer the majority of your workplace DC out to a separate SIPP but still leave the scheme running?

I'm not sure would need to check. I have considered this option before but seems a bit complex, so would prefer to keep things easy within existing scheme if possible.

AlanP_2 said:

Just checking the L&g multi index range isn't available in work scheme is it? 

Annoyingly not. There is:

L&G PMC World (ex UK) Equity Index Fund 3 (NED3)
&
L&G PMC UK Equity Index Fund 3 (NBC3)

That I think were suggested before but not sure of best % split between the two and still not sure about best bet for bonds/fixed interest with the choices that are available to me. 

george4064

Personally, I would try simplify the equity proportion as much as possible by holding either (I have given a few options as I know options can be limited, top is most preferable bottom is least):

• All World Equity (which includes EM)

• World Equity + EM, or;
• World ex UK Equity, UK Equity and EM

Edit: having seen your post above, I think you’ll need the 3rd option. World ex UK Equity, plus UK Equity, plus EM

Victorwelldue

In light of some of the comments above I'm now considering the following split. Opinions?

L&G PMC World (ex UK) Equity Index Fund 3 (35%)
L&G PMC UK Equity Index Fund 3 (30%)
L&G PMC World Emerging Markets Equity Index Fund 3 (5%)
UK Biased bond fund - L&G PMC Pre Retirement Fund 3 - NEN3 (15%)
Overseas bond fund - L&G PMC Overseas Bond Index Fund 3 - NBX3 (15%)

Bobziz

Is there a reason why you've significantly increased your exposure to UK equities ?

IamWood

My current work pension is with L&G too. I put everything into L&G PMC World (ex UK) Equity Index Fund 3.

I have other pots that are more biased towards UK equities so I'm happy not to include UK equities here.

Victorwelldue

Bobziz said:

Is there a reason why you've significantly increased your exposure to UK equities ?

Nothing other than trying to simplify my choices and that I have read here & elsewhere that having a significant amount invested in own country equity is often suggested. Perhaps 45%-50% world, 15%-20% UK would be better? I just want a multi-asset diversified index fund with higher exposure to equities.

Albermarle

Victorwelldue said:

Bobziz said:

Is there a reason why you've significantly increased your exposure to UK equities ?

Nothing other than trying to simplify my choices and that I have read here & elsewhere that having a significant amount invested in own country equity is often suggested. Perhaps 45%-50% world, 15%-20% UK would be better? I just want a multi-asset diversified index fund with higher exposure to equities.

The 'how much in UK ' question generates many different answers/opinions.
Some say it should reflect the size of the UK stock market globally which is about 4.5%
On the other hand many traditional pension funds have up to 50% .
It is complicated by the fact that many large UK listed companies make most of their earnings abroad anyway .

15/20 % seems a good compromise.