Getting started with pensions

alibean121

Hi all, any advice welcome! I’m a single woman in my early 30s and have decided I should get more organised with my pensions. I’ve been paying in for about 8 years and have spent some time tracking down the details of my various pensions. I’ve never really taken any interest in them but have paid in to maximise employer contributions.

I have just over £70k total mostly in an Aviva my money account but some with Scottish Widows and Legal and General as well as another Aviva pension account.

When I first started paying into each one, I went in and updated the default fund as I felt these were too low-risk given my age. But really I have no clue what I’m doing. I’m moving job again back to somewhere with good matching and this employer will also use Aviva. I’m trying to understand if I should move all my pensions together to reduce admin and should that be into Aviva or a SIPP at another provider.

I’ve used some pension calculators and think that my planned contributions with the middle growth projections would give retirement income I could be satisfied with.

I don’t think my fund is at a level where advice would be cost effective so I don’t know how to develop an investment strategy. I’m relaxed about fluctuations in value and have 30 years to retirement.

What are my next steps? 

xylophone

Assuming that all your pensions are Defined Contribution pensions with no safeguarded benefits, then if you are only considering ease of administration, then (assuming your new pension arrangements permit), transferring all into the new pension would meet the case.

However,  there are other considerations.

https://www.aviva.co.uk/retirement/pension-basics/moving-your-pension-into-one-pot/

https://www.tilney.co.uk/news/what-are-the-pros-and-cons-of-consolidating-my-pensions

alibean121

Thanks - yes you're right that they're all DC with no particular benefits.

However, one thing I've noticed is that they seem to be very low fee vs what I'm seeing for a SIPP. Unless I'm misunderstanding something, I think AVIVA are charging me 0.14% and I think this is the full fee for platform, fund everything included?

My issue with it is that I can't really see any particularly suitable funds available - maybe this is my ignorance. They rate risk of options from 1-7 but I can't find anything multi-asset with a risk rating over 3. I think I'm looking for 5 or 6.

Thrugelmir

Higher risk (rating) will come from investing primarily in greater concentration of equities. Mainstream alternative assets will not provide the returns (upside) to warrant inclusion. 

xylophone

Had you considered Vanguard?

https://monevator.com/vanguard-lifestrategy/

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/personal-pension-account

AndrewB22

Hi Alibean, in your shoes the factors I’d consider are: (1) fees and costs, (2) administrative convenience, and (3) asset allocation. 

You say the fees on your Aviva pension are low, so bringing all your pensions into your new employer’s scheme seems pretty sensible to me. 

Bringing several pensions together may or may not reduce your fees and costs. Over time, as your pot grows, those fees could add up. Interactive Investor, a low cost fund platform, reckons that over a lifetime the difference in fees and asset allocation can add up to £100k, so it’s worth checking whether you can save fees and costs by doing something. 

You seem pretty switched on in that you’re looking for riskier investments, as you’ve got such a long time until retirement that the ups and downs of the stock market will iron out. A globally diverse equity index tracker fund will give you a decent balance of returns, risk and fees. 

Looking at Aviva funds - and having no expertise in them - they do offer global index tracker funds. There is one called Aviva Investors International Index Tracking Fund 1 GBP Acc, but that excludes the UK, so you might want to consider holding say 80% of your funds in that and say 20% in Aviva Investors UK Index Tracking Fund A GBP Acc, which tracks the FTSE All Share index. 

These funds are relatively low cost and are rated 5 and 6 respectively. 

The 80/20 ratio of World-excluding-UK to UK is arbitrary. The UK equities market is a smaller percentage of the world than 20%. But assuming you retire in the UK, having a higher proportion invested here might mean that if Britain prospers compared to, say, the US, you benefit, and if Britain declines, you’ll be in good company. 

Albermarle

I think AVIVA are charging me 0.14% and I think this is the full fee for platform, fund everything included?

You need to double check this as it seems very very low . Maybe give them a call.

Normally AFAIK , the cheapest workplace pension would be about 0.3% all in and typically a bit more .

alibean121

Thanks for this - I've had a good dig through the charges. Turns out Aviva are charging 0.14% and I've recalculated this from my statements and agree this is what's being charged. I'm then (rightly or wrongly) currently invested in BlackRock (30:70) Currency Hdgd Global Equity Tracker which has a stated charge of 0.06% through this Aviva platform for a total of 0.2%

I'm a bit confused about where this fund fee is being charged though as I don't see it on my statement. I get a monthly charge for the aviva fee. Does the fund fee just come out of the fund so reduce the value of each unit?

Anyways, it seems I have a very low cost pension option right now. I'd always be making my active contributions into my work scheme rather than anything private as I get salary sacrifice so maybe I can just leave it alone for a bit longer.

I'll have a think about moving my smaller funds into here as some of the charges are a lot higher albeit that the investment choices are different and some of those funds appear to be active and are therefore much more expensive.

Thanks for your comments all - plenty to think about

dunstonh

I'm a bit confused about where this fund fee is being charged though as I don't see it on my statement

You won't.  it is reflected in the unit price rather than a transaction on the product.

 I get a monthly charge for the aviva fee.

platform charges are explicit fee external to funds.  Hence why you see that.

Albermarle

Does the fund fee just come out of the fund so reduce the value of each unit?

Yes

Anyway both the platform charge and fund charge are very cheap .My last employer was a very large company and I thought they had a very good deal with the pension provider . 0.17% platform and cheapest funds 0.1% but yours beats even that !

alibean121

Albermarle said:

Anyway both the platform charge and fund charge are very cheap .My last employer was a very large company and I thought they had a very good deal with the pension provider . 0.17% platform and cheapest funds 0.1% but yours beats even that !

Thanks - it's been very helpful context. I've found my other smaller pensions have much higher charges so I might move them across (this includes the other one I have with Aviva)

It probably wouldn't surprise you to learn that this pension was set up by a very large accountancy firm! Seems like they negotiated a good deal....