Consolidate two workplace pensions?

bjorn_toby_wilde

I have two workplace DC pensions (my employer switched providers in 2019) which I'm no longer paying into as I retired early in December.  I don't need to touch these for at least 5 years so I'm looking to improve growth rather than consolidate.

The first is with Scottish Widows - almost all in SW Aquila Consensus CS1, but they have just started to lifestyle the fund, which has prompted me to look more closely at it.

The second and larger pension is with Aviva - I stopped the lifestyle programme some time ago and 70% is invested in Av MyM My Future Growth.

I'm considering transferring the Scottish Widows pension into the Aviva pot on the basis that the Aviva Growth fund is performing much better and the charges don't look massively different. although the SW website makes it very hard to find them!  As far as I can see Aviva are charging 0.18% AMC and 0.21 Fund charge.  SW give a combined figure of 0.332%.

Does this seem like a reasonable thing to do or is there anything else I've missed?

dunstonh

I'm considering transferring the Scottish Widows pension into the Aviva pot on the basis that the Aviva Growth fund is performing much better and the charges don't look massively different.

We have just come off the back of 5 volatile years with 2022 turning things upside down in terms of risk and losses.  Past performance that looks at this period could give an inaccurate assumption of what you may expect in the coming years and you should not rely on that for the fund selection.

Albermarle

The issue is that in general terms the more you go for growth, the more any funds will get hit in a downturn.

Many people want relative stability as a priority rather than growth. It would be worth having a look at how the different funds performed during the Covid and 2022 downturns.

bjorn_toby_wilde

Good points both.

Looking over the last 5 years the Aviva fund seems to have outperformed the SW fund in every year apart from the 22 downturn. I'll admit I'm no expert on pension funds and these two seem to use different benchmark comparators so it's hard to judge them.  I was looking at Trustnet to try to get an idea of performance but for the SW fund they use PN Mixed Investment 40-85% Shares as a benchmark and for the Aviva fund it's PN Volatility Managed.  Not sure why that is.

Albermarle

Funds tend to pick benchmarks that make their performance look good. 

dunstonh

 I was looking at Trustnet to try to get an idea of performance but for the SW fund they use PN Mixed Investment 40-85% Shares as a benchmark and for the Aviva fund it's PN Volatility Managed.  Not sure why that is.

Volatility Managed can only contain funds that are volatility managed.  However, its a variable risk profile.  So, low risk funds are in that sector as well as higher risk funds.   So, you would never benchmark a volatility-managed fund against sector average. 

Mixed equity 40-85% has multi-asset tunds that have equity content between 40-85%.  Because of the wide variety of funds that have varying equity, you would not use the sector average as benchmark for a fund in that sector.    Risk is also an issue as a typical 1-10 scale could see the 40-85% sector have funds from risk 4 through to risk 8.   

Funds will not normally benchmark to these sectors.  However, data suppliers will usually show them against sector average despite that offering little or no benefit to consumers.

bjorn_toby_wilde

Albermarle said:

The issue is that in general terms the more you go for growth, the more any funds will get hit in a downturn.

Many people want relative stability as a priority rather than growth. It would be worth having a look at how the different funds performed during the Covid and 2022 downturns.

I do take your point Albemarle but my views on stability have shifted quite a lot over the last three years.

The proportion of my pension that was in the “safer” gilts and bonds had modest growth and took a big hit thanks to Mr Putin and Mrs Truss. It hasn’t recovered yet and is still below 2019 levels.

In contrast, the growth funds that were higher risk, took a bigger initial hit, but rebounded much faster and are in positive territory again. Combine that with the higher growth that I enjoyed before COVID and 2022 and I still have a much better return from the supposedly more risky part of my investment.

Paradoxically I suspect the last couple of years have shifted my risk profile quite significantly towards being less cautious.

Albermarle

bjorn_toby_wilde said:

Albermarle said:

The issue is that in general terms the more you go for growth, the more any funds will get hit in a downturn.

Many people want relative stability as a priority rather than growth. It would be worth having a look at how the different funds performed during the Covid and 2022 downturns.

I do take your point Albemarle but my views on stability have shifted quite a lot over the last three years.

The proportion of my pension that was in the “safer” gilts and bonds had modest growth and took a big hit thanks to Mr Putin and Mrs Truss. It hasn’t recovered yet and is still below 2019 levels.

In contrast, the growth funds that were higher risk, took a bigger initial hit, but rebounded much faster and are in positive territory again. Combine that with the higher growth that I enjoyed before COVID and 2022 and I still have a much better return from the supposedly more risky part of my investment.

Paradoxically I suspect the last couple of years have shifted my risk profile quite significantly towards being less cautious.

Just be aware that the impending issue with bonds and Gilts, was well known before Putin invaded Ukraine, and was discussed many times on these forums. It is more related to a resetting of the market after the years of cheap money/ultra low interest rates following the GFC of 2008. Probably Ukraine and Truss just made it a bit worse.
This is very very unlikely to be repeated, and bonds/gilts should resume their traditional role of stabilisers, whilst equities will remain unpredictable as always.
Just not sure you should change your long term risk profile based on quite recent events, which will have little effect going forward.

dunstonh

The proportion of my pension that was in the “safer” gilts and bonds had modest growth and took a big hit thanks to Mr Putin and Mrs Truss. It hasn’t recovered yet and is still below 2019 levels.

Truss hasn't hit your gilts.   They had already fallen significantly before she was in power.   There was a short term blip but that rebounced quickly.   The ending and unwinding of QE was just an event waiting to happen.   The drop in gilts was coming irrespective of Prime minister.  The unknown was when and how fast (some claimed it was coming since 2012).  

Truss gets blamed for many things that had nothing to do with her.     It became a bit of a meme in the same way Sturgeon blamed Westminster for everything, then everyone blamed Truss for everything.

In contrast, the growth funds that were higher risk, took a bigger initial hit, but rebounded much faster and are in positive territory again. Combine that with the higher growth that I enjoyed before COVID and 2022 and I still have a much better return from the supposedly more risky part of my investment.

2022 was an anomaly where lower risk fell by more than higher risk.  Gilts suffered two 5% events.  i.e. events that occurred in 5 in 100 years saw two of them happen in the same year.    Equities will also suffer with events that fall in the 5% of unusual activity at some point.    Except when it happens to equities, the drop will be far greater than that on gilts.

bjorn_toby_wilde

Good points both. Thanks