Private Pension Lifestyling investments - the next scandal?

Sarahspangles

leosayer said:

The time to make sure your savings are suitable for you is when you start saving, not just before you need to use them. Maybe the massive drop in bond prices last year will be a wake up call to pension holders to review their plans but I doubt it.

I don’t think the individual can be absolved of all responsibility. However from experience, both times an employer enrolled me in a dc pension I didn’t have time or energy to invest in understanding it, or to look at the default investment. Due to having a new job and new routine.

That doesn’t make it the employer’s responsibility either but it would be good to have had reminders when life settled down. L&G were happy not to engage with me at all once it was set up, apart from using my details to try to flog me other stuff. Their next contact about my pension was when I reached a key birthday. Maybe I shouldn’t have taken offence that the email was titled something like ‘Wake Up’?

Rich1976

Much of the problem is simply because the average person is not interested in pensions.
not all Lifestyle funds are geared towards annuities. I am in a lifestyle fund through my work pension with Standard Life and they had about 4 options I think on whether you wanted to buy an annuity, drawdown or unsure. It certainly takes all the hassle of choosing other funds and that in itself is another problem. The amount of choice is simply overwhelming . How can the average person be expected to sift through dozens and dozens of funds to identify a small handful which may be suitable . Sure there are filters but really even the funds it selects, you have no idea of how good they are.

so really Lifestyling can’t be that bad surely. The fees tend to be reasonable ( and certainly with my work pension are cheaper than tracker funds which are all about 1% compared to 0.65 for the lifestyle fund ), they are medium risk it seems which certainly is where my risk profile sits now so seem to suit the majority of people who don’t know where to start with choosing funds or have the skills and know how to work out how to put a portfolio of individual funds together?

also in my experience there is no guidance from the employer. The first you know you’ve been enrolled is when there is a deduction on the payslip and a few weeks ago a letter comes through from the pension provider. After that the employee is on their own.

dunstonh

so really Lifestyling can’t be that bad surely. The fees tend to be reasonable ( and certainly with my work pension are cheaper than tracker funds which are all about 1% compared to 0.65 for the lifestyle fund )

Are you sure about the cost?  Normally, the internal/in-house funds are within the auto-enrolment 0.75% cap.

Rich1976

dunstonh said:

so really Lifestyling can’t be that bad surely. The fees tend to be reasonable ( and certainly with my work pension are cheaper than tracker funds which are all about 1% compared to 0.65 for the lifestyle fund )

Are you sure about the cost?  Normally, the internal/in-house funds are within the auto-enrolment 0.75% cap.

i started off being in tracker funds which are mainly ones by Blackrock rather than standard life’s own ones. They were all 0.98% plus transactional charges of about 0.05% on top.

so then I changed to the Lifestyle fund.

but even looking on my online account this morning , the lifestyle funds are still the cheapest, there is nothing available for lower or the same charges.

Albermarle

Rich1976 said:

Much of the problem is simply because the average person is not interested in pensions.
not all Lifestyle funds are geared towards annuities. I am in a lifestyle fund through my work pension with Standard Life and they had about 4 options I think on whether you wanted to buy an annuity, drawdown or unsure. It certainly takes all the hassle of choosing other funds and that in itself is another problem. The amount of choice is simply overwhelming . How can the average person be expected to sift through dozens and dozens of funds to identify a small handful which may be suitable . Sure there are filters but really even the funds it selects, you have no idea of how good they are.

so really Lifestyling can’t be that bad surely. The fees tend to be reasonable ( and certainly with my work pension are cheaper than tracker funds which are all about 1% compared to 0.65 for the lifestyle fund ), they are medium risk it seems which certainly is where my risk profile sits now so seem to suit the majority of people who don’t know where to start with choosing funds or have the skills and know how to work out how to put a portfolio of individual funds together?

also in my experience there is no guidance from the employer. The first you know you’ve been enrolled is when there is a deduction on the payslip and a few weeks ago a letter comes through from the pension provider. After that the employee is on their own.

Lifestyling is not necessarily bad, especially for inexperienced/disinterested clients. It is bad though if you are in the wrong lifestyling approach. i.e. an annuity targeted one when you intend to drawdown, and that has been where the problem lies and basically the subject of this thread. In my opinion providers have been slow to adapt from the change from buying annuities to drawdown.
My last employers provider wrote to me later last year only, that the default lifestyling fund was being changed from an annuity focused one to a drawdown focused one ( although personally I had moved out of lifestyling many years before) .
A clear case of shutting the stable door after the horse has bolted.

Pat38493

Rich1976 said:

dunstonh said:

so really Lifestyling can’t be that bad surely. The fees tend to be reasonable ( and certainly with my work pension are cheaper than tracker funds which are all about 1% compared to 0.65 for the lifestyle fund )

Are you sure about the cost?  Normally, the internal/in-house funds are within the auto-enrolment 0.75% cap.

i started off being in tracker funds which are mainly ones by Blackrock rather than standard life’s own ones. They were all 0.98% plus transactional charges of about 0.05% on top.

so then I changed to the Lifestyle fund.

but even looking on my online account this morning , the lifestyle funds are still the cheapest, there is nothing available for lower or the same charges.

It may be that your employer is with a provider who only offers a small choice of funds.  You can certainly get tracker funds for a lot less than 1% - for example Vanguard has them at 0.22% and HSBS at 0.19% and you can get lesser than that as well.

However if your employer has locked you into a small range of choices, your only other option is to see if your employer provider allows partial transfers out - you could then transfer the money to a SIPP with a much larger choice.

The other option you have is to be in the lifestyle fund but change your retirement date to 75 or whatever so that the lifestyling does not kick in.  As discussed above lifestyling is not necessarily bad, but it’s quite often a bit over conservative to deliver the best long term results for clued up investors.

Rich1976

Pat38493 said:

Rich1976 said:

dunstonh said:

so really Lifestyling can’t be that bad surely. The fees tend to be reasonable ( and certainly with my work pension are cheaper than tracker funds which are all about 1% compared to 0.65 for the lifestyle fund )

Are you sure about the cost?  Normally, the internal/in-house funds are within the auto-enrolment 0.75% cap.

i started off being in tracker funds which are mainly ones by Blackrock rather than standard life’s own ones. They were all 0.98% plus transactional charges of about 0.05% on top.

so then I changed to the Lifestyle fund.

but even looking on my online account this morning , the lifestyle funds are still the cheapest, there is nothing available for lower or the same charges.

It may be that your employer is with a provider who only offers a small choice of funds.  You can certainly get tracker funds for a lot less than 1% - for example Vanguard has them at 0.22% and HSBS at 0.19% and you can get lesser than that as well.

However if your employer has locked you into a small range of choices, your only other option is to see if your employer provider allows partial transfers out - you could then transfer the money to a SIPP with a much larger choice.

The other option you have is to be in the lifestyle fund but change your retirement date to 75 or whatever so that the lifestyling does not kick in.  As discussed above lifestyling is not necessarily bad, but it’s quite often a bit over conservative to deliver the best long term results for clued up investors.

Well the provider is Standard Life and upon checking earlier there are over 300 funds I could choose from . Only about a dozen have charges below 1% which are mostly variations of the Multi Asset Lifestyle funds. 

Thankfully I have had a Sipp running for years which has over 25 years of contributions from previous employers as well as my own contributions .

standard life do not allow partial transfers as I phoned and asked last year.

in itself the multi asset fund does seem quite good having grown over 8% in the last 12 months and the derisking isn’t as as dramatic as some others I have seen from other providers.

Pat38493

Rich1976 said:

Pat38493 said:

Rich1976 said:

dunstonh said:

so really Lifestyling can’t be that bad surely. The fees tend to be reasonable ( and certainly with my work pension are cheaper than tracker funds which are all about 1% compared to 0.65 for the lifestyle fund )

Are you sure about the cost?  Normally, the internal/in-house funds are within the auto-enrolment 0.75% cap.

i started off being in tracker funds which are mainly ones by Blackrock rather than standard life’s own ones. They were all 0.98% plus transactional charges of about 0.05% on top.

so then I changed to the Lifestyle fund.

but even looking on my online account this morning , the lifestyle funds are still the cheapest, there is nothing available for lower or the same charges.

It may be that your employer is with a provider who only offers a small choice of funds.  You can certainly get tracker funds for a lot less than 1% - for example Vanguard has them at 0.22% and HSBS at 0.19% and you can get lesser than that as well.

However if your employer has locked you into a small range of choices, your only other option is to see if your employer provider allows partial transfers out - you could then transfer the money to a SIPP with a much larger choice.

The other option you have is to be in the lifestyle fund but change your retirement date to 75 or whatever so that the lifestyling does not kick in.  As discussed above lifestyling is not necessarily bad, but it’s quite often a bit over conservative to deliver the best long term results for clued up investors.

Well the provider is Standard Life and upon checking earlier there are over 300 funds I could choose from . Only about a dozen have charges below 1% which are mostly variations of the Multi Asset Lifestyle funds. 

Thankfully I have had a Sipp running for years which has over 25 years of contributions from previous employers as well as my own contributions .

standard life do not allow partial transfers as I phoned and asked last year.

in itself the multi asset fund does seem quite good having grown over 8% in the last 12 months and the derisking isn’t as as dramatic as some others I have seen from other providers.

I’m still researching all this but from my opinion so far, the two big problems that can arise with these lifestyle or target retirement funds is that they start to move you more into bonds too early, sometimes 10 years before retirement which is way to early if you are planning drawdown, and secondly they even carry on increasing your bond share after you have retired.

From the research I’ve read, you are arguably better off moving into a bigger share of bonds only a few years before retirement or even at retirement, and then over the 10 years after retirement slowly raise your equities back up again to 90 or 100%.

Therefore even if you don’t have much ability to control it before retirement, you can certainly transfer out as soon as you are no longer an employee and take control of your situation (and also take advantage of much lower DIY platform and fund charges if you are willing to do a bit of research and reading up on it).

Albermarle

It may be that your employer is with a provider who only offers a small choice of funds.  You can certainly get tracker funds for a lot less than 1% - for example Vanguard has them at 0.22% and HSBS at 0.19% and you can get lesser than that as well

Well the provider is Standard Life and upon checking earlier there are over 300 funds I could choose from . Only about a dozen have charges below 1% which are mostly variations of the Multi Asset Lifestyle funds

Standard Life has no platform charge, the fund fee is the only charge. 

There is also a discount, the size of which depends on the size of your pot and/or what an employer has negotiated.

However I think the ones with a fund fee below 1% do not qualify for all the discounts.

michaels

One thing with annuities - befroe they made vary little sense compared to 'swr', now they are relatively much more competitive.  So perhaps the markets are trying to tell us something and that 'lifestyling' was actually effective in what it was hoping to achieve.