Moving my pension away from the default fund, would this be the right way to go?

AdventureRocks

Hi everyone,

I am currently in the default fund setup by my company which is "Standard Life Sustainable Multi Asset Universal (AP 10 Year) SLP" it has a fee of 0.645% it has only made 14% total since the very end of 2016. That seems alarming low? But maybe explained by the fund it is roughly 70% equity, 23% bonds, and 7% property.

I am thinking of changing to this fund mix to create similar to the Vanguard All-World Cap Index:

SL Vanguard FTSE Developed World ex UK Pension Fd. -86%, fee = 1.017%

SL Vanguard FTSE UK All Share Index Pension Fund - 4% , fee = 1.017%

SL Vanguard Emerging Markets Stock Index Pension - -10% , fee = 1.217%

 

I am early 30s and from my research, it looks like it is good to be 100% equity until near retirement. Would the above be a good option to give my pension a good chance of making something respectable over the long term or could I give it a better chance anyway? I want to get it right now and leave it alone for years. I do not understand why the fees are so high compared to a stocks and shares ISA with a Vanguard FTSE Global All Cap is around 0.22%.

My only other question is do I need to alter all of this so many years before retriment to safer investments? What would that look like? I think the default fund "Standard Life Sustainable Multi Asset Universal (AP 10 Year) SLP" starts putting into less-risk funds 10 years before. I am not sure what my strategy should be . Should I put a reminder in the calendar to start looking at reducing risk 5 years before retirement, or 10 years? What would I do at that point,  putting bonds into the mix to stabilize it?

Would appreciate any advice or even nods of approval to know I am thinking the right way about this.

Thank you

Linton

It does not matter much how you package your index funds.  However to achieve xomething like VFGAC if you cant access it directly:

 1) VFGAC includes two sectors beyond a standard global index fund  One, as you have identified is EM, the other is Smaller Companies which you have not taken into account. As far as I know there are no other passive funds as broadly based as VFGAC

2) 3 funds (or 4 if you include a global small companies fund) seems excessive.  You should be able to find an all world large companies fund which includes UK and EM and then you would just need a global small companies fund.  However we dont know what funds are available to you.  There is no reason to just consider Vanguard funds, there are other fund managers, some of which may charge lower fees.

3) In practice the performance will be very similar to any global index fund.  So it may not be worth the effort.

As regards what you should do as you approach retirement: 

You will need to determine how you will allocate your pension money during retirement.  This will depend on your drawdown strategy or of course you could be planning to buy an annuity.  It could be sensible to have the funds set up accordingly perhaps 5 years before you stop work.   I dont see any advantage in having an intermediate step. 

Whether you change over 5 or 10 years before retirement is really up to your nerves.  I think anything over 10 years is excessive and anything less than 5 is beginning to get risky if you want to keep to your planned retirement date.

AdventureRocks

Linton said:

It does not matter much how you package your index funds.  However to achieve xomething like VFGAC if you cant access it directly:

 1) VFGAC includes two sectors beyond a standard global index fund  One, as you have identified is EM, the other is Smaller Companies which you have not taken into account. As far as I know there are no other passive funds as broadly based as VFGAC

2) 3 funds (or 4 if you include a global small companies fund) seems excessive.  You should be able to find an all world large companies fund which includes UK and EM and then you would just need a global small companies fund.  However we dont know what funds are available to you.  There is no reason to just consider Vanguard funds, there are other fund managers, some of which may charge lower fees.

3) In practice the performance will be very similar to any global index fund.  So it may not be worth the effort.

As regards what you should do as you approach retirement: 

You will need to determine how you will allocate your pension money during retirement.  This will depend on your drawdown strategy or of course you could be planning to buy an annuity.  It could be sensible to have the funds set up accordingly perhaps 5 years before you stop work.   I dont see any advantage in having an intermediate step. 

Whether you change over 5 or 10 years before retirement is really up to your nerves.  I think anything over 10 years is excessive and anything less than 5 is beginning to get risky if you want to keep to your planned retirement date.

Thank you for taking the time to provide such great information, very helpful.

I have had a look through and the closest I can find to an all-world is

SL Vanguard ESG Developed World All Cap Eq Idx Pn. -- fee 1.017%

SL abrdn UK Smaller Companies Pension Fund --fee 1.496%

So looks like I would have to have 3 funds to make it work.

I have emailed standard life to see if I can get a discount on any of those funds like I do with the default one

tigerspill

I did something very similar (and I am in my 50s).  I was in one of SL's lifestyle funds which was the default with my company DC pension.  I transferred to the first on your list - Vanguard FTSE Developed World ex UK Pension Fd.  For me, it wasnt a huge %age of my assets so I didnt feel the need to add UK/Emerging markets as i had these covered elsewhere.  So far, so good.  Though I acknowledge that the investment risk is higher and am ok with that.

LHW99

I don't know, but do the fees you quote in your post include any discount negotiated by your employer with SL?

Sometimes pension cos quote a maximum fee, but actually charge less in workplace pensions because of these discounts. You may need tophone SL with your details and ask them.

AdventureRocks

LHW99 said:

I don't know, but do the fees you quote in your post include any discount negotiated by your employer with SL?

Sometimes pension cos quote a maximum fee, but actually charge less in workplace pensions because of these discounts. You may need tophone SL with your details and ask them.

The discount only seems to be on the default fund.

I have emailed standard life today to ask if it is possible to get a discount on those funds.

Rich1976

AdventureRocks said:

LHW99 said:

I don't know, but do the fees you quote in your post include any discount negotiated by your employer with SL?

Sometimes pension cos quote a maximum fee, but actually charge less in workplace pensions because of these discounts. You may need tophone SL with your details and ask them.

The discount only seems to be on the default fund.

I have emailed standard life today to ask if it is possible to get a discount on those funds.

I think they will tell you there is no discount on anything other than the default fund.
i pay the same fee on the default fund as you and have access to all of the trackers you quoted  with 1% charge.

I did ask SL on two separate occasions when I joined the scheme in 2020 whether other funds are eligible for the discount and was told no, only the default fund. I decided to stick with the default fund ( partly because I realised 100% equity was off the scale for me ) and am happy with the decision. The lifestyling aspect doesn’t bother me either as I don’t have the knowledge or confidence to decide for myself when to reduce equity exposure .On the app this morning the performance shows 8.34% over 3 months , 8.17% over 1 year and 16.70% over 3 years which is pretty much in line with the multi asset funds I hold in my SIPP.

LHW99

You can reduce the effect of lifestyling by increasing the "retirement age" they hold for you, if you wish.

As long as the option is tailored to your likely eventual requirements (annuity / drawdown) even that may not be necessary.

dunstonh

The discount only seems to be on the default fund.

I usually find with SL that the discount is consistent across all funds if the discount goes further than the auto-enrolment default.  However, if there is no discount, then only the default fund is reduced to meet auto-enrolment compliance.

Albermarle

I am currently in the default fund setup by my company which is "Standard Life Sustainable Multi Asset Universal (AP 10 Year) SLP" it has a fee of 0.645% it has only made 14% total since the very end of 2016. That seems alarming low? But maybe explained by the fund it is roughly 70% equity, 23% bonds, and 7% property.

The result seems poor for a 70% equity fund.

The data on the fact sheets is quite out of date, and these types of funds have gone up significantly in the last 3 months so a more updated valuation could look more positive.