L&G fund options, vs Vanguard

sandspider2000

Hi all

Looking for a bit of guidance, please, if anyone can help. I have a workplace pension with L&G, about 25 years to go. Currently it's all in their multi asset fund 3, and has been since inception. I was looking at my statement, and while this fund is finally starting to do better, the fees are quite high and performance isn't wonderful. I was looking at their PMC World (ex UK) Equity Index Fund 3 instead - management charges a fraction lower, and passive rather than active, so I assume dealing charges would hopefully be lower too. 

I also see that our accountant suggested that we look at L&G PMC Future World Fund 3 - a chunk higher fees, but better performance than the original MAF.

To complicate things further, I also have some investments of my own in Vanguard (Lifestrategy and VEVE), and generally am quite happy with their offerings and charges. Both offerings here are doing better than L&G, so I was wondering if it might be possible (and better) to get work to contribute to a new SIPP with Vanguard? I'm not positive if the latter is an option, however. And I'd slightly like to spread my finances across several different providers, though neither are near touching the 85k compensation limit yet.

Can anyone advise which of the options above might be best, or which might be the best fund to put future L&G pension money into?

Any thoughts appreciated, thank you.

bolwin1

I can't comment on the funds, but it is extremely unlikely that your workplace will agree to contribute to your SIPP directly. The admin involved would be significant & I've never heard of a company do it. 

You may be able to do partial transfers from your workplace pension into a SIPP of your choice. My workplace provider (via Scottish Widows) allows this & I have moved my pension funds previously for the same reasons that you are considering. The key thing was to leave a small amount in the work pension so it didn't get closed. You'll need to contact your workplace pension provider to check if this is an option.

dunstonh

To complicate things further, I also have some investments of my own in Vanguard (Lifestrategy and VEVE), and generally am quite happy with their offerings and charges.

VEVE is meant to be held in a portfolio of funds where you want to select how much you put in emerging markets (and your bond spread if applicable).   Its not comparable to either VLS or the L&G multi-asset funds.

The Performance of VLS has not been great over the 8 years and charges will be unlikely to be much different from the L&G workplace pension.  VLS is 0.27% (0.22 OCF plus 0.05% TC).    Plus your platform charge on top.    You don't say what the L&G charge is but typically it is around  0.3-0.75% all in depending on your balance and the terms obtained by your employer.

Both offerings here are doing better than L&G, 

A restricted global equity fund would be.   Have you compared against the global equity funds with L&G.

so I was wondering if it might be possible (and better) to get work to contribute to a new SIPP with Vanguard? 

Highly unlikely they would allow you to opt out and create a separate payroll and pension payment run just for you unless you are a key worker or director.

And I'd slightly like to spread my finances across several different providers, though neither are near touching the 85k compensation limit yet.

What do you think that the 85k compensation limit does for you?      
L&G's worksave pension has 100% FSCS protection with internal funds (its unclear with external funds because its never been tested - and probably never will be)

sandspider2000

Thanks both

As you can probably tell, I'm a bit confused!

 

I believe the charges with L&G are about 0.35%, maybe a litte more now. It just seems that L&G take a bigger cut of a smaller pot than Vanguard do. One of the reasons I bought some VEVE is that the OCF is 0.12 vs 0.22 for VLS (plus transaction charges as you say)

Sounds like I'll need to stick with L&G anyway, so I'd appreciate any thoughts on the "best" fund, either of the 3 I mentioned or any others? Then I can research further.

Thank you.

gm0

I have had an L&G occupational which I moved partly out to a SIPP and partly to L&G worksave drawdown

As I recall - Multi-asset 3 is a circa 40% equities fund with a wide range of bonds and other fixed income and some other asset class shrapnel in it.  Depending on your exact scheme - the fund charge can be quite low and I find the bond and FI contents of interest for my purposes in portfolio building. 

Though I would not have done in accumulation a long way out from retirement.  I would have found the 40% equities way too little. For my risk appetite in long term accumulation.  You however, need to do you.

Shopping for equities with L&G in Worksave - I mostly use a blend of their World ex UK and UK Index funds as these provide a "to taste" for home market bias on equities.  And are market price i.e. equivalent to most SIPP offers that do the same.  That achieves a Global Developed Markets equities holding passively.  And should cost close to 0.10/0.12% fund management.  Plus your scheme "platform" charge whatever that is.  If that platform charge is low - like ours.  Then sub 0.2% all in should be happening.

You can of course add things from there as you choose.  A small cap fund.  An emerging markets fund.  Bonds.  Cash/MMF.  Whatever it is that is in the offered list and that you wish to add alongside global equtiies that extends things without confusing matters or overlapping 90%. (like using multiple multi-asset funds - L&G have loads of these and I confess I don't understand the practical differences or why I would care about each one vs another.

You can - as you currently do - use one of the "packaged" funds like MA3 or FutureWorld

Choice is very risk appetite and purpose dependent.  I am looking to build an overall portfolio for drawdown that delivers enough, and falls short of 100% equities levels of excitement and volatility.   More like 70%.  Still higher risk than what you have described.  In long term accumulation my purpose was different.  Save through the swings constantly pound cost averaging with equity long term returns across decades - for the largest pot as I approached access age.  At 100% equities as cheaply as possible. 

My fairly small experimental use of Multi-asset 3 was and is - intended to dampen my portfolio a little - and not to improve its long term return potential.  I expect it to have a long term return potential lower than a 100% equities fund.  Due to the bonds.  And to provide some (limited) ballast in my total portfolio against volatility from my mix. 
How well this works in practice medium term - we shall discover. 

I did not use Multi-Asset 3 in accumulation being "all in" in equities throughout.  Not my type of thing at all.  And it was introduced late on in my accumulation journey anyway.

The difficulty I found with building a multi-asset portfolio by hand via my old occupational scheme as I approached drawdown and started to think about sequence risk and adjusting risk level.   Is that I did not care much for the bond fund that we were offered.  Too many corporates.  And mix of credit quality.  And too long an average duration.  So a job for the SIPP with the broader range. 

But as I did not want many or indeed any bonds at all during the earlier period of long term accumulation. The lack of a good bond fund did not bother me. But again. Your attitude to this and mileage may vary.   I think Worksave offers a bit more choice than we used to get on fixed income.

I think that the preferred low cost L&G Global passive combination is (World ex UK + UK Index as a fund pair. That  would be my goto on an L&G setup for "just global developed market equities" as cheap as possible.  There isn't generally a cheaper option.  But check your fund list and online resources.  As the individual prices are quite variable.  And pension scheme specials exist.  So going looking on trustnet will very often give you the wrong numbers.  You need to know for your particular worksave as negotiated by your trustees/employer.

Based on limited choice - not ethical awakening - I was more or less forced in order to go global - to use their Global Ethical Index fund.  Again passive indexer but an unusual index FTSE4Good Developed.  Short (1500 or so list of stocks) for a global equities fund.  But the performance is as you would expect for something passive of that nature. 

At 100% equities it is much closer to a holding in VEVE although the list of equities is slightly different (FTSE4Good)
The passive pair - World ex UK + UK (at ~4%) are fairly interchangeable with any other global equities indexer.  As it's very close to being the same stuff in a bag with L&G on it rather than VG or HSBC.

You are looking for fund drag at the 0.12% or below for this sort of passive equties fund.  That is market price for VEVE and World exUK+UK.  Anything "legacy prices" - down at 0.05% in a particular scheme is well worth a close look at as well to see if it is a good building block.  

Unclear how you found VEVE.  An accumulation vanguard fund VHVG or one of a range of choices would serve perfectly well. Same equities. Different treatment of dividends.  Unclear what useful purpose income units serve during long term accumulation.  For me - in drawdown - they can refill my cash buffer a bit against sequence risk. For people outside a tax wrapper they make tax reporting easier. In a pension that doesn't matter.   So why you want your cash fund topped up along the way by inc units (as VEVE has) rather than acc - is something for you to think about.

For us with our fund list - global ethical was the bargain and the only passive global fund. 
But sometimes this ethical fund is offered at 0.3% and thereabouts - where it then less compelling than a range of cheaper alternatives that are also a tiny bit less ethical.  And a tiny bit better diversified.  At 0.3% it is expensive playing the role of a global passive index tracker which should as I said - cost 0.12% or so. 

sandspider2000

Many thanks for that detailed reply, GM - appreciate all the typing!

As far as I remember, I chose VEVE (a fairly small amount compared to my VLS80 holdings) as it had lower fees than the lifestrategy options, and I chose the dividend version as the divis pay my Vanguard costs, basically.

I'm happy to have more than 40% equity holdings via L&G, so will look at the World ex UK and UK Index funds you  mention. Hopefully I have a good few years until I reach pensionable age (whatever that is by then), so I can accept more risk and hope to have time to recover from any bad years.

Thanks again for typing all that out, I will read it again and consider what you say.

Albermarle

You can not compare a medium low risk 40% equity fund like the L&G one, with a higher risk fund like VLS 80.

When stock markets are up, an 80% equity fund will always outperform a 40% equity fund. On the other hand if there was a crash, you would be better off in the lower equity fund. So you are comparing apples and pears.

However in the long term ( >10 years) you would expect a higher equity fund to give more growth despite some ups and downs.

sandspider2000

Understood, thank you.

I suppose a simpler original question would have been "Which L&G fund option is roughly comparable to VLS 80 in terms of costs and likely performance, as I can't move my pension away from L&G?"

Sounds like World (ex UK) Equity Index Fund 3 is a decent option (100% equities) over the longer term, so I've moved future contributions to that. I will probably move a medium to large proportion of my existing MAF fund to WeUK as well, but keep some MAF as a cushion, just in case. As I get closer to retirement I will alter the balance of things, and increase my bond percentage, as I become less able to tolerate a crash in equity prices.

I think that makes sense, anyway.

Albermarle

I suppose a simpler original question would have been "Which L&G fund option is roughly comparable to VLS 80 in terms of costs and likely performance, as I can't move my pension away from L&G?"

L&G Multi asset 7 

sandspider2000

Thanks. Performance looks good, but fees are high at 0.6% ish. And actively managed - which I'm not sure is worth paying the extra for, personally.