Simple DC pension options

ComicGeek

I currently have a DC pension of circa £400k with True Potential, 20ish years until I will start taking pension.

Only been with TP for 2-3 years, I made a mistake trusting someone that I shouldn't have. I don't pay for ongoing advice and charges aren't extortionate but I still want to spend some time looking at alternatives now.

I'm having a couple of free initial meetings with local IFAs next week to discuss, but ultimately I think I just want something simple without ongoing advice. I want to compare what they might offer to set up for me for £££ against what I could do myself for free.

I know it has been discussed multiple times, but thought it might be helpful to group this into a single thread. If you want to note:

1. Platform used
2. Selection of funds used and briefly why
3. Charges

 

ComicGeek

No one able to help with this?

People on here are normally so quick to provide non IFA options .... 

leosayer

What you can do for free is stick everything in a cheap global equity index fund on the cheapest well established platform you can find.

However that won't take account of any of your wider circumstances, plans or goals. As a result, that approach and other people's approaches are unlikely to be suitable for you.

For example, my wife and I use a variety of SIPP and DC platforms because of work-based plans and some of our fund choices are limited because of that. As well as global equity index funds, we also invest in short-term gilts funds and cash funds because we are near retirement.

The best starting place is to work out your financial targets and work backwards from there. You can start with, asking yourself when would you like to retire and how much income will you want every year. 

Marcon

ComicGeek said:

No one able to help with this?

People on here are normally so quick to provide non IFA options .... 

As you say this has been discussed multiple times, so maybe have a browse through some of the previous threads. It might be convenient for you to have everyone repeating themselves to make your life easier (don't blame you!), but as the info is all there already...could be that the lack of responses is because people can't be bothered to say it all again?

Albermarle

A priority is to be aware of your risk tolerance.
A higher risk 100% equity fund will normally produce more growth long term than a fund that has a lower % of equity.
However it will be more volatile and could drop as much as 40% in just a couple of weeks. If you can live with this and you are sure you will not panic and pull out, then fine. Pulling out of an investment when it has dropped a lot is usually a very poor decision, so should be avoided.
However the majority of people prefer something a bit less volatile, which is why 60% ( or thereabouts) funds are popular.
In any case the short/medium term volatility is less of an issue when you are younger than when you are older, as a general rule.

ComicGeek

Ok, I've taken a few hours this afternoon looking through a few examples against my current funds.

Current True Potental funds (75% equity) have achieved average annual returns of 6.48% over the last 5 years - annual fees of £5,200, net increase of £20,720 (with fees deducted).

Fidelity Multi Asset Allocator Growth Fund W-Accumulation (60% equity) would have achieved average annual returns of 4.85% over the same 5 years - annual fees of £1,600, net increase of £17,800.

Fidelity Multi Asset Allocator Adventurous Fund W-Accumulation (80% equity) would have achieved average annual returns of 5.88% over the same 5 years - annual fees of £1,600, net increase of £21,920.

Fidelity Index World Fund P Accumulation (98% equity) would have achieved average annual returns of 11.32% over the same 5 years - annual fees of £1,280, net increase of £44,000. But much higher risk level than I could tolerate!

Vanguard LifeStrategy 60% Equity Fund would have achieved average annual returns of 5.04% over the same 5 years - annual fees of £1,480, net increase of £18,680.

Vanguard LifeStrategy 80% Equity Fund would have achieved average annual returns of 8.08% over the same 5 years - annual fees of £1,480, net increase of £30,840.

Obviously been a higher return from higher proportion equity funds over this period - if I'm comfortable with 75% equity at the moment, then I should be looking at Vanguard LifeStrategy 80% Equity fund from the info above.

My wife would be more comfortable at 60% equity which matches her current risk level. Currently net increase of only £7520 under TP, would be £18,680 with Vanguard LifeStrategy 60%.

So based on this I should be moving across to Vanguard, as currently (as expected) we're paying too much for a 'managed' portfolio that isn't performing any better.

Not necessarily looking for any feedback, just wanted to get my thoughts down

Bostonerimus1

ComicGeek said:

I currently have a DC pension of circa £400k with True Potential, 20ish years until I will start taking pension.

Only been with TP for 2-3 years, I made a mistake trusting someone that I shouldn't have. I don't pay for ongoing advice and charges aren't extortionate but I still want to spend some time looking at alternatives now.

I'm having a couple of free initial meetings with local IFAs next week to discuss, but ultimately I think I just want something simple without ongoing advice. I want to compare what they might offer to set up for me for £££ against what I could do myself for free.

I know it has been discussed multiple times, but thought it might be helpful to group this into a single thread. If you want to note:

1. Platform used
2. Selection of funds used and briefly why
3. Charges

 

How would you describe your level of investing knowledge and comfort?

dunstonh

So based on this I should be moving across to Vanguard, as currently (as expected) we're paying too much for a 'managed' portfolio that isn't performing any better.

TP would include the platform and robo-advice charge.  (assuming its robo and not full advice) and they would include OCF and TC.   

The alternative options appear to be OCF only.  Have you included platform charge and TC?

barnstar2077

ComicGeek said:

Ok, I've taken a few hours this afternoon looking through a few examples against my current funds.

Current True Potental funds (75% equity) have achieved average annual returns of 6.48% over the last 5 years - annual fees of £5,200, net increase of £20,720 (with fees deducted).

Fidelity Multi Asset Allocator Growth Fund W-Accumulation (60% equity) would have achieved average annual returns of 4.85% over the same 5 years - annual fees of £1,600, net increase of £17,800.

Fidelity Multi Asset Allocator Adventurous Fund W-Accumulation (80% equity) would have achieved average annual returns of 5.88% over the same 5 years - annual fees of £1,600, net increase of £21,920.

Fidelity Index World Fund P Accumulation (98% equity) would have achieved average annual returns of 11.32% over the same 5 years - annual fees of £1,280, net increase of £44,000. But much higher risk level than I could tolerate!

Vanguard LifeStrategy 60% Equity Fund would have achieved average annual returns of 5.04% over the same 5 years - annual fees of £1,480, net increase of £18,680.

Vanguard LifeStrategy 80% Equity Fund would have achieved average annual returns of 8.08% over the same 5 years - annual fees of £1,480, net increase of £30,840.

Obviously been a higher return from higher proportion equity funds over this period - if I'm comfortable with 75% equity at the moment, then I should be looking at Vanguard LifeStrategy 80% Equity fund from the info above.

My wife would be more comfortable at 60% equity which matches her current risk level. Currently net increase of only £7520 under TP, would be £18,680 with Vanguard LifeStrategy 60%.

So based on this I should be moving across to Vanguard, as currently (as expected) we're paying too much for a 'managed' portfolio that isn't performing any better.

Not necessarily looking for any feedback, just wanted to get my thoughts down

You have twenty years to go, but you don't trust 100% equities, the most you can do is 75%?  What do you think would happen to the extra 25% of equities that couldn't happen to the first 75%?

I think you are just limiting your growth potential for not much of a safety blanket to be honest.  If you were sub ten years away and you were very cautious then I could understand.

What would your numbers say if you just invested in Vanguard's FTSE Global All Cap Index fund on their own platform?  A fund that is much closer to the global market than their Lifestrategy funds.

They charge a 0.15% platform fee capped at £375 for the year, with a fund charge of 0.23%.  With a cumulative performance of 59.62% for the last five years.  You may be able to invest in the same fund a bit cheaper on another platform, but I have stayed with Vanguard because I don't really want to pay per transaction or think about drawdown charges etc, I just want to pay in every month and forget about it (I may change my mind as my fund grows though.)

Yes, 100% equity funds go up and down a lot, but you have a long way to go.  When it goes down just think of it as buying that months slice of the pie a bit cheaper!

ComicGeek

dunstonh said:

So based on this I should be moving across to Vanguard, as currently (as expected) we're paying too much for a 'managed' portfolio that isn't performing any better.

TP would include the platform and robo-advice charge.  (assuming its robo and not full advice) and they would include OCF and TC.   

The alternative options appear to be OCF only.  Have you included platform charge and TC?

Thanks. I got rid of the 0.5% full advice on TP last year, as I had zero contact with the FA. Their charges include platform, OCF and TC.

I've included platform charge at 0.15% and OCF at 0.22% for Vanguard, but I haven't included TC. Vanguard LifeStrategy 80% with 0.03% TC would only be £120/yr, Lifestrategy 60% is 0.04% is £160/yr.

ComicGeek

barnstar2077 said:

ComicGeek said:

Ok, I've taken a few hours this afternoon looking through a few examples against my current funds.

Current True Potental funds (75% equity) have achieved average annual returns of 6.48% over the last 5 years - annual fees of £5,200, net increase of £20,720 (with fees deducted).

Fidelity Multi Asset Allocator Growth Fund W-Accumulation (60% equity) would have achieved average annual returns of 4.85% over the same 5 years - annual fees of £1,600, net increase of £17,800.

Fidelity Multi Asset Allocator Adventurous Fund W-Accumulation (80% equity) would have achieved average annual returns of 5.88% over the same 5 years - annual fees of £1,600, net increase of £21,920.

Fidelity Index World Fund P Accumulation (98% equity) would have achieved average annual returns of 11.32% over the same 5 years - annual fees of £1,280, net increase of £44,000. But much higher risk level than I could tolerate!

Vanguard LifeStrategy 60% Equity Fund would have achieved average annual returns of 5.04% over the same 5 years - annual fees of £1,480, net increase of £18,680.

Vanguard LifeStrategy 80% Equity Fund would have achieved average annual returns of 8.08% over the same 5 years - annual fees of £1,480, net increase of £30,840.

Obviously been a higher return from higher proportion equity funds over this period - if I'm comfortable with 75% equity at the moment, then I should be looking at Vanguard LifeStrategy 80% Equity fund from the info above.

My wife would be more comfortable at 60% equity which matches her current risk level. Currently net increase of only £7520 under TP, would be £18,680 with Vanguard LifeStrategy 60%.

So based on this I should be moving across to Vanguard, as currently (as expected) we're paying too much for a 'managed' portfolio that isn't performing any better.

Not necessarily looking for any feedback, just wanted to get my thoughts down

You have twenty years to go, but you don't trust 100% equities, the most you can do is 75%?  What do you think would happen to the extra 25% of equities that couldn't happen to the first 75%?

I think you are just limiting your growth potential for not much of a safety blanket to be honest.  If you were sub ten years away and you were very cautious then I could understand.

What would your numbers say if you just invested in Vanguard's FTSE Global All Cap Index fund on their own platform?  A fund that is much closer to the global market than their Lifestrategy funds.

They charge a 0.15% platform fee capped at £375 for the year, with a fund charge of 0.23%.  With a cumulative performance of 59.62% for the last five years.  You maybe able to invest in the same fund a bit cheaper on another platform, but I have stayed with Vanguard because I don't really want to pay per transaction or think about drawdown charges etc, I just want to pay in every month and forget about it (I may change my mind as my fund grows though.)

Yes, 100% equity funds go up and down a lot, but you have a long way to go.  When it goes down just think of it as buying that months slice of the pie a bit cheaper!

When I answer the risk profiler questionnaires honestly I always come out as 'moderately adventurous'. And that's what my funds have been selected against to date. You're absolutely right that it never really takes into account the length of time for investments - if I wasn't asked any questions I would certainly pick a higher growth, higher risk category. 

I think I need to read specifically about risk and equities/bond risks.

The FTSE Global All Cap Index is an ETF then, seems to also have one off costs on trades. I think I've slightly overestimated Vanguard platform fees, as I hadn't capped it at £375/yr. 

I'm pretty much decided on moving across to Vanguard, just need to do more reading and research on what funds. The good thing is that my wife's pension is virtually the same amount but she has a much lower comfort for risk - I can look to balance out the risk level between the two pensions.