LGPS Standard Life AVC - fund(s) choice?

CraggyRockFace

I am 43, working in a school, earning £22K, and my LGPS (LPP) DB pension has a current value of around £2.5K. No idea when I'm going to retire, but I assume SPA of 67 for now.

I have decided to increase my pension contribuitions via AVCs, and the provider for my county's fund is Standard Life.

I now have to fill in a form giving my investment fund options, a full list of which appear on this PDF from SL:
https://library.standardlife.co.uk/gpen4.pdf
If I want to I can invest in multiple funds and give a % to allocate to each fund.

From my limited level of research so far, it seems that if I am investing long term - the simplest and best idea is to go for a cheap and simple passive worldwide tracker fund? Does this sound reasonable? Everything I have read so far tells me that passive trackers always beat active managed funds long term. And worldwide funds will give the biggest spread of investments.

Looking at the Standard Life PDF document (linked to above), there are pages and pages of funds. I'm just looking for the cheapest passive worldwide tracker right? So the "Global Equities" section right? (Pages 13-16.)

Looking at the list, the lowest Total Annual Fund Charge is 1.00%, which applies to two funds:
- Standard Life Overseas Tracker Pension Fund (H5) - Volatility 6 (Page 13)
- SL abrdn Sustainable Index World Equity Pension Fund (LGID) - Volatility 6 (Page 14)

Is there any obvious reason why I should choose one of these funds over the other? Or perhaps 50% one and 50% the other? Or indeed any of the other five passive funds listed which have a very similar (but slightly higher) Total Annual Fund Charge of 1.01%?

Surely I just want the cheapest?

Many thanks for any insight anyone can give me.

kempiejon

RE: SL abrdn Sustainable Index World Equity Pension Fund (LGID) - Volatility 6 (Page 14)
https://www.standardlife.co.uk/adviser/investments/updates/changes-to-the-sl-abrdn-sustainable-funds
abrdn are making changes to their fund names so they comply with new regulations. They are replacing the word sustainable in the fund names with 'Evolve'. The funds will continue to allow investments which have been selected after considering a range of Environmental, Social and Governance (ESG) factors. The changes will take effect from 13 January 2025.

When I first heard ethical investing I was scepitcal. I didnt bother to look up the regulations nor why sustainable didn't comply with them.

Albermarle

From my limited level of research so far, it seems that if I am investing long term - the simplest and best idea is to go for a cheap and simple passive worldwide tracker fund? Does this sound reasonable?

This is often what is recommended, but there is a potential downside.

If global stock markets took a dive, the fund value could drop alarmingly very quickly.
Lets say in a few years time the fund has built up to £40,000 and in a week it dropped to £25,000. Would you be OK with that and leave it alone, as the theory is it will recover again eventually?
Or with the media screaming about financial armageddon, would you panic and sell/pull out?
If it is the latter you would be better off in a less potentially volatile investment. 

CraggyRockFace

Albermarle said:

From my limited level of research so far, it seems that if I am investing long term - the simplest and best idea is to go for a cheap and simple passive worldwide tracker fund? Does this sound reasonable?

This is often what is recommended, but there is a potential downside.

If global stock markets took a dive, the fund value could drop alarmingly very quickly.
Lets say in a few years time the fund has built up to £40,000 and in a week it dropped to £25,000. Would you be OK with that and leave it alone, as the theory is it will recover again eventually?
Or with the media screaming about financial armageddon, would you panic and sell/pull out?
If it is the latter you would be better off in a less potentially volatile investment. 

Thanks for your comment. I understand that investing long term for a pension this way means you should ignore any short term volatility. I doubt I would even check the value of the fund on a regular basis. What would be the point if the idea is to leave it invested long term?

So do you agree that as long you have the discipline to just leave the money where it is (or just never check it!) this is generally agreed to be the best way to invest long term? 

Albermarle

CraggyRockFace said:

Albermarle said:

From my limited level of research so far, it seems that if I am investing long term - the simplest and best idea is to go for a cheap and simple passive worldwide tracker fund? Does this sound reasonable?

This is often what is recommended, but there is a potential downside.

If global stock markets took a dive, the fund value could drop alarmingly very quickly.
Lets say in a few years time the fund has built up to £40,000 and in a week it dropped to £25,000. Would you be OK with that and leave it alone, as the theory is it will recover again eventually?
Or with the media screaming about financial armageddon, would you panic and sell/pull out?
If it is the latter you would be better off in a less potentially volatile investment. 

Thanks for your comment. I understand that investing long term for a pension this way means you should ignore any short term volatility. I doubt I would even check the value of the fund on a regular basis. What would be the point if the idea is to leave it invested long term?

So do you agree that as long you have the discipline to just leave the money where it is (or just never check it!) this is generally agreed to be the best way to invest long term? 

It is what comes up as a recommendation regularly on the forum, as long as you have at least 10 years before you might need it.