Aviva - choosing funds

gymandtea

My employer made the decision to leave the TPS just over a year ago. I have accrued roughly £17.5k per year DB pension from 68, or £12k if I go at 58 (which is the current plan). I am now paying into a DC pension with Aviva. 

I’ve turned off lifestyling and decided to come out of the default fund a few months ago because I have 16 years before I’m planning on retiring and this should give a decent amount of time to ride out any dips. In addition I have the security of the DB which will cover expenses. The DC fund is essentially the fun money. 

The default fund was approximately 70% equities. I moved it to a slightly higher risk portfolio with more equities in the following funds:

Blackrock world ex UK Equity Index Tracker (annual charge 0.24%) 80%
Blackrock Emerging Markets Equity (Aquila C) (annual charge 0.43%) 10%
Blackrock UK Equity Index Tracker (annual charge 0.24%) 10%

I realise I am very fortunate that my employer is contributing 22.4% and I am adding 25% on top. The estimate for my pension at 58 is between £659k and £806k. The reason I am contributing so much currently is because firstly it is affordable, and secondly, I’m not sure whether I can manage another 16 years doing what I am doing. I can imagine leaving after 10 and doing something else (which is unlikely to have such a high employer contribution to pension).

In addition I have a S&S LISA with Moneybox, but only just converted it from a cash LISA with about £15k.

I’m interested in whether any others out there have an Aviva pension and what investment decisions you made if you have a high risk tolerance? I’d also be interested in hearing any views on my current strategy.

Another colleague has said they are going to transfer out their Aviva pension each year to a SIPP as they believe it will be lower cost and more fund options. Is this a good strategy? Will is really make much difference?

Thanks 

Marcon

gymandtea said:

I’m interested in whether any others out there have an Aviva pension and what investment decisions you made if you have a high risk tolerance? I’d also be interested in hearing any views on my current strategy.

I wouldn't get too focused on the fact it's an Aviva pension, unless the fund choices are predominantly in house funds with very few 'guest' funds. 

gymandtea said:

Another colleague has said they are going to transfer out their Aviva pension each year to a SIPP as they believe it will be lower cost and more fund options. Is this a good strategy? Will is really make much difference?

They 'believe' - so they've not actually checked their facts? Without knowing the charges they are paying now, and the charges they 'believe' they will be paying if they move their funds to a SIPP, it's impossible to answer. With the hefty employer contribution going into the Aviva scheme, it would be surprising if your employer hadn't agreed some sort of deal on the charging structure.

As for 'more fund options' - again, it depends what the options are in the Aviva scheme. Sometimes having more choice is just increasing the scope to make poor decisions.

DRS1

You can go on somewhere like Hargreaves Lansdown and play with various funds such as VWRP and ACWI and see how they compare to your overall investment spread.  They are a bit cheaper than the Blackrock funds you mention. 

However you may find that your employer has done some sort of deal so that overall fees are not so bad - there are platform fees as well as the fees charged inside the investment fund.

Albermarle

Another colleague has said they are going to transfer out their Aviva pension each year to a SIPP as they believe it will be lower cost and more fund options

We often see this sentiment on this forum , that - workplace pension bad - SIPP good, and of course the SIPP must be cheaper , mustn't it ?
It can be a good idea to change, but as said in the previous posts, it might not always be a good decision and needs some actual prior  analysis.

MeteredOut

Albermarle said:

Another colleague has said they are going to transfer out their Aviva pension each year to a SIPP as they believe it will be lower cost and more fund options

We often see this sentiment on this forum , that - workplace pension bad - SIPP good, and of course the SIPP must be cheaper , mustn't it ?
It can be a good idea to change, but as said in the previous posts, it might not always be a good decision and needs some actual prior  analysis.

...and leaving employment does necessarily change things either.

I've got a DC pension with Aviva from a previous employer (a large US based tech company). I was happy with the fund mix with Aviva but looked into moving it to a SIPP as I too thought it'd be cheaper. And there were transfer bonuses in play if I did move too.

However, even though I was no longer employed there, I was still getting the lower fees based on that previous employer (both reduced fund fees and platform fees) so kept it where it was.

ali_bear

I have an Aviva workplace scheme and I stopped working six months ago, not yet done anything with the fund. A large portion of it was with one of those funds you have listed, it performed very well up until now at least. 

Your arrangements sound perfect to me. 

Aviva should be giving you a summary of your charges paid overall, this is what you need to compare with other providers. Does it come down as a % as your fund grows? I doubt you will be able to get anything significantly better by moving funds to a SIPP.