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  • FIRST POST
    • Kellamergh
    • By Kellamergh 18th Sep 19, 4:16 PM
    • 4Posts
    • 1Thanks
    Kellamergh
    Nest: Would high risk suit me?
    • #1
    • 18th Sep 19, 4:16 PM
    Nest: Would high risk suit me? 18th Sep 19 at 4:16 PM
    Hi,
    I started saving into my company pension 2 years ago.
    I'm 34 years, so I have started a little later than I should have.
    I, currently, have around 5K saved in the pot.
    I have around £200 a month, being thrown into my pot, coming from my wage and my employer's contribution.

    I work with someone that has switched his pension into a high risk pot and "advises" me that I should do it.

    I'm clueless with pensions.

    Am I best off just sticking to the low risk?
Page 1
    • Prism
    • By Prism 18th Sep 19, 4:28 PM
    • 1,164 Posts
    • 876 Thanks
    Prism
    • #2
    • 18th Sep 19, 4:28 PM
    • #2
    • 18th Sep 19, 4:28 PM
    The low growth fund probably won't get you anywhere near gains of the higher risk one. It might not even match inflation. I would swap and then forget about it for a while.
    • Kellamergh
    • By Kellamergh 18th Sep 19, 4:35 PM
    • 4 Posts
    • 1 Thanks
    Kellamergh
    • #3
    • 18th Sep 19, 4:35 PM
    • #3
    • 18th Sep 19, 4:35 PM
    Thanks for the reply.
    So, if I was to swap to high risk, would I be more likely to benefit, more, from it?
    • ColdIron
    • By ColdIron 18th Sep 19, 4:43 PM
    • 5,441 Posts
    • 7,470 Thanks
    ColdIron
    • #4
    • 18th Sep 19, 4:43 PM
    • #4
    • 18th Sep 19, 4:43 PM
    Most default pension schemes are balanced or 'medium' risk. With NEST this is the NEST Retirement Date Fund. Did you specifically opt for a low risk solution?
    • Kellamergh
    • By Kellamergh 18th Sep 19, 4:50 PM
    • 4 Posts
    • 1 Thanks
    Kellamergh
    • #5
    • 18th Sep 19, 4:50 PM
    • #5
    • 18th Sep 19, 4:50 PM
    No.
    The default option was the lower risk, retirement date fund.
    Having logged into my nest account, it does offer me numerous options, such as;

    -Nest Retirement Date fund (current)
    -Nest Ethical fund
    -Nest Sharia Fund
    - Nest Higher Risk fund
    - Nest Lower Growth fund
    - Nest Pre retirement fund
    • Thrugelmir
    • By Thrugelmir 18th Sep 19, 4:56 PM
    • 64,982 Posts
    • 57,301 Thanks
    Thrugelmir
    • #6
    • 18th Sep 19, 4:56 PM
    • #6
    • 18th Sep 19, 4:56 PM
    Perhaps something more middle of the road would be appropriate while you building your savings up.
    “If the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.”
    ― Niall Ferguson
    • Prism
    • By Prism 18th Sep 19, 5:10 PM
    • 1,164 Posts
    • 876 Thanks
    Prism
    • #7
    • 18th Sep 19, 5:10 PM
    • #7
    • 18th Sep 19, 5:10 PM
    No.
    The default option was the lower risk, retirement date fund.
    Having logged into my nest account, it does offer me numerous options, such as;

    -Nest Retirement Date fund (current)
    -Nest Ethical fund
    -Nest Sharia Fund
    - Nest Higher Risk fund
    - Nest Lower Growth fund
    - Nest Pre retirement fund
    Originally posted by Kellamergh
    So the higher risk fund is about 70% equities which seems reasonable for your age
    • Albermarle
    • By Albermarle 18th Sep 19, 5:40 PM
    • 1,582 Posts
    • 1,023 Thanks
    Albermarle
    • #8
    • 18th Sep 19, 5:40 PM
    • #8
    • 18th Sep 19, 5:40 PM
    S
    o, if I was to swap to high risk, would I be more likely to benefit, more, from it?
    Nothing is guaranteed . Higher risk means basically more % of the fund in equities ( shares ) .
    This means higher volatility - so can go up or down sharply over short/medium term but long term ( >10 years ) history shows a high probability of good growth .
    So for younger investors it is usually better to go high risk . 70% equities ( as mentioned in previous post ) is not in fact not very high risk , like 100% equities, in any case.
    • Kellamergh
    • By Kellamergh 18th Sep 19, 6:17 PM
    • 4 Posts
    • 1 Thanks
    Kellamergh
    • #9
    • 18th Sep 19, 6:17 PM
    • #9
    • 18th Sep 19, 6:17 PM
    Cheers, guys.
    I've switched it to a higher risk option.
    How closely should I monitor the gains/losses?
    Should I leave it and then forget about it or monitor on a yearly basis?
    • tacpot12
    • By tacpot12 18th Sep 19, 6:34 PM
    • 2,906 Posts
    • 2,629 Thanks
    tacpot12
    Basically you should leave it alone. The performance of the fund could be good or could be bad over any 12 month period. You want the fund to perform well over 30 years, and by the time you know that another fund did better than it, it's too late. You have to have a bit of faith in the managers of the fund.

    If you want to diversify in future, have a look at the Sharia fund.
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always check official information sources before relying on my posts.
    • Prism
    • By Prism 18th Sep 19, 6:42 PM
    • 1,164 Posts
    • 876 Thanks
    Prism
    Cheers, guys.
    I've switched it to a higher risk option.
    How closely should I monitor the gains/losses?
    Should I leave it and then forget about it or monitor on a yearly basis?
    Originally posted by Kellamergh
    I would forget about it now for several years.
    • Audaxer
    • By Audaxer 18th Sep 19, 6:52 PM
    • 1,883 Posts
    • 1,181 Thanks
    Audaxer
    Cheers, guys.
    I've switched it to a higher risk option.
    How closely should I monitor the gains/losses?
    Should I leave it and then forget about it or monitor on a yearly basis?
    Originally posted by Kellamergh
    You shouldn't be concerned by volatility, because when there are falls in value your monthly contributions will be buying more units at cheaper prices. So more ups and downs are better for you for the 30 years or so that you will be accumulating.
    • Afraid of Kittens
    • By Afraid of Kittens 18th Sep 19, 6:58 PM
    • 305 Posts
    • 348 Thanks
    Afraid of Kittens
    I put my money into the High Risk fund but this lost money last year. Once it recovered I transferred my money into the Sharia fund.

    So far this year the Sharia fund has grown by 23.5%

    https://www.trustnet.com/factsheets/p/klls/nest-sharia-pn

    The High Risk fund hs grown by 14.32%

    https://www.trustnet.com/factsheets/p/kllt/nest-higher-risk-pn

    The age Retirment fund has grown by just 12.76%

    https://www.trustnet.com/factsheets/p/klku/nest-2040-retirement-pn

    The Lower Growth fund has grown by a pathetic 2.06% so far this year.

    https://www.trustnet.com/factsheets/p/kllu/nest-lower-growth-pn

    If your £5k had been in the Sharia fund since 1st January 2019 it would now be worth £6175.

    In High Risk you would have £5711.50

    In your current fund £5638

    If you had stuck it in the Lower Growth you would have £5103

    One confession. I already have 3 Local government pensions so I can gamble my NEST pension on high risk.

    If you can ride the rollercoaster of the stock markets and are prepared to gamble your NEST pot stick it in Sharia.
    Last edited by Afraid of Kittens; 18-09-2019 at 7:00 PM.
    I enjoy flower arranging, kittens, devil worship, the study of serial killers and their methods and road kill jigsaws.
    • AnotherJoe
    • By AnotherJoe 19th Sep 19, 7:44 AM
    • 16,003 Posts
    • 19,199 Thanks
    AnotherJoe
    Cheers, guys.
    I've switched it to a higher risk option.
    How closely should I monitor the gains/losses?
    Should I leave it and then forget about it or monitor on a yearly basis?
    Originally posted by Kellamergh
    As you seem to be nervous regards the stock market I suggest you don't monitor it at all because the biggest danger is you moving it all in to a cash fund after a crash when the best thing to do at that point is leave it alone and keep paying into the "high risk" fund (which as funds go, isn't that high risk at all)
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • Albermarle
    • By Albermarle 19th Sep 19, 8:20 AM
    • 1,582 Posts
    • 1,023 Thanks
    Albermarle
    If you can ride the rollercoaster of the stock markets and are prepared to gamble your NEST pot stick it in Sharia.
    It is only gambling if you have a short time horizon or you keep selling and buying into different funds to try and beat/time the market .
    If you leave it to grow for > 10 years then it is sensible investing .
    • Malthusian
    • By Malthusian 19th Sep 19, 9:51 AM
    • 6,784 Posts
    • 10,993 Thanks
    Malthusian
    Most default pension schemes are balanced or 'medium' risk. With NEST this is the NEST Retirement Date Fund. Did you specifically opt for a low risk solution?
    Originally posted by ColdIron
    NEST Retirement Date funds are a relatively low risk solution - in the early years. For someone with 35-40 years to their selected retirement date they are 50% bonds / 10% property / 40% equities. 40% in equities is very conservative by most standards, a split more suited for an elderly risk-shy investor in drawdown for whom reducing volatility takes priority over capital growth.

    This is because of a theory, almost unique to NEST, that people who have 35-40 years to retirement should be taking less risk rather than more, because they are probably inexperienced investors and if they were invested in an asset allocation that was actually suited for them, they might panic in a crash and sell it all, or stop contributing.

    Yes, this is just as moronic as it sounds. Stupidity should not be fought with stupidity. It won't even work because bonds will fall in a 2008-style crash as well (in a proper crash all assets correlate downwards), and to a financially illiterate person looking at a pension statement they don't understand, one drop in value feels like much the same as another.
    • Malthusian
    • By Malthusian 19th Sep 19, 11:21 AM
    • 6,784 Posts
    • 10,993 Thanks
    Malthusian
    It is only gambling if you have a short time horizon or you keep selling and buying into different funds to try and beat/time the market .
    If you leave it to grow for > 10 years then it is sensible investing .
    Originally posted by Albermarle
    I wouldn't call the Sharia fund gambling but it has a highly specific allocation with 70% in the US and 40% in the technology sector. (NEST is absolutely dire at disclosure, but if you dig deep enough you will find that the Sharia Fund is a rebadging of the HSBC Islamic Global Equity Index Fund.)

    There is a significant risk of noticeable underperformance if the likes of Microsoft, Apple and Facebook (the top 3 shares with 16% of the fund) fall out of favour or the US lags behind the rest of the world.

    Personally if I had a NEST pension receiving employer contributions (ruling out a transfer, or at least a whole one) I would either hold the misnomered High Risk Fund and swallow the small loss of potential growth due to the small allocation to bonds. Or mainly the High Risk Fund with a bit in Sharia to bump up the equity allocation without betting 40% of the farm on US technology companies.

    Why exactly Facebook (a website invented for college boys to look at pictures of girls which remains a vehicle for all manner of immodesty and blasphemy) finds such favour with Allah I don't know, but I don't dig through chicken entrails for a living.
    • bostonerimus
    • By bostonerimus 19th Sep 19, 12:02 PM
    • 3,327 Posts
    • 2,640 Thanks
    bostonerimus
    So you are putting money into a pension and you are "clueless" about them. While it is a good idea to contribute to a pension, it's also silly to put money into something that you don't understand. So stop being "clueless" and sit down and learn about pensions - there's plenty of information out there.
    Misanthrope in search of similar for mutual loathing
  • jamesd
    I'm 34 years ... I, currently, have around 5K saved in the pot. ... I have around £200 a month, being thrown into my pot, coming from my wage and my employer's contribution.
    Originally posted by Kellamergh
    NEST doesn't offer any fund choices that are a good match to people of your age who want to reduce the risk of failing to meet their retirement goals. That would be something like a global equity tracker fund.

    The least bad of their choices is Sharia. 100% equity but more concentrated in some areas than a global equity tracker.

    The next least bad is the one they misleadingly call high risk when it's what would normally be called medium risk. By risk they mean short term ups and downs, not the risk of failing to meet retirement objectives.

    It's quite hard to tell from their descriptions but these are the sort of growth rates, plus inflation, that you might get per year and the possible today's value of £100 per month that is increased by inflation each year for 37 years:

    4.5% £107,674 Sharia (or global equities)
    4.0% £96,318 "high" risk (30% bond, 70% equity assumed)
    3.4% £84,525 retirement date, lifestyling turned off (50% bond, 10% prop, 40% equity)

    While those are only estimates they should help to illustrate the effect of sticking to NEST's defaults on your wealth. It's important that you turn off lifestyling because it uses lower growth options for 5 years at the start and 10 at the end.

    The catch is in the short term. Sharia might go down by 50% in a year where the high risk fund goes down by 35% and a low risk fund by 15%. That's the price you pay for the higher growth.

    I assumed costs of 0.5%, equity growth 5%, property 4% and bonds 3%, all three plus inflation. This makes the lower risk ones look better than current conditions suggest.
    Last edited by jamesd; 25-09-2019 at 12:13 AM.
    • JohnWinder
    • By JohnWinder 21st Sep 19, 9:05 AM
    • 23 Posts
    • 26 Thanks
    JohnWinder
    Is it 'pensions' you need to be cluey about, or is it really saving/investing? The former is probably about taxation and social security aspects, as well as investing.
    If you just need to know about investing, and it sounds like it, you could do a lot worse than reading Tim Hale's Smarter Investing which would set you up for a long time during which you really could and perhaps should ignore your retirement savings.
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