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    • bm123
    • By bm123 8th Aug 18, 1:35 PM
    • 6Posts
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    bm123
    How to choose the best pension funds
    • #1
    • 8th Aug 18, 1:35 PM
    How to choose the best pension funds 8th Aug 18 at 1:35 PM
    Hi,

    looking for some advice re my works pension (DC pot)

    I currently pay a set % of my salary each month into my pot, and it is invested via Fidelity into my company pension plan. This is fine, and I am maximising my contributions via salary sacrifice, and also increasing % contributions each year. Result is that I am now paying a fairly healthy amount (to me anyway) of just under 10000 per year into my pension and will be increasing this yearly until I retire.

    Plan is to retire in approx 15 years (61 or 62). Already have a small DB pension and wife has a larger DB as well, so combined with state pension will be comfortable with just SRP and DB pensions. House will also be paid off and we will receive a significant inheritance at some point in the future as well (hopefully though some way off yet)

    Our company plan with Fidelity, invests in 3 main funds. 60% into Blackrock Global Equity, and 20% each into Baillie and Gifford Div Growth fund and Standard life GARS fund. All three are making money each year. (Blackrock average 8.5% per year after charges over the past 5 years, BG 4.2% average, and SL 1.9% average)

    Speaking to workmates, they have confirmed that they have changed the funds they are invested in and recommend that I do the same. I'm not risk averse by any means, but totally clueless when it comes to looking at investment funds, and whilst I would be happy to look at other more risky funds for larger growth, with a view to possibly retiring a couple of years earlier, i'm happy to remain with the default funds and enjoy the average 6% increase each year.

    I'm on track to have between 350,000 - 400,000 in my fund by the time I am 62 (appreciate its a guess only and figures will go up and down) but do you think I should investigate via an IFA possibly changing the funds I am invested in, or should I just stick with what I have.

    I'm probably overthinking things and should just stick with what I have, but some thoughts would be appreciated.

    Thanks
Page 1
    • El Torro
    • By El Torro 8th Aug 18, 2:04 PM
    • 318 Posts
    • 288 Thanks
    El Torro
    • #2
    • 8th Aug 18, 2:04 PM
    • #2
    • 8th Aug 18, 2:04 PM
    Remember that the funds that have grown the highest in the last couple of years will be the ones that most likely drop the furthest when there is a crash. i.e. they're higher volatility.


    The simple answer to your question is that you should invest to match your risk profile. Deciding what your risk profile is and which funds match it is the tricky part though I guess. You could use an IFA, though remember they will take a cut, so whether you are better off without them is up to you to decide. Many would do their own research (e.g. on Monevator), others would prefer the assurance of an IFA.


    Regarding the IFA option, I'm not sure whether your pot is currently big enough to make it worth their while.


    Will you buy an annuity or will you drawdown? Either way you are going to be invested for at least 15 years (more if you drawdown) so you can afford to take more risk now. Whether you want to, and will be willing to weather the bumpy road, is for you to decide.
    • dunstonh
    • By dunstonh 8th Aug 18, 2:13 PM
    • 96,058 Posts
    • 63,875 Thanks
    dunstonh
    • #3
    • 8th Aug 18, 2:13 PM
    • #3
    • 8th Aug 18, 2:13 PM
    It is important to invest within your knowledge and understanding. If you dont know about investing, then you shouldn't pick funds designed for more advanced investing. Stick with the multi-asset funds instead. For example, a portfolio of single sector funds would take around 10 funds to cover all the main sectors and the weightings in each fund should be structured to meet your risk profile, capacity for loss, behaviour and timescale. Each of those 10 or so funds should be researched properly.

    I would be happy to look at other more risky funds for larger growth, with a view to possibly retiring a couple of years earlier,
    Higher risk also opens up the possibility that you may need to retire a couple of years later too.

    but do you think I should investigate via an IFA possibly changing the funds I am invested in, or should I just stick with what I have.
    if you have an IFA already, then go for it. It may well be a cost free exercise if you already have one (we include it as part of our ongoing servicing even where we are not the agent on the plan and others will too). However, if you have no relationship with an IFA at present and this was the only thing, then chances are it would be not be cost effective as the IFA would have to do the full process and charge accordingly. There is nothing to piggyback it onto.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Audaxer
    • By Audaxer 8th Aug 18, 2:14 PM
    • 1,491 Posts
    • 920 Thanks
    Audaxer
    • #4
    • 8th Aug 18, 2:14 PM
    • #4
    • 8th Aug 18, 2:14 PM
    Speaking to workmates, they have confirmed that they have changed the funds they are invested in and recommend that I do the same. I'm not risk averse by any means, but totally clueless when it comes to looking at investment funds, and whilst I would be happy to look at other more risky funds for larger growth, with a view to possibly retiring a couple of years earlier, i'm happy to remain with the default funds and enjoy the average 6% increase each year.
    Originally posted by bm123
    If you are happy with the return you are getting on the funds you have you should stick with them. It doesn't really matter what your workmates do as their circumstances may be different: 1) they may have longer to go to retirement so maybe that is why they are happy to take more risk to get higher returns, 2) they also maybe need better growth as they do not have DB pensions that you have, or 3) they may just think that as these funds have produced high returns over last few years, that will continue - they could be in for a shock when the next equity crash comes, which could be soon as we have had a long bull run of 8 or 9 years where markets have continued to rise.

    Before consulting an IFA which will be costly, I would recommend learning as much as you can about investing in funds on sites like this forum and Monevator. If after that you still don't want to DIY your investments, but still want to change funds then probably you should make some initial enquiries to IFAs.
    • bm123
    • By bm123 8th Aug 18, 2:18 PM
    • 6 Posts
    • 0 Thanks
    bm123
    • #5
    • 8th Aug 18, 2:18 PM
    • #5
    • 8th Aug 18, 2:18 PM
    Thanks for this.

    I am prepared to take some risks, and agree with 15 years to go I could probably look to increase my risk profile. As you say though, which ones to choose? That's the $64,000 question.. I am a complete novice and if an IFA isn't really going to be interested, its tough to make an informed decision.

    Will most likely be drawdown I will be looking at as SRP and DB's will cover our needs in retirement, and added to lump sums, savings and inheritance will have a substantial reserve if needed.
    • bm123
    • By bm123 8th Aug 18, 2:25 PM
    • 6 Posts
    • 0 Thanks
    bm123
    • #6
    • 8th Aug 18, 2:25 PM
    • #6
    • 8th Aug 18, 2:25 PM
    To be honest i'm happy with returns as they are just now. I have a spreadsheet I have been keeping for the past few years and things are tracking as I planned, and as I have only factored 3% growth into my retirement planning getting a 6% return is more than sufficient.

    No point being greedy, as my old dad used to say, 'better a bird in the hand...'
    • GunJack
    • By GunJack 8th Aug 18, 2:30 PM
    • 10,465 Posts
    • 7,827 Thanks
    GunJack
    • #7
    • 8th Aug 18, 2:30 PM
    • #7
    • 8th Aug 18, 2:30 PM
    you may want to check what funds are available through your company scheme, it may be a limited number (which may reduce the amount of research you need to do )
    ......Gettin' There, Wherever There is......
    • MallyGirl
    • By MallyGirl 8th Aug 18, 2:31 PM
    • 3,133 Posts
    • 8,168 Thanks
    MallyGirl
    • #8
    • 8th Aug 18, 2:31 PM
    • #8
    • 8th Aug 18, 2:31 PM
    do you have a wide choice of plans or just a few to select from via Fidelity? There might not be that much research to do if the choice is limited
    • MallyGirl
    • By MallyGirl 8th Aug 18, 2:32 PM
    • 3,133 Posts
    • 8,168 Thanks
    MallyGirl
    • #9
    • 8th Aug 18, 2:32 PM
    • #9
    • 8th Aug 18, 2:32 PM
    snap!!!!!!
    • bm123
    • By bm123 8th Aug 18, 2:37 PM
    • 6 Posts
    • 0 Thanks
    bm123
    105 available funds
    • Thrugelmir
    • By Thrugelmir 8th Aug 18, 3:06 PM
    • 61,287 Posts
    • 54,531 Thanks
    Thrugelmir
    To be honest i'm happy with returns as they are just now. I have a spreadsheet I have been keeping for the past few years and things are tracking as I planned, and as I have only factored 3% growth into my retirement planning getting a 6% return is more than sufficient.

    No point being greedy, as my old dad used to say, 'better a bird in the hand...'
    Originally posted by bm123
    Over the past 30 years real growth has averaged 2%. To achieve the long term average of 5% one would have had to buy at the bottom of the market. Using 3% is eminently sensible. I've been using 2% above inflation (after allowing for fees) for as long as I've been investing. As back in the past making money from equities in more volatile markets was far more challenging.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • MallyGirl
    • By MallyGirl 8th Aug 18, 3:08 PM
    • 3,133 Posts
    • 8,168 Thanks
    MallyGirl
    ah - I understand the issue you have. I only have about 8 choices and 2 of those are 'lifestyle' ones (not for me) so it wasn't too hard to choose
    • rudigarude
    • By rudigarude 8th Aug 18, 8:56 PM
    • 17 Posts
    • 2 Thanks
    rudigarude
    Hi bm123,

    I'm actually having the same internal debate with myself as you are but expect to retire around 15 years later than you.

    I posted my question last month which you can read here https://forums.moneysavingexpert.com/showthread.php?t=5863774

    In my case, I feel that two things needed to be addressed, 1) since I have >30 years to retirement I should be more than 60% invested in equities 2) I'm quite UK equity weighted.

    Since my post, I've only made one change so far and that was to re balance the same three holdings I have so I have 80% in my Blackrock 50:50 (UK/global) global equities fund.

    It's actually interesting to me that you mentioned the Blackrock global equities fund you hold since I think that I would feel more comfortable with a global fund rather the one I currently hold which has a larger percentage in UK equities. (If anyone else has thoughts on this please let me know what you think)

    Can I ask what it is about the funds you hold that you think could perform better and how you might want to change it, i.e. are there any funds you would be tempted by and why?

    Cheers
    Last edited by rudigarude; 08-08-2018 at 9:06 PM. Reason: changed would to could
    • FIRSTTIMER
    • By FIRSTTIMER 8th Aug 18, 9:34 PM
    • 414 Posts
    • 63 Thanks
    FIRSTTIMER
    I have been quite conservative and have plucked for


    Vangaurd LifeStrategy 100
    BlackRock Consensus
    HSBC Global Dynamic


    as my three investments at the minute
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