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  • FIRST POST
    • Miiade
    • By Miiade 11th Aug 18, 7:25 AM
    • 14Posts
    • 4Thanks
    Miiade
    Choice of Funds in my pension - any advice?
    • #1
    • 11th Aug 18, 7:25 AM
    Choice of Funds in my pension - any advice? 11th Aug 18 at 7:25 AM
    My works pension dc scheme is with fidelity and up until recently I was un aware that I could change the fund choice myself and thought I had to stay with the default fund. I have recently added the bottom 3 funds and was wondering what peoples thoughts are about my choices?

    A total of 377 a month goes in from myself and my employer and I am prepared to take higher risk. My age is 47 and I would like to retire as near to 55 as possible. I have a DB scheme which will pay out about 10k at 55, which added to my dc fund, may just be enough until state pension age.

    Funds (current value 9.6k)

    Fld black rock global equity 50/50 (default scheme) 78% of fund, monthly fund allocation going forward 25%
    Fld black rock Us equity fund c1 5, 3.4% of fund value, 20% monthly allocation going forward
    Fld black rock world (ex U.K.)equity fund d5, 6.5% of fund value, 40% allocation going forward
    Fidelity Pacific Equity Fund class 5, 12% of fund value, 15% monthly allocation going forward

    Is the above allocation diversified enough, too high risk etc, any thoughts comments welcome

    I also have a small nest pension value 4K, which I pay in 60 a month into their higher risk fund, would members advice be that this extra 60 goes into the fidelity funds rather than nest.

    Many thanks
    Last edited by Miiade; 11-08-2018 at 3:59 PM.
Page 1
    • SeniorSam
    • By SeniorSam 11th Aug 18, 8:47 AM
    • 1,184 Posts
    • 605 Thanks
    SeniorSam
    • #2
    • 11th Aug 18, 8:47 AM
    • #2
    • 11th Aug 18, 8:47 AM
    Wanting to retire at 55 needs a huge pension fund. How large is the pension fund at present?

    Have you calculated what your income need will be between 55 and the time you receive your State pension and from then on for the next 20-40 years?
    I'm a retired IFA who specialised for many years in Inheritance Tax, Wills and Trusts. I cannot offer advice now, so my comments are just meant to be helpful.
    • Miiade
    • By Miiade 11th Aug 18, 9:07 AM
    • 14 Posts
    • 4 Thanks
    Miiade
    • #3
    • 11th Aug 18, 9:07 AM
    • #3
    • 11th Aug 18, 9:07 AM
    Sam, fidelity fund value 9.6k, nest value 4K. DB pension will pay around 10k at 55 with lump sum around 40k.

    Between 55 and state pension age estimate I need about 1500 net per month.
    • greatkingrat
    • By greatkingrat 11th Aug 18, 9:10 AM
    • 158 Posts
    • 141 Thanks
    greatkingrat
    • #4
    • 11th Aug 18, 9:10 AM
    • #4
    • 11th Aug 18, 9:10 AM
    Your choice of funds just appears to be duplicating each other. For example three of the four funds all invest in the same US Equities. 12% in Pacific seems rather high, especially as that is covered in the other funds as well.

    With the relatively small fund size you have, you would be better off just picking one global fund.
    • MK62
    • By MK62 11th Aug 18, 9:36 AM
    • 341 Posts
    • 248 Thanks
    MK62
    • #5
    • 11th Aug 18, 9:36 AM
    • #5
    • 11th Aug 18, 9:36 AM
    Fld black rock global equity 50/50 (default scheme) 78% of fund, monthly fund allocation going forward 25%
    Fld black rock Us equity fund c1 5, 3.4% of fund value, 20% monthly allocation going forward
    Fld black rock world (ex U.K.)equity fund d5, 6.5% of fund value, 40% allocation going forward
    Fidelity Pacific Equity Fund class 5, 12% of fund value, 15% monthly allocation going forward

    Is the above allocation diversified enough, too high risk etc, any thoughts comments welcome
    Originally posted by Miiade
    Regional equity allocation will come down to opinion in the end.....but if it was my portfolio I'd be worried that it would become a bit too heavy on US and APAC.

    I'd probably be inclined to ditch the US and APAC funds and go with around 50% each in the remaining two......will still give you plenty of US and APAC exposure without going overboard.
    Just one opinion though........
    • si2winit
    • By si2winit 11th Aug 18, 10:52 AM
    • 53 Posts
    • 14 Thanks
    si2winit
    • #6
    • 11th Aug 18, 10:52 AM
    • #6
    • 11th Aug 18, 10:52 AM
    The world (ex UK) fund has been good to me the last few years. Great returns.

    Right now I have about 55% in black rock long term class 8 which leaned towards UK equities.

    40% in the work (ex UK) fund mainly US equities

    5% emerging markets mainly Asia.
    • Miiade
    • By Miiade 11th Aug 18, 10:56 AM
    • 14 Posts
    • 4 Thanks
    Miiade
    • #7
    • 11th Aug 18, 10:56 AM
    • #7
    • 11th Aug 18, 10:56 AM
    Thanks for the comments all.

    Any thoughts about keeping my nest higher risk pension fund going at 60 a month? I have seen some negative feedback for nest on here because its funds are too conservative / dont offer enough choice.
    • dunstonh
    • By dunstonh 11th Aug 18, 2:01 PM
    • 96,107 Posts
    • 63,911 Thanks
    dunstonh
    • #8
    • 11th Aug 18, 2:01 PM
    • #8
    • 11th Aug 18, 2:01 PM
    My age is 47 and I would like to retire as near to 55 as possible.
    snip
    fidelity fund value 9.6k, nest value 4K.
    snip
    Between 55 and state pension age estimate I need about 1500 net per month.
    You are missing some zeros on the value to achieve that. Unless your DB scheme is cost-effective to commence at 55 (i.e. without penalty or even allows it - many wont)


    Fld black rock global equity 50/50 (default scheme) 78% of fund, monthly fund allocation going forward 25%
    Fld black rock Us equity fund c1 5, 3.4% of fund value, 20% monthly allocation going forward
    Fld black rock world (ex U.K.)equity fund d5, 6.5% of fund value, 40% allocation going forward
    Fidelity Pacific Equity Fund class 5, 12% of fund value, 15% monthly allocation going forward
    What is the point of having so many funds with such a small value? (even if the portfolio was structured, which it doesn't appear to be)

    Is the above allocation diversified enough, too high risk etc, any thoughts comments welcome
    Its seems very random. What investment strategy are you following?
    what target volatility range are you looking for?
    Where are you getting the asset allocation data from to build the portfolio?
    Or is it just a bit random in selection?
    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.
    • Miiade
    • By Miiade 11th Aug 18, 2:48 PM
    • 14 Posts
    • 4 Thanks
    Miiade
    • #9
    • 11th Aug 18, 2:48 PM
    • #9
    • 11th Aug 18, 2:48 PM
    Dunstonh - thanks for feedback

    You are missing some zeros on the value to achieve that. Unless your DB scheme is cost-effective to commence at 55 (i.e. without penalty or even allows it - many wont)

    DB will pay around 10k at 55 after reduction, lump sump around 40k. Trying to get enough in my dc fund to give me total (all pensions) of 1500 net a month between 55 and 67.

    All my funds were in the Blackrock 50/50 which has a high % U.K. stocks. My reason for the other 3 funds choices was to gain a higher worldwide % exposure.

    I do not understand what target volatility range is and yes it is a bit of a random selection. The 3 additional funds were rated as either medium or higher risk in the ratings provided by fidelity.
    • FatherAbraham
    • By FatherAbraham 11th Aug 18, 2:50 PM
    • 914 Posts
    • 680 Thanks
    FatherAbraham
    My works pension dc scheme is with fidelity and up until recently I was un aware that I could change the fund choice myself and thought I had to stay with the default fund. I have recently added the bottom 3 funds and was wondering what peoples thoughts are about my choices?

    A total of 377 a month goes in from myself and my employer and am I prepared to take higher risk. My age is 47 and I would like to retire as near to 55 as possible. I have a DB scheme which will pay out about 10k at 55, which added to my dc fund, may just be enough until state pension age.

    Funds (current value 9.6k)

    Fld black rock global equity 50/50 (default scheme) 78% of fund, monthly fund allocation going forward 25%
    Fld black rock Us equity fund c1 5, 3.4% of fund value, 20% monthly allocation going forward
    Fld black rock world (ex U.K.)equity fund d5, 6.5% of fund value, 40% allocation going forward
    Fidelity Pacific Equity Fund class 5, 12% of fund value, 15% monthly allocation going forward

    Is the above allocation diversified enough, too high risk etc, any thoughts comments welcome

    I also have a small nest pension value 4K, which I pay in 60 a month into their higher risk fund, would members advice be that this extra 60 goes into the fidelity funds rather than nest.

    Many thanks
    Originally posted by Miiade
    Never mind about the geographic diversification, that portfolio is one hundred percent in equities, and you're only eight years from date you want to start drawing on it?

    How come you haven't got any gilt funds or real-estate funds in there to reduce volatility?
    • dunstonh
    • By dunstonh 11th Aug 18, 3:42 PM
    • 96,107 Posts
    • 63,911 Thanks
    dunstonh
    I do not understand what target volatility range is and yes it is a bit of a random selection. The 3 additional funds were rated as either medium or higher risk in the ratings provided by fidelity.
    The three additional funds are all high risk. None of the medium On a 1 to 10 scale (1 being cash) and 10 being conventional highest risk then they are risk 9.

    You have to be wary of risk scales as you need to know the lowest and highest level to put context on the funds you are selecting.

    When you build a portfolio that includes single sector funds, you should do it based on a strategy and structure. Picking funds and weightings at random can do more damage than good.
    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.
    • greatkingrat
    • By greatkingrat 11th Aug 18, 3:46 PM
    • 158 Posts
    • 141 Thanks
    greatkingrat
    Never mind about the geographic diversification, that portfolio is one hundred percent in equities, and you're only eight years from date you want to start drawing on it?

    How come you haven't got any gilt funds or real-estate funds in there to reduce volatility?
    Originally posted by FatherAbraham
    On the other hand, he already has a safe 10k pa DB pension, so I think it is reasonable to take more risks with this relatively small DC pot, as whatever happens you eventually have DB + State to fall back on.
    • FatherAbraham
    • By FatherAbraham 11th Aug 18, 3:59 PM
    • 914 Posts
    • 680 Thanks
    FatherAbraham
    On the other hand, he already has a safe 10k pa DB pension, so I think it is reasonable to take more risks with this relatively small DC pot, as whatever happens you eventually have DB + State to fall back on.
    Originally posted by greatkingrat
    Real estate carries plenty of risk, but it's not highly correlated with equities. Mixing different risks can reduce volatility overall.

    As for the gilts, is the eight years to drawing on the pot which would unsettle me. There's not even a measly 20% allocated to gilts in that portfolio.

    Anyway, I guess dunstonh has already raised the target volatility issue.
    • michaels
    • By michaels 11th Aug 18, 7:35 PM
    • 21,768 Posts
    • 101,310 Thanks
    michaels
    How expensive is it to take the fb early in terms of reduction?

    You might be better of delaying touching it as long as possible, running down dc funds first or even using equity in your home via a mortgage (say get a 10 year fix just before you early retire)?
    Cool heads and compromise
    • Miiade
    • By Miiade 12th Aug 18, 5:37 AM
    • 14 Posts
    • 4 Thanks
    Miiade
    How expensive is it to take the fb early in terms of reduction?

    You might be better of delaying touching it as long as possible, running down dc funds first or even using equity in your home via a mortgage (say get a 10 year fix just before you early retire)?
    Originally posted by michaels
    Thanks for the feedback

    The DB reduces 5% a year, nra is 60. I am not looking to extend my mortgage to fund my early retirement
    Last edited by Miiade; 12-08-2018 at 5:43 AM.
    • cogito
    • By cogito 12th Aug 18, 7:45 AM
    • 3,887 Posts
    • 11,131 Thanks
    cogito

    As for the gilts, is the eight years to drawing on the pot which would unsettle me. There's not even a measly 20% allocated to gilts in that portfolio.
    Originally posted by FatherAbraham
    What return to you get on gilts?
    • michaels
    • By michaels 12th Aug 18, 9:18 AM
    • 21,768 Posts
    • 101,310 Thanks
    michaels
    Thanks for the feedback

    The DB reduces 5% a year, nra is 60. I am not looking to extend my mortgage to fund my early retirement
    Originally posted by Miiade
    I wasn't suggesting equity withdrawal but instead seeing this as a possible cheap 'credit line' to bridge the gap between when you want to retire and the most efficient moment to take your fb pension.

    For example if I wanted to retire at 50 but could only get my dc tfls at 55 I could use my mortgage as a line of credit costing only 2% and repay the borrowing using the tfls.

    With your 5% pa reduction I guess it is a longevity bet - say you expect to live 40 years delaying for 1 year loses you 1/40th of what you will get but increases the amount you get for the remaining 39 years by 5%. I am not sure if this is good value or not.
    Cool heads and compromise
    • FatherAbraham
    • By FatherAbraham 12th Aug 18, 9:57 AM
    • 914 Posts
    • 680 Thanks
    FatherAbraham
    What return to you get on gilts?
    Originally posted by cogito
    A low return.

    How safe is the capital value of equities?
    • Bimbly
    • By Bimbly 12th Aug 18, 11:51 AM
    • 148 Posts
    • 132 Thanks
    Bimbly
    I am doing similar. I have DB pensions to pay out from 65 and I want to be able to retire at 60 and bridge the gap using a DC pension I am currently paying into. My employer uses salary sacrifice so the tax breaks are good. My employer scheme, like yours, has a limited number of funds I can invest in. I have a bit longer to do it, though: 11 years. I also want to use this pot to pay down the mortgage so will need to save more than you.

    Before I moved out of the default investments, I read widely. Tim Hale's Smarter Investing and John Edwards DIY SIPP pensions (or similar title) were useful.

    I decided on a whole of the market approach to my equities. There isn't a global equity fund available to me, so I am invested in a mix of Global Developed ex UK, Emerging Markets and UK.

    I also decided to de-risk rapidly over the course of this investment by moving into bonds at an increasing percentage each year (and cash too towards the end). The last thing I need is to think I have it all sorted, only for a market crash to come along near retirement and I've made a loss when I haven't got time to wait for recovery.

    I looked at it from the perspective of equity investments should be held for ten years. Buying shares soon to when I want the money is too risky to me and is generally not advised.

    I can mostly increase my percentage of bonds with new contributions so I don't have to sell off equities. This makes me feel happy as when my money goes into a bond fund, I plan (on the whole) to keep it in there for 10 years or more.

    I assume you have kept your holding in the 50/50 fund and are adding to your pot using the other funds. Once you decide on your strategy, you may find that such a heavy weight in UK equities is too much, then you can sell it and buy what you need. I mean, don't stay tied into it if it doesn't fit your startegy. But work out your plan first.
    • Bimbly
    • By Bimbly 12th Aug 18, 12:16 PM
    • 148 Posts
    • 132 Thanks
    Bimbly
    I thought your numbers looked optimistic, so I did some very rough calculations.

    You have 8 years to invest. You have 9,600 already and are adding 377 /month.

    You want to drawdown 5000 per year for 12 years.

    Very roughly, that's a pot of 72,000 not allowing for inflation or tax (phased drawdown where you take 25% tax free each time would help there).

    But let's say your pot will continue to grow during drawdown and you have a target of 60,000 pot (I'm being optimistic here, I'd want more, personally).

    With your current contribution plan you need a return of 7% for your investments. I assumed no increase in contributions with pay rises, but then I didn't take inflation into account either.

    I know I'm just an amateur, but this seems hughly optimistic to me. Maybe you could achieve 7% when heavy on equities, but then equally you could achieve -50% in a crash pre retirement.

    All of those calculations assume good growth in both the accumulation phase and in drawdown with no bumps in the road.

    I could also live on 1500 /month day to day, but that wouldn't cover me for new car / new boiler / new roof / nice holidays.

    We've also had a good ten years for equities, and even bonds have done well recently, but there is no guarantee that will continue. Indeed, worryingly for me, it suggests that my ten years of investing could be bumpy.

    Do the calculations for yourself (as I'm not a maths genius) and see where you end up. It looks to me like working longer and/or boosting contributions would necessary.
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