Author Topic: Pension Choice ...  (Read 1109 times)

Slow road to freedom

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Pension Choice ...
« on: December 17, 2017, 02:05:51 AM »
Morning All

I've read JL Collins' 'Simple Path to Wealth' this weekend. I didn't particularly learn anything new - having read his blog - but it made me feel like I must surely have a clue when I think about accumulating wealth. * Smug smile *

It also confirmed my belief that the 'keep it simple' methodology of investing: that means only one or two index funds (well, I like to dabble a little - so maybe three), no messing about with BTLs, and generally follow the Vanguard low-cost super-duper 'set and forget' route. All set for S&S ISA savings. So far so good.

My company pension. Not a complete sentence, I grant you. I couldn't think of a verb to describe it adequately. The company pension is a normal defined contribution scheme, through Aviva. Charges are 0.4%, so not disastrous. However - the choice of index trackers is abysmal - Aviva or Blackrock, essentially. Certainly no Vanguard. And the performance (plus charges) are not where they could / should be, so I am left feeling dissatisfied and fleeced.

I know I get good tax relief. I know I get employer contributions. But I feel tied to products I don't want to invest in, and it's not a small amount of money (it's the largest part of my savings at present).

What can I do? What have you done?
I really want to do things other than work... :-)

Playing with Fire UK

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Re: Pension Choice ...
« Reply #1 on: December 17, 2017, 02:16:44 AM »
Morning.

Use Monevator to find a suitably cheap SIPP.
[ETA Partially] Transfer your company pension out into the SIPP (keep contributing to the work pension if you get salary sacrifice and the employer match is good).
Repeat every year or so.
« Last Edit: December 18, 2017, 01:17:06 AM by Playing with Fire UK »

never give up

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Re: Pension Choice ...
« Reply #2 on: December 17, 2017, 02:50:29 AM »
I would have thought Blackrock trackers must be fairly good?

Iíve never quite been brave enough to transfer out as PWFUK mentions. The biggest impact to me is that itís not quite as simple as it could be. I have about 9 funds in order to get the global coverage and unfortunately a couple are actively managed as there is no equivalent tracker for the area. Having said that they are performing quite well.

Ideally a 2 or 3 fund set up would be better but Iíve minimised charges and researched into the funds they do offer and thatís about all I can do (bar transferring out).

Playing with Fire UK

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Re: Pension Choice ...
« Reply #3 on: December 17, 2017, 03:03:37 AM »
@never give up. For many company schemes (based on my experience, could be biased), there is less penalty for having a lot of funds, they tend to only have percentage charges, so you don't have the same issues with purchase fees racking up.

Do you have the ability to ask for a global tracker for your scheme? We didn't have one but it turns out it wasn't that hard to get it added. It has a higher fee than the cheapest trackers on the open market but it's not terrible.

never give up

  • Bristles
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Re: Pension Choice ...
« Reply #4 on: December 17, 2017, 03:22:59 AM »
Yes I donít have an issue with purchase fees. Itís just percentage charges so no different having 1 fund or 20 funds (assuming the same charge obviously).

From memory I have UK, US, Europe, Japan, SE Asia/Aus trackers, 3 bond funds (to include different types of bonds) and a couple of emerging market funds.

Cost wise itís not too bad. Iíve recently spent a lot of time switching, sorting out asset allocation, ensuring Iím in the lowest costing funds etc. To the OPís question other than transferring out I think this is all we can do.

A global tracker and some sort of diversified bond fund would help reduce me to a 2 or 3 fund portfolio and would help me have less management time, but they donít currently exist. Not sure on the possibility of having them added. Iíll have to look into it.

Playing with Fire UK

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Re: Pension Choice ...
« Reply #5 on: December 17, 2017, 03:55:13 AM »
NGU: you have investments elsewhere yes?

Could you get your diversification across the whole of your portfolio and only have the cheapest components in your work pension? If you have access to a reasonable US or S&P tracker and a reasonable UK tracker you could have the US and home bias exposure in your company pension and have the balance in an ISA?

never give up

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Re: Pension Choice ...
« Reply #6 on: December 17, 2017, 04:04:51 AM »
Thatís certainly an option but I do see my ISA and pension as two different entities that each individually need to be well diversified.

If I did look at it as a single portfolio my ISAís which need to be used age wise pre-57 would be biased heavily towards emerging markets etc. I think that would be too risky for my attitude to investing.

The single portfolio approach may certainly work for some that are looking to FIRE around the age they could take their company pension, and could reduce fees quite significantly in some cases I would have thought. Itís a really good thought.

RetirementInvestingToday

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Re: Pension Choice ...
« Reply #7 on: December 17, 2017, 06:30:51 AM »
Firstly, I have a lot more than one or two 'funds'.  A few reasons for this but one of them is around diversification of product provider risk.  In theory your wealth should be safe if the provider goes belly up but I just don't want to or need to take that risk.  If I look at my current product providers I have:
- Vanguard UK 31.0%
- iShares UK 18.7%
- 2 bank savings accounts 11.5% (each less than £85k)
- Direct Share/REIT holdings 8.9%
- NS&I 8.6%
- etc

Then I also diversify my wrapper providers (SIPP, ISA, Trading, etc) for the exact same reasons.  That currently looks like:
- Hargreaves Lansdown 25.4%
- YouInvest 20.8%
- TD Direct now Interactive Investors 16.0%
- etc

As for how to get access to more products and lower expenses within my pension I do exactly what Playing With Fire UK suggested.  Once my work pension has built up to an economically sensible amount I complete a partial transfer (the partial bit is the critical bit as it means you don't close your work pension with Aviva).  I usually time this with a special offer from my SIPP provider(s) which puts a few more £'s in my pocket.

As a note Hargreaves Lansdown have a set-up which enables very fast transfers with some pension providers.  I've written about it on my blog recently but I was able to have my money transferred from my work scheme to Hargreaves Lansdown in 3 days.

As always DYOR around this stuff.
45 years of age, UK based (for now) and FI.  Will FIRE in mid-2018.  A lot more detail on my blog http://www.retirementinvestingtoday.com/

dreams_and_discoveries

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Re: Pension Choice ...
« Reply #8 on: December 17, 2017, 09:33:14 AM »
I'd second on third transferring it out, if you don't like the charges.

Although I was a confused about your comment on past performance; are you building a passive portfolio or an active one?

Slow road to freedom

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Re: Pension Choice ...
« Reply #9 on: December 17, 2017, 02:37:57 PM »
I'd second on third transferring it out, if you don't like the charges.

Although I was a confused about your comment on past performance; are you building a passive portfolio or an active one?

Thanks PWF, NGU and D&D. I hadn't realised a partial transfer out was a possibility; I will absolutely research that possibility. I also like the idea of looking at the whole portfolio (both in and out of pension) with the potential to cover equity and bonds in the most efficient way.

Cost is certainly one area that could be improved. Moving to a Vanguard Lifestrategy ETF would save me 0.18% / year - every little helps. Performance is also important, which is the primary reason for posting - the divergence between actual performance and index appears far greater than other trackers.

D&D - I'm looking to achieve a passive portfolio, not active. Tried that twice - once before discovering MMM (and waking up), and once when I began investing in single shares thinking my financial superpowers were better ... luckily, not a hugely expensive lesson.

Interesting the idea to spread funds between brokers - I currently use HL (S&S ISAs) and Aviva (pension) only.

Lots to think about - thanks again.
I really want to do things other than work... :-)

Playing with Fire UK

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Re: Pension Choice ...
« Reply #10 on: December 18, 2017, 01:15:57 AM »
Once my work pension has built up to an economically sensible amount I complete a partial transfer (the partial bit is the critical bit as it means you don't close your work pension with Aviva).  I usually time this with a special offer from my SIPP provider(s) which puts a few more £'s in my pocket.

Highlighting this critical point for future readers!