Author Topic: Pension Choice ...  (Read 4668 times)

Slow road to freedom

  • Bristles
  • ***
  • Posts: 288
  • Location: UK
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?

Playing with Fire UK

  • Magnum Stache
  • ******
  • Posts: 3449
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

  • Walrus Stache
  • *******
  • Posts: 7820
  • Location: UK
  • Kindness is free to give and priceless to receive
Re: Pension Choice ...
« Reply #2 on: December 17, 2017, 02:50:29 AM »
I would have thought Blackrock trackers must be fairly good?

I’ve never quite been brave enough to transfer out as PWFUK mentions. The biggest impact to me is that it’s 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 I’ve minimised charges and researched into the funds they do offer and that’s about all I can do (bar transferring out).

Playing with Fire UK

  • Magnum Stache
  • ******
  • Posts: 3449
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

  • Walrus Stache
  • *******
  • Posts: 7820
  • Location: UK
  • Kindness is free to give and priceless to receive
Re: Pension Choice ...
« Reply #4 on: December 17, 2017, 03:22:59 AM »
Yes I don’t have an issue with purchase fees. It’s 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 it’s not too bad. I’ve recently spent a lot of time switching, sorting out asset allocation, ensuring I’m in the lowest costing funds etc. To the OP’s 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 don’t currently exist. Not sure on the possibility of having them added. I’ll have to look into it.

Playing with Fire UK

  • Magnum Stache
  • ******
  • Posts: 3449
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

  • Walrus Stache
  • *******
  • Posts: 7820
  • Location: UK
  • Kindness is free to give and priceless to receive
Re: Pension Choice ...
« Reply #6 on: December 17, 2017, 04:04:51 AM »
That’s 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 ISA’s 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. It’s a really good thought.

RetirementInvestingToday

  • 5 O'Clock Shadow
  • *
  • Posts: 76
    • Retirement Investing Today
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.

dreams_and_discoveries

  • Pencil Stache
  • ****
  • Posts: 924
  • Location: London, UK
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

  • Bristles
  • ***
  • Posts: 288
  • Location: UK
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.

Playing with Fire UK

  • Magnum Stache
  • ******
  • Posts: 3449
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!

never give up

  • Walrus Stache
  • *******
  • Posts: 7820
  • Location: UK
  • Kindness is free to give and priceless to receive
Re: Pension Choice ...
« Reply #11 on: January 19, 2019, 04:27:53 AM »
Just resurrecting this old thread. I wondered how the OP had got on here?

I’m in a DC pension at work. I’m able to get myself passively invested around the developed world at a reasonable cost, although it could be better. Unfortunately though the choice of bond funds is poor and the actively managed emerging market funds have annual charges from 1.2 - 1.5%.

I was thinking of switching my emerging markets and bond funds into the developed market funds and using an ISA to get me to my required asset allocation across emerging markets/bonds. However I wanted to save into my pension really and obviously benefit from the upfront tax relief.

Reading this old thread made me realise a partial transfer could be a solution here. Is this strategy a case of:

1.  Partially  transferring a lump sum out (do I choose the amount?) and I then get to spread this between a wider choice of funds at a SIPP provider of my choice.

2. Keep paying AVC’s into the company pension along with the company contribution.

3. When the amount builds up in the company pension repeat the above steps again?

I’m ever so slightly terrified of impacting my company pension in terms of charges & ongoing benefits, or doing something that lands me with a massive tax bill. Please don’t let me make a mistake that sees me forced into moving my FIRE date back from my 40’s to my 90’s!

Has anyone transferred out of their company DC pension and has a helpful list of things to check or any advice here please?

As always thanks to the board for any help given.


MarcherLady

  • Walrus Stache
  • *******
  • Posts: 6005
  • Age: 10
  • Location: North of the Wall, UK
Re: Pension Choice ...
« Reply #12 on: January 19, 2019, 05:33:57 AM »
Hey NGU. I'll admit to not understanding as much about pensions as I should, but The Pensions Advisory Service might be able to help. They have a phone line too.


never give up

  • Walrus Stache
  • *******
  • Posts: 7820
  • Location: UK
  • Kindness is free to give and priceless to receive
Re: Pension Choice ...
« Reply #13 on: January 19, 2019, 04:54:00 PM »
Thanks MarcherLady. I have been on their website and there is a lot of good info. I am going to contact my pension provider first but will then follow up by contacting the Pensions Advisory Service.

cerat0n1a

  • Handlebar Stache
  • *****
  • Posts: 2319
  • Location: England
Re: Pension Choice ...
« Reply #14 on: January 20, 2019, 02:14:26 AM »
Has anyone transferred out of their company DC pension and has a helpful list of things to check or any advice here please?

I just did what was advised here - for about the last 10 years. Every year or so, I just transferred nearly all of the balance of my work DC pension into a SIPP. It just worked as expected, so I don't have any advice or things to check :-)

I do follow RIT's advice, which is to spread holdings around multiple places. It's not so much that I'm worried about large funds/pension providers going bust - my concern is more around IT issues, security etc.

never give up

  • Walrus Stache
  • *******
  • Posts: 7820
  • Location: UK
  • Kindness is free to give and priceless to receive
Re: Pension Choice ...
« Reply #15 on: January 20, 2019, 02:27:36 AM »
Thanks cerat0n1a. I have checked with my pension provider and can see that there are no withdrawal/exit/partial transfer charges. So this was one of the key things to check! Yes as well as avoiding the expensive funds it would give me the opportunity to split my pension in half across a couple of providers avoiding the IT and security issues you refer to. That's an added bonus through doing this.

SpreadsheetMan

  • Bristles
  • ***
  • Posts: 428
Re: Pension Choice ...
« Reply #16 on: January 20, 2019, 06:46:02 AM »
Has anyone transferred out of their company DC pension and has a helpful list of things to check or any advice here please?

I just did what was advised here - for about the last 10 years. Every year or so, I just transferred nearly all of the balance of my work DC pension into a SIPP. It just worked as expected, so I don't have any advice or things to check :-)

I do follow RIT's advice, which is to spread holdings around multiple places. It's not so much that I'm worried about large funds/pension providers going bust - my concern is more around IT issues, security etc.
Good advice - my household bill joint account is with TSB and it was effectively unusable for 2 weeks when they had their migration disaster last year. Fortunately both DW and I have personal accounts with other (and different) banks so access to cash or ability to pay bills was never an issue.

londonstache

  • Stubble
  • **
  • Posts: 115
Re: Pension Choice ...
« Reply #17 on: January 21, 2019, 06:37:33 AM »
I have 1-2 with Blackrock - I don't find their passive funds that spendy, so I'm happy at the moment. However I tend to roll up everything into a HL SIPP when I change employers, partly for savings but also to make life a lot more simple.

It is the same for me and Mrs Londonstache - we probably have the bulk with BLK and less with Vanguard than I'd like. However she works for BLK so this does cloud her view somewhat! One of my biggest successes of the past few years has been persuading her to invest with Vanguard in her ISA, so I'll take the small wins where I can get them.

never give up

  • Walrus Stache
  • *******
  • Posts: 7820
  • Location: UK
  • Kindness is free to give and priceless to receive
Re: Pension Choice ...
« Reply #18 on: January 23, 2019, 10:46:11 AM »
Just a brief update for anyone looking at this thread in the future who is considering doing something similar:

1. The Pension Advisory Service that MarcherLady linked to is very helpful on all things pensions and not just the query this thread related to.

2. I was able to check with my old plan that (a) partial not full switches are available, and that (b) there were no fees or charges for doing so. Some SIPP providers will pay £X towards exit fees/charges to help gain your custom, so don't be put off if there is a charge if you do want to partially transfer out.

3. I haven't found there was any tax/AVC/company contribution implications. The existing pension will continue to work as normal.

4. It may be different across providers but a partial transfer is only available once a year so it's important to transfer the correct amount. Due to the potential length of time out of the market for a transfer I was thinking of transferring smaller amounts every couple of months or so but this isn't possible.

5. There are normally minimum amounts that can be transferred and minimum amounts that must be left in.

Other than that it's not quite as scary as it first appears.