Private DC pension, where to put it? What are others doing?
Discussion
I'm not a firm believer in pensions.
But my previous employer paid one for me so I have a DC fund with the Scotch Widows.
It's a relatively small amount but it's quite nice to see what I can do to make it grow, rather than just run with the default funds (25% global equity, 75% uk equity iirc) which admittedly worked fairly ok since the 2008 dip but not so well in the last 18 months where things have now levelled off generally.
What kind of portfolios are other people suggesting for medium term investment right now?
I know that classically the best approach is to just play the long-term game and get growth that way, but part of me feels that currency and/or equities are currently over-valued or bubbly.
But if you subscribe to one or the other being that way then which way do you go?
Cash is great but if you are in an economy that is deflating debt then cash is getting deflated too.
But stocks trends for the last 12 months are hardly going up more than a good spread of cash ISA/savings accounts.
Is cash in a pension fund even protected like a bank deposit?
Ultimately defaults are ok, but making some active choices may prove better... and there is no way to make better choices than to ask for advice and see what fits with your personal views on risk vs reward.
So thanks for any help/advice people are willing to share!
Dave
But my previous employer paid one for me so I have a DC fund with the Scotch Widows.
It's a relatively small amount but it's quite nice to see what I can do to make it grow, rather than just run with the default funds (25% global equity, 75% uk equity iirc) which admittedly worked fairly ok since the 2008 dip but not so well in the last 18 months where things have now levelled off generally.
What kind of portfolios are other people suggesting for medium term investment right now?
I know that classically the best approach is to just play the long-term game and get growth that way, but part of me feels that currency and/or equities are currently over-valued or bubbly.
But if you subscribe to one or the other being that way then which way do you go?
Cash is great but if you are in an economy that is deflating debt then cash is getting deflated too.
But stocks trends for the last 12 months are hardly going up more than a good spread of cash ISA/savings accounts.
Is cash in a pension fund even protected like a bank deposit?
Ultimately defaults are ok, but making some active choices may prove better... and there is no way to make better choices than to ask for advice and see what fits with your personal views on risk vs reward.
So thanks for any help/advice people are willing to share!
Dave
Dave,
I notice you have no responses, so here are my initial thoughts.
Firstly, Scottish Widows. No comment!
Secondly, a lot depends on your circumstances of course. On a personal note, I think that many equities do represent great value, but a lot also have the current pessimistic market sentiment already priced in. One solution doesn't fit all. But for a cruise liner wrapper like a pension of course, something that ploughs for long distances, look at pricing as well as transient market mood.
Cash in an investment fund (such as Black Rock's) is subject to the lower FSCS protection. It's still an investment fund, but one that deals in cash and mostly used to feed into investments over time. They also have costs don't forget, as well as (currently) showing a loss via effects of inflation. Google 'Standard Life Sterling fund complaints' for the problems that *can* crop up with poor cash fund understanding.
I notice you have no responses, so here are my initial thoughts.
Firstly, Scottish Widows. No comment!
Secondly, a lot depends on your circumstances of course. On a personal note, I think that many equities do represent great value, but a lot also have the current pessimistic market sentiment already priced in. One solution doesn't fit all. But for a cruise liner wrapper like a pension of course, something that ploughs for long distances, look at pricing as well as transient market mood.
Cash in an investment fund (such as Black Rock's) is subject to the lower FSCS protection. It's still an investment fund, but one that deals in cash and mostly used to feed into investments over time. They also have costs don't forget, as well as (currently) showing a loss via effects of inflation. Google 'Standard Life Sterling fund complaints' for the problems that *can* crop up with poor cash fund understanding.
Hi, thanks for the reply.
I'm not sure how good/bad Scottish Widows are. Ironically it was the pension provider my previous employer, a leading pension comms provider, provided for us. I'd assumed it might be fairly good.
I'll admit they've got better over time. I can now do fund swaps over the phone and have web-access to data, rather than having to meet with their representative and write a letter of intent.
Yes, having funds in a wrapper isn't ideal. Ie, will fund managers (ie, the actual funds, not the people at scottish widows) be likely to dump stocks in a bear market, or are they happy to ride the wave down and back up the other side? Ie, they don't panic sell knowing their investors are in the run for the long haul?
I've been reading through all the funds over the last few days.
http://webfund6.financialexpress.net/clientsv21/sc...
Yes cash is dropping, and I think it still attracts the 1% AMC, so about a 2-3% per annum drop currently if you're in cash.
Really I need a crystal ball
When you say pricing what do you mean exactly? A current low appearing price to buy vs historical trend, or does it mean something else?
Historically it's quite hard to gauge because most of their data goes back just 5 years, and the last 5 years have been rather anomalous given the underlying economic drivers of the rather good growth over that period.
I suppose I can't go too far wrong just investing in what I believe in and what I feel is ethical. It's just a matter of going through all the fund descriptions and figuring out which are the ones for me.
But for now it's all in cash while I decide.
Thanks
Dave
I'm not sure how good/bad Scottish Widows are. Ironically it was the pension provider my previous employer, a leading pension comms provider, provided for us. I'd assumed it might be fairly good.
I'll admit they've got better over time. I can now do fund swaps over the phone and have web-access to data, rather than having to meet with their representative and write a letter of intent.
Yes, having funds in a wrapper isn't ideal. Ie, will fund managers (ie, the actual funds, not the people at scottish widows) be likely to dump stocks in a bear market, or are they happy to ride the wave down and back up the other side? Ie, they don't panic sell knowing their investors are in the run for the long haul?
I've been reading through all the funds over the last few days.
http://webfund6.financialexpress.net/clientsv21/sc...
Yes cash is dropping, and I think it still attracts the 1% AMC, so about a 2-3% per annum drop currently if you're in cash.
Really I need a crystal ball
When you say pricing what do you mean exactly? A current low appearing price to buy vs historical trend, or does it mean something else?
Historically it's quite hard to gauge because most of their data goes back just 5 years, and the last 5 years have been rather anomalous given the underlying economic drivers of the rather good growth over that period.
I suppose I can't go too far wrong just investing in what I believe in and what I feel is ethical. It's just a matter of going through all the fund descriptions and figuring out which are the ones for me.
But for now it's all in cash while I decide.
Thanks
Dave
Dave
For what it's worth, and you only had to watch Question Time last night to realise this, is that we seem obsessed with the idea that public sector spending is linked to tax revenue - what on earth happened to the contribution of exporting and manufacturi.. oh, right! The problem is, and this was reinforced by the Autumn Statement, that we are entering a strategic cycle of low taxation.. we have no money, we have created more than we dare, so what do we do?
So I think that the issue of whether or not equities are overpriced has to be taken in context. Yesterday, and it's ironic that you mentioned it the other day in your opening post, we realised that France, in all but name, has entered into a deflationary cycle. Whatever France (and more importantly, the UK) manages to achieve through half hearted economic austerity in an attempt to stimulate industry and equities is overwhelmed by the greater power of debt-deflation, the task becomes almost Sisyphean.
If we assume that the objectives of funds are to capitalise on markets and categories, and if those are going to be uncertain for a while yet, how do you make gains? By remaining parked in cash, you lose value due to the effects of inflation of course, and if you heard Radio 4 this morning and heard how water bills will be rising in line with RPI (pensions rise with CPI of course, lower!), you have to consider doing something.
You are probably tied into Scot Widows funds (your previous employer won't have spent too much time choosing the best, regrettably) but if you're not, look at the age old principles.. what is your timeline to drawing benefits, how much loss can you tolerate from these funds and how much risk do you want to take? If you don't know how much risk you want or need to take, then why would you take any risk at all? The risk that you want to take is instinctive, the issue is more how much loss can you afford?
Most clients instinctive thoughts revolve around fear and greed, it's the job of a good Adviser to eviscerate that and offer objective thinking. Many savers (especially at the moment) brood with the uncertainty of a simmering hookah, and you seem to be doing that now. You needn't do anything in a rush, just start to think things out. Think about how you want your pension to provide income to you, and possibly your partner is the first step. Income, capital (the FCA interim report of Tuesday seems to suggest that annuity inclined conservatism is in the ascendancy at the moment) or estate planning and if so, in what proportions.
Once the strategy is addressed, think about the tactics - for instance, if you want to maximise a partner's annual allowance in retirement, what should you do now to achieve that? Once you have done that, compare it to what you want retirement to look like, how much you will need or want, and how long you are going to have to work in order to achieve it.
Then extrapolate and once you have taken all of that, and more, into account ask yourself what your funds have to achieve (if anything!). It is that figure, the concentrated amount of your thinking which drips out of the bottom, the figure which is the distillation of all the ingredients which have gone into the hopper previously, that should determine what you do.
I do know this though, it's a false economy if you try to time the market, especially if your timeline is long and if you're looking to get back in because you have to, or want to, invest. Spend some time working out what you want to achieve over the long term, work out how much worry you want market sentiment and volatility to impact on you along the way, choose the most suitable funds, resist, reflect, revisit and review.. and then commit to a course of action. Sorry if that's long winded.
For what it's worth, and you only had to watch Question Time last night to realise this, is that we seem obsessed with the idea that public sector spending is linked to tax revenue - what on earth happened to the contribution of exporting and manufacturi.. oh, right! The problem is, and this was reinforced by the Autumn Statement, that we are entering a strategic cycle of low taxation.. we have no money, we have created more than we dare, so what do we do?
So I think that the issue of whether or not equities are overpriced has to be taken in context. Yesterday, and it's ironic that you mentioned it the other day in your opening post, we realised that France, in all but name, has entered into a deflationary cycle. Whatever France (and more importantly, the UK) manages to achieve through half hearted economic austerity in an attempt to stimulate industry and equities is overwhelmed by the greater power of debt-deflation, the task becomes almost Sisyphean.
If we assume that the objectives of funds are to capitalise on markets and categories, and if those are going to be uncertain for a while yet, how do you make gains? By remaining parked in cash, you lose value due to the effects of inflation of course, and if you heard Radio 4 this morning and heard how water bills will be rising in line with RPI (pensions rise with CPI of course, lower!), you have to consider doing something.
You are probably tied into Scot Widows funds (your previous employer won't have spent too much time choosing the best, regrettably) but if you're not, look at the age old principles.. what is your timeline to drawing benefits, how much loss can you tolerate from these funds and how much risk do you want to take? If you don't know how much risk you want or need to take, then why would you take any risk at all? The risk that you want to take is instinctive, the issue is more how much loss can you afford?
Most clients instinctive thoughts revolve around fear and greed, it's the job of a good Adviser to eviscerate that and offer objective thinking. Many savers (especially at the moment) brood with the uncertainty of a simmering hookah, and you seem to be doing that now. You needn't do anything in a rush, just start to think things out. Think about how you want your pension to provide income to you, and possibly your partner is the first step. Income, capital (the FCA interim report of Tuesday seems to suggest that annuity inclined conservatism is in the ascendancy at the moment) or estate planning and if so, in what proportions.
Once the strategy is addressed, think about the tactics - for instance, if you want to maximise a partner's annual allowance in retirement, what should you do now to achieve that? Once you have done that, compare it to what you want retirement to look like, how much you will need or want, and how long you are going to have to work in order to achieve it.
Then extrapolate and once you have taken all of that, and more, into account ask yourself what your funds have to achieve (if anything!). It is that figure, the concentrated amount of your thinking which drips out of the bottom, the figure which is the distillation of all the ingredients which have gone into the hopper previously, that should determine what you do.
I do know this though, it's a false economy if you try to time the market, especially if your timeline is long and if you're looking to get back in because you have to, or want to, invest. Spend some time working out what you want to achieve over the long term, work out how much worry you want market sentiment and volatility to impact on you along the way, choose the most suitable funds, resist, reflect, revisit and review.. and then commit to a course of action. Sorry if that's long winded.
Well I'm ~ 35yrs old, so a good 30-40yrs to "retirement"
There is about £10,000 there, which if you throw into an annuity calculator at the projected rates for ~ 2040 then it's a nothing pension.
Even if I pay quite handsomely into it, the expected growth rates on accumulated pensions today are dire, no nice fat compounding effects.
So even paying in a handsome sum today, locked away till I retire, and then risking the annuity market in 2040, the outcome is just pants. Even if I can just cash the lot for free by then, the projected growth rates from pension calculators seem rather poor as of today.
So personally this pot is something I'd like to try maximise the value of, and happy to take some risks with.
Whatever I do for my income in retirement, it won't be based around a 'pension'. I'm very tempted to use cash ISA compounding for a chunk of my needs at this point. At least that way I can move it around and if I do invest (stock ISA) it'll only attract the fund charges, not an AMC of 1% on top, further crippling potential growth in a low growth economy.
Anyway, going a bit off track there.
My main motivation isn't to plan for retirement with this money, but just see it as something to grow and if it works out then great. If it doesn't, and I lose 50%, it's 50% of bugger all rather than 100% of bugger all in future money terms.
Dave
There is about £10,000 there, which if you throw into an annuity calculator at the projected rates for ~ 2040 then it's a nothing pension.
Even if I pay quite handsomely into it, the expected growth rates on accumulated pensions today are dire, no nice fat compounding effects.
So even paying in a handsome sum today, locked away till I retire, and then risking the annuity market in 2040, the outcome is just pants. Even if I can just cash the lot for free by then, the projected growth rates from pension calculators seem rather poor as of today.
So personally this pot is something I'd like to try maximise the value of, and happy to take some risks with.
Whatever I do for my income in retirement, it won't be based around a 'pension'. I'm very tempted to use cash ISA compounding for a chunk of my needs at this point. At least that way I can move it around and if I do invest (stock ISA) it'll only attract the fund charges, not an AMC of 1% on top, further crippling potential growth in a low growth economy.
Anyway, going a bit off track there.
My main motivation isn't to plan for retirement with this money, but just see it as something to grow and if it works out then great. If it doesn't, and I lose 50%, it's 50% of bugger all rather than 100% of bugger all in future money terms.
Dave
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