Pension growth strategy?

[outnumbered]

The most important thing to understand is what are you trying to achieve, not how to get the biggest ROI.

E.g., what retirement age, desired lifestyle costs, dependents, attitude to risk etc etc.

This is all the sort of thing that a good financial advisor would help you resolve, and pick an appropriate investment strategy. Such advice does cost money.

[thekingisdead]

Sounds like you’d benefit from a passive global tracker.
Diversified and cheap. Hard to beat over the long term too. I use the HSBC one. 2500holdings and costs 13bps.

You might want to consider your likely retirement age, glidepath (life styling) and how you want to fund your retirement years (drawdown, annuity), whether you have any DB pensions from other employment.
All of these factors may influence your asset allocation as you approach retirement age.

[lauda]

okgo said:

Vanguard FTSE Global all cap is where everything I invest sits in terms of pension. Same for my wife.

Fairly happy with the simplicity/coverage/fee/platform, most of our investments in ISA/GIA in very similar tbh - bar my ongoing punt with Fundsmith which I will probably bin one day now there’s a 4 figure fee each year.

Edited by okgo on Wednesday 17th April 19:00

In a rare moment of agreement with okgo, this is exactly my approach.

All investments (pensions and ISAs) are in the cheapest global equity trackers whichever manager I'm with offers. Aviva for pensions and Vanguard for ISAs. I tried to be 'smarter' in the past with different asset class allocations and some active management. In reality, I missed out on the far greater return I would have had from a much more straightforward strategy and paid handsomely for the privilege.

Someone mentioned it earlier, but Meaningful Money's YouTube channel is really helpful for this sort of thing.

[Roger Irrelevant]

bhstewie said:

Don't spend too much time on it.

Investing is one of those weird areas where in an ideal world you learn just enough to be doing sensible things, you start to do them, and then you'd just keep doing them and act like you're dead

Good way of putting it. IMO for everyday working schmucks like me a little bit of knowledge re pensions investing is undoubtedly a good thing. But a little bit more can be positively dangerous if it makes you think that you are now equipped to play the markets to your advantage. Choose a broad-based equity tracker with rock bottom fees, keep the contributions going in through thick and thin, and leave well alone is my approach.

[Zigster]

I agree - there is a real “Dunning Kruger” risk with taking charge of your own investments.

The US team of an old employer of mine did some analysis on 401k outcomes. Those who made their own investment decisions underperformed the default strategy by something like 4% pa on average!

I know what I’m doing with this stuff (well, more than most people) and my own investments are almost all in basic equity trackers with some global spread. The risk of completely messing things up by trying to be clever far outweighs the potential upside.

[Bonefish Blues]

I'm in the process of retiring at the moment, age 62. Any views on whether pre-packed funds (like Vanguard's range at .25% annual fee for example) which give you a split between bonds & equities appropriate for one's age and risk rating a sensible buy or should we be considering other products as an alternative, or in addition?

We will have 2x full state and I have a couple of decent DBs but we also have a chunk sat in 7 DCs, all with the original providers of occupational schemes who tend not to buy as much lube with our fees as I would wish.

OP, hope you don't mind me jumping on the tail, but I thought this might build on your and others' posts.

[Phooey]

IMO you only want to be buying bonds *if* you need to dampen down the volatility in your portfolio/s - for example because you can't afford to suffer a 30+% drop, or afford the recovery time from it. The largest performance gains over time will come from equity, albeit with volatility, but sounds like you have other secure sources of income so if you can set aside a 'bucket' that you don't have to rely on to put food on the table, just stick it in the lowest cost FTSE world tracker and let it bake.

[Shnozz]

Phooey said:

IMO you only want to be buying bonds *if* you need to dampen down the volatility in your portfolio/s - for example because you can't afford to suffer a 30+% drop, or afford the recovery time from it. The largest performance gains over time will come from equity, albeit with volatility, but sounds like you have other secure sources of income so if you can set aside a 'bucket' that you don't have to rely on to put food on the table, just stick it in the lowest cost FTSE world tracker and let it bake.

The standard ‘advice’ is to invest in more risky funds early in your life when you have more time to sustain losses that hopefully bounce back at some stage. Then move to middle risks in middle age and then bonds and cautious funds as you head to retirement.

[Bonefish Blues]

Shnozz said:

Phooey said:

IMO you only want to be buying bonds *if* you need to dampen down the volatility in your portfolio/s - for example because you can't afford to suffer a 30+% drop, or afford the recovery time from it. The largest performance gains over time will come from equity, albeit with volatility, but sounds like you have other secure sources of income so if you can set aside a 'bucket' that you don't have to rely on to put food on the table, just stick it in the lowest cost FTSE world tracker and let it bake.

The standard ‘advice’ is to invest in more risky funds early in your life when you have more time to sustain losses that hopefully bounce back at some stage. Then move to middle risks in middle age and then bonds and cautious funds as you head to retirement.

Thanks both. Yes, I guess I was following this latter route as a bit of an article of faith, so it's helpful to have a counterpoint view to make sure I don't rule things in/out too quickly.

We've got some advice booked with one of the DB providers' funded IFA partner in a few weeks. I was a bit concerned that the advice would be too narrow since it's only maybe 25% of the whole pot, but a follow-up convo with one of their Advisors clarified what I should have perhaps realised - that in order to give advice they have to consider the whole of our situation, albeit they can't give advice on the other DB, nor on the DCs. Despite my (characteristic!) nervous nannydom, I think we're in good shape as we won't actually need to touch anything labelled 'pension' until late next year.

The useful next step is perhaps to do a little xls with all the DCs on and get a proper handle on what each comprises, in investment terms, and the charges attached to each. I looked at one of Mrs BF's the other day and answered her question as to why it had gone backwards over the previous investment year, hence my popping upon the thread.

Welcome any more thoughts as our mind turns to these DCs in particular

[lauda]

Shnozz said:

Phooey said:

IMO you only want to be buying bonds *if* you need to dampen down the volatility in your portfolio/s - for example because you can't afford to suffer a 30+% drop, or afford the recovery time from it. The largest performance gains over time will come from equity, albeit with volatility, but sounds like you have other secure sources of income so if you can set aside a 'bucket' that you don't have to rely on to put food on the table, just stick it in the lowest cost FTSE world tracker and let it bake.

The standard ‘advice’ is to invest in more risky funds early in your life when you have more time to sustain losses that hopefully bounce back at some stage. Then move to middle risks in middle age and then bonds and cautious funds as you head to retirement.

That certainly used to be the advice when you had to use your pension fund to buy an annuity at retirement. It’s different now with drawdown where your might not be accessing parts of your fund until more than 20 years after your retirement date.

It’s not smart to take investment return off the table to reduce risk until much later on the retirement journey now. I’m middle aged (44) and I have no intention of investing in anything other than equities for the foreseeable future.

[bitchstewie]

People also live longer.

That pot that used to need to last from 65 to perhaps 75 now has to last to 85 or 90.

[Shnozz]

lauda said:

Shnozz said:

Phooey said:

IMO you only want to be buying bonds *if* you need to dampen down the volatility in your portfolio/s - for example because you can't afford to suffer a 30+% drop, or afford the recovery time from it. The largest performance gains over time will come from equity, albeit with volatility, but sounds like you have other secure sources of income so if you can set aside a 'bucket' that you don't have to rely on to put food on the table, just stick it in the lowest cost FTSE world tracker and let it bake.

The standard ‘advice’ is to invest in more risky funds early in your life when you have more time to sustain losses that hopefully bounce back at some stage. Then move to middle risks in middle age and then bonds and cautious funds as you head to retirement.

That certainly used to be the advice when you had to use your pension fund to buy an annuity at retirement. It’s different now with drawdown where your might not be accessing parts of your fund until more than 20 years after your retirement date.

It’s not smart to take investment return off the table to reduce risk until much later on the retirement journey now. I’m middle aged (44) and I have no intention of investing in anything other than equities for the foreseeable future.

Very true. The flexibility afforded by drawdown has changed the landscape to a degree. It’s possibly still partly relevant for the majority of imagine but likewise your post shows how it’s very much personal circumstances in terms of what pot you have, your health and life expectancy (as much as it’s known) and your intentions around work/income.

[chip*]

A relevant read for the OP.

https://www.ii.co.uk/analysis-commentary/diy-inves...

[okgo]

Why has the bloke got 16 funds when it looks like most of them just overlap each other!

[heisthegaffer]

I have a main pension plus a smaller sub 30k pension that is doing OK. I'm mulling over what to do with this smaller one so I wonder if should invest in the S & P 500?

[Martin315]

thekingisdead said:

Sounds like you’d benefit from a passive global tracker.
Diversified and cheap. Hard to beat over the long term too. I use the HSBC one. 2500holdings and costs 13bps.

Do this and don’t waste money on an IFA.

[LeoSayer]

Zigster said:

I agree - there is a real “Dunning Kruger” risk with taking charge of your own investments.

The US team of an old employer of mine did some analysis on 401k outcomes. Those who made their own investment decisions underperformed the default strategy by something like 4% pa on average!

I know what I’m doing with this stuff (well, more than most people) and my own investments are almost all in basic equity trackers with some global spread. The risk of completely messing things up by trying to be clever far outweighs the potential upside.

I've been investing in equity funds for over 25 years and the more experience I get, the more I realise that I don't have the ability to choose the best fund manager or other factor to invest in eg. company size, country, industry etc.

So instead, like others here I have settled on the closest I can get to an all-of-market fund using Vanguard FTSE Global All-Cap or equivalent as mentioned by others on this thread. In other words, It's about as diversified equity exposure as possible because pretty much all listed companies are covered (including small-caps) in all countries around the world including emerging markets so I'm never going to miss out on growth due to a bad allocation decision on my part.

That simplification has allowed me more time to focus drawing up meaningful financial plans alongside understanding and maximising tax planning opportunities. These go hand in hand with chosing the right investment.

[RUSTILLDOWN]

bhstewie said:

People also live longer.

That pot that used to need to last from 65 to perhaps 75 now has to last to 85 or 90.

Another reason why boomer DB schemes are soooo amazing.

[500swk]

am i on the right track putting the pension in these,just looking for the low cost tracker approach


https://www.hl.co.uk/funds/fund-discounts,-prices-...

https://www.hl.co.uk/funds/fund-discounts,-prices-...

https://www.hl.co.uk/shares/shares-search-results/...

https://www.hl.co.uk/funds/fund-discounts,-prices-...

do i need to be in 4,any others that i should look at

[bitchstewie]

I think it's arguable whether there's any benefit being in four unless you think platform or fund provider risk is a serious concern.

I'd also look at Vanguard FTSE Global All Cap.

Not as cheap but it's got a bit of everything in it so you might find it helps avoid wondering whether you need a little bit of small caps or a little bit of emerging markets or whatever.