Yet another pensions thread…increase work contributions or start SIPP?

I was just about to make the same point andylc.  FTSE up 5% YTD, S&P 25% and Nasdaq 31%. To your point roli regarding bonds even the Vanguard Lifestrategy 80 is up 14% YTD.  The bar is low comparing to the FTSE and even then many pension funds can’t even beat that.

Bonds have done pretty well this year and yes LS 80 has done OK this year. However the f I compare to other global mixed funds most have done better – RL Global Equity Select 23%, L&G Global 100 30%, Fidelity Index World 22%, HSBC World 21% Schroder QEP Global 24%. So not bad but not stellar in a fairly buoyant market.

Giving up salary sacrifice NI gains, plus at source Higher Rate tax relief. Is not good.

My workplace allows salary sacrifice straight into my own pension. Most of my colleagues have stayed in the company scheme, but a conversation last week confirmed my options are out performing company scheme but about 3% this year.

I asked about fees earlier in the thread, and I’ve opted to stay with Standard Life. However I moved from what was a historical product to a new product. This has saved 0.3% on fees but most importantly given me much more flexibility at retirement.

other global mixed funds most have done better – RL Global Equity Select 23%, L&G Global 100 30%, Fidelity Index World 22%, HSBC World 21% Schroder QEP Global 24%.

i was going to invest in LS80, but after reading about the heavy weighting towards the uk funds then i think id prefer to invest in something more global.  do all the above funds have roughly the same fee?  (0.22% for LS80).

thanks

RL has higher fees but is closed to new investors now anyway. Fees are similar or lower even:
Fidelity 0.12%
HSBC 0.13%
L&G 0.14%
Schroder 0.29%

Andrew

thanks.  is the L&G global the ‘technology index’ one or the ‘100 index’?

cheers

EDIT:  just seen your earlier message, its the 100.

The global tech index has done really well too but is generally expected to have a downward correction at some point. I have an S&P 500 info tech tracker as well which I think follows a very similar vein to the L&G Technology Index – I think this would be a good tracker to put a smaller percentage into. Even with some market drops along the way, my S&P 500 info tech tracker has gone up 60% in just under 2 years.

I think this would be a good tracker to put a smaller percentage into.

rather than small percentages, im just looking at one fund, so i dont have to mess about putting my monthly DD into different funds each time.  invest in just one fund, set up the DD and forget all about it.

thanks

FTSE all-share is not a great benchmark – when I first looked into my pension rather than assuming my financial advisor had my best interests at heart was when I realised that using this as a benchmark is comparing to a globally poor performing index, in order to make a fund look good even when on a global scale it is doing terribly.
FTSE all share index has gone up by 25% in 10 years!

Agreed, I actually misread that as FTSE all-world. Don’t know why they’ve used the all-share as that’s even less relevant as a comparison with a typical pension fund.

In the research they’re saying the all-share has returned 37% over five years so I assume they’re looking at total return, but even so it’s not a great index to use as a benchmark.

Still, the point about bonds and their place in a portfolio despite the lower returns still stands. I think a lot of people are going 100% equities these days based on recency bias. But history shows us a big crash is coming at some point and those with 100% in equities stand to take the heaviest losses. If you can stay the course and wait for it to rise again, which could take a number of years, it’s all good but many will panic and sell, locking in a large loss.

I get that point. Vanguard is an easy way to compare 100% equities vs partial bonds etc and even with crashes taken into account 100% equities are as far as I can see the better option. Even big crashes usually recover within 18 months or so, and I’m fairly confident the better returns leading up to this will usually make up for this. Plus of course we know that bonds can easily crash as well, with worse consequences since their returns are only modest to start with.
Sadexpunk I was assuming you’d be telling about a SIPP so you can spread your investments within an app and then adjust as you please over time.

Sadexpunk I was assuming you’d be telling about a SIPP so you can spread your investments within an app and then adjust as you please over time.

well yes, its a SIPP, but whereas with HL i had 6 funds and just left them there without adding to them, now ive swapped to II and intend contributing monthly, and i get one free trade per month, it just seemed to make sense to choose one and stick with it, and that free trade goes into it each month.

You get free trades every month in as many funds as you choose. So you just set up what you want to invest in regularly, add extra investments when you have any cash balances from tax relief and then unless you opt to do extra trades outside of the free investment day (9th of the month), all of your trades are free.
Edit just checked – free regular investing is for up to 25 trades per month. You can go into the regular investing bit whenever you like and adjust how much of your monthly investment you want to go into each of the funds / ETFs you have decided upon.

Even big crashes usually recover within 18 months or so

On average maybe. It took four years for the S&P500 to recover after the dotcom crash, about five years for it to recover post-2008 and over 15 years for it to recover following the great depression. There’s no good reason to think these kind of events won’t happen again.

You get free trades every month in as many funds as you choose. So you just set up what you want to invest in regularly, add extra investments when you have any cash balances from tax relief and then unless you opt to do extra trades outside of the free investment day (9th of the month), all of your trades are free.
Edit just checked – free regular investing is for up to 25 trades per month. You can go into the regular investing bit whenever you like and adjust how much of your monthly investment you want to go into each of the funds / ETFs you have decided upon.

so do you not think that a global fund would pretty much return the same as 5 diverse funds that cover global funds for instance?  just seems a bit ‘neater’ to have the one that covers global funds.

thanks

I’m not really sure. I just went with a selection of a few Global funds just in case one underperformed – if I only chose one then I figure slightly more risk. Then I have smaller amounts invested in Nasdaq, S&P 500 trackers, a bit in a gold price tracker then a bit in Indian and Islamic Equities just to see how they do.
The other perhaps minor issue is the £85,000 FSA protection – by spreading across quite a few different companies most of my Pension is protected. If you went with a global investment owned by a single company then you’re likely going to go way over that £85,000 threshold. Obviously not that likely for a big company to go under but you never know.

so do you not think that a global fund would pretty much return the same as 5 diverse funds that cover global funds for instance?

I’ve always chosen ethical and/or sustainable funds. I chose 6 different funds on geography as well as just different priorities and fund managers. It took a bit of reading up. Overall though I feel that it’s even more diversity in the companies, geographies and industries that I’m invested in.

My plan for now is quite adventurous and risky – I’ve only a modest savings pot (welcome to working for charities) so far and so I’m wanting a bit more risk for the next 7-10 years to try and get better returns to boost what I’ve put in. My plan is to then transition over the next 7-10 years to much ‘safer’ options. I retire in 17 years. Again this took some reading and soul searching to work out.

Remember “Bonds” don’t crash, but traded bond funds can.

Another benefit of ii is that you can hold bonds directly in it.

I spent a bit of time last year trying to understand bonds, yields, maturity, duration risk etc. Pensioncraft do some good videos on bonds.

Bonds can crash – see Liz Truss for details – but if you have bought a bond to hold for a long time for the interest, or to hold until maturity to provide a guaranteed lump sum, you won’t be trading it and the price changes will have no impact.

Maob, just a thought experiment to be going on with – you are investing more adventurously now to go safer in a few years time towards retirement.  Assuming you are retiring around the state retirement age, life expectancy data suggests you will have at least as long again, perhaps 50% more time after retirement, than before that date…..you may well be better served extending the more adventurous stance further into the future, although it will all depend on how you fair.

The bond capital value doesn’t crash, nor does the yield. It’s only secondary market prices that can crash.

Buy bonds, hold to maturity, take the coupon every year and they are very stable.

In the US, buying/holding bonds is much easier & more common. Plus all the local government municipal bonds for local capital projects.

At the moment I am getting my fixed interest stability through money market funds, which are yielding about 4.7-5% a year. I am building a 5 year reserve for when I retire in 10 years , to protect from potential market pullbacks. In retirement, if the market crashes I can use my cash/moneymarket/bond ladder instead of drawing down the equity funds when they are down.

The issue with holding multiple global funds is that you end up heavily exposed to the big stocks which will all inevitably make up a large proportion of most funds.

The whole idea of a global tracker is that it has built in diversification, spreading your risk around different sectors and markets. The alternative is to build a portfolio of different trackers, so you can rebalance if particular markets crash, but this defeats the simplicity concept of a global tracker

Unless there is a manager overlay (thereby defeating the object of the exercise) global trackers themselves are heavily exposed to big stocks – the largest US stocks are bigger than the entire the UK market.

Most global funds are heavily weighted towards the US so I don’t think it matters if you decide on one or spread it across a few. I’m happier to try and avoid having too much more than £85,000 Invested in a fund run by one company, just in case.
I’ve attempted to diversify a bit but inevitably still have about 80% of my SIPP in US funds. The amount it has grown compared to what it was doing when it was in the hands of a financial advisor would mean even if it crashed by quite a bit I’d still be better off than I was.