Pension woes...

[25slim76]

Hi,

First time posting after spending a number of months reading through and appreciating the forums here.

I'm currently 35 and have become very aware over the last few years that I need to have a firmer hand in all things financial so that come retirement I can live a relatively comfortable life (hopefully). I've had some success with the work sharesave scheme and likewise on the stock market in recent times with some funds and investment trusts. I've also had a look into my pension that I receive through work and have found that although it's not terrible it's stuck in a company chosen plan that derisks over time until I decide to take it. I was pretty shocked at how little this eventually pays out so will more than likely have to rejig some things later on to pay more in but for now I'm asking if there are any recommendations as to how I should manage this as I would like a more active hand in it. I've read through Luni's B7 & B8 reviews which sound appealing but am not sure whether shifting my whole current pension (£75k) down that road is what would be best. Just really looking for any general words of wisdom which will be greatly received.

Thanks for taking the time to read

[BrummieDave]

Two comments on your post (and welcome to TLF btw):

Firstly it's possible that the fund you're invested in through your workplace pension is the default fund offered by the scheme. The trustees of the scheme are duty bound to offer something relatively conservative and balanced for anyone who does not actively choose to do otherwise. Such funds alter their asset mix to derisk as you get closer to your chosen/default retirement age, with the aim of avoiding any volatility/crashes in equity prices close to your retirement. Apols if you already knew this, but it's best to make sure. Perhaps there are other more 'adventurous' selections you can make outside of this lifestyle default fund. Schemes often therefore offer freestyle options where members can choose greater or indeed lower risk options, and your scheme administrator/website should show these options and how to select them.

Secondly, whilst it's imperative that you DYOR, Luni's B7 and B8 baskets were created to provide rising incomes when required, and conventional wisdom would suggest that at age 35, and with a declared ambition to take on greater risk to achieve higher total returns, a growth rather than income strategy may be what you are seeking. As Luni stated in a previous post B7 and B8 "are for investors who have finished saving and want to start living. I believe in horses for courses. To accumulate the pot, go for growth ITs (such as the 'Growth Ten', which I may report on later) or for maverick funds such as my 'Conviction Five'." (See this post for that statement and links to the Growth Ten and Conviction Five: https://lemonfool.co.uk/viewtopic.php?f=54&t=19695)

In your growth phase, you may decide that a passive rather than an active (such as ITs) approach suits you best, and Moneyvator is probably a good start for you to research that approach https://monevator.com/

Hope that helps and apols if any of it was already known. Best to strip any initial response to the basics, and build from there if you have further questions.

(BTW whilst your question relates directly to your pension, and is thus on the right board, you may wish to pose an additional broader question, or shadow link to this question, less pension specific in 'Investment Strategies' as that may get greater numbers of replies than in Pensions. It also may not of course!)

[JohnB]

Check whether your work scheme allows partial withdrawls. If they do, its worth pulling out lump sums every few years into a SIPP, but still using their scheme for monthly contributions. Buy Tim Hale or Lars Krojer's books to see where you stand on the great passive/active debate.

If it were me I'd sell employer's own shares as soon as you've gained the discount. Never good to find that if they fall on hard times you lose your job and your capital.

[Urbandreamer]

I'm currently 35 and have become very aware over the last few years that I need to have a firmer hand in all things financial so that come retirement I can live a relatively comfortable life (hopefully).

Congratulations. This is the vital 1'st step. One that many never take, to their sorrow.

BrummieDave has it right, but neglects the fact that “Lifestyling” or reducing risks in the run up to retirement is something that you can forget about for 20 years. At that point you can revisit that area of the subject.

DYOR is also vital. In simple terms, unless you pay quite a lot to a financial adviser, who will then earn the money finding out things about you: the only person who knows enough is yourself. Nobody else will know your view on risk, if or what you are likely to inherit etc. Said person would also point out that it’s an ongoing process as your life circumstances change. Again you will be in the best position to judge such things so DYOR.

If you want specific suggestions, then there are advantages to starting a LISA if you haven’t bought a house. I don't qualify so wouldn't
Spare cash to save/invest is likely to be hard to find for you at your time in life, but try.
In your situation I would likely invest in an ISA rather than pension, because of its flexibility.
If I had enough in your circumstances (>£1kpa) I would definitely look to stock market investments.

I would also council against being to concerned with getting it “right”. Making a start and learning is far more important.

PS my scheme has different "Lifestyling" formula depending upon how you wish to take your pension, including the option to do your own. Yours might too. I'm also nearing retirment, so would/should do things different from you.

[BrummieDave]

BrummieDave ... neglects the fact that “Lifestyling” or reducing risks in the run up to retirement is something that you can forget about for 20 years.

DId I neglect that fact?

I certainly didn't mean to; I thought everything I'd written acknowledged this and sought to address exactly that point.

Be careful though, a trustee derived lifestyling approach will take greater risk, and hold a heavier equity component, for a member aged 35 than someone approaching retirement. They usually do pretty well in the long run, and suit most members. If additional funds are available (eg by selling the sharesave funds at maturity), perhaps consider leaving the pension as is, and invest the additional funds, perhaps in an ISA, on something more adventurous.

[fca2019]

Workplace pension funds are typically diversified and have less exposure to equity than an equity-only fund and so will under-perform during positive market conditions. The counter to this is that it will out-perform in adverse market conditions.

For example one of my workplace schemes has a mix of the scheme may be 85% equity but as you approach retirement based on your retirement age the fund de-risks so you equity proportion drops down in stages to 40%.

Its great that you are thinking of these things at 35. I only stated in pensions and saving about then.

I'd keep the workplace pension where it is. If you move jobs a few times and have small pots you can consolidate these into a SIPP.

I invest across several types of investment - workplace pension, cash and investment ISA and SIPP. And think that is common.

[JoyofBricks8]

Hi, welcome to TLF.

I think you are ahead of many just by taking an interest. You dont mention a lot of background detail so as a general starter- This flowchart is a pretty good way to begin to think about personal finance.

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I would check to see how much employers contribution you are getting for your workplace pension, and if they offer to match your personal contributions then maximising the personal contributions is often a good idea.

If you elect to transfer out or go down the self invested SIPP route I would personally choose a cheap global tracker like Vanguard Life Strategy- just take care to choose select bond percentage to manage the risk of loss to a level you can tolerate. I use Vanguard LifeStrategy 100 as a mainstay of my portfolio , but I am content to take that big equity risk level. Others might well prefer more bonds to avoid the agony of red ink one gets in a crash.

You don’t mention if you are higher rate taxpayer or a homeowner.

[25slim76]

Wow I wasn't expecting responses quite to quickly! Many thanks, truly, much appreciated.

Secondly, whilst it's imperative that you DYOR, Luni's B7 and B8 baskets were created to provide rising incomes when required, and conventional wisdom would suggest that at age 35, and with a declared ambition to take on greater risk to achieve higher total returns, a growth rather than income strategy may be what you are seeking. As Luni stated in a previous post B7 and B8 "are for investors who have finished saving and want to start living. I believe in horses for courses. To accumulate the pot, go for growth ITs (such as the 'Growth Ten', which I may report on later) or for maverick funds such as my 'Conviction Five'."

In your growth phase, you may decide that a passive rather than an active (such as ITs) approach suits you best, and Monevator is probably a good start for you to research that approach monevator

I've just had a look into the Growth Ten and C5. The Growth Ten seems appealing (I already have looked into a few of these IT's and currently hold SMT) although I notice Luni repeatedly says he doesn't advocate it compared to other options? The passive approach is also appealing having read several books now that repeatedly try and steer the amateur investor down that road. I'll have a good look through Monevator which I've heard of but up until now haven't had a chance to look through.

Check whether your work scheme allows partial withdrawls. If they do, its worth pulling out lump sums every few years into a SIPP, but still using their scheme for monthly contributions. Buy Tim Hale or Lars Krojer's books to see where you stand on the great passive/active debate.

If it were me I'd sell employer's own shares as soon as you've gained the discount. Never good to find that if they fall on hard times you lose your job and your capital.

I will double check but I seem to recall reading something not so long ago saying that if I remove from the pot I lose some kind of benefit that it provides. Many thanks for the book recommendations. I keep a close eye on the shares and for CGT issues I can't remove all of the money but generally I sell when I can.

If you want specific suggestions, then there are advantages to starting a LISA if you haven’t bought a house. I don't qualify so wouldn't
Spare cash to save/invest is likely to be hard to find for you at your time in life, but try.
In your situation I would likely invest in an ISA rather than pension, because of its flexibility.
If I had enough in your circumstances (>£1kpa) I would definitely look to stock market investments.

I would also council against being to concerned with getting it “right”. Making a start and learning is far more important.

PS my scheme has different "Lifestyling" formula depending upon how you wish to take your pension, including the option to do your own. Yours might too. I'm also nearing retirment, so would/should do things different from you.

I currently own my own property but will be upgrading within the next 6mths or so. For the next few years at least, every spare penny I have will be going to clear the mortgage down as it's likely to be quite monstrous. I already have an ISA but just about all my savings will be going into the house.

Within my company pension I do have the choice of managing it all myself without taking anything off of the platform so ideally I will select whichever funds, trusts etc through that. For the time being I don't plan on investing anything further in it than the standard monthly contribution (6% from me + 6% from employer).

I'd keep the workplace pension where it is. If you move jobs a few times and have small pots you can consolidate these into a SIPP.

I invest across several types of investment - workplace pension, cash and investment ISA and SIPP. And think that is common.

So I definitely want to leave my workplace pension where it is in terms of platform but as I have the option to make amendments through other investment choices I am keen to do that. Long term I would love to think I stay with the same company as I'm one of those rare breed of people that thoroughly enjoys what they do but on the other hand we never know what the future holds!

Hi, welcome to TLF.

I think you are ahead of many just by taking an interest. You dont mention a lot of background detail so as a general starter- This flowchart is a pretty good way to begin to think about personal finance.

I would check to see how much employers contribution you are getting for your workplace pension, and if they offer to match your personal contributions then maximising the personal contributions is often a good idea.

If you elect to transfer out or go down the self invested SIPP route I would personally choose a cheap global tracker like Vanguard Life Strategy- just take care to choose select bond percentage to manage the risk of loss to a level you can tolerate. I use Vanguard LifeStrategy 100 as a mainstay of my portfolio , but I am content to take that big equity risk level. Others might well prefer more bonds to avoid the agony of red ink one gets in a crash.

You don’t mention if you are higher rate taxpayer or a homeowner.

If I was going off the flow chart I'm on step 6 with the exception of my mortgage which although low at the moment will increased as mentioned next year. My employer matches my contribution up to 6% so a few years ago I matched it to that. Apologies for the lack of detail, any info you think I've missed I'm happy to provide. Yes to homeowner and yes to higher rate taxpayer.

Once again, thank you all for your responses

[BrummieDave]

I'm struggling to access the Wayback Machine; can somebody post the G10 and C5 list of ITs please (or PM them to me)?

[Urbandreamer]

I'm struggling to access the Wayback Machine; can somebody post the G10 ITs please (or PM me a list of them)?

viewtopic.php?t=10278

While I do think that they are a good place to start the research, I would caution that time has passed and the world changed.
For example I believe that Mr Woodford was quite outstanding back then.
Like I said, a good place to start, but not to be treated as a shopping list.

In truth though, we are drifting into the teritory of other boards.

[BrummieDave]

I'm struggling to access the Wayback Machine; can somebody post the G10 ITs please (or PM me a list of them)?

viewtopic.php?t=10278

Yes, I have that link and post already, but none of the links within it to the Wayback Machine work for me, hence asking for someone to send me the list of ITs (G10 and C5).

And yes I know we are drifting...

[PinkDalek]

Yes, I have that link and post already, but none of the links within it to the Wayback Machine work for me, ...

I've test checked a couple and both work for me but take some time to load. If you still can't access why not provide the non-truncated URLs over there and one of us can take a look and maybe PM you.

Edit: Have replied over there viewtopic.php?p=264279#p264279

[xxd09]

Well done 25slim76
Like you I decided to take the reins myself-self employed-so had to at 40 years of age
Now 73-retired 16 years with enough!
Been through Insurance Companies,Investment Trusts and finally to Index Funds
A very interesting ride and lucrative
You are in a good place just now-so take a year or so and read,read,read. This board,Monevator.com,John Bogles books and Lars Kroijer “Investing Demystified “ plus videos from his website-financial section of a good paper-Times or Telegraph
You will find it financially worthwhile!
xxd09

[xeny]

I was pretty shocked at how little this eventually pays out so will more than likely have to rejig some things later on to pay more in but for now I'm asking if there are any recommendations as to how I should manage this as I would like a more active hand in it.

I'd suggest you've almost got that the wrong way round - pay more in sooner, so you can pay less in later - the trick is to get a greater period for compounding to happen, and at least you're relatively young.

Two other resources I'd recommend - Monevator.com (in particular https://monevator.com/why-a-total-world ... -you-need/), and Reddit's UK personal finance subreddit has an excellent flowchart for at least checking you are doing all the basics reasonably sensibly.

https://i.imgur.com/BfHzwr9.png

[25slim76]

Thanks again everyone for all of your responses. I've taken the time to read through them and really appreciate their value. The thoughts on ITs, Monevator and books worth reading I will be sure to look into amongst other things.

It's reassuring to know that a significant portion of the information given I was already aware of so am maybe a little less clueless than I thought. I don't really class myself as a 'young' person so much anymore and I agree it is certainly surprising how few people that are my age have started any level of planning for the future outside of a company pension of which they know no detail. I'm not sure I know of a single person!

All the best,

25slim76