How to choose your pension investments for maximum growth | The downsides of Lifestyling

[@stevegeek]

Great video Dianne. It's scary how many people just trust their employer / pension provider to look after their pension and take no interest in where / how it's invested.

[@porschecarreras992cabriole8]

People in their late forties early 50s come from DB background so then there was no choice. We just paid and we knew exactly what we get. DCs are so different and education is needed. In DC I was thinking I was paying £1000 a month and this was a lot!! But it wasn’t. At least there is time to address this and AVCs are used. Anyway you always need to pay a lot more the last few years before retirement. So £50-60k the last few years are a game changer

[@MrKlawUK]

adding to this: I didn’t have any idea that the auto enroll DC schemes are set up only on’qualifying earnings’ so the minimum 3%/5% caps out at 44k - so around £1320 employer contribution, £1760 employee. If you’re a high rate tax payer absolutely look at doing more additional contributions asap (and I’m looking at salary sacrifice)

[@stevegeek]

@@MrKlawUK Salary sacrifice is a great idea….I did this with my basic salary the last 2 years that I worked and saw my take home pay increase due to national insurance savings. I also paid my annual bonus into my pension via SS and saved a big chunk from going on tax.

[@MrKlawUK]

@@stevegeek oh good call on the bonus!

[@clarkeysam]

​@@stevegeeksalary sacrifice will not result in your take home pay going up. That's impossible!

[@steve6375]

Am I right in thinking that there are three stages. 1, Adding to pension pot, 2. About to retire in next 3-5 years, 3. Retire and draw on pension? So there should be a different strategy for each of these three stages. Stage 1 - go for max growth/risk you are comfortable with, Stage 2 - start moving out of less volatile stocks, Stage 3 - Move large %age to bonds and/or div stocks. The 'risk' being that if you draw down on volatile stocks in retirement and they have a run of say 2 bad years, you can run out of money! So it is very important to know which of these 3 stages you are at.

[@markstevens4341]

I have a dozen funds in my SIPP, be interested to know more why you suggest this is too many, or why detrimental to the performance etc?

[@paulacollins8327]

It is so difficult as there is always the diaclaimer that funds can fall as well as rise .....

[@MrKlawUK]

its about timeframe. 1-3 years don’t put it in high risk stocks, put more into safer sources. But over time it will generally trend positive. You have to ride it out and accept ups and downs are par for the course. Even at retirement if you’re up for actively managing - you can have some of your portfolio still in stocks for growth if they’re planned for later life

[@welshhibby]

Diana where in Wales are you from ?

[@kevatnorthfield]

If you move from your employer's pension provider. Your employer no longer has to make any contributions.

[@DianneSullivan]

Yes, correct. This video shows you how to choose funds within your workplace provider. I went through in detail how to access your workplace pension and change the funds within it - none of this video recommends moving away from you workplace pension while your employer is contributing- a big theme of many of my videos 😁

[@guymartinwicks]

The answer is then don't do it. But what you can do in the majority of cases is move a proportion of it to the pension scheme of your choice or SIPP. Easily done online and so you're still benefiting from your employers contribution and they're none the wiser. One might do it annually.

[@Mr.GeeKhan786]

Hi Great video Dianne and very relevant to me. I’m about 12 years from retirement and recently noticed my providers lifestyling had kicked in and was derisking way too early for my liking from a passive global equity fund charging 0.16% fund fee to an active multiasset fund with 35% equities and other assets charging 0.30% fund fee. The lifestyling had taken the global equities fund to 69% and 31% multiasset fund. I switched off the lifestyling and put the global equities fund to 80% and the active fund to 20%. What I’m deciding on at the moment is whether to keep the 20% active multiasset fund or switch that 20% to a passive bond fund.

[@DianneSullivan]

That’s wonderful to hear! Well done on being in control of your investments and underlying fees.

[@andypandy9931]

With the volatility of financial markets why would anybody risk their whole retirement funds if they are not knowledgeable about such things?

[@MAXERNEST]

Hello Dianne , another thing is the charges the pension provider applies to your account, i read that 1% is a big number over time, can make a big difference to your retirement pot

[@stevegeek]

Indeed...1% adds up over time. Last year I moved my workplace pension with Scottish Widows to a SIPP with interactive investor to reduce fees and give more flexibility / choice etc. My employer kept paying into my SW account until I retired at the end of last year, I then transferred the balance to ii and closed my SW pension. Best thing I ever did!

[@aficio698]

Yes - NEST is 1 of the worst. Charges total over 1.5 %. As a work place provider I have no choice over this.

[@paulfulker9318]

@@aficio698worth transferring out your investments say once a year into a SIPP of your choice.

[@BaileyMxX]

​@@aficio698 that's not fully accurate though. It's 1.8% charge for the initial payment in which indeed is high but you are then only charged 0.3% a year for all your assets. So you are right it's high when paid in but the fee you are thinking of is only on the first year! So if held for multiple years then the total fee per year will be much lower than you're saying Your company match and tax relief will far outweigh this charge so don't let it be a reason to turn down your company if it's the only pension they offer.

[@kinggeoffrey3801]

​@@stevegeekthat's why a SIPP is probably the most important tool we have. You can retire much earlier as well.

[@MrKlawUK]

do you have a video about comparing workplace pension schemes and possibly using a separate private pension (assuming you want to do additional contributions and maximise performance/minimise costs). Main concern for me is if workplace scheme isn’t great vs others on the market, but as a HRT payer I’d like to take advantage of salary sacrifice which means within company scheme

[@clarkeysam]

I'm a HRT payer. I utilise my work place pension (not the standard fund) and then once a year or so I transfer the majority of it (not all of it, as I don't want to close my work place pension) to my SIPP. This minimises my admin workload and will hopefully increase my returns.