My pension fund changed its allocation

Pension fund pic

Disclaimer – This isn’t advice and merely an informative post on my experience with default funds and the pension investment options available to ME. Yours may be completely different so you should always do your own research to see what approach is best for your own needs and time of life.

To the shock horror of many PF enthusiasts reading this, I haven’t gotten round to reallocating my pension investments (with AVIVA) away from the default fund. But I had been meaning to do so.

My reason for wanting to make this change was due to its heavy weighting in UK equities and considering allocation to bonds and gilts.

This would be fine if I were nearer retirement, but being in my 20s I want to be as close to 100% equities as my conscience can withstand.

I get it. These default funds need to cater to as wide a group of people as possible. Many of these people won’t bother checking what their pensions are invested in so the fund managers need to make sure they can apply the broadest investment portfolio to the greatest number of people and their needs.

That said, I did have ‘change pension allocation’ on my to-do list for the longest time, but always put it on the backburner for another day to focus my energy elsewhere.

I was originally thinking of a simple three fund split:

  • 85% Blackrock World (Ex-UK) Equity Index

A nice global spread 100% invested in equities, ~60% of which is in the US. Potentially a little heavy but this should be offset somewhat with the addition of the below.

  • 10% Blackrock UK Equity Index

Again, 100% equities but with exposure to the main UK indexes.

  • 5% Blackrock UK Smaller Companies

A slightly more volatile option, but one that provides the potential for more growth invested in small cap UK companies. This brings the total UK investment to 15%.

This would mean I would be fully invested in equities. This is something I’m totally ok with given my investment time horizon. The main two funds are some of the cheapest AVIVA offer too at 0.45%. The third is an active fund that comes at a premium of 1.2% but I’m ok with this only taking up 5% of my portfolio and with the potential for significant growth.

However…

AVIVA recently transferred the management of the default fund, along with their other ‘My Future’ funds, to Blackrock anyway.

As a result, Blackrock have made significant reallocations to the portfolio, completely removing any Gilts and upping the equity holdings from 67.1% to 81.2%.

This is still probably more bonds than I’d like but for the time being I’m happy to see how it performs; to be honest, the old allocation has performed pretty well returning 9.78% overall considering its overweighting in UK equities and bonds during a time of high performing US stocks.

Asset Allocation

Old Allocation

New Allocation

UK Equities

30%

9.6%

Overseas Equities

37.1%

71.6%

Sterling Corporate Bonds

6%

5.8%

Conventional Gilts

20.2%

0%

UK Index Linked Gilts

6.7%

0%

Overseas Government Bonds

0%

13%

Total

100%

100%

Equities

67.1%

81.2%

Bonds

6%

18.8%

Gilts

26.9%

0%

Total

100%

100%

Then again, I am moving to a new job in the new year so I will have the ability to either consolidate this into the new scheme or move it into a SIPP. Considering Vanguard are due to release one at some point next year, this may be something I choose to do instead.

So this is probably another good time to remind anyone reading this to check what their pension is invested in. Contact your HR department for more information, if you’re a PAYE employee, and get logged into your account with whoever your workplace pension provider is.

 

2 thoughts on “My pension fund changed its allocation

  1. There first thing I checked upon joining my companay pension scheme was to see what the default fund was and it’s in Mixed Investment 40-85% Shares which I’m ok with. It’s great to hear that you’ve checked yours at such an early age, I’m not sure I would have done the same, although in my 20’s, I wasn’t FIRE-woke!

    Good luck with the new job in the new year!

    Liked by 1 person

    1. Thank you! I’m quite excited to be doing something I actually want to do now 🙂

      I have to owe a great deal of thanks to my colleague next to me. He’s retiring next year so has been through it all and isn’t afraid to talk about money despite many seeing it as a taboo. It motivated me to bounce ideas off of and try get ahead. Mostly, I just liked to learn about new ‘stuff’, and pensions came under that category of something I hadn’t learnt about yet haha.

      Like

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