Decoding Legal Jargon: How AI Can Help Determine if Your Default Pension Fund is Fair
- May 5, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Default Pension Funds: Are They Really Worth It?
Conventional wisdom often suggests that default pension funds may not be the best choice for maximizing returns. However, when it comes to my own pension fund, the Aviva Pen My Future Growth FP Pn, the numbers tell a different story.
### Aviva Pen My Future Growth FP Pn Performance
According to Trustnet, the 5-year return of the Aviva Pen My Future Growth FP Pn stands at an impressive 54.6%. This outpaces the Vanguard Lifestrategy 80 (41.1%) by a considerable margin and even comes close to the Vanguard FTSE Global All-Cap (62.8%).
### Bond Allocation and ESG Investments
While I am comfortable with the pension fund’s bond allocation, I have some reservations about its investments in ESG (Environmental, Social, and Governance) funds. However, as long as I am not missing out on significant returns, as the numbers suggest, I am willing to keep an open mind.
### The Case for Staying Put
Given the strong performance of my default pension fund and the lack of compelling reasons to make a move, I am inclined to stay put. However, I am open to hearing different perspectives on this matter.
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****** just grabbed a
What are the fees on it, and how do they compare to other similar funds?
For a ~75% equity fund it has done relatively well and has very similar performance to the average global equity pension fund.
That said, depending on your risk tolerance and how far you are off retirement, I’d be inclined to switch to 100% global equities because that difference in performance could really add up over the decades.
The long and short really comes down to your own preferences. You have obviously done some comparative analysis and weighed the outcomes as being acceptable.
The basic premise with investing is to identify an investment strategy you are comfortable with and that meet your requirements (aims and any timescales), and then to identify investment(s) that supports your strategy.
The Aviva fund is a risk weighted multi-asset fund with a good global weight representation using ESG funds. Just for comparison, the VLS80 is a fixed ratio multi-asset fund with a high proportion in the UK (c. 25%) and therefore lower exposure to the rest of the world. So, it is not an ideal comparator. As another example (to compare) the HSBC Global Strategy range are risk/volatility weighted, with either the Dynamic or Adventurous versions worth looking at (simply as comparators).
If you are comfortable with the funds structure, its aims, and based on previous returns you have a degree of comfort with it, us anonymous posters on here are not going to be able to offer any insights that should sway you.
Hi /u/Extreme-Housing4115, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/index-funds/
* https://ukpersonal.finance/pensions/
____
^(These suggestions are based on keywords, if they missed the mark please report this comment.)
My L&G default has increased by 1% over the last 4 years.
I mean, my pension with my old employer has increased by 20% and I’ve been paying full fees!
>as I’m not missing out on big returns I suppose, which it looks like I’m not.
What’s your definition of “big”? An extra 3% a year, compounding over decades, will easily be worth hundreds of thousands of pounds.
Edit: my bad, was comparing it to the LS return. Still, an extra 1.5% can also add up to a six figure delta over the course of your career and retirement.
I work closely with Aviva and they will be moving everyone who is more than 15 years away from retirement into a ~95% equity fund over the next year. I think it will be one of the best default funds out there
> Its 5yr return according to trust net is 54.6% which beats vanguard lifestrategy 80 by some distance (41.1%) and is not too far behind Vanguard FTSE global all-cap (62.8%).
Not meaningful to compare its performance with these unless they have the same stocks-bonds allocation as your fund, and obviously they both can’t.
An asset class can out- or under-perform for a decade a time, so 5-year performance is not really meaningful.
You can invest in stocks that are listed anywhere in the world (well, it’s hard to buy individual stocks in emerging markets, but you can invest in funds that can buy them) so your benchmark is a world or all world index – that’s the average return of all the world’s stockmarkets weighted by market cap. You assess the performance of your investments by comparing it to the benchmark.
(Arguably your benchmark is some stocks-bonds composite, but you can return to that point later.)
You are guaranteed to achieve your benchmark if you invest in a tracker of a world index. Why do you think the allocation of your default will beat the world index?
If you don’t have compelling reasons and more investing knowledge than most people, you shouldn’t be trying to beat the benchmark – you should just buy a fund which is guaranteed to achieve it.
Watch Lars Kroijer’s [short video series](https://www.youtube.com/playlist?list=PLXy71rkGuCjXLg9N8zowwUpXCYfBcMJFK) and read his book or Tim Hale’s [*Smarter Investing*](https://www.amazon.co.uk/dp/1292444401).