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Paul, 47

Paul is fairly confident he knows what he's doing with his pension, but why stop there? With hopes of retiring somewhere a little sunnier than GB, he's keen to learn a few more tricks to make sure his pension is truly the best deal available.

Confidence level: 7 out of 10

"I like to think I know what I'm doing. I've invested £120,000 in my Aviva pension, in the BlackRock Global Equity Index Tracker XE fund, and pay attention to its performance over time. I tend to use tools from, and assuming I'm interpreting the data correctly, it seems to have delivered returns of 7.49% over the past 5 years.

"I don't anticipate managing my pension myself anytime soon, and have at least 15 years until retirement, so I'm doing okay. But I would still like to understand more about my pension provider and whether there's anything I can do to essentially supercharge what I've saved."

My pension planning question...

"I'm trying to figure out if my private pension is in good hands or whether I should be looking to move it to another provider. I have no idea if my current level of performance versus the charges is comparable across the market or how I go about benchmarking it. I don't anticipate managing my pension myself anytime soon, so I'm just trying to understand if Aviva are doing OK compared to others?"

Answer by Gregory Deer, Paradigm Norton

Senior Financial Planner - Meet the experts

Without full details of the client circumstances, the following information should be treated as a generic guide and not advice.

Thank you for your question. Many people are in the same position as you; trying to make sense of their pension.

1. Your pension provider

Aviva are a FTSE 100 listed company providing insurance, investments and pensions in the UK and overseas. They are the number one provider of UK workplace pensions as measured by ‘Assets Under Administration’ and are rated as financially stable by all leading credit ratings agencies. Overall, it’s fair to say your pension is in ‘good hands’ from a financial security and stability perspective.

As you are 15 years away from retirement, the key factor to consider is the plan charges. If the only charge on the plan is the Annual Management Charge of 0.40%, this is very competitive and finding a provider with an ‘all-in’ lower cost would only provide a very marginal saving.

As you near retirement, the flexibility provided by Aviva when taking benefits will be important. You may need to change pension to give you the options you need when taking an income and could take professional advice from a Chartered Financial Planner at this time to help.

2. Your selected investment fund

The fund you mentioned, 'Aviva Pension BlackRock (60:40) Global Equity Index Tracker XE’, is approximately 60% allocated to companies listed in the UK and 40% allocated to companies listed elsewhere; you can find further information on the fund using the Factsheet. As the fund is an ‘index tracker’ fund, it is likely to perform broadly in line with index benchmarks.

The cumulative return over 5 years to 30/09/2020 is 70.66%, so the performance figure of 7.49% quoted from Morningstar will be an average annualised return. The returns have been well above inflation over the period but it is important to note past performance is not a guide to future returns.

When compared to other 100% global equity pension funds, the fund is in the 4th quartile for performance. This is due to the allocation in UK equities which have underperformed global equities during the pandemic. You may wish to consider moving to a more globally diversified fund available in your pension to reduce the concentration risk in the UK.

The range of annual returns from a higher risk fund can be large. As you have 15 years to retirement, you may be able to afford the short term fluctuations now. However, as you near retirement you may want to consider reducing the risk of your investments, so you do not draw from your pension when values are lower. If equity markets are down at retirement, this could reduce the income you can afford to take.

Some pension providers will automatically reduce the investment risk of your pension as you near your retirement date using a ‘lifestyle’ option. You should check if this is active on your pension and ensure your retirement date with the scheme is correct if it is.

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