Once you have decided upon your ideal investment approach, in terms of how long you will invest for and what level of risk you are happy to accept, where do you invest?
There are a great many choices as to who you may choose as your fund manager. Indeed, Royal London offer you 30 fund managers and around 180 funds to choose from!
At our Member Meetings, we feel it is vital to your wealth to point out that keeping your management costs down is one of the key factors in deciding how your funds are invested.
Each external fund manager needs paying for the task. This means often paying out increased annual management charges of between 0.75% and even as high as 1.50%, in addition to the scheme AMC itself of 0.62%.
In summary, how one can most reliably obtain the optimum investment return for any given level of risk is either by choosing:
A) active fund management, taking advice on initial fund choices, with ongoing advice to regularly amend your investment fund holdings and the ideal asset mix each calendar quarter.
This has inherently high set-up costs, additional annual management and dealing costs (being generally known as “wealth management”), or…
B) asset allocation-based tracker strategies, with automatic investment spread across a pre-set – and regularly updated – asset mix (UK equities, overseas equities, commercial property, government bonds and corporate bonds), using index-tracker funds for all equity holdings.
These holdings represent your Portfolio, with automatic annual re-balancing to match the ideal asset mix for your remaining term to target retirement age. This has inherently low costs and no additional management or dealing costs at all.
The wealth management approach is suitable for those with relatively large sums to invest; I would suggest from our own service offerings that a minimum fund of £250,000 would be ideal as a start point.
The asset-allocation-driven, tracker strategy is an approach ideally suited to investors who are making regular contributions, even if some lump sums are invested alongside (say from other past pension schemes, assuming all total less than £250,000).
– Over periods of 10 years or more, individual fund managers rarely beat the returns of the index of the market in which they are invested (around only 33% have been shown to beat their chosen market.
Those that do, unfortunately, do not do so on a consistent basis – hence the need for Wealth Management if taking an active approach to choosing fund managers).
– The discounted Annual Management Charges (AMCs) in your Royal London GPP Scheme at Homeprotect make the asset allocation–driven, tracker approach even more compelling.
This is because your AMC is just 0.62%, lower in cost than an ordinary Personal Pension and considerably lower in cost than any wealth management strategy that could be used within the GPP Scheme.
Thus, using the asset-allocation-driven Governed Portfolio Range, offered by your Homeprotect GPP Scheme, gives you an ideal investment vehicle to match your chosen level of risk. The portfolios are assessed and benchmarked independently, ensuring (as far as is practicable) the most appropriate optimum investment mix to suit your own circumstances.
The full comprehensive guide to your investment choices with Royal London are detailed in the booklet at the bottom of this page. We have also attached the recommended Governed Portfolio Lifestyle Tracker Strategies.
To find the latest Royal London Governed Portfolio Lifestyle Tracker Factsheets, please follow the below instructions:
