Negative Return From Prudential Pension

merseymiser

Hi Folks,
I am a Newbie and this my first posting - be gentle with me !
I will be retiring in 2 years time. I have just received my annual report for my Private Pension with the Prudential. I have a "pot" of approx £45k. According to thre report my fund generated MINUS £147 during the last 12 months.I have enquired from the Prudential as to how much it would cost in penalty fees to opt-out of this fund and move to another. I was advised that it will cost about £900. My money is invested in a "with profits" (???????) account in the Managed (or in this case mis-managed) Fund.

Question 1 - Is it worth moving my "pot" to another (better) pension fund bearing in mind the penalty fee. Also, I was told from day one that I would receive a final bonus amount if the scheme were to run it's full course (till I'm 65). This amount is unspecified, indeed it is not guaranteed and is paid at their discretion. I suspect this is quoted just to keep you in the scheme to the end.
Question 2 - As regards this "final bonus", does anybody know if they are actually paying this bonus ?

Question 3 - Should I be complainig to the FSA as I feel my money has been been criminally mis-managed. In fact I am paying them fees to run my pension scheme. I would have been better putting my money in a Building Society if it wasn't tied up in a pension scheme.

Question 4 - I will obviously be making my decisions based on the replies I (hopefully) recieve from this posting. I understand that the experienced correspondents are unable to give me specific advice or recommendations as regards any new fund but perhaps I could be pointed in the right direction.
I hpoe I have got my financial terms correct so readers can understand this post.

dunstonh

.I have enquired from the Prudential as to how much it would cost in penalty fees to opt-out of this fund and move to another.

And how would that benefit you?

My money is invested in a "with profits" (???????) account in the Managed (or in this case mis-managed) Fund.

Why do you think it was mismanaged?

Is it worth moving my "pot" to another (better) pension fund bearing in mind the penalty fee.

Impossible for us to say as we dont know your charges and cannot compare them to modern alternatives. You also need to clarify what you mean by better pension.

Also, I was told from day one that I would receive a final bonus amount if the scheme were to run it's full course (till I'm 65). This amount is unspecified, indeed it is not guaranteed and is paid at their discretion. I suspect this is quoted just to keep you in the scheme to the end.

You suspect wrong. The with profits fund does generate a terminal bonus and it accrues on a daily basis. An IFA would be able to tell you what it is worth at this point. Pru may be willing to tell you as well.

Question 2 - As regards this "final bonus", does anybody know if they are actually paying this bonus ?

Of course they are.

Question 3 - Should I be complainig to the FSA as I feel my money has been been criminally mis-managed.

Only if you want to give them a laugh. Pru have not mismanaged it at all and using strong language when making incorrect assumptions can make you look silly. Of course, any response would be professional but it would be a polite explanation correcting your assumptions.

In fact I am paying them fees to run my pension scheme. I would have been better putting my money in a Building Society if it wasn't tied up in a pension scheme.

In that particular period the building society would have been a better option. However, the in years before the investment options would have been significantly better (the four years previous it grew at rates higher than you could get on cash) You choose the investment funds you have in the pension so its your responsibility not the Pru. If you dont like the fund, switch it. If you dont like the risk level switch the funds to one that suits. If you dont know how to then employ an IFA to do it.

You may or may not have heard but there is a credit crunch going on at the moment and concerns over inflation. This has caused the stockmarket to lose over 20% in value. Property has also dropped in value and fixed interest funds, whilst doing a bit better at the moment have come off a period of decline as well. The Pru managed fund is a mixture of those things so it would be daft to expect them to be able to turn in a profit when most of the areas it is invested in have gone down.

Switching to another pension provider isnt going to change a thing. If you go in Norwich Unions balanced managed fund or Scottish Widows managed fund then you are still going to get fluctuations. The amount it fluctuates will vary but you will still get negative periods. So you would be crying foul when that happens again.

All that said, the Pru managed fund is not a good quality fund. However, you need to understand investments much more before you start moving things around. You have a very negative opinion at the moment and a lot of that is not based on fact but on your misunderstanding. If you have the time to read up and learn about investments I suggest you do. If you dont then get an IFA to see you as they can teach you the basics as well as giving you a run down on the Pru pension.

merseymiser

I have enquired from the Prudential as to how much it would cost in penalty fees to opt-out of this fund and move to another. And how would that benefit you? - That's what I'm asking you.

Why do you think it was mismanaged? - Because it never made a bean in the period Feb 2007 to Feb 2008 !

You also need to clarify what you mean by better pension. - ???????

Question 2 -Of course they are. - There's no "of course" about it - they are not guaranteed - I will enquire.


there is a credit crunch going on at the moment and concerns over inflation - Tomy knowledge these are fairly recent circumstances, the economy had been performing well for some years, hence my negative opinion. If I understood investments I wouldn't be asking questions on this site.

As a newbie thanks for an informstive and heart-warming reply which tells me nothing except employ one of your brethen!

purch

Why do you think it was mismanaged?

There ought to be no reason why highly paid and skilled :rotfl: fund managers couldn't obtain a positive return from a 'With Profits' Fund over the last 12 months.

After all it isn't a long only large cap Equity Fund that can only invest in companies beginning with the letter C..............it has a hugely wide investment mandate and anyone with a bit of nous (ie. not a highly paid fund manager) should have been able to muster a decent return, plus as a 'With Profits' fund it should have used some of the excess profits held back from the good years to offset the bad year.

Unfortunately for the OP,that is the nature of the Financial Services industry. You pay huge fees to pay the wages of these twits, and the shiny brand new office blocks, plus their expensive lunches, and in return you get p*ss poor results.

Yes your pension is being mismanaged.

No you won't have anywhere to complain, cos they all scratch each others backs !!!!

the economy had been performing well for some years

Yes....and a 'With Profits' Fund is supposed to be designed to 'iron out' the swings in the market by holding back profit from good years to pump up the return in bad years. But, of course those profits made in the good years are somewhat diluted by the huge bonus's paid to the 'Highly Paid and Skilled Fund Managers' , and of course the dividends paid out to share holders.

You could of course ask the 'highly paid Fund Managers' to repay some of these huge bonus's to the Fund seeing as how they have c*cked it up last year, but then again you won't have much luck I'm afraid.

dunstonh

Why do you think it was mismanaged? - Because it never made a bean in the period Feb 2007 to Feb 2008 !

Thats not mismanagement. Thats to be expected in a period of negative returns.

there is a credit crunch going on at the moment and concerns over inflation - Tomy knowledge these are fairly recent circumstances, the economy had been performing well for some years, hence my negative opinion. If I understood investments I wouldn't be asking questions on this site.

Property started dropping in value from about June last year. Fixed interest funds have been on decline for a couple of years. Equities have been up and down since around October last year (now around 20% down).

As a newbie thanks for an informstive and heart-warming reply which tells me nothing except employ one of your brethen!

The problem is that you dont know about investments but are making assumptions. In which case your choice is either to learn yourself or get someone to do it for you (or do nothing).

There ought to be no reason why highly paid and skilled :rotfl: fund managers couldn't obtain a positive return from a 'With Profits' Fund over the last 12 months.

Purch, I think you will find the with profits fund has returned a profit over the last 12 months. The ones on my books certainly have (much to the surprise of some of the clients in them). The OP would have made a loss on the Pru managed fund (jack of all trades, master of none fund). Prus management on their with profits fund is very good. Strangely they cannot transfer those skills to their unit linked funds.

EdInvestor

merseymiser wrote: »

I will be retiring in 2 years time. I have just received my annual report for my Private Pension with the Prudential. I have a "pot" of approx £45k. I have enquired from the Prudential as to how much it would cost in penalty fees to opt-out of this fund and move to another. I was advised that it will cost about £900.

Question 1 - Is it worth moving my "pot" to another (better) pension fund bearing in mind the penalty fee.

If you want to stop any further losses (other than the penalty) you could move the money to a cash/moneymarket fund. Check what the rate of return is, net of charges, to find out how quickly you would recover the penalty charge.Also check if there is a charge to switch. You could switch a part of your fund to cash if you wanted to hedge your bets.If the Pru has no suitable cash fund you would need to transfer the whole pension elsewhere.

Question 2 - As regards this "final bonus", does anybody know if they are actually paying this bonus ?

The final bonus amount accumulates as you go along and will be a part of the total value of your fund, ie the 45k.The question is not,thus, will they pay it, but rather, will the accumulated amount rise or fall over the period until you retire? If the markets fall, the amount should go down.If they rise, it should go up. Crystal ball required.

Question 3 - Should I be complainig to the FSA as I feel my money has been been criminally mis-managed. In fact I am paying them fees to run my pension scheme. I would have been better putting my money in a Building Society if it wasn't tied up in a pension scheme.

No, you can't claim about investment performance.Only if you had been sold the pension on the basis that it was like a BS account and there was no risk of loss could you complain.

merseymiser

Edinvestor - Thank you for a CONSTRUCTIVE reply.

Judwin

I'm also in the Pru Private Pension, and in the With Profits. My intention is to move out of it sooner or later, but not yet. I'm trying to edumify myself on funds using my ISA limits first.

However - I'm not displeased with this years report. Admitedly my most recent report was dated Feb 2008 so is before the most recent turmoil, but the figures for the past 3 years aren't 'bad' - certainly a lot better than could be had from cash. I was expecting the 2007-08 to be almost flat due to the problems which started last October. For my plan the growth figures are :

Feb 05 - Feb 06 : +8.9%
Feb 06 - Feb 07 : +13.9%
Feb 07 - Feb 08 : +11.9%

So the Pru PPP WP might not be the best place, but it's a lot better than some.

IMHO

Cheers,
Judwin

Retired_I.F.A.

I doubt its that good. The only way to calculate the yield is to compare transfer values each year is that what you did?

EdInvestor

Indeed. The OP has a 900 pound MVA withdrawal penalty on his fund, you may wish to check how much is on yours.

jamesd

merseymiser, yes, you should expect the Prudential to pay out the bonus.