WHY are my endowments underperforming?

dunstonh

Having recouped only our premiums by the maturity we also worry about the vehicle used for our private pension plans. It is suggested to pay in more and more but we don't want to be struggling to make these payments now for not much at the end. Should our spare money go into ISAs rather than pension pots?

ISAs and pensions have virtually identical investment options. So, you can hold the same fund in an ISA or a pension and get identical returns. The only difference is the tax and maturity process.

Whilst there are some poor quality investments out there and you could be on those, statistically, you are more likely to be on a bog standard balanced managed fund. Even they have been out performing cash over the medium to long term. As we dont know how you invest your pension pot, we cant really say. However, modern pensions do tend to be much better than many older ones. Although there are some very good old plans around. Especially if you are looking at pre 1988 ones. If you have concerns, then get a local IFA to do a pension analysis for you. They can compare the costs of the old one with new one and discuss the investments you use and the strategy and risk profile and make sure what you have fits you.

holly_hobby

Ah ... the old S226 !

H x

holly_hobby

Further to which ... I really have to agree with O4U's post on the utterly unnecessary personal comments from Macca re Duns. - which are both totally unacceptable and completely distasteful.

In response to which I will simply repeat what I have already said (and no its not on how WP bonsues are determined .. yawn !), but that we can only give you the facts from a professional and qualified view point, on the various constraints that have led to the on going low performance of pooled investments such as WP funds.

We can not make you accept them nor can we tell you something that isn't true .. you obviously have a steadfast mindset that the failure of LCEs are as a direct result of the industry's cohersion to defraud the consumer, that all advisers "were in on it", and that everyone made and continues to make bucket loads of cash off the back of your premums.

Well done ... you've cracked it .... we might as well get our hat and coat !

Hope this helps

Holly

macca789456

google ftse 100 historical graph and then tell me its lower now than it was a decade ago

dunstonh

The FTSE100 peaked in Dec 99 at 6950.
it is currently sitting at 5505

Do I need to tell you which is higher or are you able to work that out for yourself?

That is just the nominal value as well. You can almost double the loss if you factor to give you a real terms return.

macca789456

You said ten years ago not twelve or can't you count either A decade is still ten years last time i checked.

opinions4u

macca789456 wrote: »

You said ten years ago not twelve or can't you count either A decade is still ten years last time i checked.

I think it was my post that you were repsonding to.

I said "Take a look at the chart in the link below and then tell me if the FTSE is currently around 5,500 and was nudging/over 7,000 a decade or so ago." - I wasn't aiming to pick out two specific points in time, merely trying to demonstrate that there is a chunky period where that particular index was much higher than it is today. "A decade or so" perhaps should have read 12 years. Apologies if such terminology has confused you.

If, however, you want to go for closing prices over a precise decade, that's fine. The FTSE100 is about 5% higher than it was a decade ago. An annual return of 0.4% (approximately). Your recent bonus declarations look fairly sound in that context.

Go back 11 years, and the FTSE100 is now about 10% lower. Go back 12 years and my previously quoted figure of 20% becomes more appropriate.

10, 11 or 12 isn't the point I'm trying to make though. It's been a duff few years for making money in equities and you, me and many others have seen the outcome of that in our endowment returns.

But at least interest rates on the mortgage it was linked to have been significantly cheaper than forecast. The saving there is likely to be more than any perceived underperformance in endowment returns. I hope you used the money freed up by your cheaper mortgage payments sensibly.

EDIT: I'm fairly sure the FTSE100 topped 7,000 at the end of 1999, but closed for the day below that level. Could be wrong though.

zagfles

The FTSE is now considerably higher now than it's average value over the last 20 years. Also the FTSE value doesn't include dividends which are on top. So there's really no excuse for endowments to underperform so badly. Except for the rip-off charges - something like the entire first year or two's premiums go in commission.

When I was shopping around for mortagages, twice in the 1990's, every bank and financial advisor I saw tried to convince me to take out an endowment. Most lied, like "it is better for tax relief", "you're worse off after 5 years with a repayment", "the endowment definitely will pay off the mortgage with a nice lump sum as well". Luckily I was savvy enough to realise they were lying, and got a repayment mortgage both times.

dunstonh

The FTSE is now considerably higher now than it's average value over the last 20 years. Also the FTSE value doesn't include dividends which are on top. So there's really no excuse for endowments to underperform so badly. Except for the rip-off charges - something like the entire first year or two's premiums go in commission.

If you were 100% invested on day one then you would be right. However, that isnt how regular contributions work.

Most lied, like "it is better for tax relief"

It was until 1985. You got LAPR on contributions. During the MIRAS days it was as well.

you're worse off after 5 years with a repayment

That is a possible scenario and did well happen in some periods.

the endowment definitely will pay off the mortgage with a nice lump sum as well"

That is wrong. However, change one word "will" to "could" and add 20 odd years of memory retention and they could be right.

zagfles

dunstonh wrote: »

If you were 100% invested on day one then you would be right. However, that isnt how regular contributions work.

That's why I said "its average value over the last 20 years".

It was until 1985. You got LAPR on contributions. During the MIRAS days it was as well.

Like I said it was in the 1990's I was looking for my mortgages. And MIRAS did apply to repayments as well. So it was a lie. [/QUOTE]

That is a possible scenario and did well happen in some periods.

It was rubbish. The tactic two of them used was to draw a graph and imply if I moved after 5 years, with a repayment I would effecively have to start again and be back to 25 years. This was utter bull.

That is wrong. However, change one word "will" to "could" and add 20 odd years of memory retention and they could be right.

Quite a lot of wrong things become right if you change just one word. Like "10 years ago the FTSE was higher than now" is wrong. Change "higher" to "lower" and it's right!