Trapped Pension Money

PurpleSpud

Hi,

I paid into a small private pension pot for a few years, it's a small amount just over £8,000.
The investment wasn't growing well and after receving the latest report the Company has actually lost money overall. It is somewhat strange that with all their expertise and resources that I would have been better off placing the money into a draw
However, I asked them to freeze the pension so they didn't lose more money, they have done this but have stated they will continue to take fees for 'managing' the account which over time could reduce the money to almost nothing. Whilst I have learnt my lesson with pensions (I know see why so many people use property fof their retirement) the money is in effect dying. I could move the money to another pension but there is no guarantee this will not occur. Have I effectively simply lost my money?

greenglide

You have probably lost out by moving the funds out of an stock market linked investment into cash, depending on when you actually did that.

Stock markets have done relatively well over the last few weeks so you would expect the pension to grow, but you have made sure this wont happen.

We need to know the name of the pension supplier and the name of the pension product and how it was invested before you transferred it to cash.

Turning your back on pensions for no good reason will guarantee you a poor retirement.

Do you currently have a company pension scheme? Are you a member?

dunstonh

Whilst I have learnt my lesson with pensions (I know see why so many people use property fof their retirement) the money is in effect dying.

Ok. What you really mean is that you dont have a clue about pensions (which is fair enough) but you have jumped to incorrect conclusions.

I could move the money to another pension but there is no guarantee this will not occur. Have I effectively simply lost my money

Pensions are a just a container for investments. You have over 30,000 investment options available. Are you saying that not one of those options is suitable for you?

Investments zig zag in value. They also get an income (which is reinvested). Over time, those zig zag movements head upwards. However, you could have a growth year, a negative year or a nothing year. You dont worry when you get a negative as you know these will happen. Equally, you dont get carried away when there is a positive year. These all need to be averaged out.

Since 2007, we have had mostly growth years with a couple of small negative or nothing years. Pulling out because of one negative period is just silly. Especially if you pulled out after the drop (and missed most of the recovery that followed).

PurpleSpud

Hi, Thanks for the replies. Regarding changing the product, the product hasn't been changed since the start. It is a Legal & General Equity Index Fund. Whilst I understand there may be small loss periods, it seems to regularly lose money. Clearly a 5% interest in a savings account is easily outperforming the fund. I feel that whilst there are some advantages to putting the money into a pension there is also more risk that I would like to have.
Regarding a Company pension, I don't work for a Company so don't currently have that option.

I suppose what I am saying is that the money would be better used almost anywhere else for me personally but as I understand it the money needs to remain within a pension.

Thank you for the replies so far.

atush

Which legal and general equity index fund?

Which index does it track?

Equities have outperformed cash (and property) over the long term ie decades.

People use property (which is highly taxed on both gains and income) because they dont undertand pensions or investing.

dunstonh

Whilst I understand there may be small loss periods, it seems to regularly lose money.

no it doesnt. it is also capable of large losses, not small ones as its a high risk fund when held by itself (its not meant to be held as a single fund).

Clearly a 5% interest in a savings account is easily outperforming the fund.

Is it?

The fund lost 0.25% in 2015. It made 1.51% in 2014. 18.89% in 2013, 12.50% in 2012 and -4.8% in 2011. So, it has not regularly made losses. In that 5 year period it has a nothing period, a negative period and several growth periods.

Cumulatively, it made 29.5% over 5 years. Beating the 5% in cash.

its not a good fund. It is below benchmark. Its not designed to be held the way you have it. You need to change the investments and be a bit more objective in what you are looking at. You cannot ignore the 18% growth years and only look at the less frequent and small negative years.

Jerben

I hold an L&G equity index fund. (Please note there are many different versions).
The fund I hold is up 41% over the last 5 years. Not too bad!
Yes, there are some years when the fund is down, but pensions are a long term investment and you may be making a knee jerk decision without understanding the full facts.

mark5

PurpleSpud wrote: »

Hi,

I paid into a small private pension pot for a few years, it's a small amount just over £8,000.
The investment wasn't growing well and after receving the latest report the Company has actually lost money overall. It is somewhat strange that with all their expertise and resources that I would have been better off placing the money into a draw
However, I asked them to freeze the pension so they didn't lose more money, they have done this but have stated they will continue to take fees for 'managing' the account which over time could reduce the money to almost nothing. Whilst I have learnt my lesson with pensions (I know see why so many people use property fof their retirement) the money is in effect dying. I could move the money to another pension but there is no guarantee this will not occur. Have I effectively simply lost my money?

If you invested in property and house prices dropped the first few years would you then sell the property?

PurpleSpud

Is it?

The fund lost 0.25% in 2015. It made 1.51% in 2014. 18.89% in 2013, 12.50% in 2012 and -4.8% in 2014. So, it has not regularly made losses. In that 5 year period it has a nothing period, a negative period and several growth periods.

Cumulatively, it made 29.5% over 5 years. Beating the 5% in cash.

its not a good fund. It is below benchmark. Its not designed to be held the way you have it. You need to change the investments and be a bit more objective in what you are looking at. You cannot ignore the 18% growth years and only look at the less frequent and small negative years.

Thank you for putting it into perspective. I must apologise if my tone was off, I had a pretty emotive response to the report and I apologise for that. I will look into changing the fund and also maybe look at how much I am putting in etc. I appreciate your help (and everyone else's). I became a little daunted by just how much I would need to invest but I hadn't fully taken into my partner's earnings, my state pension and being mortgage-free when retired. Thank you

atush

Mostly, you should never use just one fund for your pension. Diversification is key in almost all situations.

Unless, you either hold a lifestyle fund such as the Vanguard series where you invest in both equities and other assets like Bonds, or a Global tracker (not a UK only index fund). These have a large amount of diversification built into them.