Pension Performance - Scottish Widows Pension Portfolio One

Willdabeast

Hi,

I signed up to my company pension scheme about 4 years ago and as I was only in my late 20's, I went for the Scottish Widows Pension Portfolio One approach, this was classed as adventurous.

Having looked at the performance and seen online ratings and story's about the fund, it doesn't appear to be great, albeit from somebody who doesn't know a great deal about investing.

There is the option to choose upto 10 funds instead of their portfolio and my question was did you think it's worth paying an IFA to choose a portfolio for me, based on my appetite for risk and goals, and the better performance likely out ways the costs of the advice?

Its obviously a very big decision for me and I didn't want to just be throwing money at something that's not going to work for me. I also understand 4 years isn't a long period in investing terms, but I always hear on this site that early performance is key to a pension pot.

Any thoughts would be appreciated.

Thanks

peterg1965

My view, you can afford to be adventurous and on the higher side of medium risk in your portfolio selection if you are early 30's and have some way to go 20/30 years + before retiring. The last four years have been quite good generally for investment returns, although the last year has been more challenging, that said your portfolio should be reflecting this and I would expect a reasonable selection of mainstream funds to have increased in value.

A few questions, how big is your portfolio , how many funds and are you still contributing to it? I wonder if you are in a lifestyle type portfolio with SW.

Willdabeast

That was my thoughts as well peterg but the returns haven't been the same, I have based it on the following - http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=QGF91&univ=P&pagetype=performance

My portfolio is only just under £30K and I am now contributing more seriously.

I'm pretty sure it was a lifestyle find, as I carried out a questionnaire for them to match me with a fund.

What's your views on the performance?

Thanks

bigadaj

Life styling will be irrelevant at your age, that fund is almost wholly in equities, worldwide exposure and less in the uk than many British investors would have, which is probably a good thing.

No point going to an ifa with your sums, what are the charges through your pension and what are those of the alternative fund.

I don't see a lot wrong with that fund, seems to bounce along around the average for its sector, probably worth you doing some reading on investment which will pay dividends, monevator website and Tim hales smarting investing are often quoted and good starts though both have a passive bias so won't be pushing active funds which you might prefer.

Willdabeast

bigadaj - the charges are 0.430% per annum,

Cumulative performance over 5 years is 28%. Is 5% a year good for a pension, it's their adventurous portfolio so I maybe wrongly assumed this would be higher? After management charges and inflation it dosen't seem that great...

Appreciate the advice on an IFA not being worth the expense. I just wanted some advise off somebody with knowledge that I wasn't throwing my money at something that won't perform well for me over time.

Thanks

bigadaj

Charges are reasonable, there are cheaper but not by a lot.

Would be worthwhile you doing some reading, monevator.com and Tim hales book smarter investing would be a decent start, they are both passive biased so you might need to consider your own view on whether active managers can outperform.

Modern pensions are just made up of funds, so don't really differ from isas or other forms of investment, do some reading and then comeback here if you want some more opinion and views.

bowlhead99

Adventurous means there will be more equities (things that grow but can be volatile) than things that offer a fixed return and protection from downside shocks. It doesn't mean that any particular four year period will produce positive results. Think of it as an adventure! You get up and down and sideways from time to time.

Whether you self-select 10 high-equities funds or you let the manager manage it, you should probably just budget for "inflation plus a few percent" each year. You have certainly beaten inflation if you got 5% annualised. And beating inflation, plus free money from the employer and the tax man, is the way you'll ultimately be able to afford to put x% of your average lifetime salary into a pension for a few decades and later draw out more than x% of your average lifetime salary, for a few more decades. But adventurous certainly doesn't get you 10% a year. Sometimes it might get 20%, sometimes it might get -30%!

Some people will have potentially seen on their last annual pension statement that what they had at the end of the year is less than what they had at the start plus what they and their employer contributed. Others will have been pleasantly surprised that the whole thing grew despite hearing stories all the time on TV that markets are falling. It depends exactly what you held and when you made your contributions of how much. At the moment while you are young, a large proportion of your funds increase in value will come from new contributions. Once you have 40 years' money in there, the gain or loss from year to year might dwarf what you are paying in.

To fix a misconception, if your return is 5% you won't need to worry about losing half a percent in fees because they will be included in the unit price. If you're looking at your pension valuation to calculate the 5%, it's already been taken off. If you're looking at a performance chart, it's already been taken off to produce the net total return numbers which they then draw on a graph. Generally the only fees you worry about are ones which you have to pay manually to a pension provider (eg a DIY SIPP). With your works pension it will be taken from the funds assets each day or month or quarter.