Pension worry

sargan

My various pension assets have certainly taken a step back in last few years ... admit there was some clime, but still not back to where the pot was.

Concerned to receive a letter form Standard Life ... they have made a 'Market Value Adjustment' taking value of my fund down. (UK Real Estate fund)

Not come across this is 30 yrs of looking at my pension ... just took a significant hit.
Plus they have locked fine so I can't transfer out.

Anybody else come across this, and what should I do ?

kidmugsy

sargan wrote: »

Concerned to receive a letter form Standard Life ... they have made a 'Market Value Adjustment'

Not come across this is 30 yrs of looking at my pension

Then you've been unusually lucky. It's happened quite often with, for example, With Profits pensions.

As for "taking value of my fund down (UK Real Estate fund)"

(i) Wait.

(ii) Don't ever again be so rash again as to invest in an open-ended property fund.

LHW99

A Market Value Adjustment implies that perhaps this is a with profits pension. There will usually be a date (generally selected at the start, so 60 or 65) when this isn't applied.
The change in value will also be a prediction, and has possibly changed due to changes in the assumptions used to make it - also if it is with profits, they tend to be inflexible so not being able to transfer out early is not surprising.

dunstonh

Not come across this is 30 yrs of looking at my pension ... just took a significant hit.

1 - They have been applied at least 3 times in the last 15 years.
2 - your pension wont have taken a hit because of the MVR. That only gets applied if you transfer the fund out or commence retirement benefits at an earlier age than the scheme age.

Anybody else come across this, and what should I do ?

Nothing you can do. Its quite normal.

However, reading your post again, the term market value adjustment applies to with profits funds. However, you say its the UK Real Estate fund. This suggests a mixing up of terminology.

So, assuming it is not a market value adjustment but a suspension on the property fund, then I revise my response as follows:
1 - Property fund suspensions have happened at least 3 times in the last 15 years.
2 - The fund is suspended from trade and there is nothing you can do it about until the suspension is lifted.

Most property funds are already lifting their suspensions and/or moving their pricing back.

sargan

"Don't be so rash"

Not quite rash - followed the advice and use an FSA to manage my investments, this was one of the recommended companies & funds. I'm just thankful most of the other funds are US property and Gilts these are performing way above expectation.

The bit I find hard to understand is value of fund goes up & down based on performance - accept that. They are applying this 5% down valuation on top of whatever the fund performance is.

"wait"

Can't do much else fund changes are blocked.

dunstonh

Not quite rash - followed the advice and use an FSA to manage my investments, this was one of the recommended companies & funds. I'm just thankful most of the other funds are US property and Gilts these are performing way above expectation.

FSA? Food standards agency?

The bit I find hard to understand is value of fund goes up & down based on performance - accept that. They are applying this 5% down valuation on top of whatever the fund performance is.

it is to ensure that those creating the liquidity issues are the ones that pay for it.

Most property fund investors are very long term. Physical property takes time to sell and the last thing you want is a fire sale. So, when unexpected withdrawals draw all the liquidity out of the fund, there is no money to pay the withdrawals. So, they have to sell a property. That is an unplanned action and it may not be the best time to do it. So, a penalty is effectively applied to the unit price so those that do withdraw suffer. Once liquidity is returned, the unit price will remove that penalty and long term investors remain protected.

sargan

OK .. typo I meant IFSA

AnotherJoe

sargan wrote: »

The bit I find hard to understand is value of fund goes up & down based on performance - accept that. They are applying this 5% down valuation on top of whatever the fund performance is.

They are doing that to protect investors from the consequences of their own rashness and also others rashness. Valuing property funds which directly hold property is usually a slow process. Llets say the fund owns 100 properties or shares in them. These will be things like retail shopping centres, big office blocks and the like. They dont vary in price every day, and theres a little bit of cash floating around so that if soemone wishes to buy or sell that can be catered for by that cash float.

If a whole bunch of [STRIKE]lemmings[/STRIKE] investors suddenly want to sell, they haven't got the cash, so they would have to sell one of those shopping centers or an office block. Thats not something you can do in five minutes except at a huge discount so to protect themselves needing to sell at very short notice and make a huge loss they artificially lower the price of the fund to discourage [STRIKE]lemmings[/STRIKE] investors who buy and sell at the drop of a newspaper scare headline, which would otherwise force them to sell properties at knockdown rates that a few weeks later will likely be valued at the same as they were before the panic.

sargan

Just to help my understanding then ... if Property is 'slow process' why do property funds usually have such high growth ... or am I missing something.

dunstonh

OK .. typo I meant IFSA

IFA or FA are the two types in the UK.

if Property is 'slow process' why do property funds usually have such high growth ... or am I missing something.

They dont have high growth. They tend to be relatively steady most of the time with periodic dips when they lower the unit price and jumps when they return the unit price.

Historically, they underperform equities.

AnotherJoe

sargan wrote: »

Just to help my understanding then ... if Property is 'slow process' why do property funds usually have such high growth ... or am I missing something.

You're mixing up two things. Property could appreciate say 20% in one year. so could shares in say BP. But the process of rise or decline tends to be more steady state slow process.

However property over a year is likely to appreciate at a fairly steady rate whereas BP shares will jump about all over the place even if the general trend is upwards. Think about your house. Its not worth £100k one day, £102K the next week, £95K the week after £90k the following week and £105k the week after. But no one would be surprised if (relatively speaking) that rate of change happened to BP (or any other companies) shares.