Work Pension Looks Crap - FriendsLife

nellis10

All posting this from my Mortgage Free Diary on recommendation from a fine contributor:

I'm 46 and a 40% tax payer.

I've just looked at my current work FriendsLife "Flexible Retirement Account" pension - I have 2 years contribution in it totalling about £10K.

The pension seems to be spread across 5 different investments funds, only 2 of which have a growth rate in excess of 3% and the rest 1 & 2% only!!!

The 3%+ are My Future Growth and My Future Plus Growth.
I'm calling them tomorrow to try and get online access to see if I can change my % contribution and the funds that they are allocated to.

I am going to up the Growth and Growth plus, and I'm going to leave the My Future Plus Annuity (1% growth rate). The other 2 are My Future Consolidation and My future plus Consolidation (both 2% growth rate) which I will move out of 1 and leave the other.

Is there anything you can do once you are in a work pension to ensure that if the pension is crap you can still make gains on it? Or am I stuck with it?

I pay £110 into my old pension (Aegon) each month to keep it going and there is about 96K in it.

What's the best way to maximise the potential of a work pension?

Many thanks in advance!

dunstonh

The pension seems to be spread across 5 different investments funds, only 2 of which have a growth rate in excess of 3% and the rest 1 & 2% only!!!

Actual growth rates or assumed growth rates (such as those in the projection statement)?

Is there anything you can do once you are in a work pension to ensure that if the pension is crap you can still make gains on it? Or am I stuck with it?

It isnt crap. It is misunderstanding on your part.

What's the best way to maximise the potential of a work pension?

1 - understand it
2 - use appropriate investment funds
3 - read projections/statements correctly.

EdSwippet

nellis10 wrote: »

Is there anything you can do once you are in a work pension to ensure that if the pension is crap you can still make gains on it? Or am I stuck with it?

Do you understand the concept of 'asset allocation', and in particular the differences in behaviour and return between asset classes such as equities (stocks) and gilts (bonds)?

The Future Growth funds are predominantly equity funds, and equities have done well since the financial crisis in 2008, but tend to be highly volatile. The Consolidation funds are primarily bond funds, which are slow and steady performers that provide ballast against the high volatility of equities. The younger you are, the larger equity to bond ratio you can (usually) tolerate, because you have longer to recover from market falls.

I am unsure where you get your 1% and 2% growth numbers from. FT funds shows Consolidation funds gained between 20% and 30% in the three years to Dec 2016. Around 30% to 40% for Future Growth funds. The Annuity fund is more stolid, but that's because it's designed to maintain value more than to grow it (there is a hint in its name!).

nellis10

dunstonh wrote: »

Actual growth rates or assumed growth rates (such as those in the projection statement)?


It isnt crap. It is misunderstanding on your part.



1 - understand it
2 - use appropriate investment funds
3 - read projections/statements correctly.

Yes, I am utterly embarrassed to confess that these are assumed growth rates and my ignorance of pensions is showing through.

I apologise to all, but I am trying to learn and not panic at the same time! :o:o:o

edinburgher

Ah - projected figures could explain the disconnect - I looked and none of the funds mentioned seemed to be doing as badly over 2 years as suggested by OP? :think:

For someone trying to grow their income in retirement, there seems to be a lot of fixed interest and some odd choices (posted comments in your MFW thread).

nellis10

EdSwippet wrote: »

Do you understand the concept of 'asset allocation', and in particular the differences in behaviour and return between asset classes such as equities (stocks) and gilts (bonds)?

The Future Growth funds are predominantly equity funds, and equities have done well since the financial crisis in 2008, but tend to be highly volatile. The Consolidation funds are primarily bond funds, which are slow and steady performers that provide ballast against the high volatility of equities. The younger you are, the larger equity to bond ratio you can (usually) tolerate, because you have longer to recover from market falls.

I am unsure where you get your 1% and 2% growth numbers from. FT funds shows Consolidation funds gained between 20% and 30% in the three years to Dec 2016. Around 30% to 40% for Future Growth funds. The Annuity fund is more stolid, but that's because it's designed to maintain value more than to grow it (there is a hint in its name!).

Sheer utter ignorance on my part I'm afraid. I had read the assumed growth as realised growth and panicked!!

I've done my calcs of value to date vs contributions to date (less fees etc) and the ratio is 1.2:1

I'm so sorry folks, I'm a complete dunderhead and embarrassed now! :o:o:o

edinburgher

Better to misunderstand and ask than just write the whole thing off

nellis10

edinburgher wrote: »

Ah - projected figures could explain the disconnect - I looked and none of the funds mentioned seemed to be doing as badly over 2 years as suggested by OP? :think:

For someone trying to grow their income in retirement, there seems to be a lot of fixed interest and some odd choices (posted comments in your MFW thread).

I'm trying to get online set up tomorrow so I can go through it again.
The plan is to have a ratio of growth vs steady ship.
These are the default funds I signed up to and I've never really understood what I should be doing.
I'm about 20 years from retirement - 15 if I start doing this all properly and getting my mix of risk correct.

BUT I am passionate about learning this properly and understanding a lot more.

You guys are so patient with us numpties and I'm grateful for the replies, even if it's to tell me I'm being a wally!! ;)

dunstonh

nellis10 wrote: »

Yes, I am utterly embarrassed to confess that these are assumed growth rates and my ignorance of pensions is showing through.

I apologise to all, but I am trying to learn and not panic at the same time! :o:o:o

You are not the first. You wont be the last. Assumptions have moved to lower than expected from being higher than expected in the past.

nellis10

dunstonh wrote: »

You are not the first. You wont be the last. Assumptions have moved to lower expected from being higher than expected in the past.

Thank you for your patience!

I'm intending to up my pension from 5% to 20% hence my panic regarding the growth rates, I didn't want to make the mistake of paying into something that wasn't looking good, instead of paying off my mortgage 10 years early!

I've done some compounding sums (I do love an excel spreadsheet!!) and even a modest 5% growth with upped pension from this year will bring in an OK pension for me.

PeacefulWaters

I think it's brilliant that you've raised a concern, learned from the responses and want to do more to plan your retirement.

No need for embarrassment.