Diminishing returns on a private pension

83705628

Deleted_User said:

coyrls said:

I have noticed when people are comparing pension performance they tend to discount the contributions they have made.  Many posters talking about the recovery of their pensions seem to include their contributions made during the recovery as part of the recovery of their pensions.  You are comparing a pension where you continued to make contributions to one where you are no longer making contributions.  All other things being equal the "performance" of the pension to which you are making contributions will always exceed the one to which you are not making contributions.

I look at money-weighted and time-weighted returns. Year to date return is around zero, which means we are back to Jan 1st. Most diversified portfolios will be showing similar performance - 

/
Another feature of Vanguard is they have a performance section of the website that shows you your asset/money weighted rate of return.

83705628

Deleted_User said:

Prism said:

coyrls said:

Prism said:

LucyTheWestie said:

Prism said:

You should first get access to your private pension online to see what it is invested in. It is your responsibility to select the investments rather than just let decrease in value. If you can't get online access to it then maybe consider transferring to another provider that does. I needed to do this for a few of my older plans. 
There is no way that it should be losing money to be honest. As a comparision my pension has been increasing by over 13% per year in recent times but my mortage is only 1.4%. 

Really? Does this include payments by yourself or employer?  What was the % increase over the last 12 months without including what you or your employer pay into it?    

June to June not including any contributions is 10%.

I would say that was exceptional and not typical of the last 12 months' performance for most people.

The FTSE World Index which quite a few trackers follow is up about 6% over the same period. Not much in it.

This is showing 3.5%. 

https://markets.businessinsider.com/index/ftse-aworld

The difference may have happened in between these comments being posted or the 6% may be the total return (dividend yield is about 2.5% atm, 3.5+2.5=6, sounds about right)

Prism

Deleted_User said:

Prism said:

coyrls said:

Prism said:

LucyTheWestie said:

Prism said:

You should first get access to your private pension online to see what it is invested in. It is your responsibility to select the investments rather than just let decrease in value. If you can't get online access to it then maybe consider transferring to another provider that does. I needed to do this for a few of my older plans. 
There is no way that it should be losing money to be honest. As a comparision my pension has been increasing by over 13% per year in recent times but my mortage is only 1.4%. 

Really? Does this include payments by yourself or employer?  What was the % increase over the last 12 months without including what you or your employer pay into it?    

June to June not including any contributions is 10%.

I would say that was exceptional and not typical of the last 12 months' performance for most people.

The FTSE World Index which quite a few trackers follow is up about 6% over the same period. Not much in it.

This is showing 3.5%. 

https://markets.businessinsider.com/index/ftse-aworld

I just grabbed it from Trustnet which does include dividends reinvested. 30th June - 30th June as thats all I had stats for

Prism

tcallaghan93 said:

Deleted_User said:

coyrls said:

I have noticed when people are comparing pension performance they tend to discount the contributions they have made.  Many posters talking about the recovery of their pensions seem to include their contributions made during the recovery as part of the recovery of their pensions.  You are comparing a pension where you continued to make contributions to one where you are no longer making contributions.  All other things being equal the "performance" of the pension to which you are making contributions will always exceed the one to which you are not making contributions.

I look at money-weighted and time-weighted returns. Year to date return is around zero, which means we are back to Jan 1st. Most diversified portfolios will be showing similar performance - 

/
Another feature of Vanguard is they have a performance section of the website that shows you your asset/money weighted rate of return.

We got some quite worried people who had started their investments with Vanguard late last year and during this years crash the annualized figure was quite scary. 

[Deleted User]

Prism said:

Deleted_User said:

Prism said:

coyrls said:

Prism said:

LucyTheWestie said:

Prism said:

You should first get access to your private pension online to see what it is invested in. It is your responsibility to select the investments rather than just let decrease in value. If you can't get online access to it then maybe consider transferring to another provider that does. I needed to do this for a few of my older plans. 
There is no way that it should be losing money to be honest. As a comparision my pension has been increasing by over 13% per year in recent times but my mortage is only 1.4%. 

Really? Does this include payments by yourself or employer?  What was the % increase over the last 12 months without including what you or your employer pay into it?    

June to June not including any contributions is 10%.

I would say that was exceptional and not typical of the last 12 months' performance for most people.

The FTSE World Index which quite a few trackers follow is up about 6% over the same period. Not much in it.

This is showing 3.5%. 

https://markets.businessinsider.com/index/ftse-aworld

I just grabbed it from Trustnet which does include dividends reinvested. 30th June - 30th June as thats all I had stats for

The difference might be due to you counting in GBP. In USD total return was around 2% (same period) https://americas.vanguard.com/institutional/mvc/detail/etf/overview?portId=9679&assetCode=EQUITY#%23overview

Prism

Deleted_User said:

Prism said:

Deleted_User said:

Prism said:

coyrls said:

Prism said:

LucyTheWestie said:

Prism said:

You should first get access to your private pension online to see what it is invested in. It is your responsibility to select the investments rather than just let decrease in value. If you can't get online access to it then maybe consider transferring to another provider that does. I needed to do this for a few of my older plans. 
There is no way that it should be losing money to be honest. As a comparision my pension has been increasing by over 13% per year in recent times but my mortage is only 1.4%. 

Really? Does this include payments by yourself or employer?  What was the % increase over the last 12 months without including what you or your employer pay into it?    

June to June not including any contributions is 10%.

I would say that was exceptional and not typical of the last 12 months' performance for most people.

The FTSE World Index which quite a few trackers follow is up about 6% over the same period. Not much in it.

This is showing 3.5%. 

https://markets.businessinsider.com/index/ftse-aworld

I just grabbed it from Trustnet which does include dividends reinvested. 30th June - 30th June as thats all I had stats for

The difference might be due to you counting in GBP. In USD total return was around 2% (same period) https://americas.vanguard.com/institutional/mvc/detail/etf/overview?portId=9679&assetCode=EQUITY#%23overview

Yes likely. I was comparing to my actual return which is in GBP.

LucyTheWestie

Deleted_User said:

I was always taught to pay off my debts first, so should I pay off my mortgage with the proceeds from my personal pension pot? 

“You were taught incorrectly. Or possibly misunderstood.    You should certainly clear short term expensive debts before investing.  However, long term cheap debts that cost less in interest than investment returns “

Wow. That is a very strong and confident statement about the future. The more certain someone is about the future, the worse the advice. In reality we do not know future investment returns. 

And while in the long term stocks are likely to do well, a 55 year old with a significant debt is exposing himself to significant risks. 

Individual circumstances vary, and incurring lots of tax wouldnt be smart but the general advice is:
- borrow when you are young
- get rid of the debt and make use of Fixed Income as you get closer to retirement

I agree with what you say.
I am well grounded - I am not looking at spending my retirement funds now - in fact, I wish to protect and build on them.  
Where is the post Trump/Covid/Brexit world going to take us?   Back to the 1930's?  Stock Market crashes, UK Plc with huge tax debt and so on.
The key to the question is how much risk to take.
No mortgage... that sounds good if jobs are at risk.  No need to pay mortgage protection.  No fear or returning to the interest rates of the 1990s.   A big chunk of money to re-invest each month - maximising my work pension. Money that can be saved in tax efficient ISAs,  government bonds and so on.   There is a question on how much tax I will pay.   Am I going to pay it now or do I end up paying it when I stop work in 12 years time? 
I would love to see someone to work the numbers!

Thrugelmir

What's the likelihood of you remaining in employment over the next 12 years? For many the change can be fast and unexpected. 

dunstonh

Where is the post Trump/Covid/Brexit world going to take us?

Historically, short term events only affect the short term and not the long term.

Brexit has been good for most investors due to fall in Sterling.  Trump has been good the US stockmarket.   Covid is an in progress issue but history tells us that these things come and go and we adapt.

Stock Market crashes, UK Plc with huge tax debt and so on.

The UK has had higher debt in the past (relative)

No mortgage... that sounds good if jobs are at risk.  No need to pay mortgage protection.  No fear or returning to the interest rates of the 1990s. 

Interest rates rise when countries need to control money supply.    Typically to reign in spending to slow down growth to reduce inflation.      What is more likely is that inflation will be allowed to increase to a controlled higher level which will reduce government debt in real terms.   Both the US and the UK have used this method in the past.   However, if higher interest rates were to filter through, then you could always draw the money then. 

Money that can be saved in tax efficient ISAs,  government bonds and so on. 

Pension is more tax-efficient than ISAs.  Gilts are not a tax wrapper.   Gilts can be held in an ISA or pension or unwrapped or directly (no that you would likely hold them directly).   

Am I going to pay it now or do I end up paying it when I stop work in 12 years time?

Pay it now and you suffer 30% tax.  In retirement, if you are a basic rate taxpayer then you are looking at 15% tax.

Is it really worth paying 15% of your money to reduce a debt that is likely costing you are around 2% a year.     And missing out on around 5% a year in growth on average?  Even if you think that there is going to be zero growth over the next 7 years, you would still be better holding the money in the pension.

LucyTheWestie

Thrugelmir said:

What's the likelihood of you remaining in employment over the next 12 years? For many the change can be fast and unexpected. 

I agree with this - from experience I know too many people who did not finish their working lives the way they expected.   The phrase, "..now that I can afford to do anything I want, I don't have the health to do it." springs to mind.
Being mortgage free would reduce the stress.   I have worked continuously since I was 18.  It makes me a rare beast!