Pension Performance & Charges Questions

T3C_UK

Good morning everyone and looking forward to getting some really useful help and advice from all the great members on this site. I've spent some time just browsing for answers on here last night and was overwhelmed by how helpful people are. Didn't find quite what I looking for so hence my following questions:

1: Both my wife and myself received our annual pension statement from Royal London which we are both guilty of just quickly glancing at and then filing away with all the others. But this time something on it caught our eyes. They reported a minus figure this year and our pension pot actually lost 3.8% from 09/2019 to 09/2020. Does that sound about right for a plan that's meant to be quite low risk?

2: After seeing the -3.8% growth figure I browsed the statement a bit more and was drawn to the fees/charges set at 0.95% which normally I take no notice of but this time really caught my eye. A search around the internet seems to suggest this figure is a little on the high side for the type of pension plan risk we are on. Do people agree or that seems about right?

There's more info available if people need it but completely understand this is a rabbit hole that just might keep getting deeper and deeper the more I look into it. Just looking for some brief advice from all you lovely people for me to decide if things need changing are at least some very difficult questions that need to be asked

Just to add I do have an advisor (Goddard Perry) but he's away for a day or two and I think getting some alternative opinions would be useful.

Many thanks in advance

AlanP_2

The first thing to do is have a look at what your pension is actually invested in.

UK large cap equities (FTSE100) have still not recovered from the March worldwide falls whilst US large cap equities (S&P500) have recovered and have made gains over that period.

To be honest -3.8% sounds reasonable to me for a typical low risk pension fund that often has a large UK equities element relative to that held by those who manage their own pensions. It is also likley to have a quite large proportion of holdings that are meant to be "slow burn" in terms of losses and gains so that volatility over a period of years is smoothed. 

If you have lost due to UK equity the slow & steady returns from some of the other stuff won't be enough to balance that out.

How has it performed over previous years?

When do you plan to access the pension? What it's worth now is almost irrelevant if you won't be drawing it for another 20 years.

0.95 for a managed pension sounds reasonable, going DIY would probabaly be cheaper but you have to do the work then. I guess you are paying your adviser fees on top of that? 

Albermarle

As you will be aware that markets peaked around February and then took a big drop due to Covid . Most have recovered , like the biggest market ( US) but some are only partly recovered and still down ( like UK ) .
If your pension fund has a significant % in UK then this MAY be the reason you are showing a loss. Without actual details of the find it is difficult to comment really . In any case even low risk funds can go down and in investing terms a 4% drop is not very dramatic.
The charges are unaffected by the risk level of the plan normally . 0.95% all in charge is about right for a typical managed pension fund although charges are creeping downwards over the years so you might hope for a bit better especially if you have significant funds invested .
Normally if you have a financial advisor , they can usually get lower charges , which partly offsets their own fees. IN this case the 0.95% does look a bit high but it depends what you are actually invested in .

If you were self managing your investments using low cost trackers you can reduce charges right down but you would have to be actively involved .

T3C_UK

Thanks for the quick reply.

Our plan doesn't appear to be featured on RL's site so I can't really determine the exact breakdown and spread. Finding like for like on the internet to judge against other pension plans proved to be interesting.

Performance figures I've seen and tried to understand seem to make me think our 'safe' plan wasn't the safest out there. Tbh I understand it's the long term we should focus on and not the blips. Also that Covid has introduced a very unusual blip to the markets this year and it ain't over yet. Past statements have shown steady growth, usually around 4 - 6% which I assume is good(?)

I'm 55 and would like to think I will retire in around 10-15 years time and with this in mind my wife and I only just this month decided to get a bit up to date on our pension and see if things are working out as predicted years ago. Yes, we are guilty of just leaving it alone and not really paying our pension any attention. Until now that is!

The 0.95% does appear to include a small % for Goddard Perry but what worries me is that this figure seems to be on the higher side of normal. Finding the actual % charged by companies last night wasn't as easy as I thought it would be. Not everyone lays it out clearly and which I thought was a bit naughty. From what I did find and was able to make a comparison with would seem to point towards a figure of around 0.4 to 0.6% for a modest pension pot like ours would be more the norm. Do I need to question this as the differences in fees seems quite large and certainly worth investigating.

dunstonh

They reported a minus figure this year and our pension pot actually lost 3.8% from 09/2019 to 09/2020. Does that sound about right for a plan that's meant to be quite low risk?

You may have heard about a virus going around at the moment.   You may have also heard about the impact on businesses and how the stockmarket fell between February and March.    UK equity is still down from that point.  So, if your fund holding is heavy in UK equity then you will be down still.  Lower risk investments tend to hold more UK equity than medium to higher risk investments.

Your pension statements possibly also showed negative periods in 2019, 2015/2016, 2008/9 and 2000 through to 2003.

2: After seeing the -3.8% growth figure I browsed the statement a bit more and was drawn to the fees/charges set at 0.95% which normally I take no notice of but this time really caught my eye. A search around the internet seems to suggest this figure is a little on the high side for the type of pension plan risk we are on. Do people agree or that seems about right?

Pension and investments charges have been falling over the years.    In 2001, 1% was considered the benchmark but now you can get 0.2x to 0.5% as a typical range.  RL themselves with their modern pension frequently comes out between 0.4-0.5%

Albermarle

Past statements have shown steady growth, usually around 4 - 6% which I assume is good(?)

The past few years have been relatively good for investors and , so even lower risk funds have seen quite good growth .

Now you have one negative year ( and possibly others in the past ) That's the way it goes....

The 0.95% does appear to include a small % for Goddard Perr
If the 0.95% includes the advisers fees , then not much to complain about . If there are separate advisor fees on top , then as said above a bit on the high side , but not excessively so .
A word in the advisors ear at your hopefully regular reviews would seem a good idea. 

T3C_UK

dunstonh said:

They reported a minus figure this year and our pension pot actually lost 3.8% from 09/2019 to 09/2020. Does that sound about right for a plan that's meant to be quite low risk?

You may have heard about a virus going around at the moment.  

What is this you speak of? :-p

T3C_UK

Thanks everyone for your time and replies. Nice to know we can quickly ask about things I/we don't understand and there's a kind soul or two available to advise and assist.

My advisor or should I say Goddard Perry who haven't been in contact with me for any sort of review in the last 7 years will be having a few question to answer on Monday!

Thanks again

mark13

I am surprised that it has been 7 years, I would have expected a word of reassurance during CV19, and at least an annual review. 

dunstonh

My advisor or should I say Goddard Perry who haven't been in contact with me for any sort of review in the last 7 years will be having a few question to answer on Monday!

Have you been paying them to do reviews?  if yes, then they do have some questions to answer.  If you haven't been paying them then they would not provide something you are not paying for.

I am surprised that it has been 7 years, I would have expected a word of reassurance during CV19, and at least an annual review. 

If it was done on a transactional basis then there would not be reviews.

T3C_UK

It looks like we fell off their radar until about a month ago