Pension Cashflow Retirement Planner - Key Info?

GSP

Thrugelmir said:

GSP said:

Thrugelmir said:

GSP said:

BritishInvestor said:

GSP said:

This is interesting yet eye opening looking at certain data.
I was interested in how my wife and my funds have grown since we started just over 3 years ago. Our holdings are identical and as she is yet to drawdown, its a clean run of data with just fees excluded.
It really is interesting at the point in time you calculate growth from, such different results.
2019 data is not there but according to Moneyfacts data, average pension growth fund for 2018 (which I assume is end Dec 97 to end Dec 98) was -6.2%. This stacks up well with numbers from my wife’s fund of -5.9%.
When you compare growth at the point we were invested to year end, the results are quite different.
With fees included

Year on Year Growth Aug 17-18  3.8%.
YoY 18 -5.9%.
The big driver in this appears to a dip in Dec 18 (anyone know what that was), but while the Aug on Aug balance was c£5k higher, Dec on Dec was down c£10k.
My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?

Here is the rest of the Moneyfacts data. Is this more about catching things right.

Calendar year	% pension fund growth
2018	-6.2%
2017	10.5%
2016	15.7%
2015	2.6%
2014	5.8%
2013	13.9%
2012	10.8%
2011	-4.6%
2010	13.8%
2009	22.3%
2008	-19.7%

"My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?"

I'm not sure that yearly fund growth should be used to plan with. Typically in a cashflow model, prudent assumptions are used based on long-run returns of asset classes (~100 years). So the first step for you is to understand what reasonable assumptions to use - this can be done by working out your asset allocation and doing some research (the Credit Suisse returns yearbook is useful).
The next step is to stress test this using historical data to evaluate worst case historical outcomes. 

I know in the absence of anything else, but how can people use anything like this to project.
What I was also trying to bring in is how volatile funds are. To me, it seems timing is crucial. You can withdraw when growth is good, but put up the shutters when growth is negative (£ ravaging).

Markets aren't the real economy. Over the longer term they will however revert to the mean.  While the global economy chugs along at a fairly low rate of growth , or is going to be the case in 2020 one of contraction. Markets will swing between highs of optimism and lows of pessimism depending on the mood of the "herd".  Investors like nothing more than reaffirmation of their viewpoint. 

Exactly. Is it a case of catching the right moment to withdraw?
I’ll post these Moneyfacts average pension growth numbers again. I am not sure how these are calculated however if someone knows?
2008  -19.7%.

2009  22.3%.
2010  13.8%.
2011  -4.6%.
2012  10.8%.
2013  13.9%.
2014  5.8%.
2015  2.6%.
2016  15.7%.
2017  10.5%.
2018  -6.2%.
2019  14.4%.
An awful lot of volatility year to year. With such volatility, makes you wonder if a 3 year moving average on top provides a smoother view.
3 years average to 2010  5.5%   (2008, 2009, 2010 divided by 3).
2011  10.5%    (2009, 2010, 2011 divided by 3).
2012  6.7%.
2013  6.7%.
2014  10.2%.
2015  7.4%.
2016 8.0%.
2017  9.6%.
2018  6.7%.
2019  6.2%.

These look smoother and take out much of the volatility and you would say look more ‘sensible’ and better to work with. Perhaps planners should be looked at in years of 3, rather than 1 year in isolation?
With charges added back in and no withdrawals my wife’s pension is a clean run of data. From when the fund started in August 3 years ago, the fund has grown each year by 3.8%, 4.9% and 4.2%. Even in this data however, such is the volatility, end Dec numbers are -5.9%, +16.7% and +7.2%?

Not unsurprisingly the source is a subscription service. 

https://www.moneyfactsgroup.co.uk/publications/treasury/pensions

For the planner, I am pulling together so many columns of data it is getting quite large now, but very very interesting as well.
Without finalising just yet, the key to not running out of money appears to be having the full state pension. It’s at least a quarter of your needs and the results including are very very different from those without. 
As I work, if possible can any of you provide what you consider a run of pension growth to be for 10 years. Any negatives are ‘welcome’, but all I ask is that if you send it’s not just a 1% every year. That’ll be interesting seeing these and I may take an average of these. I’m not after forecasts, just what you would expect over the years. My risk is 5/10.
Thanks.

BritishInvestor

GSP said:

Thrugelmir said:

GSP said:

Thrugelmir said:

GSP said:

BritishInvestor said:

GSP said:

This is interesting yet eye opening looking at certain data.
I was interested in how my wife and my funds have grown since we started just over 3 years ago. Our holdings are identical and as she is yet to drawdown, its a clean run of data with just fees excluded.
It really is interesting at the point in time you calculate growth from, such different results.
2019 data is not there but according to Moneyfacts data, average pension growth fund for 2018 (which I assume is end Dec 97 to end Dec 98) was -6.2%. This stacks up well with numbers from my wife’s fund of -5.9%.
When you compare growth at the point we were invested to year end, the results are quite different.
With fees included

Year on Year Growth Aug 17-18  3.8%.
YoY 18 -5.9%.
The big driver in this appears to a dip in Dec 18 (anyone know what that was), but while the Aug on Aug balance was c£5k higher, Dec on Dec was down c£10k.
My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?

Here is the rest of the Moneyfacts data. Is this more about catching things right.

Calendar year	% pension fund growth
2018	-6.2%
2017	10.5%
2016	15.7%
2015	2.6%
2014	5.8%
2013	13.9%
2012	10.8%
2011	-4.6%
2010	13.8%
2009	22.3%
2008	-19.7%

"My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?"

I'm not sure that yearly fund growth should be used to plan with. Typically in a cashflow model, prudent assumptions are used based on long-run returns of asset classes (~100 years). So the first step for you is to understand what reasonable assumptions to use - this can be done by working out your asset allocation and doing some research (the Credit Suisse returns yearbook is useful).
The next step is to stress test this using historical data to evaluate worst case historical outcomes. 

I know in the absence of anything else, but how can people use anything like this to project.
What I was also trying to bring in is how volatile funds are. To me, it seems timing is crucial. You can withdraw when growth is good, but put up the shutters when growth is negative (£ ravaging).

Markets aren't the real economy. Over the longer term they will however revert to the mean.  While the global economy chugs along at a fairly low rate of growth , or is going to be the case in 2020 one of contraction. Markets will swing between highs of optimism and lows of pessimism depending on the mood of the "herd".  Investors like nothing more than reaffirmation of their viewpoint. 

Exactly. Is it a case of catching the right moment to withdraw?
I’ll post these Moneyfacts average pension growth numbers again. I am not sure how these are calculated however if someone knows?
2008  -19.7%.

2009  22.3%.
2010  13.8%.
2011  -4.6%.
2012  10.8%.
2013  13.9%.
2014  5.8%.
2015  2.6%.
2016  15.7%.
2017  10.5%.
2018  -6.2%.
2019  14.4%.
An awful lot of volatility year to year. With such volatility, makes you wonder if a 3 year moving average on top provides a smoother view.
3 years average to 2010  5.5%   (2008, 2009, 2010 divided by 3).
2011  10.5%    (2009, 2010, 2011 divided by 3).
2012  6.7%.
2013  6.7%.
2014  10.2%.
2015  7.4%.
2016 8.0%.
2017  9.6%.
2018  6.7%.
2019  6.2%.

These look smoother and take out much of the volatility and you would say look more ‘sensible’ and better to work with. Perhaps planners should be looked at in years of 3, rather than 1 year in isolation?
With charges added back in and no withdrawals my wife’s pension is a clean run of data. From when the fund started in August 3 years ago, the fund has grown each year by 3.8%, 4.9% and 4.2%. Even in this data however, such is the volatility, end Dec numbers are -5.9%, +16.7% and +7.2%?

Not unsurprisingly the source is a subscription service. 

https://www.moneyfactsgroup.co.uk/publications/treasury/pensions

For the planner, I am pulling together so many columns of data it is getting quite large now, but very very interesting as well.
Without finalising just yet, the key to not running out of money appears to be having the full state pension. It’s at least a quarter of your needs and the results including are very very different from those without. 
As I work, if possible can any of you provide what you consider a run of pension growth to be for 10 years. Any negatives are ‘welcome’, but all I ask is that if you send it’s not just a 1% every year. That’ll be interesting seeing these and I may take an average of these. I’m not after forecasts, just what you would expect over the years. My risk is 5/10.
Thanks.

"if possible can any of you provide what you consider a run of pension growth to be for 10 years."
For a 60/40 portfolio, the worst year was -37% and the best +105% (over the last ~120 years (Vanguard data))

Over five years you can see world equities have returned from -58% to +185%, so you need to make an adjustment for a mix of assets
https://finalytiq.co.uk/lessons-118-years-capital-market-return-data/
I can do some digging for ten years, but fear it's not going to give you what you are after.

GSP

BritishInvestor said:

GSP said:

Thrugelmir said:

GSP said:

Thrugelmir said:

GSP said:

BritishInvestor said:

GSP said:

This is interesting yet eye opening looking at certain data.
I was interested in how my wife and my funds have grown since we started just over 3 years ago. Our holdings are identical and as she is yet to drawdown, its a clean run of data with just fees excluded.
It really is interesting at the point in time you calculate growth from, such different results.
2019 data is not there but according to Moneyfacts data, average pension growth fund for 2018 (which I assume is end Dec 97 to end Dec 98) was -6.2%. This stacks up well with numbers from my wife’s fund of -5.9%.
When you compare growth at the point we were invested to year end, the results are quite different.
With fees included

Year on Year Growth Aug 17-18  3.8%.
YoY 18 -5.9%.
The big driver in this appears to a dip in Dec 18 (anyone know what that was), but while the Aug on Aug balance was c£5k higher, Dec on Dec was down c£10k.
My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?

Here is the rest of the Moneyfacts data. Is this more about catching things right.

Calendar year	% pension fund growth
2018	-6.2%
2017	10.5%
2016	15.7%
2015	2.6%
2014	5.8%
2013	13.9%
2012	10.8%
2011	-4.6%
2010	13.8%
2009	22.3%
2008	-19.7%

"My question is, if basing any decisions, shouldn’t this be from when your fund was invested or should you use the end year stats, though as you can see they can tell a different story?"

I'm not sure that yearly fund growth should be used to plan with. Typically in a cashflow model, prudent assumptions are used based on long-run returns of asset classes (~100 years). So the first step for you is to understand what reasonable assumptions to use - this can be done by working out your asset allocation and doing some research (the Credit Suisse returns yearbook is useful).
The next step is to stress test this using historical data to evaluate worst case historical outcomes. 

I know in the absence of anything else, but how can people use anything like this to project.
What I was also trying to bring in is how volatile funds are. To me, it seems timing is crucial. You can withdraw when growth is good, but put up the shutters when growth is negative (£ ravaging).

Markets aren't the real economy. Over the longer term they will however revert to the mean.  While the global economy chugs along at a fairly low rate of growth , or is going to be the case in 2020 one of contraction. Markets will swing between highs of optimism and lows of pessimism depending on the mood of the "herd".  Investors like nothing more than reaffirmation of their viewpoint. 

Exactly. Is it a case of catching the right moment to withdraw?
I’ll post these Moneyfacts average pension growth numbers again. I am not sure how these are calculated however if someone knows?
2008  -19.7%.

2009  22.3%.
2010  13.8%.
2011  -4.6%.
2012  10.8%.
2013  13.9%.
2014  5.8%.
2015  2.6%.
2016  15.7%.
2017  10.5%.
2018  -6.2%.
2019  14.4%.
An awful lot of volatility year to year. With such volatility, makes you wonder if a 3 year moving average on top provides a smoother view.
3 years average to 2010  5.5%   (2008, 2009, 2010 divided by 3).
2011  10.5%    (2009, 2010, 2011 divided by 3).
2012  6.7%.
2013  6.7%.
2014  10.2%.
2015  7.4%.
2016 8.0%.
2017  9.6%.
2018  6.7%.
2019  6.2%.

These look smoother and take out much of the volatility and you would say look more ‘sensible’ and better to work with. Perhaps planners should be looked at in years of 3, rather than 1 year in isolation?
With charges added back in and no withdrawals my wife’s pension is a clean run of data. From when the fund started in August 3 years ago, the fund has grown each year by 3.8%, 4.9% and 4.2%. Even in this data however, such is the volatility, end Dec numbers are -5.9%, +16.7% and +7.2%?

Not unsurprisingly the source is a subscription service. 

https://www.moneyfactsgroup.co.uk/publications/treasury/pensions

For the planner, I am pulling together so many columns of data it is getting quite large now, but very very interesting as well.
Without finalising just yet, the key to not running out of money appears to be having the full state pension. It’s at least a quarter of your needs and the results including are very very different from those without. 
As I work, if possible can any of you provide what you consider a run of pension growth to be for 10 years. Any negatives are ‘welcome’, but all I ask is that if you send it’s not just a 1% every year. That’ll be interesting seeing these and I may take an average of these. I’m not after forecasts, just what you would expect over the years. My risk is 5/10.
Thanks.

"if possible can any of you provide what you consider a run of pension growth to be for 10 years."
For a 60/40 portfolio, the worst year was -37% and the best +105% (over the last ~120 years (Vanguard data))

Over five years you can see world equities have returned from -58% to +185%, so you need to make an adjustment for a mix of assets
https://finalytiq.co.uk/lessons-118-years-capital-market-return-data/
I can do some digging for ten years, but fear it's not going to give you what you are after.

Wow! Just average overall totals for the year if that’s possible thanks BI. Maybe something from the last ten to twenty years something more recent maybe better.

coyrls

There have been a large number of studies on safe withdrawal rates based on historical data.  You are unlikely to improve on the existing literature by canvasing opinions on what returns might be in the future.

cfw1994

coyrls said:

There have been a large number of studies on safe withdrawal rates based on historical data.  You are unlikely to improve on the existing literature by canvasing opinions on what returns might be in the future.

You sure about that?  

Thrugelmir

Never before have so many countries entered a recession at once. Historical data is going to need some updating. 

BritishInvestor

Thrugelmir said:

Never before have so many countries entered a recession at once. Historical data is going to need some updating. 

In terms of historical data, the type of scenarios that tend to define the SWR tend to have the following in common
1. Falling markets over a long period
2. Inflation
and times such as 1915-1920 and the 1970s were pretty tough

• 1915 and 1920, UK inflation (CPI) averaged 17% a year. This means prices rose 103% in six years.
• 1973 to 1978, UK inflation (CPI) averaged 15%, which means that in six years prices rose a whopping 110%!

"According to Professor Elroy Dimson, UK bond investors lost half their wealth in real terms in the inflationary period from 1972 to 1974! In the period between 1914 and 1920, UK bonds lost over 60% in real terms over seven consecutive years. But the SWR framework would have held its own during this period"
https://www.timelineapp.co/blog/no-qe-didnt-break-the-4-rule/
You could of course be correct, but if we do have to update historical data it's going to be an extraordinarily tough time for all of us. Personally, I'm an optimist

GSP

coyrls said:

There have been a large number of studies on safe withdrawal rates based on historical data.  You are unlikely to improve on the existing literature by canvasing opinions on what returns might be in the future.

As you say, so many studies. Any the same? Who can you trust? I’d like to see where my own calculations stand. That run of rates I am seeking would be very useful if it was available.
Not sure where I read it, but there were suggestions the SWR 4% rule was not considered fit for purpose anymore.

GSP

BritishInvestor said:

Thrugelmir said:

Never before have so many countries entered a recession at once. Historical data is going to need some updating. 

In terms of historical data, the type of scenarios that tend to define the SWR tend to have the following in common
1. Falling markets over a long period
2. Inflation
and times such as 1915-1920 and the 1970s were pretty tough

• 1915 and 1920, UK inflation (CPI) averaged 17% a year. This means prices rose 103% in six years.
• 1973 to 1978, UK inflation (CPI) averaged 15%, which means that in six years prices rose a whopping 110%!

"According to Professor Elroy Dimson, UK bond investors lost half their wealth in real terms in the inflationary period from 1972 to 1974! In the period between 1914 and 1920, UK bonds lost over 60% in real terms over seven consecutive years. But the SWR framework would have held its own during this period"
https://www.timelineapp.co/blog/no-qe-didnt-break-the-4-rule/
You could of course be correct, but if we do have to update historical data it's going to be an extraordinarily tough time for all of us. Personally, I'm an optimist

The 1973 to 1978 period you mentioned. At the start of that time, I remember it well in that we were still trying to get to grips with decimalisation. The change from 240 pennies for a pound to 100, shillings, half a crown everything seemed to go up on an instant as the old money to new money conversion seemed to go out the window.Everything seemed to double from a lack of understanding and exploitation.

Thrugelmir

GSP said:

BritishInvestor said:

Thrugelmir said:

Never before have so many countries entered a recession at once. Historical data is going to need some updating. 

In terms of historical data, the type of scenarios that tend to define the SWR tend to have the following in common
1. Falling markets over a long period
2. Inflation
and times such as 1915-1920 and the 1970s were pretty tough

• 1915 and 1920, UK inflation (CPI) averaged 17% a year. This means prices rose 103% in six years.
• 1973 to 1978, UK inflation (CPI) averaged 15%, which means that in six years prices rose a whopping 110%!

"According to Professor Elroy Dimson, UK bond investors lost half their wealth in real terms in the inflationary period from 1972 to 1974! In the period between 1914 and 1920, UK bonds lost over 60% in real terms over seven consecutive years. But the SWR framework would have held its own during this period"
https://www.timelineapp.co/blog/no-qe-didnt-break-the-4-rule/
You could of course be correct, but if we do have to update historical data it's going to be an extraordinarily tough time for all of us. Personally, I'm an optimist

The 1973 to 1978 period you mentioned. At the start of that time, I remember it well in that we were still trying to get to grips with decimalisation. The change from 240 pennies for a pound to 100, shillings, half a crown everything seemed to go up on an instant as the old money to new money conversion seemed to go out the window.Everything seemed to double from a lack of understanding and exploitation.

1973 was the start of the Middle East oil crisis. High inflation in the UK was the result of increasing prices and stagnant growth. 
If you like heavyweight technical reads. Can recommend this one

This Time Is Different: Eight Centuries of Financial Folly

by Carmen Reinhart and Kenneth Rogoff