Need help calculating pension pot growth v fund growth

nkb21

Without wanting to sound stupid, can someone please help me calculate investment growth?  I'm confused.

For the last 11 months I've been salary sacrificing equal amounts monthly into my workplace pension.  The total of the contributions exceeds the £40k annual allowance but I have plenty of carry forward available and my salary exceeds the total contributions even allowing for the NLW so don't worry about that fact.

The total I and my employer have contributed over the past 11 months is £52,416.57.  The total value of the pot today is £55,407.05. If I add back in the charges that have had deducted over the 11 months (£66.52), this would give me a total pot value of £55,473.57.  I calculate that to be 5.83% growth.

The monthly contributions have been going into two funds.  The start and current unit prices for both these are:

Bonds - Was 1.31 - Now 1.34

Equities - Was 1.70 - Now 2.06

I calculate that these funds have therefore grown by 2.29% and 21.17% respectively.

My contributions have been being split 15% into the Bonds fund and 85% into the Equities fund so I'm expecting my pot growth percentage to be between these two fund growth percentages (which it is) but I'd expect it to be much nearer the 21.17 in view of the fact 85% of my contributions have been going into the better performing fund.  Somewhere around 18% would seem more like it.

Can someone explain where I'm calculating things wrongly or what I'm missing?
Thanks

NoMore

Because you have presumably being buying monthly and so the prices you bought at every month varies so you can't just use the start and end prices to calculate growth.

Notepad_Phil

Someone I'm sure will come along with the full details of what calculations you need to be doing, but in the meantime the basic issue of where you're going wrong is that you've not had the full amount in there from the beginning. If the full amount had been in from the beginning then it might be close to the 18% but 9% of your contributions has only been there for a month at one unit price, another 9% for two months at a different unit price, etc, with only 9% in there from the very start..

Thrugelmir

nkb21 said:

The monthly contributions have been going into two funds.  The start and current unit prices for both these are:

Bonds - Was 1.31 - Now 1.34

Equities - Was 1.70 - Now 2.06

I calculate that these funds have therefore grown by 2.29% and 21.17% respectively.

Growth in fund prices isn't linear. They'll fluctuate in line with market prices. One month you may have paid above 2.06 per unit to purchase equities. This would have resulted in a loss to you at the current market price. 

Prism

As an estimate feed your numbers into XIRR in a spreadsheet - there are plenty of video examples around.
Without knowing your exact contribution dates I calculate your returns as 11.54%

nkb21

I might have said I didn't want to sound stupid but I didn't try very hard to avoid it, did I. 
Thanks all - makes perfect sense.  I just didn't think it through.

Bimbly

nkb21 said:

I might have said I didn't want to sound stupid but I didn't try very hard to avoid it, did I. 
Thanks all - makes perfect sense.  I just didn't think it through.

Not at all! The stupid person was the person who continued to not understand something because they were afraid to ask. 

Kynthia

By posting this question, the answers provided will probably help loads of people, who weren't confident enough to ask themselves, understand their pension a little better. Many of us have learnt so much by lurking on this forum, and that only happens when people ask questions and others take the time to write a helpful answer.

AlanP_2

I use the spreadsheet and approach covered here 

https://www.bogleheads.org/wiki/Calculating_personal_returns

[Deleted User]

AlanP_2 said:

I use the spreadsheet and approach covered here 

https://www.bogleheads.org/wiki/Calculating_personal_returns

I was going to look for this article but you saved me the job. 

Briefly, there are two ways of calculating returns:
1. Money weighted.  This is what you need to use to understand what you are getting, taking into account your timing. Xirr in excel gives this value. 

2. Time weighted.  This is what you need to use when comparing against benchmarks or other investors.  Reflects how your asset allocation is working out. The spreadsheet in Alan’s link calculates TWR for you.