NFU Mutual Select Pension

engagedandopen

I've just set up an NFU Mutual Select Pension to invest in their With Profits Fund at Risk Level 3 and the illustration says my return is expected to be 0.1%, yet the quarterly Managed funds report says the annualised performance over 10 years has been 8.9% gross - so is this low prediction on my illustration due to inflation running so high at the moment, please?

dunstonh

I've just set up an NFU Mutual Select Pension to invest in their With Profits Fund at Risk Level 3 and the illustration says my return is expected to be 0.1%

With Profits fund?  I didn't realise that there were any still operating beyond a few friendly societies.  That is blast from the past.

o is this low prediction on my illustration due to inflation running so high at the moment, please?

It isn't a prediction.  It is a synthetic projection.  Most providers will give three projection rates.  low. medium and high.   The low is frequently a loss making projection.  ie. 0.1% before charges would be a negative return.   The medium is typically below average and the high is about average.

Projections have nothing to do with reality.  

Albermarle

It is probably something like 3.1% growth is projected along with a 3 % inflation estimate so real growth is 0.1%.

yet the quarterly Managed funds report says the annualised performance over 10 years has been 8.9% gross 

The last ten years ( until very recently ) have been very good for all investments . A repeat is not expected but hopefully your result will at least be a bit better than the projected 0.1 %

engagedandopen

dunstonh said:

I've just set up an NFU Mutual Select Pension to invest in their With Profits Fund at Risk Level 3 and the illustration says my return is expected to be 0.1%

With Profits fund?  I didn't realise that there were any still operating beyond a few friendly societies.  That is blast from the past.

o is this low prediction on my illustration due to inflation running so high at the moment, please?

It isn't a prediction.  It is a synthetic projection.  Most providers will give three projection rates.  low. medium and high.   The low is frequently a loss making projection.  ie. 0.1% before charges would be a negative return.   The medium is typically below average and the high is about average.

Projections have nothing to do with reality.  

Thank you for your response.

Aviva and M&G/Prudential spring to mind for the plc's, although Aviva seems not to allow With-Profits investments to continue into drawdown (unlike NFU Mutual; hopefully liquidity will be okay with the direct property investments).  The new CDC pensions seem similar.  Presumably a platform could, theoretically, smooth any portfolio over, say, three or five years if the demand were there.  I don't know of any Smooth Managed funds (as distinct from With-Profits) on the market for retail clients as yet (rather than advised clients) yet.

The projection is medium at 3.4% less 2% for inflation (having re-read the illustration) less 1.3% for the total charges.

engagedandopen

Albermarle said:

It is probably something like 3.1% growth is projected along with a 3 % inflation estimate so real growth is 0.1%.

yet the quarterly Managed funds report says the annualised performance over 10 years has been 8.9% gross 

The last ten years ( until very recently ) have been very good for all investments . A repeat is not expected but hopefully your result will at least be a bit better than the projected 0.1 %

Thank you for your reply, Albermarle.  The projection is medium at 3.4% less 2% for inflation (having re-read the illustration) less 1.3% for the total charges.

dunstonh

Aviva and M&G/Prudential spring to mind for the plc's, although Aviva seems not to allow With-Profits investments to continue into drawdown (unlike NFU Mutual; hopefully liquidity will be okay with the direct property investments). 

Aviva and Pru both withdrew the WP funds years ago for new business.  Only legacy contracts have them.    Its a very old fashioned way of investing.

 I don't know of any Smooth Managed funds (as distinct from With-Profits) on the market for retail clients as yet (rather than advised clients) yet.

There isn't a market for them unless that market is generated.      A number of US companies tried to bring out smoothed options over here and failed abysmally.    Pru have their smoothed fund but it was oversold by low skilled and lazy advisers, heavily on the back of DB transfers.   Aviva launched a smoothed fund but it doesn't appear to have gained much traction.     

As you can tell, I am not a fan.  They basically charge you more to build in the smoothing that is unnecessary for the bulk of consumers if someone actually takes the effort to be told or understand how investments work.

The projection is medium at 3.4% less 2% for inflation (having re-read the illustration) less 1.3% for the total charges.

1.3% reduction in yield means the charges are about 1.15% p.a   That is extremely high for a non-advised pension.   (going back to the added cost comment earlier).      no more than 0.50% is the sort of ballpark nowadays for a pension when not using adviser.   Getting to 0.3x% is pretty easy with a range of decent multi-asset funds.   Even using an adviser can get you those costs.   

engagedandopen

dunstonh said:

Aviva and M&G/Prudential spring to mind for the plc's, although Aviva seems not to allow With-Profits investments to continue into drawdown (unlike NFU Mutual; hopefully liquidity will be okay with the direct property investments). 

Aviva and Pru both withdrew the WP funds years ago for new business.  Only legacy contracts have them.    Its a very old fashioned way of investing.

 I don't know of any Smooth Managed funds (as distinct from With-Profits) on the market for retail clients as yet (rather than advised clients) yet.

There isn't a market for them unless that market is generated.      A number of US companies tried to bring out smoothed options over here and failed abysmally.    Pru have their smoothed fund but it was oversold by low skilled and lazy advisers, heavily on the back of DB transfers.   Aviva launched a smoothed fund but it doesn't appear to have gained much traction.     

As you can tell, I am not a fan.  They basically charge you more to build in the smoothing that is unnecessary for the bulk of consumers if someone actually takes the effort to be told or understand how investments work.

The projection is medium at 3.4% less 2% for inflation (having re-read the illustration) less 1.3% for the total charges.

1.3% reduction in yield means the charges are about 1.15% p.a   That is extremely high for a non-advised pension.   (going back to the added cost comment earlier).      no more than 0.50% is the sort of ballpark nowadays for a pension when not using adviser.   Getting to 0.3x% is pretty easy with a range of decent multi-asset funds.   Even using an adviser can get you those costs.   

Sorry, I was referring to Smoothed Managed funds for ISAs then (rather than pensions).  The total charge is 0.45% platform + 0.83% for their With Profits at Risk Level 3 on the Select Platform.  I think those 0.3%-0.5% all-in funds would for be multi-asset trackers with REITs for property investment.  Aviva's Multi-Manager Flexible fund costs 1.6% and yet has better performance than their flexible insured fund; in the absence of an adviser...

dunstonh

Sorry, I was referring to Smoothed Managed funds for ISAs then (rather than pensions).  The total charge is 0.45% platform + 0.83% for their With Profits at Risk Level 3 on the Select Platform.  

Typical platform charge for whole of market is in the 0.25% ballpark with a similar risk multi-asset fund costing around 0.20%. 

Aviva's Multi-Manager Flexible fund costs 1.6% and yet has better performance than their flexible insured fund; in the absence of an adviser...

The Flexible 3 has lower performance than HSBC GS Dynamic (similar risk) and it costs more.

The first question you should ask on a managed solution is whether the increased cost is justified with the potential to outperform the passive version.      Although the HSBC GS funds have underlying passives, Aviva is hybrid and has a combination of active and managed.  Yet its OCF is very high for a full managed fund, let alone a hybrid.

So, at a higher cost and lower performance at a relative risk level, what is it that appeals about that offering?

Albermarle

 no more than 0.50% is the sort of ballpark nowadays for a pension when not using adviser.   Getting to 0.3x% is pretty easy with a range of decent multi-asset funds.  

Just to back this up with some examples. I have three DC pensions still on the go.

One is with a major established insurer,   with simple multi asset funds, overall charge 0.32% 

Another is also with a major insurer  = 0.6% ( includes one more expensive managed property fund )

Whole of market SIPP - mixture of funds/IT's & ETFs ( some managed , some passive ) average cost 0.6%

engagedandopen

dunstonh said:

The Flexible 3 has lower performance than HSBC GS Dynamic (similar risk) and it costs more.

The first question you should ask on a managed solution is whether the increased cost is justified with the potential to outperform the passive version.      Although the HSBC GS funds have underlying passives, Aviva is hybrid and has a combination of active and managed.  Yet its OCF is very high for a full managed fund, let alone a hybrid.

So, at a higher cost and lower performance at a relative risk level, what is it that appeals about that offering?

It is a multi-manager fund rather than a 'simple' actively managed fund like Liontrust Sustainable Future Managed Growth.

It is more expensive than the L&G Multi-Manager Growth fund and the Myfolio Multi-Manager V (on Platform 1 or with the AMPP discount) - both of which come it at around 1.35%, but it is significantly less expensive than the likes of BMO MM and Jupiter Merlin.

I also have a couple of cheaper MM options in Cirilium Dynamic (1.15%, but the performance has been somewhat weaker and it seems overloaded with assets) and Scottish Equitable Select Adventurous (0.84%, because they use Morningstar).

What appeals is letting investment professionals select the best active funds, in the absence of an adviser.  Also, we had strong global equity growth up to 2019-ish during which, with hindsight trackers were good choices, but turning to the future there seems to be a rise of alternatives like private equity, crypto, green bonds, carbon markets etc. so I am not so sure trackers are best suited - I definitely don't want a set-it-and-forget-it strategy from Vanguard - and I want a solution where I think the managers of Myfolio Managed and the like will adapt accordingly and use appropriate actives.

engagedandopen

Albermarle said:

 no more than 0.50% is the sort of ballpark nowadays for a pension when not using adviser.   Getting to 0.3x% is pretty easy with a range of decent multi-asset funds.  

Just to back this up with some examples. I have three DC pensions still on the go.

One is with a major established insurer,   with simple multi asset funds, overall charge 0.32% 

Another is also with a major insurer  = 0.6% ( includes one more expensive managed property fund )

Whole of market SIPP - mixture of funds/IT's & ETFs ( some managed , some passive ) average cost 0.6%

My cheapest is probably Aegon ARC through IPSE (closing to new business as they have, bizarrely, opted for Penfold) at 0.23% but their Adventurous Tracker (Flexible) is 50% UK equity and 50% Global Equity ex-EM; I keep hoping they'll check it to something a bit more judicious.

I currently have about 14 DC pensions because of diversification, no adviser and the upcoming FCA non-workplace changes regarding the introduction of defaults.

What I would like to have is a SIPP for illiquids like ITs and UK equities, the NFU pension for its with-profits fund, and three DC pensions lifestyled to drawdown (Dynamic Planner 5, not 4): one ethical active, a second non-ethical active and a third passive.