Aviva pension fund performance

MAWK1

I know the Covid effect, Ukraine war effect, and the proximity of a looming recession. All effect fund performances. I also know that none of the mentioned are going to go away soon!. My Aviva pension policy has been in serious decline for a year or more. So all contributions are swallowed/lost . And on top of the Aviva policy charges it feels like I am just burning money. Bearing in mind majority of the money is invested in a supposedly safe fund ( risk level 2, out of 7 !). Am I not better of take all the money out and just hide under my pillow!? . Or just a current account? So at least the contributions are not lost!

dunstonh

I know the Covid effect, Ukraine war effect, and the proximity of a looming recession. All effect fund performances

Ironically, none of those things are direct influences on current market volatility. 

My Aviva pension policy has been in serious decline for a year or more. 

That is probably unlikely.  Can you give more details of what you mean by serious decline as most investors are down around 8-15% currently.  That is not a serious level of decline.  That is just a routine fairly frequent drop.

So all contributions are swallowed/lost 

No they are not.  You are buying more units still.  And you are buying them cheaper than they were 6 months ago. Periods like this are great news for those paying in monthly.  You need periods like this.   You should be really pleased that this negative period has occurred.    It results in higher returns in the long term than if it just kept going up in a straight line.

Am I not better of take all the money out and just hide under my pillow!? .

I am sure that is a sarcastic comment but if its not, then no.  You should not do that.

It would be a good idea though if you spent a couple of hours learning about investments.  It should remove the worries you have.

What did you do in 2020 when markets fell by around three times more than they did now?
What did you do in 2018 and 2015/16 when markets fell by double the current level?
What did you do in 2000-2002 and 2008/9 when markets fell around 4 times more than now?
What did you do in a the half dozen or so of other periods when there were just 10% falls?

Albermarle

My Aviva pension policy has been in serious decline for a year or more. 

Although it would have gone up significantly in the previous few years.

Bearing in mind majority of the money is invested in a supposedly safe fund ( risk level 2, out of 7

Due to the market conditions ( mainly relating to increasing interest rates and inflation) normally low risk assets have suffered pretty much the same as higher risk assets. In simple terms you could say low risk assets have low risk of dropping like a stone, but can still drop.

Audaxer

MAWK1 said:

I know the Covid effect, Ukraine war effect, and the proximity of a looming recession. All effect fund performances. I also know that none of the mentioned are going to go away soon!. My Aviva pension policy has been in serious decline for a year or more. So all contributions are swallowed/lost . And on top of the Aviva policy charges it feels like I am just burning money. Bearing in mind majority of the money is invested in a supposedly safe fund ( risk level 2, out of 7 !). Am I not better of take all the money out and just hide under my pillow!? . Or just a current account? So at least the contributions are not lost!

Don't panic - your contributions are definitely not swallowed up or lost as you are benefiting from buying units at cheaper prices. That is a good thing when you are contributing as the markets have always bounced back sooner or later.

gm0

You are suffering from loss aversion and recency bias.  Have a cup of tea.

Re-read dunstonh response.   Or if you are a picture and not a numbers person - look at the "long term" whole of stock market graph over decades.  Bottom left to top right. Big zig zags.

Think about how many stocks you get for a £100 contribution each month.  What happens in the dips. 

Do you get more or less "stocks" for your £100?  (Spoiler: More).  And what happens to the existing holding and the new contribution and extra bit of new stock from that month when the market goes back up subsequently?

This is deeply counterintuitive to the human brain which is strongly programmed for local resources in the here and now. 
Our instincts and neural programming tell us to flee or seek to avoid short term losses regardless of whether this is "correct" or actually in our interests long term.  

This is where fleeing the market at a 20% dip and locking in the theoretical loss as a real loss comes from. 

And all the discussion on "investing above risk appetite" etc. and why this is a bad idea.
Attitude to risk and emotional resilience varies. What makes you happy is what matters.

But more important though is your actual risk capacity.  If you need the cashflow (pension in payment) then the attitude probably has to be more nuanced than a 30 something with 30 years to go in accumulation.  The pensioner needs to think about sequence of return in deaccumulation.  The long term saver has more flexibility.

green_man

dunstonh said:

.  You need periods like this.   You should be really pleased that this negative period has occurred.    It results in higher returns in the long term than if it just kept going up in a straight line. 

Is this really true?  Doesn’t seem so to me.   If you are buying below the long term (hopefully upward moving) average by monthly drip feeding, then you will also be contributing in periods when the value is above the long term average. Overall the effect is the same as if there was just a gradual consistent monthly increase.  

Of course you must continue contributing when prices go down to balance those periods where you pay above average, so totally agree that continuing to contribute is imperative.  

The only way that you get better returns from volatility overall is if you contribute more when values are lower and less when they are higher…I.e time the market…usually discouraged for novice investors.

MAWK1

@dunstonh  @green_man  @gm0  @Audaxer @Albermarle ,
Hi Dunstonh and all who kindly replied to my post. Having submitted my first ever post on this forum, I didn't know what to expect! My deep gratitude and many many thanks to all:-)  I feel much more informed about the predicament of my pension fund with Aviva now. What I read is more helpful than all the correspondence with my Aviva advisors! The reason I am worried about the plan is that I am not far from retirement age, and as such, I don't have the luxury of decades to watch the funds rebound and grow again!  My long term view is only a couple of years. Also have little or no option to work beyond retirement age due to a multiple long-term illnesses that I have been blessed with. I am luckier than many many, in that I am alive and I thank God!.