Big loss to annual pension

stellaB85

I recently had my annual pension statement come and even though I have only been paying in for 3 years and 21-22 annual input in total was £274.38  I only added to my pension by £74.24. The figure of £200.15 was a minus figure as my pension plan has decreased by this much in the year 21-22, they say because of investment performance and management charges. How can this be right???  What has happened to almost three quarters of the money paid in? How can they charge for management when clearly not managed very well. This is a well known pension company that advertises regularly. I am a low earner hence the amount paid in being quite low so certainly can't afford to be in a plan that loses so much of my money. Should I just save my money in an ISA or change pension companies. Thanks for any advice.

ewaste

Just to clarify, you are contributing to a defined Contribution Pension scheme? what are the fund and management charges these should also be on your annual statement. 

What are you actually invested in? e.g. fund names and underlying assets they hold.

Markets have been correcting downward for the last few months so it's perfectly believable. Especially if you are older and/or the pension has a higher proportion of bonds as a result. What age are you? it's somewhat relevant to the default investments and strategies utilised.

Until you understand what you are invested in and what the charges are you'd accomplish nothing by changing provider. You also likely need to factor in tax relief even if you don't actually earn over the personal allowance. Therefore using an ISA for retirement saving wouldn't be prudent. 

SouthCoastBoy

Management charges are just that the charge for managing the pension, they are not related to performance. With respect to plan loses, over the last 12 months performance on the stock markets across the world has not been great and hence there have been loses experienced by many funds.

Pensions are a long term investment and there will be volatility

dunstonh

What has happened to almost three quarters of the money paid in?

Performance is applied to the fund value. Not the contribution.  

i.e. if your fund value is £20,000 and markets fall 15%, that is a £3,000 loss.   
Someone paying in £300pm would cover that loss. Someone paying in £30pm wouldn't come close.  What you pay in each month has no impact on performance.

How can they charge for management when clearly not managed very well. 

Why do you think it is not managed well?

Should I just save my money in an ISA or change pension companies

No.   That would not change anything other than you losing your employer contribution (if employed).

The problem here is not the pension or the provider.   It is a lack of understanding on your part.   Investment values have short-term periods when they go down periodically.    That is normal and happens frequently.     It's good news when you pay in monthly and should not be viewed as bad.     When it goes back up, the investments you bought cheaper will make more than those you bought before they went down.

tacpot12

Duntonh's question as to why you think it is not managed well is the most important question. Your fund manager could be the best in the business, but if markets are falling, all they can do is hope to stop you losing more than if you were invested in another fund.

Pensions are a very long term investment. I started my pension when I was 25 and expect that I will still have it all invested when I am 90, so you really need to be concerned about performance over the next 60+ years, not the last 3 years, which have been really volatile. 

Kim1965

Stella, you are in it for the long haul, how old are you?? 

Albermarle

Your pension is probably invested in a mixed fund of investments. A significantly  large component of these funds is often investments based on the US stock market. It has been going up for years, with a few blips, but has gone down quite a lot this year. Many reasons for that , but Ukraine war and increased energy prices have not helped. See a graph for the last 5 years.

S&P 500 - BBC News

This affects nearly all investors and pension fund holders the same. One day it will recover again, only the timing of that recovery is uncertain.

DE_612183

sorry for your "loss" but it's not big - pensions have gone down in the last 12 months by 15-20%

on the upside - when your pension fund is now buying more units - you are buying at (hopefully) the bottom of the market so when things go up they will go up dramatically. 

bostonerimus

stellaB85 said:

I recently had my annual pension statement come and even though I have only been paying in for 3 years and 21-22 annual input in total was £274.38  I only added to my pension by £74.24. The figure of £200.15 was a minus figure as my pension plan has decreased by this much in the year 21-22, they say because of investment performance and management charges. How can this be right???  What has happened to almost three quarters of the money paid in? How can they charge for management when clearly not managed very well. This is a well known pension company that advertises regularly. I am a low earner hence the amount paid in being quite low so certainly can't afford to be in a plan that loses so much of my money. Should I just save my money in an ISA or change pension companies. Thanks for any advice.

Do you have any idea how your pension money is invested? It is now your responsibility to understand your pension. If all you are doing is putting contributions into a "black hole" how can you assess the performance. Take a few moments to understand how your money is invested. You should have fund names on your statement and then just google those.

Marcon

SouthCoastBoy said:

Management charges are just that the charge for managing the pension, they are not related to performance. 

They are to the extent charges are based on total fund value. If the underlying investments perform well the fund value increases and so will the management charge; if they perform poorly the fund value drops and so do the charges.

Older style contracts (and this clearly isn't one, given OP has only been paying in for 3 years) had other types of charging structure such as 'capital units' and 'monthly contract fees' where people could be saddled with hefty charges regardless of the fund value.

SouthCoastBoy

One additional thing to note is some funds do have performance fees, which is an additional fee to any management fees