Pension Bee Alternative

dunstonh

patpalloon said:

dunstonh said:

patpalloon said:

By Shenanigans I am referring to the pensions turmoil caused by the 'mini budget'.

The mini budget didn't cause the shenanigans.    They just helped accelerate what was already happening.  

As I said, gilts have been falling for nearly a year.     The unwinding of the post-credit crunch printing of money and payouts under covid is happening much quicker than expected.

You increased the amount you invested into gilts at a time when the value of gilts was falling and was particularly volatile.   Pensionbee didn't do that.  You asked them to do that.  If you had been with Nutmeg or Wealthify or any other, they would have carried out your instructions just the same way.   And they would not be able to give you advice or opinion exactly the same way.

I moved my pension from a medium risk fund to a lower risk fund - as defined by them. If they can't give advice they should at least know the products they sell.

They do know their products.  They just cannot advise or give opinions about them. A lower-risk fund can lose greater amounts than higher-risk funds in short-term periods.  Nutmeg and Wealthify do it the same way.

We are in one of those rare periods where lower risk investments have suffered a 5% event that sees them lose more than their usual expected range.   


The  is what has happened to gilts since 1995 with unit price and income reinvested within the unit price.  It indicates how unusual a drop of that scale is.   However, post credit crunch from 2007/8 gilts grew by more than expection and long-term averages.  Indeed, if you place a ruler from 1995 to 2007 and then follow that line to 2022, you will see that the current value brings it back closer to the long term average.

Effectively what we have is the sudden unwinding of all the quantitative easing that took place since 2008.   2008 onwards saw printed money and free money for consumers create above-average returns for over a decade.   Late 2021 onwards has seen that decade unwind in a much quicker period than expected.   Historically, gilts tend to be more wavy line

The following graph shows the unit price with income removed.


With the income removed you can see how the cycles more obviously.     Without income, you would expect the unit price to fluctuate pretty much between a high and a low.   You can see 1995 to 2007 shows the rise and fall. That fall took almost a decade.   You can also see the larger balloon from 2008 to 2021.     Most were expecting the decline to be over a decade or two. Instead it happened in the space of a year.   The unit prices of gilts are currently just 4% higher than they were in 1995.

And here is the two charts above overlapped with red showing income reinvested and blue showing income removed



If you have invested since the start of the last cycle then you are still in profit.   You should be investing for at least a cycle and short term events can be ugly to look at but if you close your eyes to them, you wont see them to worry about.

german_keeper

dunstonh said:

patpalloon said:

dunstonh said:

patpalloon said:

By Shenanigans I am referring to the pensions turmoil caused by the 'mini budget'.

The mini budget didn't cause the shenanigans.    They just helped accelerate what was already happening.  

As I said, gilts have been falling for nearly a year.     The unwinding of the post-credit crunch printing of money and payouts under covid is happening much quicker than expected.

You increased the amount you invested into gilts at a time when the value of gilts was falling and was particularly volatile.   Pensionbee didn't do that.  You asked them to do that.  If you had been with Nutmeg or Wealthify or any other, they would have carried out your instructions just the same way.   And they would not be able to give you advice or opinion exactly the same way.

I moved my pension from a medium risk fund to a lower risk fund - as defined by them. If they can't give advice they should at least know the products they sell.

They do know their products.  They just cannot advise or give opinions about them. A lower-risk fund can lose greater amounts than higher-risk funds in short-term periods.  Nutmeg and Wealthify do it the same way.

We are in one of those rare periods where lower risk investments have suffered a 5% event that sees them lose more than their usual expected range.   


The  is what has happened to gilts since 1995 with unit price and income reinvested within the unit price.  It indicates how unusual a drop of that scale is.   However, post credit crunch from 2007/8 gilts grew by more than expection and long-term averages.  Indeed, if you place a ruler from 1995 to 2007 and then follow that line to 2022, you will see that the current value brings it back closer to the long term average.

Effectively what we have is the sudden unwinding of all the quantitative easing that took place since 2008.   2008 onwards saw printed money and free money for consumers create above-average returns for over a decade.   Late 2021 onwards has seen that decade unwind in a much quicker period than expected.   Historically, gilts tend to be more wavy line

The following graph shows the unit price with income removed.


With the income removed you can see how the cycles more obviously.     Without income, you would expect the unit price to fluctuate pretty much between a high and a low.   You can see 1995 to 2007 shows the rise and fall. That fall took almost a decade.   You can also see the larger balloon from 2008 to 2021.     Most were expecting the decline to be over a decade or two. Instead it happened in the space of a year.   The unit prices of gilts are currently just 4% higher than they were in 1995.

And here is the two charts above overlapped with red showing income reinvested and blue showing income removed



If you have invested since the start of the last cycle then you are still in profit.   You should be investing for at least a cycle and short term events can be ugly to look at but if you close your eyes to them, you wont see them to worry about.

A very impressive effort dunston but I fear it may have fallen on stony ground. I am also in a position where mine and my wife's low risk DC pots have fallen dramatically and whilst I can't profess to really understand it all, or indeed have any real interest in it, I am happy to accept the general point made by those more knowledgeable that recently has been one of those highly unusual times when low risk investments fare worse than high risk.

However reading the rest of the thread and explanations already offered to the OP I suspect he/she is heavily entrenched in his/her opinion that Pension Bee is the Great Satan. I think I would wager there is more chance of a U Turn from the Chancellor of the Exchequer than the OP. 

Beddie

patpalloon said:

I have a private pension originally with L&G then 2 years ago I switched to Pension Bee. I was automatically enrolled in their 4Plus plan. No issues till recently. I turn 55 in April next year and want to take the 25% tax free sum. So I decided to switch to the low risk plan called Preserve. I lost 2k straight away - that was a month before the current shenanigans. I've lost all confidence in Pension Bee as they can't give you a straight answer and say they can't advise, just wash their hands of any responsibility. And now this plan relies heavily on Bonds which thanks to the Gvt have gone from a safe bet to risky.

So I am wondering if I just sit tight or switch to a new provider. I looked at Nutmeg and Wealthify.

Hi, you've been unlucky with timing, but would have had a similar experience with Nutmeg, Wealthify or any other similar provider.

If you really need the 25% lump sum at 55 then take it. You can always leave the rest invested, to hopefully grow over time. You might even want to revert to the plan you were on before, not Preserve, if you can leave it for another 10 years or so.

patpalloon

Beddie said:

patpalloon said:

I have a private pension originally with L&G then 2 years ago I switched to Pension Bee. I was automatically enrolled in their 4Plus plan. No issues till recently. I turn 55 in April next year and want to take the 25% tax free sum. So I decided to switch to the low risk plan called Preserve. I lost 2k straight away - that was a month before the current shenanigans. I've lost all confidence in Pension Bee as they can't give you a straight answer and say they can't advise, just wash their hands of any responsibility. And now this plan relies heavily on Bonds which thanks to the Gvt have gone from a safe bet to risky.

So I am wondering if I just sit tight or switch to a new provider. I looked at Nutmeg and Wealthify.

Hi, you've been unlucky with timing, but would have had a similar experience with Nutmeg, Wealthify or any other similar provider.

If you really need the 25% lump sum at 55 then take it. You can always leave the rest invested, to hopefully grow over time. You might even want to revert to the plan you were on before, not Preserve, if you can leave it for another 10 years or so.

Thanks for the sensible and sympathetic reply. I was beginning to think it was only trolls here!

moedeeb

patpalloon said

Thanks for the sensible and sympathetic reply. I was beginning to think it was only trolls here!

I hope you will find as I have repeatedly learned that this forum is full of extremely knowledgeable people who always try their best to help. Sometimes the replies can be frank and some may find them “blunt” but trolling is very rare. Pensions are not simple and this forum is one of the places where you won’t find dumbing  down or oversimplification which wont help understanding. The same topics come up again and again and the same forum members do their best to answer them. Stick with it and you will find this forum a great way to learn.

dunstonh

A very impressive effort dunston but I fear it may have fallen on stony ground.

Didn't take long for you to be proven right.

patpalloon

The information I was after was my pension is in a Defined Contribution Scheme and not a Defined Benefit scheme - which is the one directly affected BoE intervention over government bonds.

gm0

@patpalloon my sympathy. 

It is very hard to deal with short term negative outcomes (unrealised losses).  We are not setup intellectually/emotionally to deal with it well. A darwinian inheritance of the human brain being wired for loss aversion, recency bias. 
It takes a lot of effort to overcome these biases. 

Platform and investment product sales - while the regulated small print is stuffed with detail on capital losses and risk warnings the product and brand marketing trades on simplicity and confidence.  There are terrible adverts on the TV at the moment overselling guidance and DIY robo investing on a "trust us we are the best to help you choose" story line.  It is no wonder people assume more confidence into retail financial services products than is actually there.

While it is obvious to many here the difference between guidance and advice and the (very little) that platforms offer beyond ability to trade.  I wonder if a straw poll in the street would yield the same.  Suspect not.

In pensions - getting confident with DIY to "stick to a DC drawdown plan" when the waters are turbulent is difficult. Advisers can provide reassurance for a fee to those that find that helpful to get on with something else (and have the funds). 

I chose to prepare for DIY.  It was more work than I expected - but partly due to my need for detail to be happy.

I have moved pensions and setup for drawdown this year. It's been challenging. 
I have ended up doing OK.  Far from great. But OK relative to market and single fund alternatives
Sadly still negative just less negative than simple mainstream alternatives.
So my income cash buffer has not refilled from capital growth and dividend income.

But it's less of a horror show than some alternatives and some of the questions and stories told here. 
So my plan's weaknesses have not been fully exposed by 2022.  That joy remains for the future. 
Yet my plan also means I am not in a hurry to sell growth assets to sustain income so events have time to unfold (and very likely get worse before they get better).

I can only recommend (aided or unaided by formal advice) making your own drawdown plan to your circumstances.  The platform (SIPP or robo or life company) and the funds used are an important decision but are downstream of planning income vs pot and other inputs. Almost the last decisions in fact.

Good fortune with whatever you now decide to do

[Deleted User]

1. Are you certain you had lost money in this fund before the “shenanigans started”? 

PB Preserve fund is really a renamed State Street Sterling Liquidity sub-fund.  https://www.ssga.com/library-content/products/factsheets/mf/emea/factsheet-emea-en_gb-gb00bwdbjf10.pdf

Indeed if you click on the fund’s fact sheet, it takes you straight to State Street.  https://www.pensionbee.com/plans

The fund claims that it grew in nominal terms by 0.6% in the year to September 2022. 

2. Pension Bee is a slick marketing company with high fees. If you paid 0.5% per year for short term bonds in 2021, you were guaranteed to lose in nominal terms. Not even accounting for inflation. 

3.  I do not like the way vendors market their “low risk funds”. It just means bonds and lower volatility.  Your long term risk during inflationary periods is very high indeed. State Street did a far better job at describing their fund’s essence in the name.  Pension Bee made it all nice, simple and wrong. 

4. Having said it, most vendors use the same misleading terminology as Pension Bee. 

My suggestion for a person like yourself to do 3 things:

- read the simple and solid pension book by Edwards
- read a more complex but awesome book on risks by Bernstein
- pick asset allocation and provider based on what you learn and your circumstances. Do not pick 100% bonds.  Its dangerous if inflation stays high. 

If you can’t be bothered to read then go to Vanguard and buy their 60/40 VLS fund. Thats just an opinion. As is everything on this forum. 

patpalloon

gm0 said:

@patpalloon my sympathy. 

It is very hard to deal with short term negative outcomes (unrealised losses).  We are not setup intellectually/emotionally to deal with it well. A darwinian inheritance of the human brain being wired for loss aversion, recency bias. 
It takes a lot of effort to overcome these biases. 

Platform and investment product sales - while the regulated small print is stuffed with detail on capital losses and risk warnings the product and brand marketing trades on simplicity and confidence.  There are terrible adverts on the TV at the moment overselling guidance and DIY robo investing on a "trust us we are the best to help you choose" story line.  It is no wonder people assume more confidence into retail financial services products than is actually there.

While it is obvious to many here the difference between guidance and advice and the (very little) that platforms offer beyond ability to trade.  I wonder if a straw poll in the street would yield the same.  Suspect not.

In pensions - getting confident with DIY to "stick to a DC drawdown plan" when the waters are turbulent is difficult. Advisers can provide reassurance for a fee to those that find that helpful to get on with something else (and have the funds). 

I chose to prepare for DIY.  It was more work than I expected - but partly due to my need for detail to be happy.

I have moved pensions and setup for drawdown this year. It's been challenging. 
I have ended up doing OK.  Far from great. But OK relative to market and single fund alternatives
Sadly still negative just less negative than simple mainstream alternatives.
So my income cash buffer has not refilled from capital growth and dividend income.

But it's less of a horror show than some alternatives and some of the questions and stories told here. 
So my plan's weaknesses have not been fully exposed by 2022.  That joy remains for the future. 
Yet my plan also means I am not in a hurry to sell growth assets to sustain income so events have time to unfold (and very likely get worse before they get better).

I can only recommend (aided or unaided by formal advice) making your own drawdown plan to your circumstances.  The platform (SIPP or robo or life company) and the funds used are an important decision but are downstream of planning income vs pot and other inputs. Almost the last decisions in fact.

Good fortune with whatever you now decide to do

Thanks, very helpful and informative reply. I'm still waiting to find out from Pension Bee exactly what the difference in risk is between the 'low risk' I'm now in  and the 'medium risk' one I was in before, and how much government bonds are involved in each.

I'm not bothered about it going up - alll I want is  to be able to take my 25% tax free next April without it crashing and then keep the rest for later or until my state pension kicks in. I just don't want to see it crashing because of decisions this government have taken. Market fluctuations and global crises I can accept.