Pension Review after going with financial advisor - Negative Growth

Gareth77

Hi

Last year (2021) I decided aggregate a number of different pensions (from previous employers) into a single pot. I also decided to go for a financial advisor who advised to go for a Royal London Pension.

After 18months I have my first review - after putting £194K in, my fund now stands at £170k. Down 24K.

This was explained a downturn in markets etc. 

But I find this very worrying and I'm not sure what to do as it's 20 years worth of contributions.  Should I revert and place back into my normal employee pension.  

Any help appreciated.

Keep_pedalling

It’s a bit late to do that, but in any case as virtually everyone’s investments are down over that period there will be no correlation between the move and the loss. 

dunstonh

But I find this very worrying and I'm not sure what to do as it's 20 years worth of contributions. 

20 years takes us back to 2002.

2002 was a negative year.  What did you do that year?
2008 was a negative year.  what did you do that year?
2015/16 was a negative period.  what did you do then?
2018 was a negative year. what did you do then?
2020 was the best negative period since 2008 (bigger than 2022) what did you do then?

Around 1 in 5 years is negative year or contains a significant negative period.   You have seen the ones above before and still invested (and did well because you did). So, why do you think you need to do something now?

Gareth77

Thanks - I guess it's because the first time I'm paying an advisor.   Does this kind of drop feel typical of the current climate?

dunstonh

Gareth77 said:

Thanks - I guess it's because the first time I'm paying an advisor.   Does this kind of drop feel typical of the current climate?

It depends on what dates you are looking at as the last three weeks have seen a bounce upwards.     Some people are down double what you are (extreme cases down over 30% at one point this year). 

Risk level can have a lot to do with it.  In very simple/crude terms, the greater investment risk you take, the greater the long term returns can be but the greater the short term losses can be.      However, 2022 has been very unusual as low risk assets have lost more than high risk assets due to rare events.

Marcon

Gareth77 said:

Thanks - I guess it's because the first time I'm paying an advisor.   

That's completely understandable, but remember advisers aren't clairvoyants and they can't magic up positive returns in a world where the trend is overwhelmingly negative.

Gareth77 said:

After 18months I have my first review - after putting £194K in, my fund now stands at £170k. Down 24K.

This was explained a downturn in markets etc. 

But I find this very worrying and I'm not sure what to do as it's 20 years worth of contributions.  

Does this kind of drop feel typical of the current climate?

A key part of the advice process is establishing your attitude to risk and then ensuring that your investments are invested in line with that. So depending on where you're invested, very probably yes.

MallyGirl

If you are paying them you should probably learn to trust them.
I have no idea how you are invested but people often mention Vanguard multi asset funds as a reasonable DIY choice - this is how their 60:40 product has gone in the last 18 months:

Albermarle

But I find this very worrying and I'm not sure what to do as it's 20 years worth of contributions. 

It is 20 years of contributions and most likely quite a lot of investment growth as well. 


 Should I revert and place back into my normal employee pension.  
It is almost certain that your old pension would have gone down as well. Maybe a bit more, maybe a bit less.

gm0

You misunderstood what advice does. 

It does not guarantee better or any particular market return performance outcome.  Fees to setup or ongoing are not contingent.
It loses you pay.  It wins you pay.  It loses more than the broader market median for a while (which may come good ultimately later or not) you still pay.  Markets do what they do to someone with your portfolio posture.  Fund manager gets paid. Platform gets paid, Adviser gets paid.  Then you do.

It does (sort of) guarantee that your investment choice and risk level will be somewhat appropriate to your circumstances and that the selected portfolio will match that.  The "regulated" part of the advice means that the rules of the game are set.  It is work to set that up and keep it under review yourself.

A blindfold a pin and the newspaper listing of shares or random fund picking would not ensure diversification (risk spreading) or that the risks are as expected. It would be random and the outcome would be also.

So there is a value to it. 

Just not the value people typically assume *must* be there implicitly because it is reassuringly expensive even if the contract describes what I just said.

Gareth77

Sorry I meant to say - I had 20 years of investments in employee pension funds. And I just moved them all into this new one, with the finanical advisor 

LV_426

If it's any consolation, I have 7 different pension pots, and the collective value has gone down about £20k since the start of the year. So you'd probably be in a similar position, had you left everything as it was.