How has your scheme performed?

Ransom_Dry_Elk

It's that time of year again where we get our annual pension statements through the post. Like many people I have multiple workplace pensions I'd like to consolidate, comparing stats here can be helpful for knowing which is best to transfer into.

I'm annoyed at Scottish Widows at the moment, my largest pension is with them and they've lost me almost £3k since last year. There are 2 funds responsible for almost all the damage:
Scottish Widows Property Pension (series 2) -18%
Scottish Widows Fixed Interest Pension (series 2) -16.8%

How do you even lose that much on fixed interest assets?

A smaller NEST pension is down a total of 6.8% in the same time period (neither had any contributions in that time).

LV_426

Wow that's a big loss. Mine have basically stayed static, or showed little growth over the past year (thanks Putin!)

Albermarle

Ransom_Dry_Elk said:

It's that time of year again where we get our annual pension statements through the post. Like many people I have multiple workplace pensions I'd like to consolidate, comparing stats here can be helpful for knowing which is best to transfer into.

I'm annoyed at Scottish Widows at the moment, my largest pension is with them and they've lost me almost £k since last year. There are 2 funds responsible for almost all the damage:
Scottish Widows Property Pension (series 2) -18%
Scottish Widows Fixed Interest Pension (series 2) -16.8%

How do you even lose that much on fixed interest assets?

A smaller NEST pension is down a total of 6.8% in the same time period (neither had any contributions in that time).

Fixed interest/bonds/gilts all had a torrid time in 2022, so probably unrelated to it being a SW fund, as all these types of funds have done poorly recently.
Bit more difficult to comment on property funds as they are all different and invested in different areas.
7% would be more typical for a mixed investment pension with say around 50% equity.
You might be interested in this when thinking about pension consolidation.
Scottish Widows apologises for poor service levels | Money Marketing

dunstonh

I'm annoyed at Scottish Widows at the moment, my largest pension is with them and they've lost me almost £k since last year.

Almost certainly, they are not responsible for your losses.  You choose where it invested and they follow your wishes.

Scottish Widows Property Pension (series 2) -18%
Scottish Widows Fixed Interest Pension (series 2) -16.8%

And there you go.    Two funds were invested in areas that had an abysmal 2022.  Nothing to do with SW.

How do you even lose that much on fixed interest assets?

One assumes you didn't follow events in 2022.  2022 saw fixed interest securities suffer loss levels that haven't been seen in over 100 years.   95% assets perform in line with expectation.    5% of the time they suffer due to rare events and will perform outside of that expectation.   2022 saw 2 events that would fall within the 5%.

A smaller NEST pension is down a total of 6.8% in the same time period (neither had any contributions in that time).

One assumes that you are investing differently in the Nest pension.

Suhusa

That fund will have been affected by the downturn in value of older bonds that offer low or no returns (or even made you pay for the privilege of holding them) - the newer bonds offer much higher interest so people have rushed to sell off the old bonds, so their value crashed (I've seen a few long term 0.000% bonds - not junk ones - crash down to little more than half their value). The fund likely tracks the value of older and new bonds, with most bonds being old ones, so its value tracks that downward trajectory. Afaik the funds also regularly swap them out to keep within a certain range of how long they have till maturity (whereas I keep them to maturity so I'm actually happy about the lower prices because it allows me to cheaply snap up the old bonds and cash in when they mature). In the paperwork for that fund it should say what range they go for - they might for example keep bonds that have 1-3 years left to maturity, or 10-15 years or longer. The shorter that time frame, the less influence changes in interest rates have, but right now even that 'less influence' translates to quite a loss in value.

Ransom_Dry_Elk

dunstonh said:

Almost certainly, they are not responsible for your losses.  You choose where it invested and they follow your wishes.

OK, I'll bite. There's nothing that tells you what the funds are invested in at any given time. I don't know any way to find this out.

Also, no one micro manages their pension, we shouldn't have to, they're supposed to be professionally managed-that's what the fees are for. I think my annoyance and the abysmal performance is therefore somewhat justified.

@Suhusa that's quite interesting. Do you think the bond/gilt markets will recover in the near future or would we all be better off reallocating units away from fixed income funds? The only fund I have that was up was cash at 1.2%. Looks like the best option for the time being.

dunstonh

OK, I'll bite. There's nothing that tells you what the funds are invested in at any given time. I don't know any way to find this out.

There will be the funds guide and the fund factsheets published online along with those supplied by third party data suppliers.

Also, no one micro manages their pension, we shouldn't have to, they're supposed to be professionally managed-that's what the fees are for. I think my annoyance and the abysmal performance is therefore somewhat justified.

Nobody needs to micromanage their pension.  However, if you choose to invest x% of your money in UK fixed interest securities then you expect to get returns in line with the performance of UK fixed interest securities.   Repeat that with Property and all the other funds with their focused areas.   Funds have to invest within their remit even if it is the worst place to be.

@Suhusa that's quite interesting. Do you think the bond/gilt markets will recover in the near future or would we all be better off reallocating units away from fixed income funds? The only fund I have that was up was cash at 1.2%. Looks like the best option for the time being.

What did you do in other negative periods?  such as Spring 2020 or 2018 or 2015/16 etc?
Why do you think you need to do anything different now.

fixed interest securities will not return back to their levels, excluding income, probably in our lifetime.  The reasons they were high was due to unprecedented events that had never seen happen over 300 years.  With income, then they will likely recover quicker than cash.    The changeover point is always going to be guesswork.  But typically, it is just before interest rates are expected to fall (not the fall itself but the expectation of the fall).

Suhusa

Short-term bonds (below 3 years) should recover sooner, long-term bonds later (because there it takes longer till the old ones are switched out for newer high-interest ones). If interest gets lower again (as the IMF seems to think) then bond/gilt funds will start to rise in value again (because then people will prefer buying the then older high interest bonds than newer low interest bonds). Getting out now would not be a good idea because you'd crystallise your losses. If you believe the IMF then this would now the time to invest into funds on bonds/gilts to cash in on the rise in value that would come with the lower interest rates - but as always with these things you need a crystal ball to invest and sell at the correct point. (That is precisely why I like buying bonds directly - because then I can easily calculate how much money I'll get further down the line).

SouthCoastBoy

Hi suhusa, how do you buy bonds directly?

Marcon

Ransom_Dry_Elk said:

It's that time of year again where we get our annual pension statements through the post. Like many people I have multiple workplace pensions I'd like to consolidate, comparing stats here can be helpful for knowing which is best to transfer into.

Not really. That old chestnut of 'past performance is no guide...' springs to mind - and, of course, you've given no indication of your age, attitude to risk etc etc.

Ransom_Dry_Elk said:

It's that time of year again where we get our annual pension statements through the post. Like many people I have multiple workplace pensions I'd like to consolidate, comparing stats here can be helpful for knowing which is best to transfer into.

I'm annoyed at Scottish Widows at the moment, my largest pension is with them and they've lost me almost £3k since last year. There are 2 funds responsible for almost all the damage:
Scottish Widows Property Pension (series 2) -18%
Scottish Widows Fixed Interest Pension (series 2) -16.8%

Ransom_Dry_Elk said:

dunstonh said:

Almost certainly, they are not responsible for your losses.  You choose where it invested and they follow your wishes.

OK, I'll bite. There's nothing that tells you what the funds are invested in at any given time. I don't know any way to find this out.

...bit you've just identified the two funds which are responsible for 'almost all the damage'. Your original application will give details of the funds you chose, or whether you simply opted for the default position; and your annual statement has presumably given you details of all the funds or you wouldn't have been able to point the finger at the two 'guilty' funds.

Ransom_Dry_Elk said:

dunstonh said:

Almost certainly, they are not responsible for your losses.  You choose where it invested and they follow your wishes.

OK, I'll bite. There's nothing that tells you what the funds are invested in at any given time. I don't know any way to find this out.

Also, no one micro manages their pension, we shouldn't have to, they're supposed to be professionally managed-that's what the fees are for. I think my annoyance and the abysmal performance is therefore somewhat justified.

Not sure you can speak for the whole universe of pension scheme members. Judging by some of the posts here, there's quite a bit of micro-managing being attempted!

Your annoyance is wholly understandable, but equally wholly unfair. Even the best-managed funds can't deliver positive returns in an adverse climate, nor can the fund managers step outside the parameters governing the objectives of each fund - if they did, that's when people would, quite rightly, be complaining.




 

Prism

Ransom_Dry_Elk said:

dunstonh said:

Almost certainly, they are not responsible for your losses.  You choose where it invested and they follow your wishes.

OK, I'll bite. There's nothing that tells you what the funds are invested in at any given time. I don't know any way to find this out.

Also, no one micro manages their pension, we shouldn't have to, they're supposed to be professionally managed-that's what the fees are for. I think my annoyance and the abysmal performance is therefore somewhat justified.

@Suhusa that's quite interesting. Do you think the bond/gilt markets will recover in the near future or would we all be better off reallocating units away from fixed income funds? The only fund I have that was up was cash at 1.2%. Looks like the best option for the time being.

In the yearly report it will tell you which funds you are invested in. Also on the Scottish Widows website you can log in and see or change those funds. It is not being managed as such - you are responsible for the funds that you use. You are probably in a default fund but this may not be the best to suit your situation.

For comparison, my wife's SW pension fund is up 2.4% over the past year, although this is mostly down to luck.