How has your scheme performed?

Suhusa

SouthCoastBoy said:

Hi suhusa, how do you buy bonds directly?

They're traded at stock exchanges so that's where you buy them. It is fiddlier than buying an ETF on bonds, because you have to look at the returns and the maturity and have to decide which one fits you best for the foreseeable future. As far as I'm aware there's no pension wrapper for bonds in the UK though (I'm based in Germany these days so that's not relevant to me). I use them as an alternative to fixed rate savers and instant access savings accounts. Being based in Germany I buy German government bonds (because you look to reduce currency risk and risk of the country you bought bonds from going bust). You get somewhat better returns on bonds than for instant access accounts, and unlike fixed rate saving accounts (which in turn have better returns than bonds right now) you can sell them off if you have to (but possibly losing money in the process - although if I'm in the position to need more money instantly than I've parked in an instant access account them I'd be really badly in need of ready money). I haven't parked oodles of money in bonds and I haven't allocated a fixed percentage to them - I've got a maximum amount that can go into bonds, but if the returns have slumped when I want to buy some then I won't buy. But on the lower risk side of a portfolio they fill a a nice little gap in that they're flexible enough to be useful for rebalancing the portfolio but they also allow you to calculate your returns in advance.

Pat38493

Also you never stated the size of the total SW fund - 3K of how much in total?  Most people lost on their funds last year and there are often negative years.  As far as I’m told the main unusual thing about last year was that some  bond and gilt type investments actually lost more than equities which is rare but not importable.  

Ransom_Dry_Elk

To clarify as a few people have mentioned it-yes, the annual statement tells me which funds I'm invested in-but gives not details about what's in them.

I've adjusted unit allocation once to move away from equity as I initially opted for a relatively risky profile. This is a workplace pension I've had since 2009. I didn't realise there was such a selection of funds.

As it turns out Scottish Widows has 6 pages of series 2 pension funds (all the funds I have are series 2).
https://digital.feprecisionplus.com/ScottishWidows/en-gb/scottish_widows?Category=MAIN&BespokeColumn1=Pension Funds

It looks like you can only invest in certain series based on what your pension scheme is and when it was taken out.

The most information they seem to give you about any given fund is a list of the top ten holdings in a PDF. Could still be worth a look for those looking to do a bit of a deep dive on their pension. The environmental one has been performing well in recent years, I'm personally thinking of reallocating some units into that.

dunstonh

he environmental one has been performing well in recent years, I'm personally thinking of reallocating some units into that.

The normal activity is that they underperform conventional investing in most years but every now and then have a good year.

Remember you do not get past performance by investing in it now.  Some of the best funds in the next period will be the ones that went down the most in the last.

bostonerimus

The one year return of my DIY retirement portfolio is -7%. The 10 year average yearly return is +7%. I don't have a large allocation to bond funds, UK or otherwise, so I avoided the massive losses in Gilts etc caused by rising interest rates and falling confidence in the UK fiscal policy that have hit many UK funds.

It's far more useful to concentrate on a longer time frame that one year, but you must have short term tactics to deal with losses and gains. If you are in the accumulation phase that might involve some rebalancing and if you are in drawdown you might want to rebalance and also spend from cash rather than having to sell at a loss.

tichtich

I don't know how the OP's options were presented to him by SW, but I don't think the average pension contributor, who knows very little about investing, should be expected to allocate their money between asset classes. In my opinion, that should be a pension fund manager's job, unless the contributor actively chooses to do it themselves. 

An average person might not realise that holding  very low yield long duration bonds is risky (and arguably poor value). But I would hope that a fund manager would know better, and wouldn't allocate much money to such bonds, especially at a time when the inflation rate was rising. 

Also, are these SW funds index-trackers or actively managed? If they are actively managed, then arguably the OP has some cause for complaint if they underperformed the average for the given asset class. 

TheBanker

tichtich said:

I don't know how the OP's options were presented to him by SW, but I don't think the average pension contributor, who knows very little about investing, should be expected to allocate their money between asset classes. In my opinion, that should be a pension fund manager's job, unless the contributor actively chooses to do it themselves. 

An average person might not realise that holding  very low yield long duration bonds is risky (and arguably poor value). But I would hope that a fund manager would know better, and wouldn't allocate much money to such bonds, especially at a time when the inflation rate was rising. 

Also, are these SW funds index-trackers or actively managed? If they are actively managed, then arguably the OP has some cause for complaint if they underperformed the average for the given asset class. 

None of my workplace pensions have ever forced me to pick my own funds. They've all come with default selections which, unless you understand investing, are probably best. They give you the option to make your own selection - and if you are prepared to do research then that may be beneficial. But if people switch things without understanding what they're investing in, and are guided by past performance rather than future expectations then they are doomed to fail (or they might get lucky I suppose). 

Albermarle

tichtich said:

I don't know how the OP's options were presented to him by SW, but I don't think the average pension contributor, who knows very little about investing, should be expected to allocate their money between asset classes. In my opinion, that should be a pension fund manager's job, unless the contributor actively chooses to do it themselves. 

An average person might not realise that holding  very low yield long duration bonds is risky (and arguably poor value). But I would hope that a fund manager would know better, and wouldn't allocate much money to such bonds, especially at a time when the inflation rate was rising. 

Also, are these SW funds index-trackers or actively managed? If they are actively managed, then arguably the OP has some cause for complaint if they underperformed the average for the given asset class. 

The OP has highlighted two funds.
Scottish Widows Property Pension (series 2) -18%
Scottish Widows Fixed Interest Pension (series 2) -16.8%

The fund managers of both have to work to a fairly tight remit. One can only invest in property, and the other in Fixed Interest. They can not decide that due to market forecasts/info to start investing in something else.

However I suspect you meant that someone at the pension provider should be managing the whole portfolio, and moving in and out of different funds. However such a person does not exist. You have to manage the portfolio, or you employ a financial advisor to do it for you.

As you rightly say  I don't think the average pension contributor, who knows very little about investing, should be expected to allocate their money between asset classes. When joining a pension like this you will be given the opportunity to pick a  portfolio of funds. If you take no action then your money goes into a default fund ( which is what happens in >95% of cases) that is typically some kind of medium risk multi asset fund. It can be that every few years, the constituents of the default fund maybe be altered. Some slowly derisk as you get near retirement. That is pretty much all the pension portfolio management you will get, unless you do it yourself or employ an advisor.

However it could be argued that the big drop in gilts/bonds values in 2022 was widely predicted ( it is a lot easier predicting bond markets than equity ones) . In fact it was discussed on these forums many times.
So maybe 18 months ago would have been a good time to reduce bondholdings in default funds, but it is not common practice for these default funds to be trying to second guess markets in the short & medium term. Also the extent of the drop off in bond values was maybe  greater than expected.

Prism

tichtich said:

I don't know how the OP's options were presented to him by SW, but I don't think the average pension contributor, who knows very little about investing, should be expected to allocate their money between asset classes. In my opinion, that should be a pension fund manager's job, unless the contributor actively chooses to do it themselves. 

An average person might not realise that holding  very low yield long duration bonds is risky (and arguably poor value). But I would hope that a fund manager would know better, and wouldn't allocate much money to such bonds, especially at a time when the inflation rate was rising. 

Also, are these SW funds index-trackers or actively managed? If they are actively managed, then arguably the OP has some cause for complaint if they underperformed the average for the given asset class. 

I agree that the average person using a workplace pension would be best off in a default fund. Scottish Widows typically use a mid risk level multi-asset comprised of underlying active or passive funds. The current default tends to use passive index trackers though older ones like the OPs from 2009 might well use more expensive or active options. What none of them do though is change allocations based on current conditions - they are relatively fixed. 

When I last looked, the fund manager that looks after these funds has about 200+ funds under their remit. They are not making management decisions on that many funds I would suggest.

dunstonh

I don't know how the OP's options were presented to him by SW, but I don't think the average pension contributor, who knows very little about investing, should be expected to allocate their money between asset classes. In my opinion, that should be a pension fund manager's job, unless the contributor actively chooses to do it themselves. 

The pension would have a default multi-asset fund if they dont want to choose their investments.    i.e. if you select no fund, then you end up in the default fund which is a multi-asset fund in most cases.

It would be ridiculous to expect a fund manager to pick the funds for the end investor.  it isn't their remit.  That is the job of the investor's IFA, FA or themselves.

An average person might not realise that holding  very low yield long duration bonds is risky (and arguably poor value). But I would hope that a fund manager would know better, and wouldn't allocate much money to such bonds, especially at a time when the inflation rate was rising. 

If the fund manager is in control of the UK gilts fund, then they dont have a lot of choice in the matter.  They have to invest in gilts.

Also, are these SW funds index-trackers or actively managed? If they are actively managed, then arguably the OP has some cause for complaint if they underperformed the average for the given asset class. 

There is absolutely no grounds for complaint.   You shouldnt give the OP false information as its clear they are already low on knowledge.  Giving them duff info doesnt help them.