Pension Angst

straightshooter1

My annual private (ex company) pension statement arrived recently. Perhaps not surprisingly it has reduced 7% over the year (11% over the past 18 months)
My cash lies within SW's tailored default funds -what is as if not more worrying is the projected pot vale at retirement (2026) is £ 5,000 less than its current worth (NB I no longer make contributions to this fund/provider having changed employers)

I don't know what metrics have been used in this calculation but on face value surely I would be 'better off' moving all funds into a cash fund....?
I could probably benefit from the engagement of an IFA, but this is likely to cost £4,500 circa, and that's something I don't have behind the sofa. I know some providers will allow you to withdraw funds to pay for pension advise, but my understanding is that this is limited to as little as £500.

Any thoughts and guidance from members would be gratefully received.

Thanks in advance.

Dazed_and_C0nfused

Some context would help.

Is the fund £50k, £300k, £1m??

And what other pension provision do you have?

Don't forget a projection is just a made up figure, possible yours is factoring in fees and no contributions coupled with no growth.  In reality the final element could be being far from the mark.

xylophone

There has been considerable volatility over the past year. Positive performance in all conditions is not guaranteed.

Is the current pension a DC scheme? Are you content with performance/charges? If DC, have you seen sharp fluctuations in performance?

How old are you now?  Do you have other pensions?

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

Suhusa

If your retirement is close then I wouldn't be surprised if a good chunk of your pot is invested in gilts. They have lost value due to the increase in interest rates so while the timing for you is unfortunate it's not unexpected.

lisyloo

Also do you have to retire at a particular age?
i quite like my job and I’m healthy so I’m going to try to optimise the timing financially.

L9XSS

xylophone said:

There has been considerable volatility over the past year. Positive performance in all conditions is not guaranteed.

Is the current pension a DC scheme? Are you content with performance/charges? If DC, have you seen sharp fluctuations in performance?

How old are you now?  Do you have other pensions?

Have you obtained a state pension forecast?

https://www.gov.uk/check-state-pension

The above. You could take the BOLD step of withdrawing your funds and moving them to a low cost SIPP. I did this about 5 years ago (consolidating a Prudential stakeholder Pension, circa £136k). Through this forum I read and read and researched to build my knowledge! To begin with I didn’t know the difference between a DB pension and a DC pension. I now manage my pension online, I’m happy with the growth I’ve achieved and the decisions I’ve made. I’ve a mix of DB and DC pensions. The questions I’ve asked have helped me shape the direction I’ve took, but you have to be confident in your risk level and understanding of pensions, tax and your “wants” at retirement. I have a very clear plan with what I need to achieve at 62 years of age, financially to give me the freedom to retire.

dunstonh

My cash lies within SW's tailored default funds -what is as if not more worrying is the projected pot vale at retirement (2026) is £ 5,000 less than its current worth (NB I no longer make contributions to this fund/provider having changed employers)

Projections are synthetic figures and not reality.  It's usual, under the current methodology, for the low projection and often the mid projection to use figures that result in a real terms reduction.    

In particular, the growth rate is before charges. Not after charges.    Plus, there is a further 2% deduction for inflation.  So, if the low growth rate projection uses 2%, then a 3% deduction for inflation and charges will show a lower projection than the current value.

A fund that has grown by 10% a year every single year (doesn't exist but talking theoretically), would still show the same loss figure on the projection because it is not using real investment returns.  

I don't know what metrics have been used in this calculation but on face value surely I would be 'better off' moving all funds into a cash fund....?

No. The projections would actually be worse if you used a cash fund.  Cash has the lowest growth rate assumption.

The assumptions used in the projection will be displayed on the projection.

I could probably benefit from the engagement of an IFA, but this is likely to cost £4,500 circa, and that's something I don't have behind the sofa. I know some providers will allow you to withdraw funds to pay for pension advise, but my understanding is that this is limited to as little as £500.

All IFA providers allow the deduction of the cost of advice from the product.    Non IFA providers will not.   Cost doesnt need to be £4500.    

straightshooter1

Dazed_and_C0nfused said:

Some context would help.

Is the fund £50k, £300k, £1m??

And what other pension provision do you have?

Don't forget a projection is just a made up figure, possible yours is factoring in fees and no contributions coupled with no growth.  In reality the final element could be being far from the mark.

Thanks for your reply -

The fund is £150K
Currently (past 12 months) contributing into a Nest workplace pension.
State pension accessible in 2028 

straightshooter1

xylophone said:

There has been considerable volatility over the past year. Positive performance in all conditions is not guaranteed.

Is the current pension a DC scheme? Are you content with performance/charges? If DC, have you seen sharp fluctuations in performance?

How old are you now?  Do you have other pensions?

Have you obtained a state pension forecast?

check-state-pension

The scheme is DC with an annual fund charge of 0.75%
It's split into 2 funds and performance over the past 5 years has been;
-7.68%    0.64%  17.50%  -4.76%  4.2%
 1.12%   -0.91%   -0.20%  -0.10% -0.10%

Just commenced (2022) a Nest workplace pension.

Aged 62

State pension forecast 2028 £1071.53 a month.

Suhusa

On a hunch it looks like the first one is stocks-based and the second is money market-based or similar. It frankly looks like a reasonably expected performance for the last couple of years.

straightshooter1

Suhusa said:

On a hunch it looks like the first one is stocks-based and the second is money market-based or similar. It frankly looks like a reasonably expected performance for the last couple of years.

Have to assume that these are a good mix based upon age and risk....

1 Global Fixed Interest43.50
2 US Equities15.36
3 UK Fixed Interest9.69
4 International Equities9.15
5 UK Equities5.31
6 Property Shares3.70
7 Money Market3.07
8 Japanese Equities1.98
9 US Corporate Fixed Interest1.78
10 Others6.47

1	Money Market	43.41
2	Global Fixed Interest	41.49
3	UK Fixed Interest	12.83
4	UK Gilts	2.14
5	Alternative Investment Strategies	0.13