Aviva v Prudential Pension comparison query???!!!!

AERobson

Hello, my husband will retire in 5 years aged 65 and he's asked me to look at the pensions we've been paying into as he's struggling to understand it all. I must admit I am too!
But before I write a huge essay of questions, could someone give their thought on the following - Is our Aviva plan performing very badly?? Here's why I ask:
We have 2 pensions - an Aviva Pension started in 1996 and a Prudential Pension started in 1990. The statements for the last 12 month period show the following:
Aviva - paid in £9778 in last 12 months, fund value gone up by £8978 (that's £800 less than paid in!)
Prudential  - paid in £319 and the fund value has gone up by £3100

Thanks for taking the time to read this.

Linton

The past year has been a poor one generally and for more cautious investments in particular. You need to look at the figures over the long term, not individual years. When investing you have to accept significant ups and downs over the years.  You gain from the long term trends.

For a long standing investment the % gain/loss in a year has virtually nothing to do with the contributions but rather depends on what sort of things the money is invested in and the returns made by previous years' contributions..  So making that comparison may look significant but really it means very little. 

The difference between the Prudential and the Aviva funds could well be that the Prudential fund smooths the returns over the years giving less in good times so it can subsidise the bad times.

To provide more specific discussion itr would be helpful to know the names of the investments within each pension.  The provider of the pension as a whole is generally not a very sifgnificant factor. 

Also to judge whether £8K is significant or not one needs to know the amount invested.  For example £8K out of £500K is just noise, £8K out of £80K may have some significance.

dunstonh

Aviva - paid in £9778 in last 12 months, fund value gone up by £8978 (that's £800 less than paid in!)
Prudential  - paid in £319 and the fund value has gone up by £3100

Exactly the same dates?  
Exactly the same risk profile/asset mix?

Without knowing any details, I suspect you are in the Pru With Profit fund.    The current value for the Pru cannot go down but the final bonus (which isnt included in the current value) can go down as well as up.  So, negative periods do not affect the current value but instead impact on the final bonus.     Aviva, is most likely unit linked and you see the ups and downs more as there is no final bonus.

There is a good chance that both pensions can be improved upon with a modern alternative.  Around 4 out of 5 cases, would see a modern plan cheaper than a legacy plan.

AERobson

Linton said:

The past year has been a poor one generally and for more cautious investments in particular. You need to look at the figures over the long term, not individual years. When investing you have to accept significant ups and downs over the years.  You gain from the long term trends.

For a long standing investment the % gain/loss in a year has virtually nothing to do with the contributions but rather depends on what sort of things the money is invested in and the returns made by previous years' contributions..  So making that comparison may look significant but really it means very little. 

The difference between the Prudential and the Aviva funds could well be that the Prudential fund smooths the returns over the years giving less in good times so it can subsidise the bad times.

To provide more specific discussion itr would be helpful to know the names of the investments within each pension.  The provider of the pension as a whole is generally not a very sifgnificant factor. 

Also to judge whether £8K is significant or not one needs to know the amount invested.  For example £8K out of £500K is just noise, £8K out of £80K may have some significance.

Thank you for coming back to me so quickly. Looking back at the last 8-10 years the Aviva pension looks even worse but maybe I am not understanding. If I detail the information you refer to would you give me your thoughts? If that's too much to ask could you suggest who I should speak to. Many thanks

AERobson

dunstonh said:

Aviva - paid in £9778 in last 12 months, fund value gone up by £8978 (that's £800 less than paid in!)
Prudential  - paid in £319 and the fund value has gone up by £3100

Exactly the same dates?  
Exactly the same risk profile/asset mix?

Without knowing any details, I suspect you are in the Pru With Profit fund.    The current value for the Pru cannot go down but the final bonus (which isnt included in the current value) can go down as well as up.  So, negative periods do not affect the current value but instead impact on the final bonus.     Aviva, is most likely unit linked and you see the ups and downs more as there is no final bonus.

There is a good chance that both pensions can be improved upon with a modern alternative.  Around 4 out of 5 cases, would see a modern plan cheaper than a legacy plan.

A modern pension?? Oh dear, I feel very out of date. I see you are an IFA and I appreciate your views. How can I progress this further to improve the pension (if possible). Thanks

Linton

AERobson said:

Linton said:

The past year has been a poor one generally and for more cautious investments in particular. You need to look at the figures over the long term, not individual years. When investing you have to accept significant ups and downs over the years.  You gain from the long term trends.

For a long standing investment the % gain/loss in a year has virtually nothing to do with the contributions but rather depends on what sort of things the money is invested in and the returns made by previous years' contributions..  So making that comparison may look significant but really it means very little. 

The difference between the Prudential and the Aviva funds could well be that the Prudential fund smooths the returns over the years giving less in good times so it can subsidise the bad times.

To provide more specific discussion itr would be helpful to know the names of the investments within each pension.  The provider of the pension as a whole is generally not a very sifgnificant factor. 

Also to judge whether £8K is significant or not one needs to know the amount invested.  For example £8K out of £500K is just noise, £8K out of £80K may have some significance.

Thank you for coming back to me so quickly. Looking back at the last 8-10 years the Aviva pension looks even worse but maybe I am not understanding. If I detail the information you refer to would you give me your thoughts? If that's too much to ask could you suggest who I should speak to. Many thanks

There are other factors than returns that should influence the decision on what to do with the pensions. In particular pensions of that era may provide very valuable guarantees. You should check the details of the schemes or ask the providers who should be able to answer factual questions.

The only source of independent regulated advice on what to do with the pensions is an IFA. Whether the benefits would justify the costs is something you would need to decide.  If annual contributions of £8k have been steadily made for the past 30+ years then the pots will be large and there could be significant benefits from paying for advice.

The more information you provide the more usefully people here will be able to comment. However you should bear in mind that comment is all we can give and that unlike paid for advice you have no come back should those comments be incorrect or inappropriate for your specific situation.

Albermarle

AERobson said:

dunstonh said:

Aviva - paid in £9778 in last 12 months, fund value gone up by £8978 (that's £800 less than paid in!)
Prudential  - paid in £319 and the fund value has gone up by £3100

Exactly the same dates?  
Exactly the same risk profile/asset mix?

Without knowing any details, I suspect you are in the Pru With Profit fund.    The current value for the Pru cannot go down but the final bonus (which isnt included in the current value) can go down as well as up.  So, negative periods do not affect the current value but instead impact on the final bonus.     Aviva, is most likely unit linked and you see the ups and downs more as there is no final bonus.

There is a good chance that both pensions can be improved upon with a modern alternative.  Around 4 out of 5 cases, would see a modern plan cheaper than a legacy plan.

A modern pension?? Oh dear, I feel very out of date. I see you are an IFA and I appreciate your views. How can I progress this further to improve the pension (if possible). Thanks

No need to feel out of date !
When you are adding to pensions, it is not really a big problem to have pensions that were started many years ago. Investment X in an old pension will perform just the same as Investment X in a new pension.
The only real issue is that a newer pension may have lower charges.

The main problem with older pensions is that are normally less flexible in how you can withdraw from them. So they will have less options. You may well find that when it comes time to take money from them, that AVIVA and the Pru will move you to a new pension them selves. The Pru will want to charge you for the privilege, so that would be a good time to transfer out to another provider ( something which is pretty easy nowadays). Their customer service also leaves something to be desired as well.