Poor pension fund performance

dunstonh

 but then transfers take a while 

About 3-5 days if both sides are using Origo.   About 2-3 weeks if one forces the old way.   Upto 6 months if you have one of the administrator-controlled occupational pensions and are transferring to a SIPP.

However, in each of the cases, you are likely to be only out of the market for less than a week.

 Also, while funds dont go up and down at the same rates, even if transferring at a low point, surely we are also more likely buying funds at the new provider at lower price too?

Statistically, markets go up in more days than they go down.  So, pure statistics would suggest you will miss gains.   However, its out of your control.

Pat38493

dunstonh said:

2018 was a negative year.
2019 was a very good year
2020 had the third biggest drop in the last 25 years in Spring but finished average to good
2021 was better than long term average
2022 was really poor for low risk investors (worst in over 100 years) but small losses on higher risk investors.
2023 YTD is up but spent most of the last 5 months in a wavy line not going anywhere.

2022 was so bad for many that it wiped out a number of the previous years.     Is it possible that only 2018 and 2022 were bad and not the other years?

When you refer to years as negative, positive and such, I assume you are talking pure returns and not net of inflation?

I guess there could be some years where returns were positive by a few %, but if inflation was high, they were negative after inflation.  Conversely another year returns could be lower but inflation very low and so the net returns higher.  Isn't that in some ways more important than the pure return before inflation?  2022/2023 looks pretty bad if you factor in inflation as well?  Just curious how you look at these things as an IFA.

Or maybe you see inflation as two "unconnected" things which has to be factored in separately?

dunstonh

When you refer to years as negative, positive and such, I assume you are talking pure returns and not net of inflation?

Yes.  There is no point trying to confuse low knowledge investors more than you need to.   They need to understand the basics first.

 2022/2023 looks pretty bad if you factor in inflation as well?  Just curious how you look at these things as an IFA.

Depends on the conversation being held.  All modelling is based on real terms including inflation but short term returns and issues that led to the gains/losses wouldn't.       On this thread, its short term performance that is the issue. 

michaels

I find it interesting that almost everyone quotes nominal returns which to me is a pointless metric.

Then again looking at returns over a short period (unless it is to compare against other funds) is pretty pointless if you have an equities based portfolio.

dunstonh

Then again looking at returns over a short period (unless it is to compare against other funds) is pretty pointless if you have an equities based portfolio.

The problem is that all these threads about short term performance are from inexperienced investors looking at the short term and don't realise this is normal and actually a good thing to happen when you are still contributing.        And ironically, some of them have said about moving to cash which will suffer even greater inflation risk.

If the inexperienced investor is willing to learn, then bringing inflation adjusted returns into the conversation is fine.   But if they are not willing to learn and prefer to rant about it, then making them more confused will just make them more determined to make bad decisions.

Hopefully, these recent posters will stick around and learn and understand.   But we have seen plenty of times when posters prefer to remain ignorant and go on to make bad decisions.

RennieMackintosh

I’m an inexperienced investor or rather I have a small pension pot with Aviva and have left it to them to manage my fund as I’m sure they know better than me! I’m 71, have been retired for five years, and am currently in a drawdown situation. The fund value did go down this year and someone has suggested that I should take £50,000 out and buy premium bonds instead. This has really confused me.  I’m not a gambler and I don’t buy lottery tickets. So this idea really goes against the grain, but does anyone think this is a valid idea?? 

AlanP_2

RennieMackintosh said:

I’m an inexperienced investor or rather I have a small pension pot with Aviva and have left it to them to manage my fund as I’m sure they know better than me! I’m 71, have been retired for five years, and am currently in a drawdown situation. The fund value did go down this year and someone has suggested that I should take £50,000 out and buy premium bonds instead. This has really confused me.  I’m not a gambler and I don’t buy lottery tickets. So this idea really goes against the grain, but does anyone think this is a valid idea?? 

Why was the suggestion made, what is the objective?

If it is to create a cash reserve to be used for living off when markets are really down then maybe, if it is because the person who suggested it thinks PBs will give you a better return then probably not (based on typical returns from PBs).

Did they factor in the tax you would pay to get £50k out of your pension? You'd need a lot of wins to get back to the £50k for a start.

dunstonh

. The fund value did go down this year and someone has suggested that I should take £50,000 out and buy premium bonds instead.

That would be a particular bizarre recommendation.

 I’m not a gambler and I don’t buy lottery tickets. So this idea really goes against the grain, but does anyone think this is a valid idea?? 

What was the justification?
Significant negative periods happen.  2022, 2020, 2018, 2015/16, 2008, 2000,2001,2002.
Did you take money out of your investments to put in premium bonds in those years?

Pensions can pretty much invest in most conventional things if you want them to.  Cash savings, gilts, bonds, shares etc.      So, why take money out of a pension (where it is outside of the estate and effectively tax free at the moment) to bring it into your estate, pay income tax (assuming its the 75% element) and put it into Premium Bonds with an average win rate that equates to 4% but 62% of Premium Bond savers have not won a penny since May 2004.

The losses during 2022 were not large.    They have been seen before and will be seen again.   Any drawdown plan that was viable before 2022 should still be viable now.    If your plan is no longer viable, then it likely means it was not viable to begin or you were reliant on optimistic returns rather than pessimistic.

Or it could be that you are being nervous for no reason other than you are looking at it too often and worrying about what is normal.

briktopp

just wanted to say thankyou to everyone for contributing to this thread..it has contributed to my learning for sure.

Im comfortable with the idea of factoring in inflation when analysing performance.

My pension providers have both pointed towards my options of changing funds but obviously i dont want to make blind decisions hence part the reason i started this thread. I dont want to reply on a big rebound to fund a career change

I mentioned 5 years of zero growth..to calculate this I roughly looked at how much my employer and I have contributed in total and compared it to the current value and i might as well have kept it under the bed

2018 may have been good year but one of my pots was at its smallest anyway so by my maths i was least likely to notice growth there anyway...I should check the other bigger pot that ive had for 18 years to see if 2018 was better

dunstonh

I mentioned 5 years of zero growth..to calculate this I roughly looked at how much my employer and I have contributed in total and compared it to the current value and i might as well have kept it under the bed

Too short again.  Those contributions made in that period will go on to be the ones that make the most.  i.e. units bought during downturns make more than units bought in growth periods.   

2018 may have been good year 

You read it back to front.  2018 was a negative year (nearly all as a result of Q4 2018)