L & G Workplace Pension

Hihosilverlining

Hi I'm a first time poster . I have been reading recent posts about poor fund performance and would appreciate some thoughts on my husbands workplace DC pension. Started in default fund in May 19. Its L and G Pmc multi asset 3. He is 95% sure he is going to retire next year at 57 so has invested regularly into it plus extra lump sums in the 4 1/2 years. I also transferred his large Standard Life pension and another 5 smaller one into it as the costs were a lot lower and I though at the time the default fund looked quite good with a bit lower equities and more bonds and it was managed ( I thought this meant they would change the allocation percentages if needed but this doesn't seem to be the case? )  The current split is Equities 37.8%, dev corporate bonds 18.9%, dev government bonds 13.5%, alternatives 13.3% and alternative credit 15.6%. Current performance says total invested £319, 000 , value £317, 500. I'm worried now its been the wrong decision choosing this fund and we are considering if we should use an IFA since we need to make big decisions in the next 6 months. But if we were advised to transfer this would that not just then be locking in the poor performance? Do you think this fund is OK to stay in if my husband chooses drawdown or UFPLS. We have £143000 cash and SIPPS each we could use for a few years while it hopefully recovers. I'm retired already and have 2 DB pensions. Any help appreciated thank you

Marcon

Hihosilverlining said:

Hi I'm a first time poster . I have been reading recent posts about poor fund performance and would appreciate some thoughts on my husbands workplace DC pension. Started in default fund in May 19. Its L and G Pmc multi asset 3. He is 95% sure he is going to retire next year at 57 so has invested regularly into it plus extra lump sums in the 4 1/2 years. I also transferred his large Standard Life pension and another 5 smaller one into it as the costs were a lot lower and I though at the time the default fund looked quite good with a bit lower equities and more bonds and it was managed ( I thought this meant they would change the allocation percentages if needed but this doesn't seem to be the case? ) 

'Thinking' and 'assuming' are usually dangerous options when it comes to financial matters (and yet so many of us do just that...).

Doing some basic reading could give you a lot more confidence, starting with all the literature which relates to your husband's scheme, especially as you say you transferred a large SL pension + 5 others into his L&G pension.

Also worth doing is making an appointment (for you both to attend): https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise?source=pw It's free and you won't be sold anything. Nor will you be given advice, but often guidance and information can go a very long way towards helping.

gm0

This seems to be a very low cost multi-asset fund and not fully active in the way Lindsell Train or Woodford active stock pickers were/are.   It holds the mixture described in the fact sheet objectives and replaces things a they rollover like for like or thereabouts. It's objective is to be a basic one stop shop choice and to be a bit boring.  But not wild or extreme on any dimension.

And it is quite conservative at circa 40% equities. 

*Most* of the time it would not have been alarming and surprising in any way.  Less of the gains of the concentrated in mega cap US tech stocks - tesla, meta, google, apple.  And less of the risk based on the wild speculation about them.  Lower gains. But also lower volatility.  And in a sharp equities correction. Less unpleasant.
Modest gains. Modest losses.  Lower volatility.

The higher risk (of a 50%+ correction) in equities is moderated by the range of fixed income in it.  The evidence base over the years to support the belief that diversification is mostly a good thing most but not all of the time is quite good.  And recent events are not a unique exception to that.

Unfortunately the "rapid" reset of interest rates vs inflation and the associated impact on bond capital values held in funds (like this one) was a big drag on performance to everyone holding bond funds last year. 

You can argue about whether the bond upswing during QE and low interest rates was "real" or not.  It was real at the time - if you sold.  And it was notional if you did not.  Normal life and 5% interest rates have resumed at a time of an inflation spike.  Bond values will not rapidly go back to the QE era.  Unless something else weird happens in the real world, government and central bank reactions to it.  You cannot say never - but the normal mechanics don't support a rapid zoom back up.

Expectations are an issue here.  If you expect these funds to guess when the 100 year bond event will occur and rapidly or slowly (most expected a slower adjustment) - and also when the next big equity correction cycle will occur then you will be disappointed.   If they had sold bonds at some arbitrary date late 2021 and bought equities - it could have worked out, or it could have lost you more money should the equity correction cycle be illtimed.

They and you would not know at the time.  Just actively guessing and gambling (trading) with your money whoever does it.  Same issue now.  A 40% equities 60% fixed interest fund doesn't jump to cash or jump to 100% equities and hope. It's not how this works. 

A "wealth preservation" active fund or a few "bet on me" star fund manager ones do the bigger jumps.  But the mainstream  "mixture of stuff" ones don't. You can spot the "bet with me" ones by the extremely vague decscriptions of what is in it.  Opacity and flexibility for the gambling.

Bonds will *likely* now react to further inflation news and interest rate changes up and down more in line with conventional thinking and speed. 

The arguments for and against having more than one asset class for the very long term have not essentially changed.  So the "best" portfolio for you during a drawdown based retirement is not likely to have changed either. 

I was and am not a fan of this fund as a *single* solution for my portfolio at L&G.  But I did buy some Feb 2022 as part of a setup for drawdown in early retirement.

And like you have lost (some) money on the bond market reaction in the short term.  When I recently rebalanced I bought a little more.  I like the assets in the context of the others I have on that platform.  And I like the price.  And the role of this fund in my portfolio is "damping" - lowering volatility a little overall (I am going to see if it does that).  Trustnet backtesting suggests it could.

In an occupational selection this can offer a cheap access to a mix of global developed market equities and quite a wide range of FI/bonds/credit at a lowish price. 

There will likely be a cheap and simple way to hold equities alone - which is what I use. 

World ex Equity Index Uk and UK Equity index.  But I did not find the L&G bond fund selection compelling.  Which led me to a review of the multi-asset choices like this fund and Future World and the many other variations on a theme that they offer

Albermarle

 Current performance says total invested £319, 000 , value £317, 500.

Remember that some of the money invested is tax relief and some from the employer, so your husband will not have personally invested £319,000, which might make you feel a bit better.
As already explained in detail, medium/low risk funds have suffered due to collapse on bond prices in the last couple of years, which is probably now over.
Probably if you had gone to an IFA and said you wanted a medium/low risk investment portfolio, it would have suffered similar issues, maybe more, maybe less.

Hihosilverlining

Thank you for the helpful answers especially the detailed information about L and G funds . We will take a look at some of the equity funds for future contrubutions. And yes the tax relief is the saving grace at the moment especially since my husband was paying 40% tax so we were able to get a big benefit from that.