Pension Investment Performance

Bostonerimus1

magd36 said:

Bostonerimus1 said:

magd36 said:

I just selected a balanced fund. It’s a mix of various things equities, bonds, property. It’s currently split into 3 parts {40% growth, 40% low risk, 20% secure). My point is the average person shouldn’t need to understand markets and risk their pension. There just seems no alternative.

This is another example of owning a DC pension with a DB mentality. Now that Defined Benefit pensions have been largely replaced with Defined Contribution pensions all the risk has been moved from the employer/insurance company to the employee. It is therefore the responsibility of the employee to understand how their money is invested and how much they are paying in fees. OP you have done more than many by actually looking at your balance and understanding it. That's the first step towards control. Your asset allocation information is still a bit vague and I don't fully understand the growth figures you gave in your original post, but I imagine that falls in equities and bonds brought on by Covid, Ukraine and Liz Truss have hurt your pension balance. You should have seen some recovery in the equity allocation though and maybe fees are hurting you so investigate those.

For some comparison, since 2015 something like Vanguard's VLS40 fund which has 40% equities has averaged about 4% annual gain for a total gain of about 37% over the last 8 years. Higher equity allocations have done better; I've had roughly 85% equity, 15% bonds in my defined contribution pension, mostly in low cost index funds, and it's investment gain has been 8% annual average which is a cumulative 85% total gain and is very similar to just putting the money into VLS80.

I’m sure you’ve done great but you’ve kind of proven my point. There’s no way the average guy would have enough knowledge to understand your post never mind pick funds. I think my experience is far more the norm than yours. I can assure you the fees are very low (0.538% total charge). I know this sounds paranoid but it feels like these large pension funds are a sink whole to enablle knowledge investors to profit. I just want safe funds that match inflation. Is that too much to ask.

My example of VLS40 is a very popular fund that many people own. It's one of many retail multi-asset funds that are supposedly on the less risky side of the spectrum. People who own it don't need a lot of investment understanding as it's an all in one wrapper for a number of other funds. You seem to be in something vaguely similar offered by Standard Life, but without more exact information about the product it's difficult to do a comparison. Is it a straight forward DC pension?

SouthCoastBoy

I've just left my employer after 5.5 yrs and I got a pension statement, the summary was something like the following, can't remember exact amounts but similar to, contributions 82k, fund value 90k. The choice of funds was not great, but I was 100% in equities. Does make me think is it worth the risk if I can get a short term money market fund (once transferred out) paying around the boe base rate - .5% after fees

magd36

Bostonerimus1 said:

magd36 said:

Bostonerimus1 said:

magd36 said:

I just selected a balanced fund. It’s a mix of various things equities, bonds, property. It’s currently split into 3 parts {40% growth, 40% low risk, 20% secure). My point is the average person shouldn’t need to understand markets and risk their pension. There just seems no alternative.

This is another example of owning a DC pension with a DB mentality. Now that Defined Benefit pensions have been largely replaced with Defined Contribution pensions all the risk has been moved from the employer/insurance company to the employee. It is therefore the responsibility of the employee to understand how their money is invested and how much they are paying in fees. OP you have done more than many by actually looking at your balance and understanding it. That's the first step towards control. Your asset allocation information is still a bit vague and I don't fully understand the growth figures you gave in your original post, but I imagine that falls in equities and bonds brought on by Covid, Ukraine and Liz Truss have hurt your pension balance. You should have seen some recovery in the equity allocation though and maybe fees are hurting you so investigate those.

For some comparison, since 2015 something like Vanguard's VLS40 fund which has 40% equities has averaged about 4% annual gain for a total gain of about 37% over the last 8 years. Higher equity allocations have done better; I've had roughly 85% equity, 15% bonds in my defined contribution pension, mostly in low cost index funds, and it's investment gain has been 8% annual average which is a cumulative 85% total gain and is very similar to just putting the money into VLS80.

I’m sure you’ve done great but you’ve kind of proven my point. There’s no way the average guy would have enough knowledge to understand your post never mind pick funds. I think my experience is far more the norm than yours. I can assure you the fees are very low (0.538% total charge). I know this sounds paranoid but it feels like these large pension funds are a sink whole to enablle knowledge investors to profit. I just want safe funds that match inflation. Is that too much to ask.

My example of VLS40 is a very popular fund that many people own. It's one of many retail multi-asset funds that are supposedly on the less risky side of the spectrum. People who own it don't need a lot of investment understanding as it's an all in one wrapper for a number of other funds. You seem to be in something vaguely similar offered by Standard Life, but without more exact information about the product it's difficult to do a comparison. Is it a straight forward DC pension?

Yes. Straight forward DC pension. The 3 funds are
1. sustainable multi asset 10yr
2. sustainable multi asset pre retirement 10yr
3. Sustainable multi asset at retirement 10yr

VLS40 very popular amongst investors yes. Not necessary very popular with the man on the street. I’m sure there are thousands more funds that haven’t done this well.

magd36

SouthCoastBoy said:

I've just left my employer after 5.5 yrs and I got a pension statement, the summary was something like the following, can't remember exact amounts but similar to, contributions 82k fund, value 90k. The choice of funds was not great, but I was 100% in equities. Does make me think is it worth the risk if I can get a short term money market fund (once transferred out) paying around the boe base rate - .5% after fees

Very similar. Doesn’t seem worth the risk to me either.

dunstonh

2015/16 had a small negative period but both years ended positve.  2017 was positive.  2018 was negative.  2019, 2020 and 2021 were positive.   2022 was negative (severely in the case of definesive assets - they suffered bigger losses than a typical stockmarket crash).   2023 is positive for stockmarket but negative for defensive assets.

Its a great time to be paying in monthly or adding to investments.  Not so great if you are not adding to them.

However, there is nothing unusual going on. Just investments going through another one of their short term negative periods.  Just as they have for hundreds of years.    This one is dragging on a bit at nearly 2 years but not as bad as at the start of millenium which saw nearly 3 years of negativity (followed by 5 years in which doubled).

Prism

As an example of a bog standard default workplace pension from Scottish Widows, the Portfolio Two pension is up 65% since 2015. The actual return of individual investors will be different depending on the cashflows into it. As the pot tends to be bigger in the later years, any changes to valuation become accenuated. I imagine a return like that, which seems entirely decent to me, is more typical of an average pension investor. Cash over the same period hasn't come close.

ewaste

It depends if everyone is talking about nominal or real-terms returns. I'd imagine in real terms the OPs pension could maybe only be 5% up but in nominal terms that'd unexpected. 

Bostonerimus1

magd36 said:

Bostonerimus1 said:

magd36 said:

Bostonerimus1 said:

magd36 said:

I just selected a balanced fund. It’s a mix of various things equities, bonds, property. It’s currently split into 3 parts {40% growth, 40% low risk, 20% secure). My point is the average person shouldn’t need to understand markets and risk their pension. There just seems no alternative.

This is another example of owning a DC pension with a DB mentality. Now that Defined Benefit pensions have been largely replaced with Defined Contribution pensions all the risk has been moved from the employer/insurance company to the employee. It is therefore the responsibility of the employee to understand how their money is invested and how much they are paying in fees. OP you have done more than many by actually looking at your balance and understanding it. That's the first step towards control. Your asset allocation information is still a bit vague and I don't fully understand the growth figures you gave in your original post, but I imagine that falls in equities and bonds brought on by Covid, Ukraine and Liz Truss have hurt your pension balance. You should have seen some recovery in the equity allocation though and maybe fees are hurting you so investigate those.

For some comparison, since 2015 something like Vanguard's VLS40 fund which has 40% equities has averaged about 4% annual gain for a total gain of about 37% over the last 8 years. Higher equity allocations have done better; I've had roughly 85% equity, 15% bonds in my defined contribution pension, mostly in low cost index funds, and it's investment gain has been 8% annual average which is a cumulative 85% total gain and is very similar to just putting the money into VLS80.

I’m sure you’ve done great but you’ve kind of proven my point. There’s no way the average guy would have enough knowledge to understand your post never mind pick funds. I think my experience is far more the norm than yours. I can assure you the fees are very low (0.538% total charge). I know this sounds paranoid but it feels like these large pension funds are a sink whole to enablle knowledge investors to profit. I just want safe funds that match inflation. Is that too much to ask.

My example of VLS40 is a very popular fund that many people own. It's one of many retail multi-asset funds that are supposedly on the less risky side of the spectrum. People who own it don't need a lot of investment understanding as it's an all in one wrapper for a number of other funds. You seem to be in something vaguely similar offered by Standard Life, but without more exact information about the product it's difficult to do a comparison. Is it a straight forward DC pension?

Yes. Straight forward DC pension. The 3 funds are
1. sustainable multi asset 10yr
2. sustainable multi asset pre retirement 10yr
3. Sustainable multi asset at retirement 10yr

VLS40 very popular amongst investors yes. Not necessary very popular with the man on the street. I’m sure there are thousands more funds that haven’t done this well.

VLS40 is about as bog standard as you can get for a retail multi-asset fund. The VLS series forms the backbone of many people's investments because Vanguard have done all the work. 

There are certainly many funds that have not performed well over recent years and to see the reasons for your pension's performance we'll need a detailed breakdown of the contents of your numbers 1,2 and 3. But 2 and 3 could well be bond heavy and it will take a few years for those to recover from Liz Truss and the BoE interest rate rises. There have been several similar threads to yours pointing out poor pension returns and those people were "lifestyled" into bond biased portfolios.

magd36

Prism said:

As an example of a bog standard default workplace pension from Scottish Widows, the Portfolio Two pension is up 65% since 2015. The actual return of individual investors will be different depending on the cashflows into it. As the pot tends to be bigger in the later years, any changes to valuation become accenuated. I imagine a return like that, which seems entirely decent to me, is more typical of an average pension investor. Cash over the same period hasn't come close.

£91k built up between 2015 an now. Current value £95k. Therefore total growth £4k.

Stuck £40k in a 1 year fixed interest last year. Current value £41.6k. Therefore total growth £1.6k.

If I had I done the cash option for 8 years I’d say cash would have came more than close.

Am I missing something?

magd36

dunstonh said:

2015/16 had a small negative period but both years ended positve.  2017 was positive.  2018 was negative.  2019, 2020 and 2021 were positive.   2022 was negative (severely in the case of definesive assets - they suffered bigger losses than a typical stockmarket crash).   2023 is positive for stockmarket but negative for defensive assets.

Its a great time to be paying in monthly or adding to investments.  Not so great if you are not adding to them.

However, there is nothing unusual going on. Just investments going through another one of their short term negative periods.  Just as they have for hundreds of years.    This one is dragging on a bit at nearly 2 years but not as bad as at the start of millenium which saw nearly 3 years of negativity (followed by 5 years in which doubled).

I’m still adding more than I’ve ever done. So I hope you are right.