Pension Investment Performance

magd36

ewaste said:

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. 

No idea what that means. Sorry, but thanks for the reply.

Qyburn

magd36 said:

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?

The fact that a lot of time in those eight years cash would only have earned a fraction of a percent?

magd36 said:

I My point is the average person shouldn’t need to understand markets and risk their pension. There just seems no alternative.

I agree. Both my private and workplace pension were setup with an advisor working through attitude to risk, timescales, expected retirement date etc. It doesn't make sense that a normal individual should then be expected to instruct choice of specific funds. 

JohnWinder

No idea what that means. Sorry, but thanks for the reply.

If your investments grow by 5% in the last year, from £100 to £105 you have a nominal return of 5%. If inflation was 4% during that year, your return after inflation is 1%, called a ‘real’ return. If ‘nominal’ or ‘real’ is not mentioned with return figures there is always ambiguity.

Prism

magd36 said:

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?

Well it all depends what investments the pension is using, which fund, what charges etc. Then the dates of the cash flows in matter.

For example, that pension fund I mentioned above is up 6.7% as of 1 year ago today. So better than the fixed one year savers from last year. However move it around by a week or a month the numbers will be different.

I think what has happened with your pension is just down to timing at the moment. You have built it up over the years that investments were doing well but not really benefited as the pot was not that big. Then drops over the last 2 years have made the return look worse.

Linton

magd36 said:

DoublePolaroid said:

magd36 said:

That’s what we keep getting told but I don’t think the evidence that cash would’t have out performed this fund over the last 8 years is there. The so called secure fund has fell 2.5% over the last 3 months. I think there should be an option for those tha Want the security (especially in later years)

Only a time traveller can make decisions with the benefit of hindsight. 

You may (or may not) find this video illuminating. 

I’ve now got the opportunity to put things to the test. Assuming nothing too unexpected, I’m able to put a 5 figure sun in fixed interest accounts over the next 5 years. I intend to give the same amount to a financial advisor for the same duration. All things being equal we’ll see the results in time.

5 years is far too short a time frame for any meaningful test of alternative financial strategies.   If that is your tme frame a 5 year fixed rate savings account is by far the best option.  No IFA knowing your timeframe would recommend a potentially high return portfolio.

The most important factor in choosing investments is appropriateness for your circumstances, not highest return return.

magd36

JohnWinder said:

No idea what that means. Sorry, but thanks for the reply.

If your investments grow by 5% in the last year, from £100 to £105 you have a nominal return of 5%. If inflation was 4% during that year, your return after inflation is 1%, called a ‘real’ return. If ‘nominal’ or ‘real’ is not mentioned with return figures there is always ambiguity.

Thanks. I was referring to nominal.

magd36

Prism said:

magd36 said:

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?

Well it all depends what investments the pension is using, which fund, what charges etc. Then the dates of the cash flows in matter.

For example, that pension fund I mentioned above is up 6.7% as of 1 year ago today. So better than the fixed one year savers from last year. However move it around by a week or a month the numbers will be different.

I think what has happened with your pension is just down to timing at the moment. You have built it up over the years that investments were doing well but not really benefited as the pot was not that big. Then drops over the last 2 years have made the return look worse.

Thanks. I think this is a factor in my situation 

Prism

magd36 said:

Prism said:

magd36 said:

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?

Well it all depends what investments the pension is using, which fund, what charges etc. Then the dates of the cash flows in matter.

For example, that pension fund I mentioned above is up 6.7% as of 1 year ago today. So better than the fixed one year savers from last year. However move it around by a week or a month the numbers will be different.

I think what has happened with your pension is just down to timing at the moment. You have built it up over the years that investments were doing well but not really benefited as the pot was not that big. Then drops over the last 2 years have made the return look worse.

Thanks. I think this is a factor in my situation 

Just to add my own example of why not to give up (I thought about it), I started my personal pension in 1997 and contributed regularily each month, increasing it with my salary from time to time. I didn't get a company contribution but felt the tax benefit was worth it along with general good practice of saving for retirement.

I would get yearly posted out statements and after around 5 years, when I got made redundant, I remember checking the statement and worked out that it had a lower value than all of the money I had put in. A bit demoralising but it was only 5 years so kept on going. A few years of gains and then in 2008, over 11 years later, it was once again below what I had put in. 

Roll on another 5 years and the whole thing had doubled. And then doubled again. By 2020 the extra monthly contributions I make are just a footnote. I am sure that over the coming years it will probably halve again (although I have tried to make my investments a bit more defensive). 

Nowadays, lower fees, company contributions, good tax benefits and a stable and widely accessible set of stock markets are all good for long term returns. Its just timing really that we can't avoid.

Bostonerimus1

I think this is the OP's pension

https://lib.standardlife.com/library/uk/sma-10-year-slp.pdf

One remaining question is the age of the OP...

The fact sheets for the various options are online the first of the OP's funds claims a 13.5% cumulative 5 year gain.

https://lib.standardlife.com/library/uk/invsum_s3ap.pdf

1. sustainable multi asset 10yr - 13.5% gain

I think the OP should talk to Standard Life and maybe log onto their website and do some more investigations.

MallyGirl

magd36 said:

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?

£91k built up could have been hardly any at the beginning, then a big boost in the couple of years where the markets were not so friendly. Your £91k hasn't all been there for 8 years.
There aren't many fixed interest products inside a pension. If comparing to what you get outside a pension then you need to factor in the NI and income tax that you would have paid to get the money in your bank account. Pensions are a great way of not paying tax (and NI if salary sacrifice is in place).
There are some cash-like products like money market funds but I don't think that is what you were thinking about.