Pension Investment Performance

Bostonerimus1

MallyGirl 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?

£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.

Yes, with regular contributions things get complicated. The OP should look at their online pension account and see if investment gain is given and see how that factors in with when they bought in and their allocation.

zAndy1

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).

Is it really a great time to be investing? There seems to be a lot of nervousness right now about the level of global debt and a 'correction' being likely sooner rather than later. Could easily wipe 10 even 20% off global equity values and when you're like me with 5 years to retirement it's unlikely you'll get that back in time. My pension has been stagnant for the last couple of years really. If it wasn't for the fact I pay my pension by salary sacrifice and my employer matches my contributions (mind you that comes out of my overall salary as I get the company pension as a flex pot which I could in theory have paid as extra salary) I'd stop contributing and use the extra net income to pay off my mortgage quicker , would probably work out to be a better investment in the long run! I'm actually still very tempted to do it even though it would mean me paying more tax and NI which isn't exactly a sensible thing to do but neither is paying into a pension each month and not seeing it increase in value whatsoever, I could owe £8k less on my mortgage right now (and saved 5% interest on that for 19 years) if I'd stopped paying into the pension and paid more off my mortgage instead...

Pat38493

zAndy1 said:

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).

Is it really a great time to be investing? There seems to be a lot of nervousness right now about the level of global debt and a 'correction' being likely sooner rather than later. Could easily wipe 10 even 20% off global equity values and when you're like me with 5 years to retirement it's unlikely you'll get that back in time. My pension has been stagnant for the last couple of years really. If it wasn't for the fact I pay my pension by salary sacrifice and my employer matches my contributions (mind you that comes out of my overall salary as I get the company pension as a flex pot which I could in theory have paid as extra salary) I'd stop contributing and use the extra net income to pay off my mortgage quicker , would probably work out to be a better investment in the long run! I'm actually still very tempted to do it even though it would mean me paying more tax and NI which isn't exactly a sensible thing to do but neither is paying into a pension each month and not seeing it increase in value whatsoever, I could owe £8k less on my mortgage right now (and saved 5% interest on that for 19 years) if I'd stopped paying into the pension and paid more off my mortgage instead...

Pensions are long term investments and shouldn't be assessed over just a couple of years.  10 years would be the minimum.

Have you checked the investments inside your employer pension fund?  Probably you can move your money into other investments if you are not happy with the ones you have.  You can even keep the money in cash in your pension if you like - at least you will still get the tax relief.  However this would probably be a terrible idea as your money will then shrink in real terms.

I doubt your pension has been stagnant for 19 years so it's not apples to apples to compare your pension over 2 years, to your mortgage over 19 years.  If you look at your pension growth over last 19 years it would have beaten the 5% mortgage rate over that time if sensibly invested.

dunstonh

Is it really a great time to be investing?

Yes.  For regular contributions or those adding money now, you couldn't ask for better.

 Could easily wipe 10 even 20% off global equity values and when you're like me with 5 years to retirement it's unlikely you'll get that back in time. 

Being negative after 5 years is extremely rare.  Plus, if you are not buying an annuity, the you are likely to be invested on much of the money for another 30 or so years.

You are looking at things on a too short term basis.  

Bostonerimus1

zAndy1 said:

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).

Is it really a great time to be investing? There seems to be a lot of nervousness right now about the level of global debt and a 'correction' being likely sooner rather than later. Could easily wipe 10 even 20% off global equity values and when you're like me with 5 years to retirement it's unlikely you'll get that back in time. My pension has been stagnant for the last couple of years really. If it wasn't for the fact I pay my pension by salary sacrifice and my employer matches my contributions (mind you that comes out of my overall salary as I get the company pension as a flex pot which I could in theory have paid as extra salary) I'd stop contributing and use the extra net income to pay off my mortgage quicker , would probably work out to be a better investment in the long run! I'm actually still very tempted to do it even though it would mean me paying more tax and NI which isn't exactly a sensible thing to do but neither is paying into a pension each month and not seeing it increase in value whatsoever, I could owe £8k less on my mortgage right now (and saved 5% interest on that for 19 years) if I'd stopped paying into the pension and paid more off my mortgage instead...

Even after you retire your pension money will keep working and you could easily have 30 years of investment returns to manage, You are right to worry about losing pension money right before your retirement, which is why "lifestyle" funds try to place people in less volatile things like bonds just before retirement. Unfortunately, Ukraine, inflation, interest rate rises and Liz Truss confounded the conventional logic. IMO your best strategy going into retirement is to keep a long term horizon and a high equity percentage and enough cash to pay for 2 or 3 years of expenses so you can ride out the down turns. It's definitely a good idea to pay off the mortgage before retirement as that will vastly reduce the amount of income you'll need, but I would not do it at the expense of pension contributions. What I'd do is look at your spending and find some savings and put those towards the mortgage.

magd36

Hi, OP here. I appreciate all the comments. I now understand things a little clearer and will continue investing in my pension as it stands. The benefits of Tax Relief, Employer Contributions and reduced NI contributions, that only come with pensions, kind of make it the only real option. Thanks for all the opinions and here's hoping for a positive market.

AlanP_2

magd36 said:

Hi, OP here. I appreciate all the comments. I now understand things a little clearer and will continue investing in my pension as it stands. The benefits of Tax Relief, Employer Contributions and reduced NI contributions, that only come with pensions, kind of make it the only real option. Thanks for all the opinions and here's hoping for a positive market.

In an ideal world what you want is for the market to double / treble the day before you start withdrawing as every "bit" purchased before then will have been cheap. 

Down markets are the accumulators friend, it is those about to withdraw or withdrawing who need to be wary of them.

In reality we get what has been outlined on here and many other threads, some ups, some downs and some sideways drifts and it will never change.

AlanP_2

zAndy1 said:

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 could owe £8k less on my mortgage right now (and saved 5% interest on that for 19 years) if I'd stopped paying into the pension and paid more off my mortgage instead...

From that description it sounds like you have paid £8k in to your pension over 19 years, and all of it on Day 1.


Is that right?

handful

I haven't read all of the above but have you factored in the 20% tax relief (or 40% if you are a higher rate tax payer) that your contributions have been lifted by?