Pension Returns

DavidAC

My pension has returned 14.6% in 5 years and 45% in 10 years. Is this a reasonable return or should I be looking at switching to another provider?

dunstonh

providers have nothing to do with your investment return.  The pension provider is just an administrator for the pension.

It is the investments that matter and the returns will largely be down to your choice of investment funds.
2010-2021 was a good period for investments.  Especially low risk investments which went into a bubble.
2022 was a poor year for investments and a dreadful year for fixed interest securities (where the bubble burst) and technology stocks.
2023 has been an average year for investments (got to double digits in Aug but has fallen back until a week ago) but another awful year for fixed interest securities.

If your investments are high in fixed interest securities, then recent performance will be heavily negative.   If they are high in equities, then less so unless you are heavy in technology stocks and some other areas.

Negative periods are normal.   When paying in each month, they are actually desirable.  Not having them can create a long term bubble that will burst at some point.

You will need to let us know what your investments are to get a more focused response.

DavidAC

This is the fund invsum_u3pp.pdf (standardlife.com). I am about 8 years from state pension age when I would probably start drawing from it. The growth figure I gave are what my plan shows. The AMC is discounted to 0.55%

dunstonh

Ok, nothing wrong with the pension provider.

Sustainable investments typically underperform conventional periods and that has been no different of late.    So, you need to decide whether you are happy putting your money where your mouth is in respect of your ethical views.

The timeline on that factsheet is actually very informative as to the number of negative events there has been over the last 5 years (far more major events than normal)

The asset mix is not a concern with 69.4% equities.   So, its really the sustainable bit you need to think about.

DavidAC

They moved it to the sustainable fund not so long ago Standard Life completes transition to sustainable multi asset solutions - Pensions Age Magazine.

dunstonh

DavidAC said:

They moved it to the sustainable fund not so long ago Standard Life completes transition to sustainable multi asset solutions - Pensions Age Magazine.

There was pressure on firms to do this.  However, some are now backtracking on ESG. Including its founder who feels it has gone beyond its early position

If you don't want ESG/sustainability, then change it.   You are in control of your investment selection.   You currently have the default option. if you dont like the default, then pick another.

Bostonerimus1

dunstonh said:

DavidAC said:

They moved it to the sustainable fund not so long ago Standard Life completes transition to sustainable multi asset solutions - Pensions Age Magazine.

There was pressure on firms to do this.  However, some are now backtracking on ESG. Including its founder who feels it has gone beyond its early position

If you don't want ESG/sustainability, then change it.   You are in control of your investment selection.   You currently have the default option. if you dont like the default, then pick another.

I agree 100%. Take a good look at your finances and make sure you have an appropriate asset allocation/fund choice for your circumstances and drawdown plan. If you don't have one or even understand what one is, now is the time to rectify that.

DavidAC

Thank you all. My other pension is Aviva Pension UK Equity AP 1 Fund factsheet | Trustnet and Aviva Pension Managed AP Fund factsheet | Trustnet, with a bit less in the managed than the other one. Again, not bad compared to the reference. Over the years I have moved savings about for the best return, but left my pensions. No idea if these two, Standard Life and Aviva are invested in good sectors. I am currently putting a lot into Standard Life while I can before I retire, which could be any time. I don't plan on drawing from either for another 8 years. Obviously I want to maximise returns for retirement.

JohnWinder

Before you go on a guilt trip for being in an ‘ethical’ fund can we know how big an effect this is likely to be having on returns, please? We might be barking up the wrong tree. It seems there are at least two approaches to being ‘ethical’: either an ESG overlay on ‘normal’ investing which I think is a bit more of this and bit less of that; and an ‘ethical’ approach which says ‘no fossil fuel mining’ etc. The former has cost returns about 1%/year by one measure, the latter’s results depends on whether mining was a high return or low return sector of the economy during the period one is considering. So ‘ethical’ might do better when mining and land mines have very poor years, because you don’t hold those stocks.

Back to Standard Life. What might we compare those returns with as a starting point, before we agonise over how valid the comparison is? As I read the sheet, it’s a ‘target date’ type fund, so can we compare it with a Vanguard target date fund? If it is, I can’t understand where it is on the asset reallocation path (is it 8 years from retirement?), because if its asset allocation has been changing year after year then making comparisons with other funds is tricky, and you certainly wouldn’t compare it with a VLS type fund of fixed allocation.

When I compare it with Vanguard’s 2035 target date fund, the Standard Life returns look like disappointing. 

DavidAC

Just after the market nose dived during the pandemic Standard Life informed me they were going to start moving it to the pre retirement fund. I told them not to, I thought it would be a bad time to move out of stocks. If they had I presume it would have been moved to more bonds, just before the bond crash. So it was left and I was told it will not move to the pre retirement fund until I asked them to move it. My selected retirement year is 2030 when I will be 65. I will retire before then, but live off of cash savings and probably not withdraw anything from the pension until 2030.

I am more interested in if my Standard Life and Aviva pensions are in reasonable funds. I have been told and have read many times I should invest instead of holding cash, but even over 10 years the pensions don't seem to return much more than good savings accounts. Most of the tax rebate will be paid back when I withdraw from it as well.

MallyGirl

as a minimum, even if you pay the same rate of tax on the way out as you saved on the way in, then the 25% tax free leads to a 6% ish benefit to using a pension wrapper.  Many people who are on 40% tax while contributing to a pension manage to then only pay 20% tax on the 75% taxable part of the pension income coming out.
If salary sacrifice is an option then you also save NI on the way in and there is no NI on pension income coming out.
Good savings rates have not been available for 10 years - they are a much more recent thing.