Two Pensions - different results

Gaz012012

Hey, 

I have worked for two companies most of my career for a similar length of time. I have two pensions both with Vitality on the lifestyle option. Both with same retirement date and I didn't expect to see such variance. Is it the company i work for (worked for) that agree it? Appreciate past performance doesn't dictate future performance but wondering if I should move the former.

They have different dates but broadly per below:

P1
2019 - 22% gain
2020 - 13% gain
2021 - 20% gain
2022 - 6% loss
2023 - 16% gain

P2
2019 - 3% loss
2020 - 17% gain
2021 - 7% loss
2022 - 7% gain

JoeCrystal

I haven't heard of Vitality before but exactly what are the investment funds each of your pensions are invested in? That may explain the difference in performance and indeed as expected. Vitality could be just a wrapper but you choose the investments(or at least company choose the default for the start.)

Gaz012012

Sorry meant Fidelity (was sorting my health stuff and added wrong name). Yeah they are two different funds, both for drawdown. Was just suprised at such a difference 

JoeCrystal

Gaz012012 said:

Sorry meant Fidelity (was sorting my health stuff and added wrong name). Yeah they are two different funds, both for drawdown. Was just suprised at such a difference 

No worries. Then it make perfect sense. If you don't mind, what are the funds called? It would be interesting to see the breakdowns and goals of each fund.

Generally speaking , lifestyle options are generally for people who are considering taking annuity when reaching the specific date (aka moving investments into less risky investments). So I am surprised to see such funds mentioned for drawdown.

Gaz012012

They changed it to allow for drawdown, rather than annuities (unsure of date but will check). I am 20 yrs to retirement so wouldn't have thought any/much would hsve moved to bonds that had a recent challenge

Marcon

Gaz012012 said:

They changed it to allow for drawdown, rather than annuities (unsure of date but will check). I am 20 yrs to retirement so wouldn't have thought any/much would hsve moved to bonds that had a recent challenge

But they are still a different range of funds - useful to know how different. The charges may be different too if one of your employers negotiated a better deal than the other, w which could have some impact, although not of the order you've shown above.

Gaz012012

I checked the fees and the one with the worser performance is actually lower.

I guess I was asking as they are both same industry, same company how they would be so different.  Does the Pension provider suggest/recommend/decide which plan or is that from the organisation.  

Appreciate future could look different but considering moving the worser one to the more positive of histrionic results as could make a huge difference to final amounts. 

gm0

Entirely normal.  Portfolio A (list of stocks and bonds) has done better than Portfolio B - for 5 years at this stage of an overall monetary cycle overlaid with "events" QE, Bond correction etc, 2020 short wobble.  Different events.  Zig and Zag. 

B might outperform A.  Or A over B in varying conditions. So swapping B for A might be excellent - or exactly the wrong thing - for another 5 years.  The joy of investing.

There are a lot of moving parts (base currencies. FX movements overlaid etc.)
And as an "amateur" it is difficult sometimes to rationalise differences. Which do seem vast. And sadly permit a lot of secretive raking of fees at various levels of the stack.  Reporting is subject to game theory for the investment banking players - manipulated to the extent possible.

I run different combinations in different parts of my overall portfolio. 

Last year (2023) with a notional total return for global equities as an index was a shade under 20% pre any costs. 

My best (and riskiest) section did between 17 and 18 after all costs.  Happy with that but well aware that it could crater at any moment by 50%.  It has done it before.   The lower risk sections created with some of the funds from that are designed for lower volatility and "adequate" return now that I am in deaccumulation. 

Those did about 10-11.   What I want it to do for the next 40 years is deliver about 3.5% in sterling - after inflation.  If it can manage that without major drawdown of capital - my heirs get pension wealth. Reality is likely to be "some" drawdown of capital alongside returns and they get less but the plan still works.

In accumulation and a long way out from retirement - I was "all in" for equities i.e. 100% single fund.  This was an accident of 1980s default funds and my inertia.

I now understand that the long time ahead saving 20 years ahead makes it *possible* to look past volatility and a correction even at the decade level.  To celebrate buying cheap units when one of these roller coaster dips comes along.   You don't have to do it - but the option exists for those willing to countenance a 50% drawdown in pot size along the way - and to ignore it - as there is no plan to touch the money for ages.  In return for a good shot at higher overall long haul growth (than is obtained from a mix of equities and safer bonds with a known (lower) return and lower risk.  And a smaller drawdown in the correction. Each to their own preference.

For some 40/60 is the answer.  Others 60/40.  Others again 100/0. 

Nobody can predict what your particular timing as a cohort will bring in terms of sequence and whether conditions will be benign or hostile as you go into pension access at retirement.

eskbanker

Gaz012012 said:

Appreciate future could look different but considering moving the worser one to the more positive of histrionic results as could make a huge difference to final amounts. 

It would be better to decide on an investment strategy and to ascertain which fund(s) will achieve that, rather than picking one of your existing ones over the other based solely on recent performance.

dunstonh

Two Pensions - different results

The results would only be the same if you invested in the same fund with both of them.  If you use different funds, then the results will always be different.  That has nothing to do with the pension. It has to do with where you invest.

Appreciate past performance doesn't dictate future performance but wondering if I should move the former.

You haven't told us anything about either of them.  i.e. costs, where they invest (which is important when using investment performance).

I guess I was asking as they are both same industry, same company how they would be so different.  Does the Pension provider suggest/recommend/decide which plan or is that from the organisation.  

Take ten whole of market pensions with 30,000 investment options available.   If all ten of them invest in the same funds with the same ratios then the returns will be the same.     If the same 10 pensions all invest in different funds or at different ratios, then the returns will be different.

Appreciate future could look different but considering moving the worser one to the more positive of histrionic results as could make a huge difference to final amounts. 

Are those results because it is invested at higher risk in period when risk paid off?   

Albermarle

JoeCrystal said:

Gaz012012 said:

Sorry meant Fidelity (was sorting my health stuff and added wrong name). Yeah they are two different funds, both for drawdown. Was just suprised at such a difference 

No worries. Then it make perfect sense. If you don't mind, what are the funds called? It would be interesting to see the breakdowns and goals of each fund.

Generally speaking , lifestyle options are generally for people who are considering taking annuity when reaching the specific date (aka moving investments into less risky investments). So I am surprised to see such funds mentioned for drawdown.

That was historically the case, but most providers now have a range of lifestyle products aimed at different outcomes. Also the drawdown option is becoming the default option. Although due to past reasons some people will still be in an unsuitable option.