Pension performance qeary

P933alilli

My with profits R.L pension has flatlined for the last 22 months and the value is less than the payments ive put in. I can understand last years tax year being down but thought there would be some improvement this tax year. Its invested in the Royal London ordinary fund which consists of 44% company shares, 36% bonds, 13% property and 7% cash & other investments.

   Maybe its just the fact that it has been 2 poor years generally? I'm paying in my maximum £2880 as i no longer work. The previous four years had returned 9.9% (2021-22), 5.1% (2020-21), 9.8% (2019-20) and 11.3% (2018-19) after deducting payments!

eskbanker

Yes, much of that period has been poor, but equities have been strong for the last few months.

Hopefully you accepted the principle of ups and downs when investing, and understood the long term nature of the exercise, i.e. how unimportant it is to pay much attention to short term fluctuations?

dunstonh

My with profits R.L pension has flatlined for the last 22 months and the value is less than the payments ive put in.

Which is understandable given the short term period you are looking at.

 I can understand last years tax year being down but thought there would be some improvement this tax year.

If you can understand why 2022 was negative negative then you should be able to understand why 2023 still suffered a drag due to bonds.

2022 was negative across the board.  Majorly so with gilts.  2023 was a good year for equities. Bonds did go positive thanks to a good December but turned negative again in 2024.

That 36% in bonds has been a drag.  Property has been off the boil as well.   So, you only have 44% of your portfolio in assets that have gone up in that period.

Hoenir

Collyflower1 said:

 The previous four years had returned 9.9% (2021-22), 5.1% (2020-21), 9.8% (2019-20) and 11.3% (2018-19) after deducting payments!

Putting these numbers into context. The average 100 plus year return on pure equities is 4%-5% above inflation, before taxes, dealing charges and management costs. That's with income reinvested. Without being reinvested,  it averages down to a gross 0.5%. 

We've had an exceptionally strong bull market for over a decade. The reasons for which are fully documented. Wouldn't come as any great surprise now if there was now a period of relative underperformance. As markets reprice to reflect the real world economy. Not the one built on abundant cheap money and debt. 

P933alilli

Thanks for the replies! With my dc pension being with profits i thought some return may have been recognised due to smoothing but maybe theyve gone as far as they could until market conditions do start to recover. If they do!

DavidAC

Is much of it invested in UK equity, that has done badly in the last year.

Hoenir

Collyflower1 said:

Thanks for the replies! With my dc pension being with profits i thought some return may have been recognised due to smoothing but maybe theyve gone as far as they could until market conditions do start to recover. If they do!

The bond holdings will certainly progressively recover. The correction in interest rates to what would be regarded as normalised levels. No one foresaw events unfoldings as they have. 

BoxerfanUK

Collyflower1 said:

Thanks for the replies! With my dc pension being with profits i thought some return may have been recognised due to smoothing but maybe theyve gone as far as they could until market conditions do start to recover. If they do!

I feel your pain Collyflower1 my OH has a with profits policy with SL and the bonus goes up down up down yes I do get the 'smoothing' thing but very frustrating nonetheless especially when she's on the verge of transferring out to a SIPP and it would be nice to have a relatively stable number to get our heads around.

dunstonh

BoxerfanUK said:

Collyflower1 said:

Thanks for the replies! With my dc pension being with profits i thought some return may have been recognised due to smoothing but maybe theyve gone as far as they could until market conditions do start to recover. If they do!

I feel your pain Collyflower1 my OH has a with profits policy with SL and the bonus goes up down up down yes I do get the 'smoothing' thing but very frustrating nonetheless especially when she's on the verge of transferring out to a SIPP and it would be nice to have a relatively stable number to get our heads around.

And the investments in the SIPP will go up and down.  So, no difference and really shouldn't have any impact on retirement income planning.

BoxerfanUK

dunstonh said:

BoxerfanUK said:

Collyflower1 said:

Thanks for the replies! With my dc pension being with profits i thought some return may have been recognised due to smoothing but maybe theyve gone as far as they could until market conditions do start to recover. If they do!

I feel your pain Collyflower1 my OH has a with profits policy with SL and the bonus goes up down up down yes I do get the 'smoothing' thing but very frustrating nonetheless especially when she's on the verge of transferring out to a SIPP and it would be nice to have a relatively stable number to get our heads around.

And the investments in the SIPP will go up and down.  So, no difference and really shouldn't have any impact on retirement income planning.

Yes of course I do understand that and as an IFA you are obviously used to that but as an individual, generally, when you see a bonus figure written down, you expect the bonus to stay the same or increase.  I know it doesn’t in with profits policy but…….

MetaPhysical

Bonds have performed poorly this last two years and have only recently started to come back.  Equities had a cracking November and December after a torid October and in my case gained almost 15% in two months.  Unfortunately, many funds apply a "lifestyle" on older workers' funds into "safe" funds that contain bonds that have tanked.  I counsel turning lifestyling off.